The Marc Faber Blog - Oil Prices Moving to $500? - (Video) Bullish on Crude Oil , Bearish on India

The Marc Faber Blog - Oil Prices Moving to $500? - Bullish on Crude Oil , Bearish on India

Not a good picture!

 

Impossible! Could Never Happen! Well actually in mathematical terms it has happened a number of times before. And $500 a barrel is not that ridiculous when you think about it.- that's just a five fold increase  Compare that to the jump it took between 1971 and 1980 when it moved from $2 to $35 a barrel - a 17 fold increase. Meaning a five-fold increase is possible and more probable to occur as time goes on.

So Marc's bullish attitude towards oil is well founded and supported by growing demand from increasing populations and on-going economic growth in Asian markets. However, it is quite the opposite on the supply-side as most believe we are at or near peak extraction and can no longer add to reserves an amount equal to this consumption.

Doing some simple analysis, we confront a rather disturbing destiny. With present global consumption running at 30 billion barrels annually - equating to 300 billion every decade - total  reserves of 1.2 trillion are thus set to be practically depleted by 2053, if not sooner.

But what comes between this date and now is much more disturbing, as the world scrambles to find a way to replace the cheap energy equivalent provided by these 30 billion barrels. One thing is certain, if alternatives are found they will not be any cheaper than today's energies prices. Expect more political and social turbulence as the world seeks to rebalance this physical loss of energy inputs - that will dramatically affect food and basic transportation needs. 


To the point, we are bullish on oil and bearish on currencies whose national economies are highly dependent on imported supplies - their turbulence could be devastating. As well it will place huge downside pressure on stock and bond markets - so cash, and better yet a farm, are certain to become increasingly popular as oil prices rocket to new heights.

Dr. Peter G Kinesa
July 11, 2013

One last drop -

ALJAZEERA (Video) - EGYPT IS HOT SPOT PUSHING OIL PRICES HIGHER?

ALJAZEERA (Video) - EGYPT IS HOT SPOT PUSHING OIL PRICES HIGHER?

Economics, Theology, Politics or EXISTENTIAL PHYSICS?

More and more, we are keeping an eye on these powder kegs around the world, as the potential for physical disruptions in oil supplies or critical raw materials grows with each new revolution or social disruption. Sure shootings and violence will bring the interested parties to the table, seeking diplomatic solutions, but we fear that they are short lived. Why? Because what is really needed are economic solutions that grow ever so much more impossible to effect, as these countries have overshot the physical capacities of their geographies. Too many people and too little resources.

There are two clear actions countries such as Cyprus, Greece, Spain, Japan, Egypt and the rest need to do - first,  effect civil policy measures  to reduce populations levels in the years ahead, as they can no longer draw blood from a stone. It is time to face the reality that certain geographies will only be able to sustain their population levels for so many years, before completely collapsing. And certainly, infinite sustainability is absurd. Secondly, develop and implement a  "National Business Strategy" - that may also mean opting-out of global or regional institutions (EU, IMF,WTO, etc.) that largely  restrict emerging foreign competition through trade agreements providing short-term benefits, but working to the long-term and over-weighted benefits of bigger players. In other words, denying or retracting their ability to develop sustainable "comparative advantages" through protective measures that allow industries to develop and grow over time.

Some tough medicine here, in very general terms, however if measures are not soon taken to re-balance a nation's physical economy's limits with the number of people it can optimally and sustainably serve; then the political situations in many nations will simply spin out of control. Not good for oil! markets! consumers!- and just about anything you can think of.


Dr Peter G Kinesa
July 9 2013     

Blood From an Existential Stone?