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Coming 'oil glut' may push global economy into deflation
The Telegraph (UK) ^ | 8:52PM GMT 15 Jan 2014 | Ambrose Evans-Pritchard

Posted on 01/18/2014 10:12:50 AM PST by Kennard

One piece of the jigsaw puzzle is missing to complete the deflation landscape across the West: a slide in oil prices. This is becoming more likely each month. Turmoil across the Middle East and parts of Africa has choked supply over the past two years, keeping Brent crude near $110 a barrel despite a broader commodity slump. Cotton and corn prices have halved, as has the UBS index of industrial metals. Such anomalies rarely last. "We estimate that crude oil is now the mostly richly priced commodity in the world," says Deutsche Bank in a fresh report. Michael Lewis, the bank's commodity strategist, said markets face an "new oil supply glut" as three forces combine. US shale will add 1m barrels a day (b/d) to global supply for the third year running; Libya will crank up shipments after a near collapse in 2013; and Iran will come out of hibernation. "This will push OPEC spare capacity to levels last seen in the depths of the financial crisis in 2009," he said. America is on track to overtake Saudi Arabia as the top global producer of oil by 2016. It will account for more than half of non-OPEC world supply this year. The US Energy Department says US oil imports will drop to 5.5m b/d by next year, half the level a decade ago. This turns the world's 89m b/d market upside-down. Deutsche Bank said Saudi Arabia may have to slash its output by a quarter to 7.5m b/d this year to stop the bottom falling out of the market. The Saudis no longer have such money to spare. They are propping up an elephantine welfare nexus to keep a lid on explosive tensions in the Eastern Province, home to Saudi oil and its aggrieved Shia minority. A cut of this

(Excerpt) Read more at telegraph.co.uk ...


TOPICS: Business/Economy; Canada; Mexico; Russia
KEYWORDS: agitprop; canada; china; deflation; evanspritchard; fracking; india; iran; iraq; kuwait; mexico; oil; oilglut; oman; opec; qatar; russia; saudiarabia; unitedarabemirates; venezuela
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Evans-Pritchard sees an oil glut, rising world money supply, rising world debt and austerity as causing deflation. His economic thinking has the logic of an AGW scientist. He has a huge following, however.
1 posted on 01/18/2014 10:12:50 AM PST by Kennard
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To: Kennard

Bring on the glut....


2 posted on 01/18/2014 10:17:00 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: Kennard

Bad news for Saudi Arabia and Al Qaeda. Finally.


3 posted on 01/18/2014 10:19:15 AM PST by St_Thomas_Aquinas ( Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: Kennard

With all the money we’ve printed, and all the debt we owe, deflation is the last thing the Fed will allow.


4 posted on 01/18/2014 10:20:13 AM PST by Yo-Yo (Is the /sarc tag really necessary?)
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To: Kennard

In the mid-long term, the new fracking craze will raise up a lot of previously inaccessible oil. If the Middle East malaise partly clears, that is a bonus.

I’m almost wondering if this is a silver lining of Obama’s inept foreign relations. The world knows it can’t count on America, so it begins seeking what it can for itself. And then God blesses it for doing so. Could our more foreign relations savvy Republicans actually have been making the world too dependent on America for its own good?


5 posted on 01/18/2014 10:21:00 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: HiTech RedNeck

Gee, just think if our government were PROMOTING
oil production. We’d be in a hell of a fix...


6 posted on 01/18/2014 10:21:21 AM PST by tet68 ( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
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To: Yo-Yo

Well, at least it would be a counterforce to its consequences. Like I’ve said, we need a gold mine in America to pay for all this funny money. Maybe fracking oil is it.


7 posted on 01/18/2014 10:21:59 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: tet68
Gee, just think if our government were PROMOTING oil production. We’d be in a hell of a fix...

And imagine how much worse the economy would be without the fracking boom. < shudder>

8 posted on 01/18/2014 10:22:30 AM PST by St_Thomas_Aquinas ( Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: HiTech RedNeck
Well, at least it would be a counterforce to its consequences. Like I’ve said, we need a gold mine in America to pay for all this funny money. Maybe fracking oil is it.

They'll just increase spending proportionately. Bummer, huh?

9 posted on 01/18/2014 10:24:08 AM PST by St_Thomas_Aquinas ( Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: tet68

The private sector seems to be doing a pretty fair job of it.

