by frog
It’s not that significant that oil is bouncing around the US$100 mark, as oil prices fluctuate madly as a matter of course. What is interesting about today’s high is that in inflation adjusted terms, it is the highest price ever. We have broken through that 1980 price ceiling. I remember that 1980 oil-fired recession and the rise of New-Right politics that accompanied it. Would we be a different country here if we had not followed the Thatcher/Reagan economic model but instead the European one? I think so. I think we would have been better for it as well. Looking back, the northern European model scores so much higher on wellbeing indicators as well as enjoying economic success.
Will this price rise lead to a recession? Our western economies are more dependant on oil than ever, but not for heavy industry. We have exported that to Asia and have decoupled a little from a direct oil to GDP linkage. It’s more indirect now. I suspect that the financial markets, the paper mirror of the real material economy, will cop the blame for any downturn that may be looming.
It’s a chicken and egg debate as to whether the failing US dollar is to blame for high oil prices or whether high oil prices, reflecting the plateau in production for the last three years, are the root cause of the decline in the dollar. My money is that oil’s contraction in relation to demand is controlling the dollar, not the other way around. Oil is real. The production plateau is real. Demand is real. The dollar is subject to the fiat of the market and as such is not real at all.
on the trolls and those who are unable to keep on topic
Given the high price of oil NZ will be in for a windfall should the southern oil fields prove to be as large as anticipated.
Like or Dislike:
0 
0 (0)
I would spend that very carefully, leaving much of it in fact, for my children’s children if I could. For it will be more precious a resource to them. It is a “strategic resource”.
I tend to disagree with Frog though. This is an inflationary recession coming at us and commodities are going to reflect the massive increases in M3 far more than decreased supply… the curves won’t try to cross for another year or two by most analysis I’ve seen of oil and demand for it.
BJ
Like or Dislike:
0 
0 (0)
I would take it right now, imagine how wealthy we would become as a nation.
There would be genuine jobs for all and no need to tax the hell out of those who create the wealth in NZ.
Like or Dislike:
0 
0 (0)
‘It worked for the Arabs’…
Like or Dislike:
0 
0 (0)
NZ following the Reagan / Thatcher model is but a blip on the radar; that the US chose Reagan over Carter changed the world forever. In the wider analysis, thats why global warming is a big problem and we have no solutions to the addiction to oil. So when The History of The Planet retrospective is written, those decades post-Carter will be seen as the greatest time lost of them all.
Digging up and selling off resources you happen to have is a neat way of making money these days it has to be said, now these commodities fetch a reasonable price. But… NZ’s core sort-of-sustainable business is based on growing stuff which relies on oil products, and we would be so much better keeping what we have for trading for product when we get to the times when we cant afford oil product as we’re priced out of the world market.
And I’ve no idea where BB thinks that a small puddle of oil will provide “genuine jobs for all” and make us “wealthy as a nation”. The only thing that will make us wealthy as a nation is when we get business leaders willing and able to build businesses in New Zealand that add significant value to product. Sadly, all most of our business leaders can see are low value propositions relying on a paying people peanuts.
Like or Dislike:
0 
0 (0)
Bush’s war in 2003 put us on this track. From that point onward, based on the experince of the late 60s and the later oil price hikes, I expected higher interest rates, higher petrol prices and a sliding US dollar as being all but inevitable. The “outsourcing” of US jobs to China on a massive scale has also contributed. The US is bleeding out of every orifice. It had to be just a matter of time. US debt (at all levels) has been ballooning while the war has pushed up oil prices as it was sure to do, whether or not it was intended to. A credit crunch was inevitable at every level – including the top one. The US Federal Reserve will cut rates, but I’m not sure it will help in the long run. Looking forward, we may see another bubble (result of efforts to avoid recession) before the big pop. The consequences of reducing incomes for more and more people over time will have to be faced at some point and deflationary pressure will collide with inflationary pressure driven by oil and lower interest rates. Time to cash up and get rid of debt if you can. Looks like saving is going to be the only way through this for the average person. The above isn’t rigorous or comprehensive – and I don’t assert infallibility.
I hope I’m wrong. I just can’t see the way things have always been continuing and I also can’t see any leading (big) political party in the West prepared to acknowledge that – never mind actually do anything about it.
