[Olaf]

Interesting web page that I came across. Someone has probably posted it before, but thought I would share.

http://www.shadowstats.com/

Olaf

[bratticus]

The first peak oil recession: Interview with Steven Kopits (link)

Kopits: The US has experienced six recessions since 1972. At least five of these were associated with oil prices. In every case, when oil consumption in the US reached 4% percent of GDP, the US went into recession. Right now, 4% of GDP is $80 oil. So that’s my current view: If the oil price exceeds $80, then expect the US to fall back into recession.

Oil: What price can America afford? (link)
Steven Kopits

The US economy has tended to grow well when oil consumption expenditures were less than 2% of GDP. In the early 1970s, for example, oil ranged from 1% to 2% of GDP. By contrast, from 1973 through 1978, oil consumption’s share of the economy peaked as high as 6.3%, never fell below 4%, and averaged 5.3% of GDP. In other words, oil expenditures represented a drag of about 3% of the economy throughout the period.

Many Americans remember the era as a depressing time...

I welcome any input on how to calculate the price of oil required to be 4% of the 2007 US GDP. This is just my playful effort at it.


Can't get a single answer about the 2007 US GDP so here are two:

GDP: $13.84 Trillion (2007 Est.)

GDP Purchasing Parity Power - $14.56 trillion (2007 est.)

13.84 * 0.04 = 0.5536 so 4% of the 2007 US GDP is about $553 billion.
14.56 * 0.04 = 0.5824 so 4% of the 2007 US GDP is about $582 billion.

US oil consumption 2007 -- 20.73 million bbl/day

I'm struggling with how to get the "time aspect" right.

$553 / 365 = $1.515 billion "GDP day"
$582 / 365 = $1.595

20.73 * $70/bbl = $1451.10 so at $70/bbl about $1.45 billion/day
20.73 * $80/bbl = $1658.40 so at $80/bbl about $1.65 billion/day

The price of oil between $70 - $80/bbl oil for one day is around 4% of the US 2007 GDP for one day.

Does that make sense?

[TheDude]

Sounds about right. Here's a good source for annualized international data: ERS/USDA Data - International Macroeconomic Data Set. Monthly US data you can get from the BEA.

Were you around when Ken Deffeyes posted about this?

[bratticus]

But we have never seen inflation during an economic contraction.

So is the term "stagflation" not applicable?

[mos6507]

I am so tired of hearing that a housing boom in the "Inland Empire" or Cleveland, Ohio caused this world economic contraction. Germany and Japan went into recession before the US real estate crash or the financial meltdown.

Occam's razor suggest we look for the simplest explanation of this recession, $147 oil. The essential definition of economy tells us it is futile to do with more things that which can be done with fewer.

[mos6507]

(does it mean anything?)

I guess not if you haven't studied the credit crisis at all to know the difference between an ARM and a CDO.

As long as you guys want to look at things purely from the prism of peak oil, you'll miss important details, like, um, just the little detail of the biggest debt bubble in the history of mankind.

[mos6507]

Mos, how do you explain Germany and Japan's economic recessions? Do you believe that the US housing mortgage crisis is responsible for impending financial collapse of Greece, Spain, Portugal, etc? Have have read Hamilton, Rubin, Therramus., or Steven Kopits? Do you have data to refute them? By the way, cute picture. Very retro, Like your thinking

We've been down this road a dozen times. Do we have to do this again? All I'm saying is your marginalization of the credit crisis is laughable. Absolutely laughable. The damage the credit crisis--on its own--has done to the economy of the US and the globe is unprecedented and will linger on for many years.

[bratticus]

We've been down this road a dozen times. Do we have to do this again? All I'm saying is your marginalization of the credit crisis is laughable. Absolutely laughable. The damage the credit crisis--on its own--has done to the economy of the US and the globe is unprecedented and will linger on for many years.

Can you explain how the US went from being a creditor nation to a debtor one?

[mos6507]

Can you explain how the US went from being a creditor nation to a debtor one?

It wasn't $147 oil that made that happen.

[dorlomin]

We've been down this road a dozen times. Do we have to do this again? All I'm saying is your marginalization of the credit crisis is laughable. Absolutely laughable. The damage the credit crisis--on its own--has done to the economy of the US and the globe is unprecedented and will linger on for many years.

Can you explain how the US went from being a creditor nation to a debtor one?

By spending more than it earned?

[mos6507]

Imports don't tell the whole story. Price is more important, and we all know oil prices in the early 90s were at historic lows, imports or no imports.

[dorlomin]

Imports don't tell the whole story. Price is more important, and we all know oil prices in the early 90s were at historic lows, imports or no imports.

And there are a number of countries that do quite well for themselves without ever having had large oil industries. They simply produce goods people want to buy and largely avoid spending more than they earned.

[mos6507]

Higher oil prices preceded the recession. Not an embargo, not a war in the mideast, etc. What preceded both this world-wide financial crisis and the mortgage crisis? ONE BIG F#CKING EVENT. you know but you refuse to here it.

What preceded the recession was a huge wave of liar loans given to people who had NO HOPE of paying their mortgages after the ARMs reset. And those mortgages were bundled together into fraudulent "AAA" financial products that were then sold across the globe. It was the equivalent of a financial biological weapon. Once the stage was set, the end result was unavoidable.

By 2007, the pool of buyers for housing had diminished so much because those who wanted had already bought in, or housing prices had appreciated so far that even teaser loans would not yield an acceptable monthly fee. And around that time, the foreclosures began.

Did people pay more to commute from the exurbs? Did this apply downard pressure on exurban house prices? Did the failure of GM and Chrysler and the ailing airlines matter? Yes, but if you removed all those factors, the end result would have been much the same.

There was no further inflation of the housing bubble possible. $10 oil would not have allowed another round of housing mania. It was gonna pop, period.

This has been my claim all along, and you dispute it. Peak oil neophytes like Jeff Rubin who are more interested in waving the "Soylent Green is Peeple" flag than really getting down and dirty into the data say what you want to hear, but it just doesn't hold up under scrutiny.

Remove $147/oil and the credit crisis still happens and (IMHO) would have been pretty much just as bad as it turned out with $147/oil.

The credit crisis was more than sufficient to cause the situation that we have today. I say this not as a "peak oiler" but as a rational independent thinker. I will not let peak oil bias me into placing the oil superspike (which, let's face it, was partly driven by speculation) to the center stage as the causative factor of the recession.

Throwing ad homs my way will just get your posts flagged.

[bratticus]

What preceded the recession was a huge wave of liar loans given to people who had NO HOPE of paying their mortgages after the ARMs reset.

Do you have any explanation of why this was done?

[diemos]

Do you have any explanation of why this was done?

Because the financial players had found a way to collect a fee up front for making a bad loan and then passing any potential future losses onto some chump. In the end, that chump became the US taxpayer.

[bratticus]

Do you have any explanation of why this was done?

Because the financial players had found a way to collect a fee up front for making a bad loan and then passing any potential future losses onto some chump. In the end, that chump became the US taxpayer.

So why did it take until the 21st century to try it?