Category Archives: Peak Oil

What happens after the gold rush?

Random Thoughts

From Bloomberg Businessweek:

• THEM: Commodity prices are rising – “raw materials were up 9.6% in January” – while at the same time “wages remain under wraps, constrained by sky high unemployment.”

o ME: When exactly is this going to get better? It’s not. We are going to get poorer across the board.

• THEM: Janet Yellen – President of the San Francisco Federal Reserve – says it will take until at least 2013 for the economy to “recover.”

o ME: Can our cities and states take another three years of this? Taxes are going to have to go up, while at the same time services will have to come down. This at a time when more of our constrained income is going for commodities.

• THEM: College tuition has increased 92% in nine years. Twice as much as health care, three times more than food, and 100% more than the price of cars. At the same time, the income of college graduates has decreased 1% during those years! The only consolation is that college graduates have lower unemployment right now.

o ME: Is getting a traditional college degree worth it for most people? So much time and debt to gain what exactly? Certainly not the kinds of skills needed in a low energy, local world. And what about colleges? Lower enrollments will result from the growing awareness that it just isn’t worth it. THEN how much will tuition have to increase to keep the bloated colleges running? Either that, or there soon may be a whole lot of highly educated administrators and professors who will be out on the street. This can’t go on forever. The bubble is going to burst. Whoa be to cities that have put a lot of stock in being “recession proof” because of the presence of a college in their midst.

• THEM: “Business is powering the recovery” – Manufacturing added 21,000 new jobs in the last two months.

o ME: So this is the sign that a) the economy is picking right up, and b) it is businesses that will grow us out of the hole we are in, not consumer spending. There is so much wrong with this that I wont even try. Enough to say that the spinmeisters are just pulling stuff out of their asses in the hope to get confidence back into us.

From the Wall Street Journal:

• THEM: Front page March 12 – “Massive” Personal Bankruptcies will “Clear the Ground for Growth.”

o ME: I shit you not. This is how bad things really are: we are counting on people going bankrupt – stiffing their creditors – so that they will have more money to spend on consumer goods rather than paying back their debt. Who reads this shit and believes things are in anyway shape of form about to get better?

• THEM: Exxon’s existing oil fields are declining by a rate of 5% per year.

o ME: Exponentially, by the rule of 70, that means that within 14 years the company will be out of oil. But they are drilling like crazy to find new sources….but that is expected to only bring 1-2% per year on line. Now I’m not great at math, but it sure seems like they are not covering their depletion rates. So while they are adding, what they add will continue to get more and more expensive since it will become ever more valuable to them.

• THEM: “The economy is expected to grow steadily in 2010.”

o ME: Don’t you feel better?

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Uh Oh….Peak Oil Replay

The IEA says that this year oil demand will pass the previous high in 2007 – does anyone remember what happened right after that milestone?  Hint:  starts with a c….then has an r….then an a…. an s…finally an h. 

This is it.  The U.S. economy cannot take this.  Folks, I am not making this stuff up.  

Global oil demand seen higher in 2010

IEA lifts 2010 oil demand forecast as surging Chinese growth offsets flagging OECD demand

ap

Greg Keller, AP Business Writer, On Friday March 12, 2010, 7:56 am

PARIS (AP) — World oil demand will rise this year due to surging economic activity in Asian countries, especially China, the International Energy Agency said Friday as it bumped up its forecasts.

The Paris-based IEA, which advises oil-consuming countries, predicted in its monthly report that oil demand will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than in 2009.

The IEA’s previous report, in February, had estimated daily demand in 2010 of 86.5 million barrels. The estimate for 2009 was revised upwards to 85 million barrels a day.

The agency said that after five consecutive quarters of decline, “the latest data confirm that global oil demand resumed growth on a yearly basis in the fourth quarter of 2009.”

Oil demand in developed economies will fall 0.3 percent in 2010, but this will be offset by higher demand in Asia, the IEA said.

“China is currently expected to account for almost a third of global oil demand growth in 2010,” the IEA said.

Global oil demand fell 1.4 percent last year compared to 2008, as the Great Recession caused oil demand in OECD countries to drop by the biggest amount since the early 1980s.

While oil demand in OECD countries is seen contracting in 2010 for the fifth consecutive year, growth in developing countries is more than picking up the slack, the IEA said.

“This year’s global oil demand growth will be driven entirely by non-OECD countries, with non-OECD Asia alone representing over half of total growth,” the IEA said.

Global oil demand hit an all-time peak in 2007 at 86.5 million barrels a day.

This year’s rebound is forecast to be driven by China, where the IEA said preliminary data indicated that demand “surged by an astonishing 28 percent year-on-year in January.”

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The Economic Effects of Peak Oil

Very nice piece below explaining clearly the economic impact that peak oil will have on us:a permanent state of increasing depression.Without cheap energy to fuel the growth that is hoped to pay off the accumulated debt, austerity will become an everyday reality, not a short-term fix. A reality that slowly sinks in for the rest of our lives, as net (oil) importers become progressively poorer.

This is an investment adviser, not some enviro nut with an axe to grind.  In the article there is a link to investments he recommends – he sees money to be made in the transition times we are in.

That said, this is just one more alarm sounding that we must begin relocalizing.  We must disconnect from the global economy, we must begin a serious local food system, we must use our “creative class” to help us with how best to relocalize our economy, and we must be making energy descent plans.  And this is a very large reason why I am so pleased with the Legacy Projects and the way the community has engaged around them – these are ways that we can improve our quality of life – which is vital.

(but ok, I think the mass of our leaders and population will simply go around with smiles on their faces and their positive attitudes waiting passively for “recovery.”)

And as you may remember, I’ve written about “peak demand” a lot over the last month or so.  This article makes the point that we will indeed reach peak demand, but it will be rationing by price. We will not use any more oil simply because we can’t afford to, not because we don’t want to:

‘Peak Demand,’ Yes, But Not the Nice Kind

by Chris Nelder

“For Energy and Capital last week, I explained why the “peak demand” argument is a good one–but not for the nice reasons.

Why there will be no recovery

When oil crossed $120 a barrel for the first time in May 2008, oil cornucopians knew they were in trouble. Prices had quadrupled in just five years, yet had failed to bring new production online. Regular crude had flatlined around 74 million barrels per day (mbpd). The case for peak oil was looking stronger with every new uptick in crude futures.

The following month, prominent peak oil critic and cornucopian Daniel Yergin of IHS-CERA changed his stance: The peak oil threat would be neutralized by peak demand. Gasoline consumption had peaked in the U.S. and Europe, he argued, due to the combined effects of increasing efficiency, biofuels, and the recession.

In 2009 the peak demand story seemed confirmed, as prices stabilized around $70 in June, and U.S. consumption remained well off its previous high. Most people thought the nearly 2 mbpd decline in U.S. petroleum demand from 2007 through 2009 owed to efficiency and people driving less.

In reality, only about 15% owed to reduced gasoline demand. The other 85% was lost in the commercial and industrial sector: jet fuel, distillates (including diesel), kerosene, petrochemical feedstocks, lubricants, waxes, petroleum coke, asphalt and road oil, and other miscellaneous products.

Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world’s most developed economies to shrink. At $147, it wreaked serious damage.

As I explained in “Investment Themes for the Next Decade,” the new normal will be cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing, only to bump our heads against the ceiling once more.

Scooters Will Kill SUVs

Two interesting news stories crossed the wire this week, which portend badly for the world’s #1 net importer, the U.S. Continue reading

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Here’s a Challenge for You

I need you to tell me the opposite viewpoint of mine. 