Like or Dislike:
0 
0 (0)
Yup, the US have been printing dollars like crazy buggers the last few years, so it’s no surprise to see the value of the dollar going down against everything, not just oil. That said, the price is going up against other currencies
http://www.economistblog.com/2007/11/26/in-euros-and-uk-pounds-oil-prices-arent-that-bad/
Just not as fast.
Like or Dislike:
0 
0 (0)
The US dollar will take a further hit when Iran start to trde oil in Euros.
How long before the rest of OPEC does the same? And the effect of this on the US dollar?
Maybe we should be reporting the cost of a barrel of oil in Euros?
Interesting that some would want to leave the oil in the ground for future use.
Bit like leaving money in the bank “for a rainy day”.
I’m with BB on this. Pump the oil and invest the revenue now to create a better future for our children (education, health, training, etc.) and before technology makes oil a redundant and worthless commodity.
Or if the technology does not come along and the oil is worth moonbeams we might find ourselves invaded by the Australians!! (tongue in cheek, but possible)
Like or Dislike:
0 
0 (0)
outinfront..
paragraphs..!.
spaceing..
stop strangling your words..!
phil(whoar.co.nz)
Like or Dislike:
0 
0 (0)
Paragraphs, phil..?
Like or Dislike:
0 
0 (0)
yes dammit outinfront, stop writing normal. try using more random dots & slashes & line spaces to induce the mild crosseyed trance which makes the reader glide over your posts & greatly speeds up the reading of a thread
Like or Dislike:
0 
0 (0)
Paragraphs?
Now that would be a novel concept phil. Like absence of capital letters? Or excessive use of ellipses?
Personally, I frequently find yours harder to read than outinfront’s.
..!~fHsw.. hjeejy^*|||\..! ..me**YTH#(42)||.. ..SP*^^ nn35^~~`xyz/AB..!
Like or Dislike:
0 
0 (0)
Or is the first rule of whoar grammatical constuction that no paragraph should containe more that one third of each of three separate sentence and should in no case run for no longer than two lines?
Like or Dislike:
0 
0 (0)
Haha, what an assault! Maybe phil was taking the piss but i doubt it.
Like or Dislike:
0 
0 (0)
big bro
the problem is it will take 10-15 years to develop any field. What is yours and any other pundit’s record on oil price prediction 10 years out? ie don’t hold your breath for any windfall.
Like or Dislike:
0 
0 (0)
big bro, wealth isn’t created. it’s discovered!
Like or Dislike:
0 
0 (0)
Gerrit Says:
“I’m with BB on this. Pump the oil and invest the revenue now to create a better future for our children (education, health, training, etc.) and before technology makes oil a redundant and worthless commodity.”
What technology are we talking about here? We are told by the right that we should use up the oil so the price will rise, that way our (shallow) geniuses will cough up the appropriate responses.
………………………………………………..
# big bro Says:
I would take it right now, imagine how wealthy we would become as a nation.
There would be genuine jobs for all and no need to tax the hell out of those who create the wealth in NZ.
“wealth creaters” a term used by property investors.
Who are “wealth creaters” BB? Is John Key (a money trader) a wealth creator? When it comes to natural resources many people are catalysts in the service of entropy (a concept over your head.. but think Hummer)
Like or Dislike:
0 
0 (0)
jh, the answer is clear. John Key is/was not a wealth creator, he is/was a wealth redistributor (or, as some on the right like to refer it, a social engineer – but, funnily enough, that term seems to be used only when the wealth distribution is from those with more wealth to those with less).
John Key made his money at the expense of those who lost theirs. An intelligent gambler, who picket the right gambling option, unlike the poor mugs who play the pokies.
Wealth creaters are people who make money through investing in productive enterprise and employment.
People who invest in property and money trading don’t create any wealth – they only move around where the wealth is – usually to their own advantage and at the expense of others, until/unless they don’t anticipate where the market is moving, in which case, some do lose.
Like or Dislike:
0 
0 (0)
- “People who invest in property and money trading don’t create any wealth – they only move around where the wealth is – usually to their own advantage and at the expense of others,”
People who invest in property provide a service, which others willingly pay for.
It’s not *that* hard to grasp, is it?
As for money traders, they provide a currency service for business. If they can make money on top of that by speculating then good luck to them.