The high gas prices are partly because of overregulation choking the refinery biz. Only a handful of blessed, expensively fitted refineries furnish the juice pumped by gas stations nationwide, and so the sparse competition lets prices stay high. Let more refineries into the picture (to be sure, established ones will try to fight that) and we will be travelin’.


10 posted on 01/18/2014 10:24:29 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: St_Thomas_Aquinas

Well that is a temptation.

But who says we need to have idiots at the helm forever?


11 posted on 01/18/2014 10:25:04 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: Kennard

Don’t the Chinese have oil shale too?


12 posted on 01/18/2014 10:25:09 AM PST by montag813
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To: Kennard

No problem, the Feds will just double or triple taxes to compensate.


13 posted on 01/18/2014 10:25:55 AM PST by ImJustAnotherOkie (zerogottago)
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To: montag813

If they do, they probably won’t be shy about cooking it out even if it smogs the whole Chinese countryside.


14 posted on 01/18/2014 10:27:02 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: Kennard
Blah, blah, blah to him. Economists are full of sh*t. They remind me of physicists who think they have the universe figured out according to math equations on a chalk board.

More oil WILL eventually reduce the cost of gasoline which will give people more discretionary spending income which will raise net worth. Yes, I know it's a fungible product. However, eventually the net cost of gasoline will decrease.

Funny how the Time and Newsweek rags said we were running out of oil so many decades back much like other erroneous crap they predicted on another thread here on FR.

15 posted on 01/18/2014 10:28:04 AM PST by A Navy Vet (An Oath is Forever!)
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To: A Navy Vet

A gracious God is being rather annoying about knocking at our door with blessings, every single time the Chicken Littles think they have a bulletproof racket going.


16 posted on 01/18/2014 10:29:18 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: tet68
Probably never survive...
17 posted on 01/18/2014 10:31:23 AM PST by Eric in the Ozarks ("Say Not the Struggle Naught Availeth.")
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To: HiTech RedNeck
I’m almost wondering if this is a silver lining of Obama’s inept foreign relations. The world knows it can’t count on America, so it begins seeking what it can for itself. And then God blesses it for doing so.

Pax Americana should have lowered risk, increased production and kept oil prices down. Higher oil prices, however, will now increase unconventional U.S. production, improve the U.S. balance of payments and counteract the domestic negative effect of high energy costs. As you imply, this may be a win either way for the U.S.

18 posted on 01/18/2014 10:34:02 AM PST by Kennard
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To: A Navy Vet

Like I said, it would counter an inflationary trend, so he isn’t entirely in the dark. He just needs more picture in his equations. The world kited money. Then God stepped in and showed it more real wealth. Agh, what is Satan to do? Well Satan does have us despising ourselves in other ways. Abortion and the wastes of socialized medicine, ‘nuff said. But it’s only our own fault that this situation has to go on as badly as it is.


19 posted on 01/18/2014 10:34:16 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: montag813

Just about everybody has oil and gas shale.

Massive reserves in S. America, Europe, Australia and China. Probably the largest volume is in Russia, not surprising since it is the largest country.

When US prices for gas drop low enough, those American who have acquired expertise will fan out across the glove and drill for the gas there.

All of which is a very good thing. The power and influence of the Arab oil states, and by extension that of Islamists, has flowed from their control of a scarce resource. When the resource is no longer scarce, their influence goes bye-bye.


20 posted on 01/18/2014 10:37:10 AM PST by Sherman Logan
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To: Kennard

Oil glut bring deflation...

This guy is definitely on drugs and may reside in Colorado. Oil glut means cheap energy and business expansion. This must be the decade of bad science and idiot wetters.


21 posted on 01/18/2014 10:37:57 AM PST by mountainlion (Live well for those that did not make it back.)
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To: HiTech RedNeck

Exactly. If we hit a period of deflation, cash will be king. I have a good amount that I’ll be turning into tangibles if this happens.


22 posted on 01/18/2014 10:41:35 AM PST by Bloody Sam Roberts ("The further a society drifts from truth the more it will hate those who speak it." - George Orwell)
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To: ImJustAnotherOkie
"No problem, the Feds will just double or triple taxes to compensate."

WELL....do you want children to go to bed hungry?

23 posted on 01/18/2014 10:43:10 AM PST by blam
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To: blam

Not hungry...just sick without medical care. It’s easier to lie your way out of it.


