Posted on 05/12/2008 4:34:46 PM PDT by freerepublic_or_die
Note:I took literary license to post this as "What Does $120 Oil Mean for the Global Economy? from What Would $120 Oil Mean for the Global Economy?
The pdf is a short report written by Robert F. Wescott and published in April 2006 by Securing America’s Future Energy. It was written when oil was ~$60 a barrel and addressed a scenario where the price of oil surged to $120 due to coordinated terrorist attacks on global oil transport infrastructure. Well, here we are, two years on at $120 oil (without the attacks) so it’s worth revisiting the analysis in light of the conclusion:
The main conclusion of this note is that $120 oil would have profound negative effects on the world economy and global financial markets. ... Such oil prices would almost certainly precipitate a global recession.
The scenario is not identical to the present situation, Wescott’s terrorism induced $120 involves a rapid spike upwards however the analysis is based on the $120 price being sustained for a year. This long term high price is similar to today’s situation.
The most interesting chart from the report shows world oil expenditure as a percentage of world GDP
Wescott points out that historically this metric has been in the range of 1-3% and recessions have occurred when the expenditure exceeded 4%. $120 represents approximately 8% of world GDP, higher than at any time in modern history. Two studies are cited: The International Monetary Fund (IMF) suggesting a $5 increase cuts world GDP by 0.3% so it follows that the $60 to $120 doubling would reduce world GDP by 3.6% and the US Federal Reserve estimates that a $20 increase reduces GDP by 0.75%, which would result in a loss of 2.3% from increase $120.
(Excerpt) Read more at theoildrum.com ...
At what point does Civilization draw the line, at what point does it sink in that the era of Chamberlain has run its course, has been over for some time, at what point does the "epiphany" reveal itself, at what point do we respond to the "Invasion of Poland" moment a moment History has time and again demonstrated will soon be foisted upon is, whether we are ready or not?
im all for it, problem being, we launch on them? EVERYBODY launches on u.s,
believe me, we have no friends in the global community anymore.
Looking for every cause of $125 oil except the True Cause
Israel will hit Iran before the elections in the US. The Iranians will NOT be allowed to acquire nuclear weapons. This will scare the American people away from Obama.
It means one of two things:
1. Drill and Refine our OWN oil — where ever it may be.
2. Inform OPEC to take their own production up to a point where the market price returns to $25/barrel, or we’ll kick their ass and take the gas.
You choose.
OPEC does not have the capacity to increase production to a point where oil would be $25.00 a barrel.
BTW-You do realize that you do not have a right to cheap oil?
If we were to "vaporize Iran" on Tuesday, oil would be selling for $300.00 a barrel on Wednesday.
Real cute....did you learn that in Pubic Skool? (sp intentional)
I have the right to do what is necessary to fight blackmail by oil cartels and ransom demands...
Might makes right...and the victor writes history....
It’s good stuff if you live Houston. HOOO-YAAAH!
As long as our president believes that the US has an eternal friendship with the Saudis, I doubt that we are going to war with Saudi Arabia.
Better yet, live in the Hill Country and fly to Houston to meetings or to catch a plane at IAH to go to South America or the Middle East.
Do you know how much oil we get from the Middle East? Any ideas?
It’s all good. Houston this spring has been monumental. I can only imagine the hill coutry. We are blessed.
And I don’t know your age or anything but I am here HERE to tell you Harry S. Truman is the greatest human being to live in my lifetime, bar none. I need to lay a wreath at his memorial. God Bless Harry Truman!
Actually, it’s the other way around.
The world cannot afford expensive oil.
US Dollar vs. Euro
DO NOTHING and that $300 barrel is going be astronomical not merely in financial terms but in quality of life which is astronomical, unquantifiable.
COST OF STOPPING HITLER IN 1934;A few thousand men, maybe, several ten of millions ($1930's)
COST OF STOPPING HITLER +1939:+55 million dead, many multitudes of billions. Has it been actually calculated??
The price of oil has not doubled because the demand shot up in the last year or supply has declined dramatically. The true cause is a cheap dollar. Until the fed kicks up interest rates don’t expect the price of oil to come down. I expect that to start happening this summer probably. Probably not soon enough to help McCain. If Obama is elected his worshippers will claim the Obamessiah has created his first miracle - a sharp decline in oil prices.
I hope I’ve instilled in my boys the debt of gratitude we owe to the men just ahead of them in age who fought with their lives to insure that democratic free market prosperity gets a chance for the last giant swath of people ready for it. George W, drawing from the great spirit of Theodore Roosevelt, set the wheels in motion. We will prevail in the ME because our justice stands tall. Not hyperbole and certainly judges need to be reigned in, but in the international arena we shine.
Why should the Fed prop up the dollar? In real earnings, we aren’t hurt. Yet. This increase is here to stay. Commodity inflation is never polite. In due course and with the overdue advent of better fuel consumption for US autos, it’ll stabilize.
PS we need the inflation. We need to keep people greedy for stuff. Modern manufacturing will have no problem keeping up. That’s the Fed’s gambit and they are wise. Volcker policies would not help today. We need to outrun it.
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