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werewolves

Opec, Oil And Inflation. What Others Aren't Telling Us.

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Hello everyone!!...

Oil prices have been sliding and numerous economic commentators have expected them to drop back down to $40's (or even $30's). However did I not hear that OPEC were seeking to defend a basket price of $50?

A price of $50?

Not quite the trough others were expecting?

Well I know that OPEC cartel doesn't have complete control over deflationary pressures (cheeky bugg ers Venezuela) and the US will no doubt apply a considerable amount of arm twisting... But are they really going to let prices drop to the low $40's?

Looks like the inflationary pressures aren't quite going to recede like some have wished for.

I wonder what impact this will have on our interest rates, going up maybe? And houses going down... possibly?

CNN quote:

"OPEC's reference crude basket price dropped to $51.30 on Thursday, the latest available number, only just above the $50 a barrel level that OPEC ministers have said they would seek to defend."

I'm not an oil expert so I would appreciate others opinions.

:o

Edited by werewolves

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I'm not an oil expert either. It is to be expected that oil prices will get extremely volatile as the global supply system gets pressured harder and harder by increasing demand. Ken Deffeyes makes this point in his book about Peak Oil, noting that Nat gas prices in the USA not only rose but became volatile as supplies got short. Oil might well drop to $30/barrel, but could then shoot up to $100/barrel in a matter of a few months.

We'll just have to see. It's too early in the crisis to do much more than understand the range of possibilities.

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Here are a couple of reasons for oil's recent decline... it won't last though!

1. Weather is much warmer than normal both in the US and EU. Sustained normal (ie cold) weather will probably see an end to the downward trend.

2. The market is impressed by the ability of the global oil infrastructure to smoothly deal with the hurricanes. Folks are a lot less nervous now than they were prior to Katrina/Rita/Wilma.

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Some good points, but oil is still running out.

I'd give it 7 years before a monumental shock.

Best policy - imho - conservation. Lagging, turn off lights, insulation, etc...

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Some good points, but oil is still running out.

I'd give it 7 years before a monumental shock.

Best policy - imho - conservation. Lagging, turn off lights, insulation, etc...

In a few months time the yearly change in oil prices will be zero if not negative. In the absence of secondary effects (which are unlikely if the economy slips into recession) the impact of energy prices on inflation will be close to zero. Interest rates will not rise above 6% for the next 10 years....

Property prices will remain high and our generation is screwed. The wealth transfer to the baby boomers has already happened, just look at the mortgages of FTBs.

If we are lucky, prices will drop by 10 to 15%....

What do you think? Am I to pessimist?

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IMo the oil price hasn't broken down YET but there is a significant possibility that it will.

Every major bull market normally has one major setback. For example the 1987 stock market crash or the gold price plunge of the mid-1970's. In both of those cases the underlying trend was very much up, but a major correction took place.

I think oil will most likely do the same. At some point the economy weakens and oil demand drops thus depressing prices. Once that's over THEN we get the big up move.

It is possible that this is the major correction. Possible but not certain.

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In a few months time the yearly change in oil prices will be zero if not negative. In the absence of secondary effects (which are unlikely if the economy slips into recession) the impact of energy prices on inflation will be close to zero. Interest rates will not rise above 6% for the next 10 years....

Property prices will remain high and our generation is screwed. The wealth transfer to the baby boomers has already happened, just look at the mortgages of FTBs.

If we are lucky, prices will drop by 10 to 15%....

What do you think? Am I to pessimist?

I think you are too pessimistic. House prices will correct so that people on average wages can afford them again.

Let's think about the future.

If we do stay in a benign interest rate environment ...

If inflation generally is benign - quite likely given the current scenario of our goods being supplied cheaply to us by China - and the general downward pressures on inflation from globalization, oursourcing, technological advances etc ....

Then we will also stay in a benign wage increase environment.

In fact many people now are finding it hard to get cost of living increases - times are getting tighter for many people and will continue to do so.

Property is now beginning to be perceived as not a one-way bet. Developers are finding it hard to shift their new flats - FTBs can't afford them and the numbers do not stack up for BTL.

Sooner or later the market will turn properly and, once the perception grows that we are in a falling house market - it will fall and fall and fall until people realise a mortgage is cheaper than renting and buy in to the market.

Something I fail to understand is why young people are not making more of a noise about this.

Edited by Marina

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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