{"id":6372,"date":"2015-03-10T06:08:18","date_gmt":"2015-03-10T11:08:18","guid":{"rendered":"http:\/\/olduvai.ca\/?p=6372"},"modified":"2015-03-10T06:08:18","modified_gmt":"2015-03-10T11:08:18","slug":"the-oil-glut-and-low-prices-reflect-an-affordability-problem","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=6372","title":{"rendered":"The oil glut and low prices reflect an affordability problem"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/ourfiniteworld.com\/2015\/03\/09\/the-oil-glut-and-low-prices-reflect-an-affordability-problem\/\" rel=\"bookmark\">The oil glut and low prices reflect an affordability\u00a0problem<\/a><\/h3>\n<p>For a long time, there has been a belief that the decline in oil supply will come by way of high oil prices. Demand will exceed supply. It seems to me that this view is backward\u2013the decline in supply will come through low oil prices.<\/p>\n<p>The oil glut we are experiencing now reflects a worldwide\u00a0<strong>affordability<\/strong>\u00a0crisis. Because of a lack of affordability,\u00a0<strong>demand<\/strong>\u00a0is depressed. This lack of demand keeps prices low\u2013below the cost of production for many producers. If the affordability issue cannot be fixed, it threatens to bring down the system by discouraging investment in oil production.<\/p>\n<p>This lack of affordability is affecting far more than oil products. A\u00a0<a href=\"http:\/\/www.economist.com\/news\/business\/21645212-promised-golden-age-gas-arrivingbut-consumers-are-cashing-well-producers\">recent article in The\u00a0Economist<\/a>\u00a0talks about LNG prices being depressed. LNG capacity ramped up quickly in response to high prices a few years ago. Now there is a glut of LNG capacity, and prices are far below the cost of extraction and shipping for many LNG suppliers. At least temporary contraction seems likely in this sector.<\/p>\n<p>If we look at\u00a0<a href=\"http:\/\/econ.worldbank.org\/WBSITE\/EXTERNAL\/EXTDEC\/EXTDECPROSPECTS\/0,,contentMDK:21574907~menuPK:7859231~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html\">World Bank Commodity Price data<\/a>, we find that between 2011 and 2014, the inflation-adjusted price of Australian coal decreased by 41%. In the same period, the inflation-adjusted price of rubber is down 58%, and of iron ore is down 59%. With those types of price drops, we can expect huge cutbacks on production of many types of goods.<\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The oil glut and low prices reflect an affordability\u00a0problem For a long time, there has been a belief that the decline in oil supply will come by way of high oil prices. Demand will exceed supply. It seems to me that this view is backward\u2013the decline in supply will come through low oil prices. The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[4059,151,1851,1233,4058,3044,592,1775,1232],"class_list":["post-6372","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-affordability","tag-commodities","tag-commodity-price-collapse","tag-gail-tverberg","tag-lack-of-affordability","tag-oil-glut","tag-oil-price","tag-oil-price-collapse","tag-our-finite-world"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6372"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6372\/revisions"}],"predecessor-version":[{"id":6373,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6372\/revisions\/6373"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6372"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6372"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}