Saturday, September 27, 2014

DEFLATION all around

Russia Discovers Massive Arctic Oil Field Which May Be Larger Than Gulf Of Mexico

This could be enough to tip oil futures smacking down towards $80 or $60 a barrel. Asset values across the board will tumble, European rates will turn SERIOUSLY negative, and all those fancy pants renewables projects collapse. With central banks misinterpreting this as a monetary issue when it is in fact a technological revolution, QE and negative rates will send property prices to the moon.

Posted by libertas @ 09:43 PM (3996 views)
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18 thoughts on “DEFLATION all around

  • “QE and negative rates will send property prices to the moon”.

    …Oh, I thought you were going to say they were building houses in the Arctic!

    Seriously, isn’t this property ramping getting out of hand?

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  • DEFLATION all around – Deflating London house prices & transactions?

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  • On net, across Europe, house prices are probably falling. However, as said, we are seeing mass capital flows to London and the rest of the UK. London is just a small bit of Europe but it is connected completely.

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  • Over 25% of all mortgage money in uk is secured against London property…add south east
    And 50% of mortgages are held in a huge bubble….very significant imo

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  • So much for ‘peak oil’then

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  • Since it probably won’t be worth developing this field at today’s oil prices it’s hardly likely to be deflationary.

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  • Icarus, regardless, it puts a cap on oil price inflation even if its not viable at today’s prices, and no doubt Russia will seek to tap it for political reasons, even subsidising it to achieve greater international leverage and self sufficiency. Regardless, as Taffee shows, not only was peak oil a dupe, but the market will soon be flooded with alternative energies that will make oil look expensive and medieval by comparison.

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  • I have been hearing this alternative energy crap since the 90’s and I will still be hearing it in 30 years time. Much like housing the various VI’s conspire to keep energy prices high.

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  • If the market is flooded by ‘alternative energies’ then Russia’s subsidising oil for political leverage will be shovelling money down a black hole, or ‘treading the olives for no oil’.

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  • Seriously, isn’t this property ramping getting out of hand?

    You are on the wrong website……please go somewhere else.

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  • That was early Sep 2008 just prior to Lehman etc. s2r1 had already loaded up on Brent puts north of 140 in the summer – it would get to 35 by December of that year – the return would have been somewhere in the thousands/tens of thousands of percent depending on the strikes. They also mocked him for owning gold at $900 in this thread. Maybe the guy had some whacky ideas about market cycles, alternate energy,etc but he certainly got a few very big calls right.

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  • At what point do we all admit we where wrong, and accept that there isn’t going to be a crash?

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  • Icarus, Russian new oil IS alternative energy to that being provided by the cartels.

    Recent agression towards Russia is no doubt centred on this new oil discovery because the oil men do not want oil prices to fall. Saddam pumping too much oil led to us invading Iraq initially, and surprise surprise, the sanctions include sanctions against the very oil drilling equipment required for this field. What a surprise.

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  • libertas 7.25pm – the last line of your post 10.27am makes a clear differentiation of oil from ‘alternative energies’.

    hpw 4.05pm – Watch it – a recent post of mine in which I said libertas was morphing into flashy (for being a perma-bull on the economy) was pulled.

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  • It strikes me that Russia will struggle to make any money on less than $80 a barrel from the arctic. Russia uses it’s oil wealth to subsidise the economy and is not in a position to do otherwise.

    The idea that deflation will result in higher house prices is nonsense. Prices are based on positive economic and wage growth, while inflation may result in real wage falls, the value of the debt decreases relative to the asset. Look to Japan, as other asset values and profits drop wages will follow. with new gas and oil coming online in the US the money is not going to stay in London for more than a few minutes.

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  • I am sure the oil price drops are part of geopolitical strategy of the USA (with us on the coat tails) they want to crush Russia and Iran. SO I agree with libertas if not the rest of his economic analysis (if only because of his refusal to recognise the role of Economic rent) Not sure it will work though.

    New technologies can change the game – there is a lot of domestic solar being installed in equatorial regions for off grid stuff.

    Have yet to see any seriously useful renewable technology as of yet. Electric cars and deserts full of solar panels with big cables to population centres looks interesting but needs massive infrastructure investment that is beyond private capital at the moment.

    Interesting there has been a lot of discussion on the role of oil as an asset and how this will affect the 1% and financial system if a carbon tax is enacted. Very similar to the issues of House prices and what would happen if Land Value Tax was implemented:
    Its seams odd that asset owners get the full benefit of rising asset value on the way up but cry foul and want compensation when government policy reduces those values. Heads they win tails we loose.

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  • The perfection of horizontal drilling and hydraulic fracturing has already changed the game .

    The U.S. are converting their commercial vehicle fleet over to compressed natural gas .

    In-situ coal gasification has also been perfected and can provide synthesis gas (a mixture of H2 , CO , CO2) which can be converted into liquids using technology which has been around for 100 years .

    If we learn to tap methane clathrates then there is enough gas to keep us going for thousands of years .

    Fossil fuels aren’t in short supply . Just increase the price of oil to $120 and many contingent resources can be moved to the reserves category .

    Opec cannot live with sub $100 oil for long . The lifting costs in some places may be low but maintaining security in the middle east , maintaining the house of saud and running countries is expensive .

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