Saildog

Crude Oil and Gasoline Prices: Like Déjà Vu All Over Again

This is article was written by somebody not well acquainted with oil production. All the usual stuff is in their about price, markets and technology; and its all rubbish, since oil production has already peaked. Now the rules are different. With a supply curve that is completely inelastic, price is determined by demand only; and that in turn is driven by economic activity. The oil price and economic activity will settle into a new relationship that will remain tightly bound. As oil production drifts down and absorbs ever more inputs, our economies will shrink accordingly. Of course it will be patchy and variable around the world. Some places with energy resources will do better and others without will do worse. But overall, Business As Usual is finished. Welcome to The Longest Recession.

Global Populations to Accelerate Demands for Fossil Fuels, Renewable Energy

Unfortunately no combination of nuclear, corn, used french fry oil, wind, "clean coal" (stupid oxymoron) or any other "source" of energy can replace oil.

Efficiency and conservation will help a lot, but the greatest danger comes from the markets. How will the capital markets react to high prices?

Hidden Risk for Canadian Oil Sands: Environmentalism

With and EROI of 3 at maximum oil from tar is not really a viable source of energy. It is dependent on conventional oil (supporting the economy more generally) and gas directly. If these two commodities are ever revalued the tar sands industry will die. In the mean time the environmental cost is horrific.

Some of the posters above equate environmentalism with anti-capitalism. No doubt the there are some environmentalists who are socialists. But environmentalists care about the environment, they are not usually arguing against the economy per se. They argue that just because something hasn't been monetized that it means that it is free. If the environmental costs of the oil from tar sands operations were fully internalized it is very doubtful that the operation would exist at all. No capitalist can argue that costs shouldn't be internalized; and the costs can be determined reasonably accurately using techniques such as contingent valuation. They just aren't being counted right now.

Higher Gas Costs Lead to Consumer Pullback, Even as Spending Rises

Well, there is a surprise!

Welcome to the world post Peak Oil folks. Oil prices will kill off recovery - for ever.

Obama's Energy Bill: A Recipe for Economic Destruction

Oh Dear

Gerard Jackson has crawled out from under his stone. The real issue here is that Jackson thinks Global Warming "is garbage". He also thinks Peak Oil "is garbage".

Both are real risks that need proper management. Obama's bill is a long way from perfect, but it is a start at attempting to deal with an energy crisis that is all too real, whatever Jackson and his band of Austrian school economists think.

His arrogance is breathtaking. The academies of science of all the G8 nations and of India and China have endorsed Global Warming theory and called for rapid action. Just who does he think he is?

Oil Volatility Will Keep Killing the Economy in Waves

The most sensible comment I have yet seen from outside the Peak Oil community. This man "gets it", he clearly understand the thermodynamic and scalability issues we face.

Where it is perhaps weak is on the political and economic fronts. The fossil fuel lobby will kill this and the economy will never recover because the oil trap has sprung and we can't get out. Lower prices mean less investment, a better economy means higher prices, but that kills the economy and we revert to lower prices. The last sentence implies a cyclical economic pattern, but I doubt we will even get that.

We need both an energy and a financial surplus to achieve this. Now we have neither and we never will. Maybe it can be done. I will not be holding my breath. On the other hand if a major new oil province is found in a friendly place maybe we will be clever enough to use it wisely. Again, I am not going to hold my breath.

Rising Oil Price Could Slow or Kill Economic Recovery

I agree on the low hanging fruit theory. But increasing supply from the harder to get fruit is more expensive in both monetary and energy terms.

NG certainly can/will substitute for oil, but is less energy dense, is less transportable, will require a new distribution network and anyway is subject to its own peak. Just ask the UK. In addition it will not substitute well for diesel and jet fuel, and is also required for fertlizer production.

However it is not the physical limitations that worry me. It is the impact of high energy prices in the economy and the consequent problems in the capital markets. I am concerned that our current complex economy is not viable without cheap and growing supplies of energy.

At a macro level if a greater and greater proportion of economic output is devoted to procuring energy, less is available for reinvestment. And this most certainly will stifle growth!

That is unless we get real smart real quickly. But I see no evidence
of that.


On Apr 10 10:55 PM old trader wrote:

> Saildog,
>
> No, I don't think that oil is "just another commodity", and recognise
> that there're many factors that play into its pricing. I am a believer
> in what is currently termed the "Peak cheap oil" theory...i.e., all
> the low hanging fruit has been plucked from the tree, and additional
> supply will cost increasing more.
>
> I also find it a bit puzzling as to why NG for use as transport fuel
> is not visible on the radar scream of oil dependency solutions, since
> its old, proven technology, with definite green benefits, in terms
> of pollution.

Rising Oil Price Could Slow or Kill Economic Recovery

Old trader - it seems your view is that oil is just another commodity that the world holds an infinite supply of. Not so. Oil is all about physical flows and these are impacted not just by geology, but also by economics, politics and several other factors such as an aging workforce and obsolete plant.