Mine is that we are in the worst economic times in 75 years and yet the price of oil is the highest it’s been since the spike of ’08.    How can this be?  Shouldn’t the price have come down, because we know that demand is down? 

Instead, the price is rising right now.  The mainstream press says it’s rising because of shaky hopeful economic news from the U.S.  And if the U.S. economy has at least stopped hemorrhaging, that means that other countries will pick up too. 

But look around, in Lexington yesterday 2,600 people lined up for 100 temporary jobs.  Do YOU think things are getting better? So if they are not, why is the price of oil rising?  

My bottom line:  we’ve reached peak oil, which has caused – even during the deepest recession – the price of oil to remain far above where it’s ever been.  And all it will take is “green shoots” or the “nascent” recovery to take hold here in the U.S. and oil goes back through the roof. 

The chart below shows the pattern we are now in.  Economic “growth” leads to higher oil prices, which leads to recession, which drops prices, which leads to “economic growth,” which leads to higher oil prices, which leads to recession, ad infinitum…….

The only other way I could explain this is that oil producers could say: “we aren’t pumping all we can now because demand is too low.”  If that’s the case, then when the economy “recovers,” they will simply start pumping more, flooding the world with oil, thus reducing it’s price.

Here’s what I don’t understand:  Why, if during the worst demand climate in forever, are prices so high?  And how on earth will they come down when demand increases?

Peak oil is all about price. 

Look at this chart and consider the current economic situation and tell me how oil is over $80 a barrel.   What do you think is happening?

Weekly All Countries Spot Price FOB Weighted by Estimated Export Volume  (Dollars per Barrel)

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“Growth” v. “Development”

This is a GREAT explanation of the situation we find ourselves in.  Lexingtonians should watch this.

Dr. Dennis Meadows is one of the authors of Limits to Growth. Dr. Meadows made this video in Davos, Switzerland in September 2009, when he was there to participate in the World Resources Forum.

In the video, Dr. Meadows talks about economic growth, peak oil, and the possibility of collapse.

 

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Peak Oil TidBits

The Wall Street Journal had an interesting article about the price of oil on March 4th.   The point of the article was that the oil futures market, which gauges the price of oil for delivery in 12 months, is showing that 12 months from now traders expect a tight market.  The discount for contracting now to buy oil a year from now is dwindling.  The trend shows that the discount is nearing $0, essentially meaning that it doesn’t save you any money to buy it now.  If it passes $0, then the effect would be that you will pay more NOW for oil in 12 months than you would today.

The writer is puzzled as to how this could be.  The article states that there are 60 million barrels of surplus in the world.  The implication is that these 60 million barrels should be enough to tide us over, thus there isn’t any real reason that anyone should be expecting a tight market.

Yet the world uses approximately 85 million barrels of oil per day; 60 million isn’t even a day’s supply.  And, it appears conveniently, the author chooses to confuse what’s happening now with what is expected to happen 12 months from now.

There should be no confusion:  the market understands that supplies are tightening even at a time when demand is dropping in the U.S., by far the world’s largest petroleum consumer.   If there is  any chance of an economic “recovery’ in this country, oil demand will have to pick up.  Increased demand and constrained supplies will equal rapidly increasing prices.  That’s what is driving the futures market.  http://times.busytrade.com/6089/2/The_Oil_Market_Is_Throwing_a_Curve.html

Our friend Jeff Rubin (Your World is About to Get A Whole Lot Smaller) has a great commentary out this week:  “We’re all PIGS now.”  Simply put, it’s not just European governments that are in a serious debt situation.  Here in the U.S., and even Canada, we’ve been borrowing WAY too much and that government spending by necessity will come crashing down.   “…actually paring those deficits down is a whole other matter. For the economy, it is tantamount to taking one’s foot off a floored accelerator, suddenly slamming on the brakes, and then keeping them on at full force for years to come.” The dreams of life as we knew it will end with that.

We borrowed too much to bail out financial institutions.  But this was the wrong cure:  in his words, “we mistook an energy shock for a financial crisis.  Today’s bailouts are tomorrow’s spending cuts.”

http://www.jeffrubinssmallerworld.com/2010/03/03/we%E2%80%99re-all-pigs-now/

All this sounds like peak fucking oil to me.

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Peak Oil and the Economy

This is a very good article that explains simply the relationship between oil consumption and our economic health. Basically, the more we use, the stronger the economy. The less we use, the weaker.

It’s interesting to note that our oil use is the same as it was in 1998, despite 20 million more people. This corresponds perfectly with the fact that our economy hasn’t grown during that time either.

Folks, we are in the peak oil time. The economy as we knew is over. No amount of stimulus, or wishful thinking, will get it back.

By Dr. Stephen Leeb:

“The two most important developments that came to light this past weekend both occurred within the energy sector, a sector which is also a key indicator of economic health.

On the global level, we had a report that oil consumption in the U.S. fell in January to its lowest level since 1998. We can interpret this drop in several ways.

Most of the recent decline came in the demand for distillates, including diesel fuel. Diesel fuel, which is used in trucking, railways, and other forms of mass transit, is particularly sensitive to economic activity. The more goods we produce, the more transportation fuel gets consumed and vice versa. In fact, UCLA has recently created a Pulse of Commerce Index based on real-time diesel consumption by the American trucking industry.

Diesel consumption has a very good record as an indicator of industrial production. Unfortunately, this means the drop in January’s consumption figures suggests that industrial output is slowing as well.

To be fair, the 3-month moving average for this index is considered more reliable than the monthly data, and the 3-month MA is up. December saw a big increase in consumption, so perhaps January’s dip is really just a brief correction. Nonetheless, another drop in February would call the U.S. economic recovery into question.

Looking at the longer-term data, the flat-lining of energy demand confirms that the U.S. economy has not grown much over the past decade. Even allowing for conservation, a 12-year period of no growth is unprecedented. Indeed, there is even the possibility that growth in America, however measly, has been overstated.

However, despite this lack of U.S. growth, oil has been on a tear. In 1998, oil sold for around $14 a barrel. Since then, oil prices have risen fivefold. Why such a huge move if demand hasn’t been growing?

(Incidentally, we recognize that oil is well below the high it set in 2008. It’s also well above its low for that year. Commodity prices can sometimes get ahead of themselves and be subject to oversized corrections. But the long-term trend has been undeniably up.)

The rise in oil prices from $14 to $80 price, despite weak U.S. consumption, sends us an important message: U.S. demand is no longer the key driver of oil prices. Instead, oil prices are being driven by demand elsewhere in the world.

It is not surprising, therefore, that the U.S. seems to be losing some of its clout with the biggest oil producers. For example, we are no longer Saudi Arabia’s most important trading partner. That place of honor has gone to China, which now imports more Saudi oil than the U.S. and is therefore more important to the Saudi economy. This change could have profound implications for the U.S. Dollar.”

http://seekingalpha.com/article/190095-a-long-term-look-at-energy-demand-and-a-great-oil-bargain?source=article_sb_popular

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What Really is Our Most Important Issue?

Last night, Lexington mayoral candidates assembled for a debate. All the  candidates agreed that economic development – creating jobs – is the most important thing facing Lexington in the next four years.

Since Lexington’s city government is payroll tax dependent that makes sense – as increase in jobs should theoretically increase the tax base (unless they are low wage service jobs, in which case people are likely to demand more in services than they pay in taxes – we’ve got lots of those) .  Anyway, the theory is that increasing jobs will allow us to keep acceptable levels of government service.   Of course, it doesn’t hurt elected officials at election time to be pro jobs either.

But what if?

What if the biggest issue facing Lexington is not jobs? What if the biggest issue facing Lexington was energy descent? What if the price of oil, and consequently, the price of everything that surrounds us, was to increase rapidly and enormously? Jobs wouldn’t be the number one issue then, would it?

