
What a World Without Oil Looks Like - kafkaesq
http://www.bloomberg.com/news/articles/2016-02-02/morgan-stanley-this-is-what-a-world-without-oil-looks-like
======
Lazare
The headline is very, very misleading.

What's being discussed here is not what a world without oil would look like,
but "what would the economy look like if we pretend the energy sector doesn't
exist, but we're still somehow getting oil from magical fairies".

If you were looking at the performance of the US economy lately and going
"huh, it keeps going up and down, but some of that is 'cause of oil prices
changing, what would it look like if they _hadn 't_?" then this is the article
for you.

If you were thinking about literally any other question (and especially the
question of what the world might look like without oil) then this will be a
puzzling waste of time; the payoff is just a graph of US industrial production
over time excluding the energy sector.

(Spoiler: Recent fall in oil prices has not been good for the energy sector,
but has been good for the rest of the economy, so if you pretend that the
energy sector doesn't exist, then the "economy" looks better. Also, if you
pretend that the unemployed don't exist, the unemployment rate is _amazing_.
On the other hand, if you pretend Canada doesn't exist, it raises some very
troubling concerns about maple syrup supplies. In other words, this is pretty
fucking pointless.)

~~~
Zigurd
It's not so useless. It's one exercise in why broad indices can be misleading.

Creating value in energy production is good, up to a point, and that point
depends on whether you are an exporter or not. But if energy becomes a too-
large part of the economy it does so at the expense of the rest of the
economy.

The same can be said about health care: Health is good. So spending on health
care is good. Until it exceeds what other nations pay to get the same health.
Similarly, a healthy financial sector is good, unless it drifts into excessive
financialization.

Illustrating how one economic sector becomes a vampire is useful because it
illustrates how raw GDP can hide vampires that suck the blood out of quality
of life.

~~~
ArkyBeagle
Who gets to say what "too big" is? I'd rather see a healthy energy sector than
the continued eclipsing of everything else by finance.

Health care will eat everything now anyway. Medicaid is going to be the real
estate purchaser of last resort - if you live long enough to outrun Medicare,
the State (not the Federal gov't ) will get your house. No amount of estate
planning will prevent it.

High energy prices could be quite useful right now - we'd seen actual _drops_
in measures proportional to carbon being added to the atmosphere. I'd rather
see that done in the market than by government fiat. It is just that
government fiat takes a couple-three generations to get calibrated.

And I have a really funny feeling about your "at the expense of the rest of
the economy". I didn't buy that in the 1980s and I don't buy it now. We're not
exactly seeing an explosion on consumer spending.

~~~
Zigurd
It is even more arbitrary to do it the way gdp is added up now: if plenty is
good, more must always be better, and always counts toward a larger gdp.

What's too much? That's why people study statistics, so they can spot the
outliers. 5x other similarly industrial nations is probably too much health
care spending. Draw the line at some mathematically defensible place.

------
roymurdock
Warning: autoplaying video w/ sound on.

Here is the main takeaway:

    
    
      YoY EPS Growth
      S&P 500 With Energy: -2%
      S&P 500 W/out Energy : 5%
    

_" We commonly hear that corporate earnings are 'rolling over,'" wrote the
analysts. "It may be more accurate to say that commodity sector earnings are
collapsing, while profits for the remainder of the market are still posting
moderate growth."_

These short Bloomberg pieces have truly perfected the art of explaining
nothing but looking like its explaining something, then slapping a clickbait
title on top of everything. They've stripped out 3 quotes from an analyst
report that they don't bother linking to, and tenuously tied together brief
blurbs on the industrial production index, EPS growth, and core inflation
without explaining any of them in a satisfactory manner.

~~~
tomc1985
> without explaining any of them in a satisfactory manner.

Welcome to finance...

Financial feels so full of decoy material, designed to keep minds weak and
preoccupied so the elites can do their thing without interference...

~~~
kaybe
Does anybody know better sources?

~~~
tomc1985
The hardest part is recognizing the good material from the bad. In my
experience its less about feeding for information from a single source, and
more about separating useful market information from stories full of chaff.

Advice can be tricky but IMO the best information are plain, boring whiteboard
lectures explaining investment fundamentals. (This guy, who I've enjoyed a few
of his tutorials, as one example:
[https://www.youtube.com/user/MoneyWeekVideos](https://www.youtube.com/user/MoneyWeekVideos))
I avoid fruity, feel-good financial gurus because I see a lot of the same
mannerisms and personality types as I encountered amongst the con artists in
the 'financial seminar' and MLM scenes.

Also, market commentaries from conservative brokerages are good for figuring
out the macro picture

------
crpatino
TL;DR If we just ignore the energy sector (and close our eyes very, very
tight), the economy looks rosier than ever.

~~~
ihsw
I think it's important to note that this intellectual exercise obviates the
fact that our reliance on energy resources is as dangerous to the environment
as it is to our economy.

~~~
douche
Do we need to have the obligatory comments on every story about the petro-
chemical sector that this is all _Very Bad For The Environment™_

"Resources exist to be consumed. And consumed they will be, if not by this
generation then by some future. By what right does this forgotten future seek
to deny us our birthright? None I say! Let us take what is ours, chew and eat
our fill."

\- CEO Nwabudike Morgan "The Ethics of Greed"

~~~
XorNot
Yes. Morgan's faction (all the factions really) were not meant to be healthy
desirable models of future civilization.

Americans who decry environmentalism and the EPA don't seem to be clamoring to
say "there's nothing wrong with Beijing's air"

~~~
mikeash
I've seen one or two saying that when the topic is brought up. None who have
actually been to Beijing, I think.

------
jchin
I clicked thinking it was about that 2007 augmented reality game by Jane
McGonigal.
[http://www.worldwithoutoil.org/metahome.htm](http://www.worldwithoutoil.org/metahome.htm)

------
erikb
Didn't understand at all how a world without oil looks like. How is the title
even connected to the article? The article talks about all these commodities,
including electricity and co, not just oil. And there is nothing about how any
world looks like it just describes how to analyse numbers differently.

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kmonsen
This is what the world looks like with abundant cheap oil, not what it looks
like without oil.

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exabrial
Yah, because we don't need plastics or synthetics. We don't need lubricants
for electric motors. We don't need coolant, we don't need lightweight
composites and we don't need solvents.

Where do you think all this stuff comes from?

~~~
jfoutz
Had a tough time finding the statistic, maybe it has changed a bit since 2009
[1]. It seems like those uses are a tiny fraction of what we use oil for.
Transportation is like 70% of the usage. 1 cent worth of lubricant turning
into 10 cents worth of lubricant doesn't seem like a big deal when you buy a
$10 electric motor.

Oil got expensive. People and industry got more efficient at using oil. Oil is
cheap. who cares? we're much more efficient at using oil. The painful part is
switching to 30mpg cars.

To put it another way, pre-boom you budget $100/month. gas gets expensive, and
turns out to be $200/month. People carpool, or turn down the thermostat, or
get a more efficient car, to get back to the $100/month budget. Gas prices,
fall so under the new system it's only $50/month.[2]

That $50 is nice, but not as nice as that $100 was painful.

[1]
[http://alternativeenergy.procon.org/view.resource.php?resour...](http://alternativeenergy.procon.org/view.resource.php?resourceID=001797)
[2]
[https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E...](https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=M)

~~~
exabrial
You're right! Much like helium, we burn away an important resource. It cracks
me up still we tax (non-fuel) uses of oil.

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dovdov
Coal it is then.

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kwoff
There seem to be a lot of bloomberg articles recently.

