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Old 02-29-2012, 12:29 PM   #1
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Default Why American Oil Demand Is Irrelevant



From this article:

http://5minforecast.agorafinancial.c...ices-rising-2/
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Old 02-29-2012, 02:21 PM   #2
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That chart assumes a lot about China's economic future.
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Old 02-29-2012, 10:36 PM   #3
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Yes. Consider, though:

The Chinese passed the Japanese in car ownership, at 75 million, in late 2009 or early 2010.

As of late 2011, they were at 100 million total vehicles (http://www.chinaautoreview.com/pub/C...e.aspx?ID=6597), making the graph's estimates already too low.

The Chinese have resorted to restricting licenses with a lottery system in an attempt to slow acquisitions—and gridlock—in Beijing.

Chinese car ownership per capita is about the same as the US—in 1916.

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at $4,000 per capita GDP, auto ownership takes off, rising twice as fast as per capita income. This rapid motorization slows when GDP/person hits around $14,000 ... And China? Currently its per capita GDP is about $7,500.
http://www.freakonomics.com/2011/04/...uto-ownership/
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Old 02-29-2012, 11:25 PM   #4
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Does this count scooters/motorcycles and those three wheeled taxis they have running on kerosene (like india?)
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Old 02-29-2012, 11:49 PM   #5
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I get the trend. It still relies on China's economic growth continuing. That is not exactly a given.
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Old 02-29-2012, 11:59 PM   #6
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It does count three wheeled vehicles, but does not count motorcycles, scooters, work type trucks, or heavy haulers (18 wheelers in the US). As of a couple of years ago, there were in fact more trucks than cars in China. Automobiles, motorcycles, tractors, trailers, and other "motor vehicles" totaled 168 million in 2006 (of which 128 million were private vehicles), with the US figure at that time 250 million (more cars and fewer motorcycles, of course).

The above cobbled together from multiple sources, and probably wrong in some specific.
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Old 03-01-2012, 12:11 AM   #7
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Quote:
Originally Posted by Ought Six View Post
I get the trend. It still relies on China's economic growth continuing. That is not exactly a given.
With respect, you're missing the point. So Chinese growth slows from 8% to 6%, and the graph hits its mark 18 months later. The fix is still in, short of a worldwide depression, which is as possible as ever, of course.

Remember we are really using China as a proxy—China, India, Vietnam, Indonesia, all the rapidly growing, aspirational societies are beginning to get into that portion of their development when cars become attainable—and desirable. 3 billion people wanting the freedom of the road trump 300 million who already have it and think it costs a little too much.
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Old 03-01-2012, 12:29 AM   #8
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Originally Posted by dharma View Post
With respect, you're missing the point.
Nope. As I said, I get your point just fine.
----------
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So Chinese growth slows from 8% to 6%, and the graph hits its mark 18 months later. The fix is still in, short of a worldwide depression, which is as possible as ever, of course.

Remember we are really using China as a proxy—China, India, Vietnam, Indonesia, all the rapidly growing, aspirational societies are beginning to get into that portion of their development when cars become attainable—and desirable. 3 billion people wanting the freedom of the road trump 300 million who already have it and think it costs a little too much.
So barring the inevitable, it is inevitable.

Let me put it to you this way.... If this many people truly become upwardly mobile, demand for commodities is going to explode to horrific levels very quickly. There is not a chance in hell we can build out capacity that fast. That demand outstripping supply by nearly a full order of magnitude will obviously spike prices for everything to equally horrific levels equally quickly. How do you think our fragile global economy will stand up to that sort of pressure? You see, the very megagrowth scenario you propose contains within it the seeds of that which will destroy it, making its fruition, or anything remotely close to it, impossible.
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Old 03-01-2012, 01:07 AM   #9
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So prosperity is bad because it drives up prices? Which people can't afford, so everyone goes broke? Interesting economics.

Prosperity has never done that before. The wonderful thing about prosperity is that it almost always leads to more prosperity. What gets us into trouble is when governments take prosperity for granted and start dinking around with the mechanism. As I've pointed out elsewhere, technology, free markets, and the human spirit are such powerful positive forces that even when heavily hobbled by the sort of madness that passes for policy, well, just about everywhere, they still drag civilization along, onward and upward.

Need an example? China. Just a little freedom, and . . . voilà!

I have no doubt that commodities will get much more expensive. I've had no doubt about that for thirty years, and commodities, mainly oil and gas, have made me a decent living for a while now.

I also have no doubt that, though the cost may screw things up for a while for many, "the cure for high prices is high prices", as we say in the oil biz. Already, expensive oil is leading to the exploitation of cheap natural gas; soon enough, expensive electricity will lead to cheap and ubiquitous thorium reactors, expensive rare earth metals will lead to mining expansion outside of China (and eventually to substitutes), expensive steel will bow to carbon fiber, expensive mainframes will give way to fast desktop units (oops, that already happened), and so on. The British didn't crash when they ran out of trees; they started burning coal, and birthed the industrial revolution. That sort of thing tends to happen, given the chance.

