Re: "For oil executives, the experiences of the 1985 and 1998 price collapses remain a stronger influence than their belief that the world has entered a period of more expensive energy".

Lee Raymond, the chairman of Exxon Mobil, said in his recent Senate testimony. "In the energy industry," he said, "time is measured in decades."

Raymond said that Exxon Mobil was involved in a $13 billion project in eastern Siberia that began 10 years ago and is expected to produce for 40 years.

"All told, that's more than 50 years for one project," he said, adding, "Fifty years ago, Dwight Eisenhower was president." He might have added that this was before the U.S. interstate highway system was built and sport utility vehicles became the vehicle of choice.

Ah, Lee, this is the problem--aside from the fact that you are a reactionary asshole who has funded the climate change "skeptics" industry for about 10 years now.

So, I just don't get it. As far as we can tell, the oil majors have 8%-10% annual decline rates on existing production, their total production is dropping in the last few years in most cases, they have been having difficulty replacing reserves causing some (Shell) to cheat. How can they possibly be so sanguine? Bubba - help us out here...

I guess there are four possibilities. One, they are powerfully ignorant. Two, they are hopeless optimists. Three, we are nowhere near peak. Four, they are lying criminals who could very well cause a major panic by not preparing the public for the imminent price spike that they know will happen this winter.  Are there any other possibilities?

True. Just happened to be skimming through Stiglitz book on globalization. He talks about how the Asian Currency Crisis came before the dramatic 40% drop in prices in the late 90s. This could happen again.  

only a US financial meltdown, triggered by a housing bubble collapse and fannie mae insolvency, would be enough to decapitate the demand side of the equation and avert a massive price spike.

so which will it be, the end of dollar hegemony via housng bubble or peak oil?

I don't really care about the oil companies behavior.  I agree they do what seems to make them the most profit.

In my opinion it is almost criminal the way our policy makers in the U.S. are allowing the average consumer to think supply AND prices are going be in their favor.  As I have said before at this site.  You can tell people that energy is going to get scarce and expensive and they will grumble but make changes to their habits.

If how ever you let them (or activly encourage?) that supply will be very robust, in fact so robust that prices are going to come way down than people will change behaivor in that direction.  Which is where we are now in early December with everyone assuming the worst is behind us.  Most people I talk to are not aware what problems we will face if we have 3 months of sustained cold weather.  We will consume a lot more gasoiline, heating oil and NG than we have over the past 3 months.  

The heating bills are just starting to come in and they are 2x to 3x what they were last year BEFORE it got cold.  We are subzero now and expected to be there for weeks.  Bad things are about to happen.

The housing bubble is bursting now.  An actual popping sound may not be audible but the impacts of high energy prices as well as old news shortages are hitting everything that goes into houses.  In Edmonton, Alberta, gateway to the supposed saviour of the single driver assault vehicle culture, single family house construction costs have leaped upwards very fast. So fast in fact that many homebuilders have not been able to raise prices fast enough, forcing them to build the last two months worth of sales for much lower profit margins.  Concrete, steel, wood transportation and so on are all on the inflation list and further cost increases appear imminent.  A popular home model from one of Edmonton's largest builders went from about $168000 to $188000 overnight - and the profit margin stayed the same.

Much of this inflation data will not be reported publicly for months - I only know because of family links in the business...

Toll Brothers has recently announced a notable slowdown in sales, implying that at least the US market is pretty much sated, overstretched or both.  Edmonton builders compete continent wide for materials and Canada suplies the US with much of it construction material.  The indicator link is incontrovertible.

Is it completely clear that a housing price/currency collapse lead to a significant collapse in oil prices?  While it is a sure thing that discretionary energy usage will decrease as the economy slows it is not completely evident that this will lower prices to their 90s levels.  As any Kunstlerite will tell you, demand destruction potential will be tempered by the housing boom driven expansion of the average urban "wasteline".  

Also, "past performance does not necessarily indicate future performance."  The "post oil shock" price drops were definitely related to massive demand destruction but this combined with significant growth in daily production.  A scenario combining demand destruction with only marginal and short lived production increases, or declining production, is completely unprecendented (correct me if I'm wrong on this one).   China and India seem content to grow consumption of oil at todays prices - will 20% more expensive prices make a big difference?  Is it not possible that demand destruction in the West (US) will be rather quickly offset by demand growth in Asia.  Would this not play perfectly for the Chinese national strategy of securing a bigger piece of the world's resource pie?

Just because housing prices are leveling off doesn't mean a "housing bubble" is "bursting". An alternative model is that the rise in housing prices was a perfectly rational response to interest rates lower than we have seen in generations, which made housing much more affordable. Now that interest rates are rising it is natural that the situation will change.

Unlike tulips, houses have real intrinsic value. While some localized areas may see price corrections, on the whole people buy houses to live in them, and if their prices stop going up, they'll do just that. They'll hold onto them and live in them, and find some other way to make a quick buck than flipping houses.