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Oil Is Different To Housing

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David Smith's Outlook

On reading this weeks informative (as always) commentry from David Smith I found this section incredible:

“So what’s the outlook? In the short term anything is possible. A bit more tension on Iran and a couple of nasty hurricanes and $80, $100 or $120 a barrel could result. But the history of oil is that the bigger the upward spike, the sharper the subsequent fall. That is what gave us ultra-low prices, $10 oil, after big rises in both the 1980s and 1990s “

Could it be that oil is subject to a completely different set of economic conditions that the housing market? How can he be so sure that history will repeat itself with oil when it does not apply to house prices?

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Replying to Oil Is Different To Housing

Please, it's similar to, but different from. Let's try and maintain standards. B)

Edited by Sledgehead

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I suppose that the theory is that once high oil prices send the economies that consume oil go into recession, the demand for oil decreases and so therefore does the prices.

In this respect I can't see how different it is with the housing market. David Smith is just a another member of the "it's different this time" brigade as far as that's concerned.

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With oil, it probably is 'different this time', because it seems likely that we really are running out. Of course that doesn't mean that a global depression won't push it back to $30 a barrel before it hits $300 a barrel.

That said, I was reading a book from 1980 earlier today which was talking about how we'd never see cheap oil again: so maybe some big new source of oil will unexpectedly turn up, but it seems unlikely right now.

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He ignores the fact that many new supplies are only viable at higher prices, if production from places like Canada or Mexico is only viable at >$50 and prices drop to $40 obviously any new supply will simply cease as it's no longer cost effective, especially if it's of the heavy sour variety and energy intensive to extract.

The best we can hope for is prices that resemble a jagged saw-tooth, with lower prices instantly being offset by falling supplies.

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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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