I am not worried about too much prosperity leading to depression and ruin, any more than I am worried about too much happiness leading to suicide. The really big worries for the future are debt, entitlements, fiat currencies/inflation, regulation, erosion of human rights, religious fanaticism—all bugaboos that have nothing to do with markets and enterprise except insofar as they threaten to crush them.

Physical constraints? Bah. Government constraints? They may doom us all.
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Old 03-01-2012, 03:04 AM   #10
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Quote:
Originally Posted by dharma View Post
So prosperity is bad because it drives up prices? Which people can't afford, so everyone goes broke? Interesting economics.

Prosperity has never done that before. The wonderful thing about prosperity is that it almost always leads to more prosperity. What gets us into trouble is when governments take prosperity for granted and start dinking around with the mechanism. As I've pointed out elsewhere, technology, free markets, and the human spirit are such powerful positive forces that even when heavily hobbled by the sort of madness that passes for policy, well, just about everywhere, they still drag civilization along, onward and upward.

Need an example? China. Just a little freedom, and . . . voilà!

I have no doubt that commodities will get much more expensive. I've had no doubt about that for thirty years, and commodities, mainly oil and gas, have made me a decent living for a while now.

I also have no doubt that, though the cost may screw things up for a while for many, "the cure for high prices is high prices", as we say in the oil biz. Already, expensive oil is leading to the exploitation of cheap natural gas; soon enough, expensive electricity will lead to cheap and ubiquitous thorium reactors, expensive rare earth metals will lead to mining expansion outside of China (and eventually to substitutes), expensive steel will bow to carbon fiber, expensive mainframes will give way to fast desktop units (oops, that already happened), and so on. The British didn't crash when they ran out of trees; they started burning coal, and birthed the industrial revolution. That sort of thing tends to happen, given the chance.

I am not worried about too much prosperity leading to depression and ruin, any more than I am worried about too much happiness leading to suicide. The really big worries for the future are debt, entitlements, fiat currencies/inflation, regulation, erosion of human rights, religious fanaticism—all bugaboos that have nothing to do with markets and enterprise except insofar as they threaten to crush them.

Physical constraints? Bah. Government constraints? They may doom us all.
So you are going to pretend the fragile state of the global economy is a non-issue? And you are calling the the state-run, state-owned artificial Chinese economy true prosperity, borne of a free market; a solid, sustainable tide that will raise all boats? Sorry, but that is fantasy. China's corrupt cleptocracy will not deliver us from evil, because it is evil. It will collapse and take down everything else with it.
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* I have the right to my private property, thus I have the right to defend my property from thieves who would take it from me.
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* The only usable tools for these tasks are guns, and thus I have the right to shoot anyone who would take my guns from me.
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Old 03-01-2012, 12:32 PM   #11
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Quote:
Originally Posted by Ought Six
So you are going to pretend the fragile state of the global economy is a non-issue?
Not what I said, is it? Good heavens, bubba, as much as you complain about people misquoting you, should you be doing it?

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Originally Posted by Ought Six
And you are calling the the state-run, state-owned artificial Chinese economy true prosperity, borne of a free market; a solid, sustainable tide that will raise all boats?
Solidity is relative. We have a few problems with state interference here in the good ol' USA, you may recall—sufficient, in fact, that they are more likely to bring down the world economy than those of China, IMNSHO.

Yes, China's economy is riddled with corruption and state interference (http://www.bloomberg.com/news/2012-0...e-paupers.html). Yes, China's banking system, the fulcrum of its command economy, is an over-leveraged, malinvested, illiquid mess.

But: China's economy rests on the backs of a billion plus people who work very, very hard, save a third of their wages, have no debt, and want very badly to prosper. They are a powerful force, indeed, and they are not saddled with a parasite class comprising 50% of the population, with "entitlement" programs that cannot be paid for, with huge balance of trade deficits, with leaders who are abject fools.

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Originally Posted by Ought Six
China's corrupt kleptocracy will not deliver us from evil, because it is evil.
This is what really bugs you, yes? Well, me too. I don't believe in dictators. But, evil as they are, are they as evil as Mao? Are tens of millions working hard for low wages in the city worse than tens of millions starving to death in the countryside, or being summarily executed by fanatic teenagers? Are the Chinese people worse off, in all respects, than they were in the 60s? Is economic freedom without political freedom worse than no freedom at all? Give them time. Let them get rich, and then see whether they want freedom as well as wealth; I'm betting they will.

China has huge economic and social problems. So do we. Any combination of them may take the world down, and they may not. We shall see.
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Old 03-01-2012, 02:02 PM   #12
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April gasoline up 6 cents this morning...
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Old 03-01-2012, 02:07 PM   #13
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dh:

Over two-thirds of major China industry is directly owned by ruling Communist Party members, generals, the PLA, or families and cronies of same. I do not see such a system delivering free-market prosperity of any sort. They can prop it up for awhile, but I see its collapse as inevitable. YMMV.
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* I have the right to my private property, thus I have the right to defend my property from thieves who would take it from me.
* I have the right to self-determination, thus I have the right to defend my liberty from tyrants who would take it from me.
* The only usable tools for these tasks are guns, and thus I have the right to shoot anyone who would take my guns from me.
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