24 posted on 01/18/2014 10:44:49 AM PST by ImJustAnotherOkie (zerogottago)
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To: HiTech RedNeck

There are still around two billion people without electricity or reliable power. Cheap gas makes that easier, from generators to vehicles.
For the developed world, cheaper gas means more disposable cash and hence more money for the service economy and employment.


25 posted on 01/18/2014 10:45:06 AM PST by tbw2
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To: A Navy Vet

“Funny how the Time and Newsweek rags said we were running out of oil so many decades back much like other erroneous crap they predicted on another thread here on FR.”

That bs was pushed by the Opecker Princes back in the late 1950’s and from then to now.

They bribed every left wing professor and economists, (Left Wingers = Probably about 99.98 % of both groups). Then they created and financed the green economic terrorists, funded the Gorebull warming thugs/ We have been shipping our money to the Opecker Princes for decades and spilling American blood in the middle east for that time.

Hopefully, some healthy competition will destroy the Opecker Princes and their evil cartel know as OPEC.

Then, as their oil fortunes and power decline, maybe the Saudis and their allies will enter into a mutually destructive battle with Iran and its insane allies. Hopefully, the US will stand back and watch Allah sort out the winners and losers.


26 posted on 01/18/2014 10:46:11 AM PST by Grampa Dave ( Obamacare is a Trinity of Lies! Obamaganda is failing 24/7/365! Obamaganda will fail 24/7/365!)
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To: mountainlion
Oil glut bring deflation ... This guy is definitely on drugs and may reside in Colorado. Oil glut means cheap energy and business expansion. This must be the decade of bad science and idiot wetters.

From Peak Oilers to Oil Glutters, they turn themselves into pretzels trying to turn good news into bad.

Despite Obama's best efforts, the oil markets are working.

27 posted on 01/18/2014 10:49:39 AM PST by Kennard
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To: Kennard

Oil glut but food shortage. Can you have deflation with the price of food going through the roof? Wait until you see what happens to the price of food when the California drought is factored in down the road. Some investors will make a fortune on commodities this year.


28 posted on 01/18/2014 10:50:13 AM PST by anonsquared
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To: Sherman Logan

“When US prices for gas drop low enough, those American who have acquired expertise will fan out across the glove and drill for the gas there.”

That will be one of the best investments for a few decades.

Investment in companies that have the experience/expertise you cited, and the companies that can build the refineries/pipe lines and other large standing investments needed with the ‘New’ discoveries.


29 posted on 01/18/2014 10:50:35 AM PST by Grampa Dave ( Obamacare is a Trinity of Lies! Obamaganda is failing 24/7/365! Obamaganda will fail 24/7/365!)
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To: Yo-Yo

The Fed’s no longer in control.


30 posted on 01/18/2014 10:53:25 AM PST by DManA
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To: A Navy Vet

Thank you NV. IF the ME settles down, IF shale well productivity is maintained, IF this and IF that... The first two are unlikely and the first one has never happened longer than about a year in the last 40+ years.

The REAL inflation adjusted cost of fuel may decrease and if it does a time of prosperity will ensue. We will not see “cheap” $2 gasoline though. Instead it will not inflate as much as it has at other times.

There will be ebb and there will be flow and money will shift from one alternative to the better one. Recessions will come and depressions will as well. Populations will generally increase and the poor will increase in number.

Generally, the quality of life will become diluted and worse as more humans use the finite resources and space of spaceship Earth. Eventually there will be wars and some will die, probably not enough to make a difference for the survivors though. Mankind will eventually become victim to a disaster and the many fewer survivors will start the cycle again or not but you and I will be long dead by then.


31 posted on 01/18/2014 10:55:13 AM PST by Sequoyah101
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To: Kennard

I don’t think we will see dramatically lower fuel prices. I do think we will have greater stability. OPEC will not be able to manipulate prices as they have in the past.


32 posted on 01/18/2014 10:58:50 AM PST by Lurkina.n.Learnin (This is not just stupid, we're talking Democrat stupid here.)
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To: Grampa Dave
This is not your grandfather's rig.


33 posted on 01/18/2014 11:03:48 AM PST by Kennard
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To: Kennard
Cheap energy.
Power to the People!

Actual 'power to the people' is an anathema to some...