(And don’t call me doom and gloom! I’m just reporting what Toyota, Great Britain, the major oil companies, the American military, Warren Buffet and others are saying or doing – this isn’t me sitting in my basement – well I am doing that – but I’m not making this shit up)

If that we’re true, you know what would be the number one issue? Take your pick: Food security. Alternative transportation. Energy efficiency in buildings and homes. Free falling government revenues. Commercial collapse. Sharp population losses, or gains. Safety.  Feel free to add yours.

Debating jobs is a luxury at this point in time. Lexington is in no way prepared to have some sort of “jobs revival.” Global forces will conspire to keep that from happening. Until we decouple from the global economy, we will have no power over jobs in a conventional sense. For our candidates, all smart, sincere people, to be arguing over being the “jobs candidate” is silly. It ain’t happening. It’s just empty. (For example,the bureau of Labor statistics data shows that in December 2009 there were 2,500 LESS jobs in the metro compared with December 1999!    This is despite adding over 20,000 new people to the regional labor force.  A truly lost decade. See the numbers here:  http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LAUMT21304605&data_tool=XGtable)

Preparation is the biggest issue facing Lexington. We know what’s coming. We shouldn’t be wasting our time debating “jobs.” We need to be creating resilience. And the great thing is that jobs will come with the purpose of resilience.

Creating resilience means relocalizing our economy, from food to fiber to finance. Creating resilience means ending the hostage situation we are in with oil. Creating resilience means adapting to a new climate.

This is not a social, environmental, or personal “values” debate. Reality isn’t political. What is happening is happening. It isn’t Democrat or Republican or liberal or conservative. We can use those frames of reference when we debate about creating resilience – oh what debates those will be! What we can’t waste time on is debating reality.

We will be the least vulnerable to the shit that’s coming down when we are the most self-reliant. This strategy is at once the most deeply conservative – the preservation of our place – as well as the most populist – we’re all in this together. And the great thing is, resilience is something that can be accomplished during the intervals between election cycles and as well it will offer true hope and optimism to our community.

The politician that gets this will be the one rewarded with a landslide. He or she better be ready to move once they get it.  We deserve the best.  Let’s get it.

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Peak Oil: MORE Peak Demand BS

(painting Zero Sum Game by Michael Fajans)

The mainstream media cannot get its mind around peak oil – probably because mainstream people cannot. Each mirrors the other. So, the media reaches for other explanations about why things are changing in front of our eyes. They find people in the oil industry who know that things are going to get radically different because of extremely expensive oil, but who explain it almost as a choice we are making. That somehow we will demand less – and that our lower demand will be the reason that less oil is produced. Less oil = higher prices. 

To explain it as a supply issue would be to admit that it is really going to happen – that the ground can’t keep up. And to them, that is really bad news – and who wants to be the bearer of bad news?

From the New York Times By JAD MOUAWAD

Published: February 15, 2010:

“This year, the International Energy Agency expects oil demand to grow by 1.4 million barrels a day, to 86.3 million barrels a day, or 1.7 percent higher than last year, mostly reversing a drop of 1.3 million barrels a day in 2009 and 300,000 barrels a day the previous year.”

“But none of this expected growth will come from consumers in the United States, Europe and Japan. For industrialized nations, which account for 60 percent of global oil demand, energy-saving measures, government subsidies for renewable fuels and declining populations mean that oil demand is unlikely ever to grow again.”
 
 “We’ve really hit peak demand in developed nations, and so the name of the game now is China,” said Daniel Yergin, the chairman of IHS Cambridge Energy Research Associates. “In terms of the dynamism of the market, the vector of demand will be China and the dynamo of supplies is Iraq.”

Remember, demand and supply are always equal. What this is telling us is that supply cannot keep up with our demand, so we will adjust our demand downward accordingly. Forget the bullshit about our declining population – we are projected to add 120 million new people by 2050. Forget the bullshit about how we are adopting energy saving measures – what exactly? I’ve never heard of any measures, other than requiring new cars to get a few miles to the gallon better. Forget the bullshit about government subsidies for renewable fuels – when was the last time you put a renwable fuel in your tank, or used a renewable to heat your house?

Remember, demand and supply are always equal. So we can take this sentence, “…oil demand is unlikely ever to grow again” and rewrite it thus: “…oil supply is unlikely ever to grow again.”

See how easy it is to read peak oil clearly?

And the bullshit about “China being the vector of demand?” And that Iraq will supply China? Even the article itself says that ain’t going to happen. “The (Iraqi) government aims to raise output rapidly and to rival Saudi Arabia by the end of the decade, with production increasing to 12 million barrels a day, from about 2.4 million barrels a day currently. Petroleum executives do not believe in this optimistic scenario. In private, they point to Iraq’s lack of pipeline infrastructure and export terminal capacity to accommodate such a rapid growth, and a shortage of workers with the skills to sustain the planned ramp-up in production. And though the security environment has been getting better, there remains huge uncertainty about the country’s political stability.”

All that is saying is that China, and others, including us, will help to drive the price of oil sky high over the next couple of years. Because if our demand is constrained by supply, then theirs will be too. And more people competing for a scarce resource means higher prices. To quote Dave Cohen: “Here’s the deal. Once we run through the current spare capacity, the oil supply then and for the rest of your life is essentially a Zero Sum Game. If China uses more, someone else must use less.”

Lexingtonians, get ready. Within a few years, we will see an enormous increase in basic costs in our daily life. This huge spike in costs will cause an even deeper recession, meaning more job losses – among many other losses. Job losses will drive down average wages. So at the same time things are getting more expensive, we will earn less.

What are our adaptation plans?

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Solutions Aren’t the Answer

Here’s the thing about peak oil: it’s not that we are running out of oil, but rather that because oil is now getting more scarce every day, it will become much more expensive. And it’s the expense that will get us – every single thing we’ve done in this country is predicated on cheap energy. When energy gets too expensive, our lifestyle becomes unsustainable. That’s when a new way of living will be forced on us. I think we should take control now and not let us get dictated to.

When I hear about plans for alternative energy that will somehow enable us to keep our lifestyle going, I immediately get suspicious. Lately, one of my peak oil gurus, Houston energy investment banker Matt Simmons – a long time peak oil prophet – has created a new energy alternative: ammonia

The basic premise is this: in order to create a fuel that can be burned in cars but with a supposedly smaller footprint , (from Forbes magazine) Simmons plans to:

  1. Build the world’s biggest windfarm off the windy coast of Maine;
  2. Use the electricity generated to desalinate and de-ionize sea water;
  3. Use that water, plus electricity and air, to manufacture ammonia;
  4. Pipe the ammonia to shore and use it to power a new generation of cars.

Simmons is also thinking about turning oil platforms in the Gulf of Mexico into windfarms to do the same thing.

The whole point of the using wind energy is to eliminate the carbon footprint. Ammonia can be made with any source of energy, but it kind of defeats the purpose to use carbon-based forms.

I am in no way a scientist, but it does seem that there could be personal and global drawbacks to using ammonia as a fuel for vehicles. Be that as it may, I do know enough to know that it will be extremely expensive. The cost of creating the first windfarm is estimated at $25 billion in today’s dollars. Then there is the storage, transportation, and transmission of the Ammonia fuel. Ammonia is very dangerous if not handled properly – so lots of costs there. Then there is the issue of having EVERY SINGLE vehicle on the road retrofitted to burn Ammonia instead of gas or diesel.

