Private credit is about to crater, IMO.
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It’s a tough time and I’d suspect it’ll get worse sooner than later. I’m almost certain that the stock market and commodities market are just a propaganda tool. We’re certainly seeing cracks develop but the paper printing covers them up quickly. At the end of the day, the losers will lose and the winners will win. Everything requires faith, including waiting for the truth to emerge. It’s there already but they keep finding ways to hide it. Truth is eternal so they can’t win, it’s impossible given enough time.
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Un unmanaged decline of population and resource consumption after peak oil could spell civilisational collapse and be a real threat to the power structure. However… a managed decline… Pulling back a little on both those levers at the same time causes a clunk that buys a bit of time to reorganise systems and expectations. Think of the pullback on resource demand during lockdown in the countries with the greatest resource demand share. Could recent events be partially the latest iteration of the same
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It’s not going to be a case of “running out” for many decades…but it will be a case of “what price settles supply and demand?” With price and demand being the variables adjusted during a supply shortage.
Some demand can be nipped with higher prices, but petroleum demand for fuel (70% of a barrel) and other products (30%) tends to be what economists call “highly inelastic.”
Demand tends to be stubborn, so prices rise a lot more than for an elastic product. People still need to drive to work and trucks still need to move about.
So the price can rise quite quickly during a petroleum shortage.
It remains to be seen how long the Gulf shutdown lasts, but every day the Hormuz block lasts is another day closer to an oil price panic.
Rough calculations put that at about 60 to 90 days, or 2 to 3 months. Since the Strait has been closed for 6 days, make that 54 - 84 days. Even once the Straight is fully reopened, we’d have to expect it would take ~ 2 - 4 weeks to get everything turned back on and running again. So, realistically, the timeframe is 1.5 - 2.5 months
That’s the clock that’s ticking.
Right now, the ““markets”” tell us that the demand equation settles out at ~$90/bbl. In a couple of more weeks, that will probably be closer to $150/bbl. But if we make it all the way to the panic stage? Pick a number. $300? If it drags on for another 3-6 months after that? Pick a higher number.
And, oh, ‘demand destruction’ from higher prices is the same thing as saying ‘economic destruction’, so GDP is going to be taking its lumps on the head as this unfolds.
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If they collapse, movies and games will get better. Commercial rents will lower. Consolidation will reverse across industries. Good riddance.
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Would i be right in saying (and the implications are horrendous) that the demand destruction will come in the countries least able to afford it? So in competing for supply, we don’t have to out bid other western nations, but rather prices just have to rise enough that the poorer regions of the world just have to do without. Assuming they can absorb 20% of global loss. Can’t begin to imagine what that would be like to live through, this is brutal
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Yes, that’s accurate. Both across and within countries. The poor places and people get outbid.
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So food riots in the poorer countries. Will there be possibly be toppling of the government in those poor countries? Power vacuum to be filled or rather installed by whoever super powers of the world want to be in there?
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I’ve visited the place for a short holiday … It is a pretty amazing place to see in its full glory but quite obviously 100% dependant on cheap, abundant energy. The wasteage of water alone (fountains all over the place, green spaces everywhere, a huge golf course, massive indoor ski park, four massive water parks, huge aquarium in the Mall of Dubai), was breathtaking to see in a desert.
Both to use and to generate revenue. It’s going to be reverting into sand-covered desert ruins without it.
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I’ve just been arguing with a cretin on another forum who thinks that the UK will be relatively unaffected as Daddy Trump will make sure US produced oil and LNG flow to the UK. 
Meanwhile, petrol and diesel are shooting up in price at the pumps and home heating oil has just about doubled in price over the course of a week (at the tail end of winter, too…). There really is no arguing with some people out there, who are as dumb as a rock 
and whose heads overflow with mainstream media propaganda.
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ho hum another mideast war…not. I believe its is like calling ‘wolf’ enough times it is not getting everyones attention, yet. Every stop at the grocery store we see people deciding what they can afford to eat, ordinary working people, elderly, who are being blindsided by the predatory elites. Personally, we have been relatively lucky so far, and can weather the price effect, the absence effect, I think is coming, and will be more dislocating (and probably not short term). Inconspicuous consumption, will become necessary
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I visualize it as: price level is like water level and some economies (national, regional, local) are on higher ground than others.
As the waters rise, the low landers suffer first and worse. They lose access to resources and consequently rebel against their system, destabilizing the government. (Historically a critical threshold is whether the average person can work for a day and not make enough to pay for food; that often leads to revolution. )
Those on the high ground see higher prices but those with control of resources see greater income that offsets the rising costs.
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I know someone from UAE who married an American here. She said that every month her government deposits $ in her account. Even though she is residing in USA here. This was more than a decade ago. Lost touch with her so not sure if it’s true now.
Also spoke to someone from the Middle East with his son at the Children’s Hospital. We were there with our son. He said that his government paid for him and his son to get medical help in US which their local hospital does not offer. All expenses paid for including stay at nearby lodging for the whole month they are here.
So it seems the people are taken care of with that oil $.
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A couple friends asked me if I thought the economic turmoil would be as bad as Covid. I said that I thought it would be worse - more like the Great Financial Crisis. I told them that the western financial plumbing was weak to begin with, now it is getting a punch in the solar plexus. I expected - at the very least - a year to recover. In the meantime I told them to stay out of the markets.
It is worthwhile to note that the war in Ukraine was provoked since Russia was seen to be a “house of cards” just needing a push to cause it to collapse. The same thing was said about Iran. But actually, it is the Collective West that is a fragile “house of cards.”
And it is about to get one hell of a “push.”
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One of the most valuable framings I picked up from you is “from the outside in.” I’ll be watching the margins very closely as this thing goes forward.
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This is the exact model to keep in mind.
“The future has arrived. It’s just not evenly distributed.”
More succinctly: Local millage will vary.
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William Gibson’s novels are wrapped in “cyber” styling and details, but a consistent character is lopsided capital allocation versus the hero. Typically personified as a black card that buys any and everything it wants, the universal digital currency in wicked hands is a central theme and, well, I can’t see the fiction in that part of his science fiction.
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Yeperoo!
Thanks both for this, I was starting to get a bit like a rabbit in the headlights (living in a one bed in suburbs of a non-US city, a couple of attempts at balcony veg/herbs with suboptimal results, no realistic options to relocate) reading posts that have been making it sound like we’re due to drop into a scene out of Fallout/The Last Of Us. I think a lot of what’s coming will be down to mindset. I was able (and lucky maybe?) to spend some time with family out in Zim (end of the Mugabe era/farms getting taken over by ‘vets’ and destroyed) and the mentality out there was very much the WWII make do and mend, swapping goods/time/skills for other items. That’s probably what’s going to get most people; the relatively quick removal of their creature comforts whilst still having some access to electricity and water, and the mental adjustment (or lack of) to it.
As such the only real security available is a pair of eyeballs on a swivel, common sense and personal fitness (not mentioned anywhere here on PP that I’ve seen so far). With power/water being communal in cities it makes it difficult if not impossible to be modified and I wouldn’t trust the rain or river water.
Unless I’ve got this completely in the shallow end of the pool?