Like or Dislike:
0 
0 (0)
“People who invest in property provide a service, which others willingly pay for.”
Using “other peoples money”. They rely on inflation to wipe out their debt, but expect the tenant to do the hard graft. There’s no such thing a a free-lunch. The “Rich Mastery” types are societies biggest leeches.
Where talking wealth creation here not redistribution.
Being a bludger is socially acceptable if your rich and what you do is tricky.
Like or Dislike:
0 
0 (0)
jh – how come we’re so much in agreement here, but not on Te Tiriti, foreshore and seabed etc (as on this thread?
Dosn’t it all come down to the same thing – political and economic power v political and economic powerlessness?
Like or Dislike:
0 
0 (0)
do people who buy shares on the sharemarket provide a service? if so, to whom? & if the price of those shares subsequently rises, has that person created wealth?
if on the other hand the price of the shares falls, (or the price of the rental house), is that investor then a wicked fellow who has destroyed wealth?
Like or Dislike:
0 
0 (0)
Its obvious we should install a PLASMA ARC FLOW™ process recycles liquid wasteinto a cost competitive and clean burning biogas, known as MagneGas™. Interchangeable with Natural Gas. In wellington, I’m sure they produce enuff waste to satisfy the countries fuel needs of our car fleet.
Dunedin is already installing one, Dunedin New Mexico that is.
Btw has anyone actually tried HHO or Water Hybrid in their car?
Like or Dislike:
0 
0 (0)
Back ter topic, lads and lasses. Oil consumption per unit of national product is declining and has been since the first ’70′s. Think, miniaturisation, efficiency etc. So it’s not quite accurate to characterise the present oil spike as the latest Chicken Little episode.
And the wealth creation/redistribution argument is sooo 20th century working class. Wealth is created when I author another piece of cunning code and ship it, when the next J K Rowlings sits in a coffee house, stares at Greyfriars, and starts writng, and when the builder next door turns a pile of sticks into a house. And when the cow on the farm drops another calf, the veges in the plot fill up – ye gods – yet another damn courgette, and when the plantation up the road pops another P radiata up into the sun.
In all these simple cases, there is a literal host of others involved. Tthe maker of my laptop, the author of the OS, the maintainer of the telco network, the owner of the coffee house, the sawmiller who made that pile of sticks etc, and the banks who pooled other’s savings and lent them to the miller to build the factory, and the owner of that coffee house to buy it, and the new owner of that just-built house.
And just as in nature, this web of relationships, interdependencies and trusts is wide, easily disturbed, hard to control or mediate, and even hard to comprehend.
Bit like a garden, really.
Like or Dislike:
0 
0 (0)
heh! that “back ter topic” thing didn’t last long eh?
if oil is at an inflation-adjusted record price in US dollars but not in other currencies, i guess the conclusion is that the inflationary effects of the USA’s falling currency haven’t filtered through to the whole economy yet… more of a milestone will be when it’s at an inflation-adjusted record in all currencies
Like or Dislike:
0 
0 (0)
andrew, add to your list:
since records began (in 1860)
Like or Dislike:
0 
0 (0)
“Looking back, the northern European model scores so much higher on wellbeing indicators as well as enjoying economic success.”
Which one is that? Being part of a free trade agreement with the rest of Western Europe? Having a culture that tends to be anti-industrial action and does not shirk from hard work and responsibility? Having predominantly service based economies not primary sector (except Norway which rakes in oil money)? Not to mention the 1990s liberalisation and reforms in Sweden, Denmark and Finland (e.g. Sweden has education vouchers – shock horror). Some might argue ethnic/language homogeneity (which they all pretty much have) avoids a lot of tensions (questionable at best). It could be as much as the difference between Anglo-Saxon culture and Nordic around a sense of life, strong sense of families and identity? It IS interesting though.
Like or Dislike:
0 
0 (0)
Very interesting, though apparently the Swedes are good at padding out their unemployment figures with ‘make work’ programmes and I THINK forced early retirements. There was an article about this sort of thing in a 2006 edition of The Economist called “The Swedish Model”, if you have access.
What frog was probably triumphantly referring to was the high/relatively high taxes, high government spending and relatively cushy welfare system; which at least correlates with VERY high indicators of wellbeing and good indicators of success.
Like or Dislike:
0 
0 (0)