All this adds up to lots of doe ray me. Yeah, its possible, but can we afford it is another question. This smacks like more of the old “we can’t handle anything different that what we’ve known over the last 60 years . We’ve got to keep it going!” I don’t think we’ll ever be able to keep our lifestyle going on expensive ammonia – and I don’t think there is any economy of scale that can make it cheap enough. To paraphrase Jim Kunstler, this sounds like trying to sustain the unsustainable.

I respect Matt Simmons, he’s trying to find solutions. But I also understand that maybe in this day and age, solutions aren’t the answer. Acceptance and adaptation is. What do you think?

 Read: http://blogs.forbes.com/energysource/2010/02/10/peak-oil-solution-the-simmons-plan/

http://www.oceanenergy.org/about.asp

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Uh Oh: Gasoline heading above $3 a gallon by this summer

The Valero St. Charles oil refinery is seen during a tour of ...

The key thing in this story is the fact that cost is going up whether we like it or not…whether we can afford it or not.  There are other people in the world, and they want “our” oil.  And  prices are going up during a world-wide recession.  What will happen when “recovery” kicks in?  No wait, don’t think about, it’s depressing.  Something will work out. 

As I rode around Lexington on my bike yesterday, it dawned on me that people are simply waiting for the calvary (technology) to rescue us.  We’ve all seen the movie.  It will be fine – nothing to worry about here.  It HAS to be that way….because we got no alternative…Hope this works out for us…

“NEW YORK – Retail gas prices likely bottomed out last week, and they’re again headed to above $3 a gallon this summer, experts said Monday.

Although pump prices typically rise this time of year as refineries switch to a more expensive grade of gas, the increase likely will frustrate many motorists. Prices are climbing even after millions of Americans received pink slips and kept their cars in the driveway.

“If you look at demand, it’s just abysmal,” said Fred Rozell, retail pricing director at Oil Price Information Service.

What’s pushing prices higher isn’t American consumption. It’s the crude oil that’s used to make motor fuel, Rozell said. Crude is an international commodity that’s become ever more expensive as demand grows in China. As crude increases, so does gas.”

http://news.yahoo.com/s/ap/20100222/ap_on_bi_ge/oil_prices

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Economic (un)Certainty

Which way is the economy going? This is important for us here in Lexington as we look to somehow improve our city budget, as well as our overall standard of living. But we are living in very uncertain times, though. Just today we have two very different opinions on where things are going.

My take on it is that oil prices will rise with any “recovery” and will thus act as a lid on any “expansion.” We are in the peak oil time, which looks like everything going on around us today: recession, joblessness, stagnant wages, foreclosures, uncertainty…. but that doesnt stop the:

MAINSTREAM MEDIA: “Economists expect the recovery to remain “firmly on track” over the next two years though job growth is likely to remain slow, according to a new survey.The latest outlook from The National Association for Business Economics, set to be released Monday, sees regular job gains resuming this quarter but no drop in unemployment below 9 percent for another year.  

“We see a healthy expansion under way, although it will take time to reduce economic slack and repair damaged balance sheets,” said Lynn Reaser, the group’s president and chief economist at Point Loma Nazarene University.

The NABE forecast is largely consistent with its last quarterly forecast in November and reflects an economy in slow-but-steady recovery mode.

Participants in the survey consider the housing market rebound sustainable. Home prices are predicted to rise 1.6 percent in 2010 and an additional 2.6 percent in 2011. Those may not be huge increases but they would still represent an important watershed for the economy, the NABE noted, after the declines of the recent past.

The stock market is expected to climb significantly in 2010 and 2011. On average, the economists predict the Standard & Poor’s 500 index, a widely used barometer of the stock market, will rise 23 percent over the next two years. The S&P 500 jumped 3.1 percent last week, though it’s still down 29.1 percent from its high.”

http://finance.yahoo.com/news/Poll-Economists-see-healthy-apf-276308132.html?x=0&sec=topStories&pos=5&asset=&ccode=

MISH:“The European recovery is on its last legs. The global recovery will soon follow. Prepare for an economic relapse. One is highly likely. ….it is a mistake to assume the US ‘recovery’ is about to pick up steam. If the economy stagnates (which I think is the best case scenario), that would add to housing pressures. An economic relapse is more likely….” 

http://globaleconomicanalysis.blogspot.com/search?updated-max=2010-02-21T01%3A27%3A00-06%3A00&max-results=3

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Peak Oil? Peak Demand? How About Peak Bullshit

Within the last 2 months a new theory is being floated about how peak oil is not the issue, because we’ve passed “peak demand.”  To the unititiated, peak demand sounds harmless, and kinda cool.  Hey, peak demand means that peak oil is not a problem because we’ve reached a point where we just don’t need to increase our oil consumption. 

But stop, think, and infuse a little common sense.  Have we, somehow, in the last 2 months, overcome our 150 year addiction to oil?  Have we somehow decided that from here on out, “thanks, but we’ve got all we need,” is going to be our mantra?  And do we know that not one of the additional 150 million people that the US will add by 2050 will need any additional drops of oil? 

I’m sorry, exactly when did we cross the green horizon of conservation and efficiency? 

What fucking bullshit.  We will never reach peak demand until and unless we’ve reached peak supply.  Supply and demand are always equal. 

We are oil addicts. We will cease being oil addicts when the price of our addiction becomes so high that we walk away.  What will it take for that to happen?  Hopefully just $200+ barrel oil and not a tea bagging hitler who starts World War III to try and keep us hooked up. (See:  Sarah Palin, Glenn Beck, Rush Limbaugh, etc…)

When we reach peak demand – and supply – for whatever reason, that will be the signal to tell us that our economy has changed for ever and we are now into the post carbon era.  It’s going to happen - IF YOU HEAR PEOPLE SAY THAT WE’VE REACHED PEAK DEMAND THEN IT HAS ALREADY HAPPENED!  Shouldnt we be planning for it?

BREAKING NEWS:  “Oil prices rose to just below $80 a barrel Monday after a three-week rally, as investors expect the U.S. central bank to keep interest rates near zero to help fuel economic growth — which would boost crude consumption.”  Wait a minute – I thought we had reached peak demand?

Don’t believe me?  Read Kurt Cobb:

“First, every economist knows that supply and demand are always equal and that it is price that makes them so. Ergo, technically speaking if demand has peaked so has supply. It is a tacit admission that peak oil is upon us.

Now, if what these people mean is that oil supply capacity could grow, but won’t because we won’t need it, then one must ask the complicated question of why people won’t need it. Is it because the economy has been so decimated by a debt-fueled crash aggravated by high oil and other resource prices that it cannot grow? Is it simply because people across the globe on average don’t feel that they need to use more oil despite the fact that population continues to grow?

Some claim that energy efficiency and the growing production of alternative fuels will depress oil demand. But no one was saying this before the crash. Why has it suddenly become relevant? Did we just discover energy efficiency and alternative fuels?

It is a truism that no one knows whether the world has reached peak oil or will reach it soon. We’ll only know many years after it occurs. But the rush to announce that peak demand has arrived seems to be nothing more than an attempt to put a happy face on peak oil.

No matter what the reason, if world oil production has peaked, we are all in serious trouble. Peak means decline won’t be very far away. Peak means economic recovery, let alone robust growth, may be all but impossible. Of course, we could try to run the world economy on other fuels such as natural gas and coal. But we have not prepared our infrastructure to do so, and such preparations are measured in decades, not years. Besides, there are serious questions about the longevity of these fuels as well, especially if we vastly ramp up their consumption.

