Chris on Yahoo! Daily Ticker - April 2013 (Part 1)

Adam Taggart
By Adam Taggart on Wed, Apr 10, 2013 - 12:37am

At last week's Wine Country Country Conference, Chris sat down with Lauren Lyster of Yahoo!'s Daily Ticker -- who was there to moderate the event -- and talked about his rationale for how structurally higher oil prices add such headwinds to the global economy that those hoping for a return to the "normal" economic growth of the past several decades will likely be very disappointed:

(click image below to access the video)

 

From Yahoo!'s write-up of the interview:

If you want evidence that the U.S. economy is rebounding, forget analyzing common economic indicators like home sales, retail sales, consumer confidence and manufacturing data. Economists and individuals need to track just one key measure of data: oil consumption. That’s the thesis of Chris Martenson, author of PeakProsperity.com and the “Crash Course” Series. Martenson says oil has always been very tightly associated with economic growth. Oil prices have not returned to their 2008 all-time highs and that’s not necessarily a good thing, he argues.

“If you want to have economic growth you’re going to need growth in oil consumption,” he says in an interview at the 2013 Wine Country Conference in Sonoma benefiting the Les Turner ALS Foundation. “Oil is the lifeblood of any economy.”

More demand for oil from businesses and consumers will drive up prices, which is symbolic of a healthy economy. Martenson points out that oil consumption in the U.S., Japan and Europe peaked in 2007 and has tapered off over the last few years. The decline reflects the slow growth and budgetary crises in these countries more so than the increase in fuel-efficient vehicles on the road, Martenson argues.

Oil companies have been pumping nearly the same amount of oil out of the ground since 2005 even though investment in oil production has doubled from $300 billion to $600 billion worldwide, Martenson notes. In 2012 U.S. oil production rose by 790,000 barrels per day, the largest annual increase since 1859. The Energy Information Administration (EIA) estimates that domestic oil production will rise to 815,000 barrels a day in 2012, a new record.

Oil consumption in the rest of the world has been on a steady uptrend with fast growing economies like China, Brazil and India using more oil than the U.S., Japan and Europe combined.

Martenson says he will be carefully watching weekly oil data for any upticks in U.S. oil consumption. Oil consumption also has a direct correlation with GDP. Growth in oil consumption powers economic growth, Martenson explains, and “without growth in oil consumption, GDP growth doesn’t advance.”

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7 Comments

mobius's picture
mobius
Status: Silver Member (Offline)
Joined: May 18 2009
Posts: 160
Great Clip!

I'm a fan of Chris, & (gents, this is a lady writing) I'm a fan of Lauren...

I've taken some defensive action in the penultimate week of March (which I'm glad I did) & I do have a sense that the EU markets over-reacted on the positive side (that is went up) to counter-balance the Cyprus fiasco.  Or the went up as a result of money coming our to Cyprus and entering the market. 

I certainly have a sense that the central banks will be watching Japan as they try to lure saved cash into spending & I do expect some drum beating in the EU media outlets to reflect this.  "Buy now before your EURO's decrease in value!"

My question :  When will you be taking the Peak Prosperity Show to continental Europe???

Greetings!  Joanne

 

Quercus bicolor's picture
Quercus bicolor
Status: Gold Member (Offline)
Joined: Mar 19 2008
Posts: 456
Part II Speculation

Great interview Chris,

I'm betting in part II you'll mention the "tricks" behind those articles a month of so back claiming the U.S. surpassed Saudi Arabia in oil production: including not accounting for the significantly lower energy content per barrel for natural gas liquids and ethanol, and ignorning the very significant fraction of ethanol's energy content used up by the inputs to farming, and processing the corn into ethanol. 

I hope I'm right.

MAV's picture
MAV
Status: Member (Offline)
Joined: Oct 7 2008
Posts: 12
Comments on the Yahoo site

There are A LOT of clueless comments on the Yahoo page under the interview.

Fun (and frightening) to read thoughts about this topic from a more general audience.  And they are still the people interested enough in the economy to visit the Yahoo Finance site.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5569
The Yahoo Copy Is Off Target

In the copy below the interview, there are numerous errors which, unfortunately, is par for the course in energy reporting in the US these days.

Two examples:

"Brent crude oil was trading above $105 a barrel on Tuesday. U.S. oil prices hit an eight-month low last Friday."

No, US oil prices did not even hit a one month low on Friday.

 

"In 2012 U.S. oil production rose by 790,000 barrels per day, the largest annual increase since 1859. The Energy Information Administration (EIA) estimates that domestic oil production will rise to 815,000 barrels a day in 2012, a new record."

I'm not even sure what's being expressed here but whatever the angle it's wrong.  The first sentence correctly identifies that in 2012 oil production rose by 790kbd which is correct, and it was a record.  The next sentence says that oil will rise to 815kbd in 2012 which both contradicts the earlier sentence and, even if we spot them a typo and change the 2012 to 2013, still does not make sense because US oil production is over 7,000 kbd.

Not a hard thing to identify and correct, but if the commenters below the article are confused that's understandable.... I am not sure why energy reporting suffers from such goofy mistakes more often than other reporting, perhaps it's because math and numbers are involved, but it's a real struggle to find mistake free articles out there.

Other  places of confusion include mixing up reserves and resources, interchanging depletion and decline rates, and failing to note the different energy contents and end uses of various petroleum products.

Rector's picture
Rector
Status: Gold Member (Offline)
Joined: Feb 7 2010
Posts: 490
The general public doesn't believe you anyway.

Sadly when I talk to people about oil, energy, and its effects on the economy I get one of three responses:

1.  Peak oil is just a theory akin to "conspiracy theories" promulgated by kooks.  "Nothing bad happened to me yesterday so I'm good!"

2.  "America is on the verge of a new energy revolution and energy independence."  Full Stop.  No other analysis required.

3.  "Oil consumption is killing the planet through CO2 emmissions.  Wanna go to WalMart?"

4.  Did you see Dancing with the Stars?

Rector

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
I think there was a big shock

I think there was a big shock and loss of confidence in 2008 that would be different today knowing what we know now about the inclination of the Fed and other central banks to intervene; this may temper an overcorrection.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Gail Tverberg's Graph.

I pinched this graph from Gail Tverberg's Our finite World.

It shows the oil consumption of the PIIGS 

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