34 posted on 01/18/2014 11:15:16 AM PST by null and void (We need to shake this snowglobe up.)
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To: HiTech RedNeck
But who says we need to have idiots at the helm forever?

The voters.

35 posted on 01/18/2014 11:17:10 AM PST by null and void (We need to shake this snowglobe up.)
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To: Kennard
corn prices have halved

They're still well above 2010.

36 posted on 01/18/2014 11:17:38 AM PST by Sherman Logan
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To: null and void

My aren’t you cynical.

Some unconventional political work is called for.


37 posted on 01/18/2014 11:18:18 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: HiTech RedNeck
My aren’t you cynical.

Who? Me?

38 posted on 01/18/2014 11:23:59 AM PST by null and void (We need to shake this snowglobe up.)
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To: null and void

Yeah... you.

The cynic’s rant is “Our future has to be our past!”


39 posted on 01/18/2014 11:26:36 AM PST by HiTech RedNeck (The Lion of Judah will roar for you if you give him a big hug and a cheer and mean it. See my page.)
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To: HiTech RedNeck

Will be interesting to watch the possible glut run into Caliph Baraq’s 54 mpg standard for new vehicles.


40 posted on 01/18/2014 11:28:36 AM PST by nascarnation (I'm hiring Jack Palladino to investigate Baraq's golf scores.)
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To: Sherman Logan
In 2008 the pump price for a gallon of regular gasoline was $1.799.
41 posted on 01/18/2014 11:29:08 AM PST by null and void (We need to shake this snowglobe up.)
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To: Kennard

Evans-Pritchard sees an oil glut, rising world money supply, rising world debt and austerity as causing deflation. His economic thinking has the logic of an AGW scientist. He has a huge following, however.
...........
what galls me about these guys is that even though they are always wrong, they keep their following.

Lower oil prices will act like pure oxygen on the world economy. While they will depress the oil patch—they will light a fire on the rest of the economy. This is great for mixed economies like the USA & China and even better for Europe and Japan, but its hell on the Gulf States and Russia.

What’s not to like?


42 posted on 01/18/2014 11:46:28 AM PST by ckilmer
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To: Sequoyah101

We will not see “cheap” $2 gasoline though. Instead it will not inflate as much as it has at other times.
............
disagree.

We will see $2 gasoline. But not for a couple years.

There is now a two front war on the price of gasoline. Not just the supply but also the demand. The effects on the demand side however are still at least 5 years away. But when they come, they will be brutal on the oil patch.


43 posted on 01/18/2014 11:52:34 AM PST by ckilmer
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To: Kennard
FYI





44 posted on 01/18/2014 11:56:19 AM PST by Koracan
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To: Kennard

I’m sure a way to keep gas prices will be found no matter what.


45 posted on 01/18/2014 12:01:12 PM PST by skyman
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To: Kennard
Evans-Pritchard sees an oil glut, rising world money supply, rising world debt and austerity as causing deflation. His economic thinking has the logic of an AGW scientist. He has a huge following, however.

I started reading...wait a minute, who wrote this...oh, that AEP poofter again..."doom and gloom next month!" for decades...his loyal followers must be smarter than me.

46 posted on 01/18/2014 12:04:20 PM PST by Moltke (Sapere aude!)
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To: Koracan

I love your last chart. Evans-Pritchard could ‘pivot’ and make it the theme of his next article.


47 posted on 01/18/2014 12:05:01 PM PST by Kennard
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To: Yo-Yo
With all the money we’ve printed, and all the debt we owe, deflation is the last thing the Fed will allow.

Wouldn't deflation mean that our salaries would by more and stimulate the economy?

48 posted on 01/18/2014 12:07:27 PM PST by fella ("As it was before Noah so shall it be again,")
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To: ckilmer

Somebody will be right.

Get back to me in two years.


49 posted on 01/18/2014 12:17:44 PM PST by Sequoyah101
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To: fella
It means your salary would go down in the number of dollars, but remain steady in buying power. (And don't think your salary wouldn't go down.)

The Government's tax intake would also go down in number of dollars, but steady in buying power.

But we have to pay interest on the debt in numbers of dollars, not in buying power, so with fewer numbers of dollars coming in, it would be harder to continue to service the debt.

50 posted on 01/18/2014 12:35:47 PM PST by Yo-Yo (Is the /sarc tag really necessary?)
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