The announcement of peak demand then is really designed to allow all those who made faulty oil production forecasts to keep selling their sunny optimism about future energy supplies while covering their asses for when the verdict on peak finally comes in. What the purveyors of the peak demand thesis really need to do is find some clothes to put on over their dream-time underwear and get to work figuring out where they went wrong in their analyses of oil supplies.

read the whole thing here:http://resourceinsights.blogspot.com/2010/02/peak-demand-cornucopians-reach-for-fig.html

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Did Peak Oil Cause the Financial Crisis?

Absolutely not says Ilargi (who completely understand peak oil) at the Automatic Earth:

“Where did the financial losses originate? In the energy field? Not even close. They stem instead from low post tech bubble interest rates which led to low mortgage costs which led to everyone wanting to buy a home which led to no-questions asked loans which led to high volumes of mortgage based securities which led to a zillion other forms and sorts of derivatives which led to untold trillions in lost wagers which led to a collapsing financial economic system, a process we find ourselves in the early stages of. We can argue about the sequence in which these things happened, but not about whether they did happen, or about the role of peak oil in their occurrence.”

Absolutely says Gail the Actuary at The Oil Drum:

“What happens is that many of the consumer’s most necessary purchases tend to be closely tied to the price of oil—things like food and gasoline, and home heating oil. If the price of these necessities goes up, the consumer is likely to cut back on something else. One possibility is to cut back on non-essential purchases—not go out to a restaurant, or not buy a new car or higher priced home. Another possibility, if the consumer is really pressed, is to default on some of the consumer’s promised debt repayments. What effect would cutbacks in discretionary spending and loan defaults have? It seems to me that they would look a whole lot like the recession and debt defaults that we have been seeing recently.”

Partially Absolutely says the International Energy Agency (who have denied peak oil until late last year):

The IEA warned in 2006 that the effect of high oil prices from the preceding four years had not yet worked their way through the world economy, and that further increases in prices would “pose a significant threat to the world economy, by causing a worsening of current account imbalances and by triggering abrupt exchange rate realignments, a rise in interest rates and a slump in house and other asset prices”.

Partially AND It Will Happen Again Says Dr. James Hamilton: ” Some degree of significant oil price appreciation during 2007-08 was an inevitable consequence of booming demand and stagnant production. It is worth emphasizing that this is fundamentally a long-run problem, which has been resolved rather spectacularly for the time being by a collapse in the world economy… If growth in the newly industrialized countries resumes at its former pace, it would not be too many more years before we find ourselves back in the kind of calculus that was the driving factor behind the problem in the first place. Policy-makers would be wise to focus on real options for addressing those long-run challenges, rather than blame what happened last year entirely on a market aberration.”

Absolutely says Jeff Rubin: “By any benchmark the economic cost of the recent rise in oil prices is nothing short of staggering. A lot more staggering than the impact of plunging housing prices on housing starts and construction jobs, which has been the most obvious brake on economic growth from the housing market crash. And those energy costs, unlike the massive asset writedowns associated with the housing market crash, were borne largely by Main Street, not Wall Street, in both America and throughout the world.”

Absolutely, But it was China’s Fault says Steven R. Kopits: “Ultimately, the inability of the oil supply to keep pace with global demand proved to be a key contributing factor to the current recession. I would note, however, that the proximate cause of the recession is China, not peak oil. China ultimately provided both the financial liquidity and the commodities demand which brought down the global economy. Were China not so large and not at its current stage of development, peak oil might have come and gone without anyone noticing for some time. As it was, China hit its stride just as the oil supply was stumbling. The issue was not, therefore, peak oil in and of itself, but rather the supply/demand imbalance caused by the inability of the global oil supply to adjust to China’s incremental demand.”

Here’s my take: The price of oil and the financial crisis sure seem to have weird parallels. Was it just a coincidence that both things happened essentially at once?

To me, the gigantic price spike in 2008, and all the spikelettes leading up to it, prove that energy abundance is over. We had too many people wanting too small of a resource – oil. And if oil is limited that means it will get very expensive, then that means that economic growth as we knew it is over. So to me, peak oil caused the recession indirectly. The recognition that growth was over caused the greedy sluts on Wall Street (and everywhere else) to chase “growth” in ways that were criminal, because there was no none criminal way to find rewarding returns. Most of those folks have made out like, well, criminals, in this new era. The crash didn’t cost them. They got fantastically rich. It’s the rest of us living in the peak oil time that will suffer – a time of non-existent real national or personal income growth, high unemployment, and devastated savings. It was going to happen anyway, I guess. I just wish that we hadn’t spent so much bailing the fuckers out. 

WHAT DO YOU THINK? Love to hear from you.

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Morningstar Analyzes Peak Oil for Investors

Morningstar is one of the most repsected finanical services in the world.  Merely having them mention the words “peak oil” show how far we’ve come in just the last few months.

This article purports to be a serious look at peak oil and offers advice on how to invest wisely during the peak oil time.

But. Good. Lord.

I’m glad to have come across this on the mainstream internets, but this shows so clearly how little thought actually goes into the reality that peak oil presents.

First the opening:

“Although there are large implications throughout the economy, I want to say upfront that I do not think this will bring on Armageddon. Oil prices that are significantly higher than earlier in our lifetimes will bring about great change, yet I firmly believe that our economy has the ability to successfully adapt. Despite the strong headwind oil scarcity will create, I am still an optimist.”

Here is the typical American mindset: “Great Change is coming. A strong headwind of scarcity. But I’m still an optimist.” No one in any position of responsibility wants to appear to be worried about anything. We have the cult of “growth.” We also have a twin cult of “optimism.” What is this optimism about, you ask? That things will remain basically the same as they are now. See, despite great changes, and strong headwinds of scarcity, we cannot admit for one minute that anything will be different in our lives. That’s what passes for optimism.

Ok, so on to the investment advice. I’ll bet that there’s lots of talk about coal and electric cars. Let’s see:

Initial Winners and losers in Peak Oil:

Winners:

  • Oil exploration and production companies: “If oil is becoming more scarce, it makes sense that those who own rights to the resource will benefit.” The article says Exxon could be a winner, for example.

Losers:

  • Existing Petro Infrastructure: “With lower production of oil, there will be less of a need for the energy infrastructure needed to support the processing and transportation of liquid petroleum.” The article says Exxon could be a loser, for example. Wait, what?
  • Coke and Pepsi – people just wont drink as much bottled water. They’ll opt for the “free and ‘green’ alternative” of tap water and this “is only going to get stronger.” DOES THIS MORON REALLY BELIEVE THAT WHAT COMES OUT OF THE TAP IS FREE? But really, no one has to lose in this world because “Thankfully, Coke and Pepsi still have exceptionally attractive businesses, even without any contribution from water products.” Folks, I shit you not.

Now, lets get on to the meat:

Losers:

  • Inefficient Transportation: “Unfortunately, our entire economy is currently based upon relatively inexpensive point-to-point transportation of people and goods.” “Trucking companies and airlines are likely to continue suffering. Even traditional newspapers and the postal service–which at the end of the day revolve around moving information via dead trees–should continue their downward spirals.” “…few companies will be totally immune to higher transportation costs.” YEAH, a little reality.

Winners:

  • Efficient Transportation: “…we will continue to see more and more hybrid and electric cars on the road.” Ok, here’s the problem. Our Morningstar analyst has not taken the time to think through what the total effects of peak oil are. Most people make this mistake. They think that, if gas gets expensive, then I’ll just switch to an electric car. What they don’t think through is the fact of just how thoroughly drenched with oil every single thing in our lives is. If we can’t afford to drive around with regular gas because it’s too expensive, how will we be able to drive around in an electric car that is made from and produced with that same expensive oil? This is just an infantile reaction: I don’t want to give up my car based life, so I’ll keep the fantasy alive. There is no substitution from oil .

