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Wednesday, October 29, 2008

Oil Price: Dead Cat Bounce

You may have heard this little nugget of wisdom referring to market behaviour as prices fall.

"Even a dead cat will bounce if it falls far enough".

It works the same way in reverse. Take a peek at oil's roller-coaster ride over the past decade. link Expect price volatility like never before seen... if Peak Oil is a credible concept.

It's just Adam Smith's cold, dead hand enforcing supply & demand economic behaviour. The recent meteoric fall in oil's price should be at least as disturbing as it's assent... it heralds the violent correction to come.

These swings will devastate hydrocarbon alternative industries globally. With no firm economic base to ensure profitability, these fledgling oil alternative businesses will struggle for financing, and ultimately be delayed by years... perhaps decades. Imagine the downstream impact this interruption will have on our collective future.

"Drill baby drill" should contribute nicely to wild oscillations in price.

Can you say "demand destruction"?

I knew you could.

How about "poverty"?

Yeah... thought so.

2 comments:

JDragun said...

Your point was interesting, but I really wonder if there wil be fluctuations large enough to crumble the alternative energy buisness for lack of funding. The present drop in the price of oil, is presumed by many to be part of a cycle of oil price dropping around every modern American election.

And once that passes, I believe that the asymmetry of oil and gas prices [Balls, Brown, & Mine, 'crude oil and gasoline prices:an asymmetric relationship; Federal Reserve Bank of Dallas] will bring prices up and keep them high enough to enable an energy aware America to keep our awareness up.

Not to mention, OPEC lowered production as of Nov. 1st, which will have its affect on price soon as well. Morris Adleman from MIT wrote a paper in the nineties, which basically said there is no oil crisis, only a clumsy OPEC monopoly. [I wonder how he feels about peak oil now?] Although I don't think that he is correct in denying that peak oil has or will hit soon, I do agree that OPEC nations, and all oil companies, have a very greedy system of export. That monopoly has seen record profits and will not likely be willing to let it go for any length of time.

I hope the gas prices stay driven high, as hard as it is to say, in order for the funds for alternative energy sources to continue. I love this blog, though I just discovered it.

JDragun said...

I posted a comment last night, hopefully you saw it. I wanted to email you, but the link doesn't actually provide your email adress.

I am a Student at the University of Albany and the comment I wrote last night was a part of an assignment for a Resources in Ecological Perspective course. The assignment was to try to start a dialog within the comment space with the author. I truly hope you allow the post to be viewable or if not perhaps you would not mind a dialog via email. My Name is James Dragun (posting as JDragun)
and my email, if you would prefer is jdragun2@yahoo.com. I sincerely hope you will respond or give me your email to attempt a dialog.

I find the subjects that your blog adresses extremely important to our very survival as a whole, and would love to converse more with you about your thoughts. Thank you.

Jim Dragun
jdragun2@yahoo.com