Wednesday, March 18, 2009

 

Crude Must/Must Not Rise

The only way for governments, corporations, municipalities, and consumers — all of whom are up to their eyeballs in debt — to have any hope of all at servicing their debt is to have continuing high economic growth. Of course, oil is the key to growth, and that’s why OPEC recently decided not to make any more cuts, because they too realize how essential cheap oil is to world economic growth. Now we have a bear market rally, which is really only the faintest glimmer of hope, yet that has been enough to propel crude back up to $49. Dear reader, if oil jumps to near $50 on that alone, imagine what could happen if we really do have a comeback. So, to fuel economic growth, crude must not rise.

On the other hand, any regular visitor here knows also that current crude prices are too low to support enough exploration and development to replace oil reserves lost through depletion. To assure a continuing flow of oil, the price should approximately double.

The discerning already see the problem. Crude prices must rise, but they must not rise. Therefore, now is the moment that humanity must decide to “let go,” and abandon the perpetual-growth economy. More on this in the near future.



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