“Railroads already have a major cost advantage over trucks in terms of fuel efficiency, and this advantage will only get stronger as fuel prices rise. I have no doubt this is one of the primary reasons Berkshire Hathaway and Warren Buffett was attracted to Burlington Northern Santa Fe.” See what I’ve been saying?

  • Electric Utilities: “The primary alternative to oil as a transport fuel is electricity. In a world with declining oil production, electric cars and plug-in hybrids are only going to continue to replace gasoline-fired vehicles.” CAN YOU HEAR ME SCREAMING? Sorry. Remember, if gas is too expensive to burn in a car, then it’s too expensive to make cars with. See the tortured logic of people who cannot imagine giving up what they have now?
  • Electricity Generators: “Not only will the regulated utilities need to be beefed up to handle a shift from oil to electricity in terms of transportation, but a scarcity of oil will cause a rise in electricity prices.” This is a mixed bag. One the one hand, we get the standard economist’s theory of substitution, which says when one thing gets too expensive, then we’ll just switch. But we are NEVER going to make a switch to electric powered transportation and keep the same scale that we have now. Never.

Now, peak oil WILL cause “a rise in electricity prices.” Oil is the       beginning point for all other energy sources. But uh oh, “This will happen directly, as electric vehicles are substituted for gasoline vehicles, increasing overall electricity consumption.” Nope. See above.

  • Alternative Energy: “There will be no shortage of alternative energy technologies and companies vying for a piece of the energy market pie that is being vacated by liquid petroleum. Wind, solar, biofuels, geothermal, tide capturing, and so on, these are all areas that will become increasingly economical…” All the energy generators he lists have oil as a beginning point. You simply can’t make them without oil. So if oil is too expensive to burn in a car, its going to be very expensive to make things with. That means that renewables will never become “increasingly economical.” That doesn’t mean that we should pursue them with everything we’ve got, they’re just not going to provide us with cheap energy. Those days are gone.
  • Labor: “Although higher oil scarcity will act as a drag on the entire economy through raising shipping costs, there is one silver lining.” Ok, we are getting closer to some real truth, but once more we have to wade through the muck first. Peak oil is not just a transportation crisis. This is thrust of the whole article and its wrong. Peak oil is a lifestyle crisis. Oil is at the bottom of everything in our lives. When it gets scare, everything will change.

But this article does offer the glimmer of understanding that peak oil will make our world, to borrow from Jeff Rubin, a whole lot smaller. In the era of cheap energy, labor costs could be cut by off-shoring. No longer – this is where peak oil IS a transportation crisis – it “all boils down to high oil prices taxing transport and causing us to act more locally. This means goods being produced much closer to where they are actually consumed, which would benefit local laborers. ” YEAH. Right for reasons not quite understood.

In conclusion: “As you can see, there are actually quite a few companies that will benefit as oil production peaks and our economy moves from a heavy dependence on liquid petroleum to the alternatives. Overall economic growth will be constrained, and it will not be an easy transition. Yet peak oil will certainly not destroy the investment landscape.”

These statements offer another mixed bag. The old hoax of substitution is trotted out, making us feel like we do indeed have choices. Some reality in there about the facts that growth will be constrained and it won’t be an easy transition. And then smiles and rainbows at the end!

Wow. We have a lot of work to do folks, but even having an article like this in the mainstream says that we are moving forward.

http://finance.yahoo.com/news/Peak-Oil-Who-Wins-Who-ms-4013011254.html?x=0

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Is the Sky Falling, Chicken Little? Questions for Lexington’s Leaders

Reasonable people in this country have become numb – to avoid pain, we look for the middle when we hear “extreme” viewpoints.

We say, “Well, it (whatever topic it is) must be between those extremes,” meaning that it isn’t so bad.

And it’s not just the Overlord classes. We have bright people here in Lexington, writers who have audiences, who subscribe to this thinking.

Folks, peak oil isn’t a political talking point. It’s reality.

But because it sounds “extreme,” no one is taking it seriously here.

This is a train wreck happening in slow motion right in front of us (…as I dredge up every cliché in the book).

Our problem is this: we’ve had so many predictions and warnings about the limits to our life that we’ve grown immune to them.

Chicken Littles have been running amok for 40 years, and in people’s minds, the sky isn’t falling because it hasn’t already . The egregious bullshit that many climate science people have perpetuated is just the most recent example. (But know this folks, the earth is warming, greatly. Oh, but that sounds extreme, so let’s find a compromise on how to think about it instead of accepting it… J )

The real problem is that the sky was falling the whole time, and now it’s accelerating. 40 years is nothing in the span of history. Seems like a lot to us, but those prophets who’ve been saying “we can’t go on as we have” – and who caught so much derisive shit because of it, are right.

But ask ANY SINGLE LEADER IN OUR CITY TODAY: “What about peak oil?” And I guaran-fucking-tee you that you get a dumb look first, then a slick rationalization about how we are the greatest and there ain’t nothing going to stop us.

Our leaders are focused on “growth” and “economic development” which is laughable because we haven’t had significant economic development in this region for 25 years, when Toyota came to town. Since then the biggest employment area in the region has been Hamburg. Low wage, low skill, selling environmentally destructive shit, and businesses that won’t survive peak oil have become our model. Yea for us.

Oh, right, we got lots of health care and education jobs. Those aren’t subject to a bubble or anything that would burst…if we got poor, or healthy, or needed a new set of skills…..

We are living in the peak oil time. We are getting used to the new normal of these days: high unemployment, declining wages, broke local governments, global economic insecurity, a changed climate, and higher energy costs.

This sounds extreme. But look around: isn’t it real? Are we going to wait until it gets worse to do something about it?

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The Great Reskilling

The future of work in Lexington is much different than what most people conventionally imagine.  Peak energy simply means that distance will matter a great deal.  When distance matters a great deal, being LOCAL matters a great deal too.  Since we wont be able to rely on food and things made half a world away to keep us going, we are going to have to make do right here.  This is great – our communities are stronger in this future, there is more freedom, more meaning in our lives.  Read this and see what your next “career” might be – if it’s not already!

Posted by Magnus K at Sunday, January 17, 2010 on http://life-after-oil.blogspot.com/
“Rob Hopkins has founded and popularaized the Transition Town movement. One of his ideas is The Great Reskilling. The basic idea is simple – the twin challenges of peak oil and climate change mean that society will change fundamentally, and this will in turn force each one of us to acquire new knowledge and skills. These “new” skills are often old skills; knowledge of how to do things in a world of drastically reduced access to energy, and incidentally leading to a much lower environmental impact. They include old craft skills, resource management and farming — knowledge that was alive and widely distributed in society only two generations ago:

“Re-learning the skills that our grandparents took for granted, such as how to use hand tools, how to build our own structures, how to mend and make clothing, how to make our own medicine, how to forage, grow, preserve and store our food.”

To some extent, The Great Reskilling is about turning the clock back. Not for dogmatic reasons (“technology is evil”) or for romantic reasons (“everything was better in ye olde times”), but because the required direction of action – given coming (energy) resource scarcity and climate change concerns – is so obvious. And it is thus better to start acting now, rather than to wait until we have no other choice than to learn everything all at once. However, we should of course hold on to any and every technology that we can possible manage to maintain. From this perspective, it is clear that cars are not a sustainable transportation technology, and that resources for transporting people (in cities) already today should focus on rail traffic and bicycles, rather than wasting resources on building brand new roads. Continue reading

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Shortage of Rare Earth Elements Could Thwart Innovation

In a timely follow up to my post below – “The Cult of Growth” – I came across an article that describes the peaking of the rare earth elements needed to sustain high tech.  The point I made in that earlier post is this:  we cannot continue to exploit nature as we have done in the name of growth because nature itself won’t let us.