Then there is the interaction between what is a vital commodity with a wholly inelastic supply curve (higher prices do NOT equal more supply) and the capital markets. The higher prices last year (along with lax banking regulation) led directly to this recession/depression. It is unlikely production will ever exceed levels achieved since Q4 2004. According to Liebigs law of the minimum oil is now the limiting factor. Our economies will languish in lock-step with oils decline.

That is unless we get real smart real quickly. But I see no evidence of that. And BTW I am no tree-hugger.


On Apr 10 10:08 AM old trader wrote:

> Btw, before I get jumped on by the tree-huggers who believe alternative
> energy is the only answer, please recall that most, if not all, "green"
> alternatives are only economically viable when compared to higher
> oil prices. Do some reading, and it isn't hard to see how many projects
> have been scaled back/put on hold because they're not profitable
> when oil is at $40/bbl. (unless they receive heavy government incentives).

Rising Oil Price Could Slow or Kill Economic Recovery

There is a great deal of assumption in here based on the thinnist of thin evidence.

1. The current rally is a bear suckers rally. A major down-leg is due in the autumn.

2. There is nothing wrong with economic growth per se; however economic growth based on ever increasing resource use (especially oil) is finished.

The world is rapidly moving toward zero or negative population growth, the reduction and rapid elimination of fossil fuel use; and relocalization. We still have some time to mitigate the pain of this transition, but it is rapidly disappearing. The later we leave things the worse the transition will be.

Spending what little time and wealth we have left on propping up the banks, AIG and GM is wasted effort.

Our remaining resources could be used to build a vibrant economy that is based on conservation, renewable energy and rearranging our living arrangements around highly local concepts - walk/ride to work, local food and factories and more close knit communities.

Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

The article would have been better had the author learned something about energy.

Why Are Gas Prices Still So High?

I am always amazed by how people irrationally explain oil prices. Go back to school and do Econ 101, especially elasticity. It really isn't difficult.

Iraq Production, Conservation Could Keep Oil Price in Check for Years

I am not so sure a distinction between "in ground" and above ground factors is relevant or even appropriate. "Above ground factors" are almost certain reinforcing feedbacks from the "in ground" reality that production has peaked.

Iraq, the major topic of the piece is itself the prime example of such a feedback. The US does not invade China over its aggression in Tibet, or Zimbabwe because Mugabe is a a worse despot than Saddam. The US invaded Iraq because of oil. It's own oil of course, but also because Iraq sits neatly between Saudi and Iran, both odious and unstable but oil rich regimes.

The American mistake was to assume that stability could be quickly and easily imposed.

Oil Futures Market: Unwinding the Bubble

Alex - this article is bunk. The reason for oils price volatility is the almost perfectly inelastic supply and demand curves (even in this very wide price band). Demand has contracted and the price has imploded.

You clearly know nothing about production. Go and read up some stats. Find out what the export land model means. Go and study the mega projects list. Learn what the implications of the IEA's 6.7% decline rates are. Understand the geopolitics of oil.

Wittering on about the price and the various costs of production is meaningless and adds nothing new to the debate.

Where Have All the Peak Oil Believers Gone?

Babak - you know nothing. That BP economist should be fired for making misleading statements.

Peak Oil is now a past tense term. Peak oil says nothing about price, only about flows. Price is one symptom of Peak Oil, and the fact that it has changed dramatically does not mean that the facts on the ground in the oil industry have changed beyond a sharp cut back in investment. Less oil is now produced every month and while production decline is relentless, it is hard and expensive to add new production.

The recession/depression we are entering is caused at least in part by Peak Oil (oil price spikes have preceded every recession since WW2). The high gas and food prices (themselves directly caused by Peak Oil) meant that people were less able to service their debt. That is at least partly why the sub prime mess started. Unlike the last major recession in the 1980's there is no new oil (such N.Sea or Prudhoe Bay) to help us power our way out of this one. So as JH Kunstler says this one will be "The Long Emergency".

We need to be thinking within the terms of a new paradigm: Zero or negative population growth, year on year reductions in resource use (we will get that anyway with oil, we do not have the choice to use more) and dramatic decreases in the size of our individual and collective environmental footprints. If we can manage <i>economic growth<i> within those constraints, all well and good.

One way or another we will do this anyway. We can choose to establish our living arrangements so that this is achieved with the minimum discomfort, or we can let nature impose her own limits on the parasite called <i>homo sapiens<i>. The latter course of action could see the human population decline to 1-2bn. The choice is ours.

The Great Oil Deception: Part Two

The other issue is that oil is becoming harder to find. Chevrons Jack find appaently cost $100m.

Brazil oil E&P will be extrordinarily expensive and the technology to drill it does not exist. New metals will need development and the cahllenge of lifting 100+ deg C oil through water at 4 deg C has not yet been addressed. I have no doubt all thes issues will be overcome, but it aint cheap.

So I accept the argumant that much of the cost is cyclical, but much is structural too. Brazil is a new oil province. Which is great, but it isn't Ghawar, that's for sure.