Many people will argue that we have reached a higher plane, that we are now in the “knowledge economy” and plundering the earth is not what we need to continue to grow.  My response is:  nonsense.  Everything we do has the earth as it’s beginning in some form or fashion.

The article states: “…rare earth elements with exotic names such as europium and tantalum hold the key to hybrid cars, wind turbines and crystal-clear TV displays – that is, if a looming supply shortage doesn’t stop innovation in its tracks.

Rare earth elements, called ‘rare earths’ by those who use and study them, often prove irreplaceable in green technologies and high-tech consumer products. Yet the world’s production of rare minerals relies mainly upon China, and the Chinese government warned last year that its own rising demand will soon force it to stop exporting the precious elements.

‘Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths,’ said W. David Menzie, chief of the international minerals section at the U.S. Geological Survey (USGS).”

See, even high tech can’t be done without something from the earth as a beginning.  But even assume hypothetically that we aren’t reaching a peak in the rare earths, how would they be transported from China to the world?  On a vessel of some sort that relies on oil.  So disregarding the limits of the materials themselves, they would become much higher priced simply because of peak oil.  Higher prices means less use.  In this case, it means less “high tech.”

As the title of Richard Heinberg’s book says, we’ve reached “Peak Everything.”  Not because we want it to happen, not because of any socialist plot to take down America.  Simply because nature can’t give us any more.

Read it here: http://news.yahoo.com/s/livescience/20100216/sc_livescience/shortageofrareearthelementscouldthwartinnovation

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Top 10 Peak Oil Responses, so far:

  1. Meh…
  2. Ok, I’ll just drive less…
  3. So things are going to get a little more expensive….I can deal with it
  4. Whatever, we are America – we are entitled to oil, we’ll always get our share
  5. I hate _______(the world, Muslims, oil companies, Obama)
  6. God doesn’t mean for us to suffer….He’ll provide….
  7. I’ll live greener, tomorrow, I promise….
  8. This means nothing, it’s a liberal hoax perpetrated to bring greater government control over my life
  9. Why are you so NEGATIVE?
  10. WHO CARES!

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Wall Street Journal – The Next Crisis: Prepare for Peak Oil

  • By PATIENCE WHEATCROFT

As Europe’s leaders gather in Brussels today, they have only one crisis in mind: the debts that threaten the stability of the European Union. They are unlikely to be in any mood to listen to warnings about a different crisis that is looming and that could cause massive disruption.

A shortage of oil could be a real problem for the world within a fairly short period of time. It was unfortunate for the group which chose to point this out yesterday that they should have chosen to do so on the day the Organization of Petroleum Exporting Countries, or OPEC, reported that the effects of the financial downturn had led to a slight downgrade in its forecast for oil consumption this year.

AGENDA.0210

AGENDA.0210

Against the gloomy economic backdrop that Europe currently provides, siren voices shrieking that a potential energy crisis is imminent and could be worse than the credit crunch are liable to be dismissed as scaremongers. Since they are led by Sir Richard Branson, whose Virgin group runs an energy-guzzling airline, and include Brian Souter, who runs Stagecoach, another energy-hungry transport business, they are also at risk of being seen as self-interested scaremongers.

But the work of the Industry Taskforce on Peak Oil and Energy Security shouldn’t be disparagingly dismissed. Its arguments are well founded and lead it to the conclusion that, while the global downturn may have delayed it by a couple of years, peak oil—the point at which global production reaches its maximum—is no more than five years away. Governments and corporations need to use the intervening years to speed up the development of and move toward other energy sources and increased energy efficiency.

In the first report from the task force, Lord Ron Oxburgh, a former chairman of Shell, wrote that “It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive.” He went on to quote King Abdullah of Saudi Arabia commenting on a new oil find: “Leave it in the ground…our children need it.”

The latest report from the Taskforce points out how much modern economies depend on oil, whether for transport, heating or even fertilizer. Demand may have peaked in the developed world but any shrinkage there, is likely to be more than outweighed by the developing countries, with their rapidly expanding appetite for energy to fuel industry needs and consumer aspirations. The International Energy Agency, in its World Energy Outlook report last year, estimated global oil demand, currently running at just over 85 million barrels a day, could reach 105 million barrels a day by 2030. The Taskforce, assimilating various opinions, believes 92 million barrels a day will be the most that global supplies will be able to generate, “unless some unforeseen giant, and easily accessible, finds are reported very soon.”

It may be that the oil companies are keeping some giant secrets from us but that seems unlikely. So what lies ahead is a mismatch between supply and demand. According to Chris Skrebowski, of the Peak Oil Consulting firm, mid-2015 is when the crunch hits. “This is when capacity starts to be overwhelmed by depletion and lack of new capacity additions.”

Where that would take oil prices, who can tell? In recent times they have been extremely volatile, hitting $147 a barrel in July 2008, plummeting to $32 at the end of that year and hovering between $70 and $80 since August last year.

At these levels, it is economic for some of the oil that is harder to get at to be extracted from deepwater developments such as the Gulf of Mexico or the Canadian tar sands. A higher price might encourage more of this difficult production.

But a higher oil price brings with it dangerous knock-on effects for oil-dependent economies with little in the way of their own oil resources. Europe has reason to be concerned. According to Philip Dilley, the chairman of Arup, the consulting engineers: “We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil prices have the potential to destabilize economic, political and social activity.”

Not everyone involved in the energy business takes such a pessimistic line. BP, for instance, has been more optimistic about the prospects for tar sands, although it is also pursuing wind, solar and biofuel investments. Gas is also becoming a much more important part of the energy mix.

Yet even if the gloomsters should turn out to be wrong, the core of their message surely deserves attention. Governments should be doing all in their power to encourage developments that lessen oil dependency. That will also enhance their energy security for, as Russia’s Vladimir Putin has demonstrated with use of the on/off switch on the pipeline to Ukraine, it can be uncomfortable being dependent on other countries for energy.

Wind and sun and wave can all make their contributions, but nuclear is where the biggest strides can be made. The U.K. gave up an early lead in nuclear and only in 2008 gave the go-ahead for a new generation of reactors, though funding remains an issue. France is the most enthusiastic devotee of nuclear, with around 60 working reactors. Whatever progress can be made in turning crops into power, scale will make nuclear the fuel of the future. But governments need to wake up to the urgency with which it may be required.

Some dubious emails and slightly dodgy dossiers have cast a new, and unflattering, light on the global-warming debate, raising the risk of a return to the belief that we can go on consuming oil with impunity. Being a “climate-change denier” is in danger of becoming almost fashionable. But whatever the risk to the climate, scarce and expensive oil would be a threat to established economies.

We need alternatives.

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This Man Believes We Have Plenty of Oil Left

‘Peak Oil’ Is a Waste of Energy

“Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota.” Michael Lynch, New York Times, August 2009.

(Alright…I’ve kept this idotic post up for a total of 12 seconds before I have to comment on it, and it’s my own post for christ’s sake:  this is insane…we are in the midst of the absolute worst economic crisis in 75 years and oil is STILL over $70 a barrel, a price it never reached in even the good economic times, BUT THIS FUCKING PUTZ believes that prices will indeed go DOWN once we commence undertaking ever more expensive drilling.  What am I missing guys?

Read his whole (undocumented)piece here http://www.nytimes.com/2009/08/25/opinion/25lynch.html?pagewanted=2&_r=1

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This Man Thinks Peak Oil Could Be Real Bad

Many peak oil deniers like to point out that the people concerned about it’s consequences are “environmentalists.” As if that was a bad thing to be, considering that we only live in one environment – the earth. But here we have Matt Simmons, a certified Republican (see below), saying this:

“If the world’s use of energy begins to outstrip supply, shortages will quickly lead to run on the energy bank. This can quickly morph into social chaos and war. An energy crisis can end up blowing us up.”

FROM WIKIPEDIA: Matthew Simmons - chairman and CEO of Simmons & Company International, is a prominent oil-industry insider and one of the world’s leading experts on the topic of peak oil. Simmons was motivated by the 1973 energy crisis to create an investment banking firm catering to oil companies. In his previous capacity, he served as energy adviser to U.S. President George W. Bush.

Click thru his most recent presentation, from which these quotes come: http://www.simmonsco-intl.com/files/AON%20Annual%20Energy%20Insurance%20Symposium.pdf

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Peak Oil in Britain

On 10 February 2010 at the Royal Society, six UK companies – Arup, Foster + Partners, Scottish and Southern Energy, Solarcentury, Stagecoach Group and Virgin – joined together to launch the second report of the UK Industry Task-Force on Peak Oil and Energy Security (ITPOES).

The report, titled “The Oil Crunch – a wake-up call for the UK economy”, finds that oil shortages, insecurity of supply and price volatility will destabilize economic, political and social activity within five years. The Task-Force warns that the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states that policies to address Peak Oil must be a priority for the new government formed after the 2010 election.

The report tackles the issue head on: “For the UK, ‘peak oil’ is no longer a matter of theoretical debate.”

“As we reach maximum oil extraction rates, the era of cheap oil is behind us. We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil price shocks have the potential to destabilise economic, political and social activity.

Virtually every sector of our economy is still dependent on oil. This is why it is vital that whichever party forms the next government, they have a coherent set of policies to help the UK adapt. This is especially important for the UK, and other developed economies, which have been so reliant on low-cost oil for decades.

There are two challenges for government and policy-makers. Firstly, to recognise the situation we face, and secondly to take action to mitigate the worst implications of the crunch.

Unless we do so, we face a situation during the term of the next government where fuel price unrest could lead to shortages in consumer products and the UK’s energy security will be significantly compromised. This has the potential to hit UK business and commerce as well as the most disadvantaged in society with yet another crisis.”

The report goes on to thoroughly analyze the situation and clearly states:

“Based on the foregoing arguments, it seems inevitable that global demand will move to a point where it consistently exceeds supply. The effect must be a structural increase in oil prices, coupled with the prospects of oil shortages and a consequent increase in market volatility. The only questions are “how soon, and by how much?”

EFFECTS of Peak Oil – The report concisely lays out the following effects:

“Based on this assessment, we might expect to see the following effects reflected in our economy within the term of the next government:

Markedly higher prices for all forms of travel (air, sea, rail and road)

Increased food prices

Increased general retail prices

Increased domestic utility bills for heating and power

It is an unfortunate by-product of these factors that the disadvantaged members of society are likely to be hit first, and hardest. Our concern, therefore, centres around a situation on which it seems that future oil prices will be significantly higher, in real terms, than they have ever been in the past, and in which disruptions to oil supply cannot be ruled out.”

While this was written for Britain, it applies equally here too.  Bottom line: everything will get more expensive AT PRECISELY THE SAME MOMEMENT that our wages are declining.  We will be forced to spend more on the basics simply because all of our basics are so infused with oil.  This will leave little room for discretionary spending, which hurts the consumer economy, which leads to continued recession, and the cycle goes on and on.  What I see now is a decade long recession, which ultimately becomes the new normal.

Only by decoupling from the consumer economy and the oil based system and becoming relocalized will we be truly recession proof.  Either that, or we have declining standards of living for all but the wealthiest among us. Folks, that’s what we are facing.

Read it here: http://peakoiltaskforce.net/wp-content/uploads/2010/02/final-report-uk-itpoes_report_the-oil-crunch_feb20101.pdf

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Sir Richard Branson Says Peak Oil Within 5 Years

(Folks this aint just me talking peak oil – now its going mainstream!)

Sir Richard Branson and fellow leading businessmen will warn ministers this week that the world is running out of oil and faces an oil crunch within five years.

The founder of the Virgin group, whose rail, airline and travel companies are sensitive to energy prices, will say that the ­coming crisis could be even more serious than the credit crunch. (emphasis mine)

“The next five years will see us face another crunch – the oil crunch. This time, we do have the chance to prepare. The challenge is to use that time well,” Branson will say.

“Our message to government and businesses is clear: act,” he says in a foreword to a new report on the crisis. “Don’t let the oil crunch catch us out in the way that the credit crunch did.”

Other British executives who will support the warning include Ian Marchant, chief executive of Scottish and Southern Energy group, and Brian Souter, chief executive of transport operator Stagecoach.

Their call for urgent government action comes amid a wider debate on the issue and follows allegations by insiders at the International Energy Agency that the organisation had deliberately underplayed the threat of so-called “peak oil” to avoid panic on the stock markets.

Ministers have until now refused to take predictions of oil droughts seriously, preferring to side with oil companies such as BP and ExxonMobil and crude producers such as the Saudis, who insist there is nothing to worry about.

But there are signs this is about to change, according to Jeremy Leggett, founder of the Solarcentury renewable power company and a member of a peak oil taskforce within the business community. “[We are] in regular contact with government; we have reason to believe their risk thinking on peak oil may be evolving away from BP et al’s and we await the results of further consultations with keen interest.”

The issue came up at the recent World Economic Forum in Davos where Thierry Desmarest, chief executive of the Total oil company in France, also broke ranks. The world could struggle to produce more than 95m barrels of oil a day in future, he said – 10% above present levels. “The problem of peak oil remains.”

Chris Skrebowski, an independent oil consultant who prepared parts of the peak oil report for Branson and others, said that only recession is holding back a crisis: “The next major supply constraint, along with spiking oil prices, will not occur until recession-hit demand grows to the point that it removes the current excess oil stocks and the large spare capacity held by Opec. However, once these are removed, possibly as early as 2012-13 and no later than 2014-15, oil prices are likely to spike, imperilling economic growth and causing economic dislocation.”

Skrebowski believes that Britain is particularly vulnerable because it has gone from being a net exporter of oil, gas and coal to being an importer, and is becoming increasingly exposed to competition for supplies.

“This is likely to put pressure on the UK balance of payments and in a world of floating exchange rates is also likely to put downward pressure on the valuation of sterling. In other words, the positive benefits to the valuation of the pound as a petrocurrency are now eroding,” he said.

The question of peak oil came to centre stage last November when a whistleblower told the Guardian the figures provided by the IEA – and used by the UK and US governments for much of their planning scenarios – were inaccurate.

“The IEA in 2005 was predicting that oil supplies could rise as high as 120m barrels a day by 2030, although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.”

But Saudi Arabia launched a counter-strike at Davos, insisting the issue was overblown. “The concern about peak oil is behind us,” said Khalid al-Falih, chief executive of Saudi Aramco.

Tony Hayward, the BP chief executive, downplayed fears about dwindling supplies in an interview with the Guardian last week.

http://www.guardian.co.uk/business/2010/feb/07/branson-warns-peak-oil-close

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Peak Oil and the Australian Military

 

The most recent scholarly journal of the Australian Defence Forces contains a detailed examination of why the military must be prepared for peak oil.  The paper lays out facinating scenarios of how and where future armed conflicts may arise.  I like the short explanation of the impacts of peak oil on the country as a whole:

“….many counter-arguments (to peak oil) point to new sources, such as heavy oil and tar sands. The reserves of these are enormous, with up to three times the proven reserves of conventional oil.  However, there is no sign that unconventional reserves can be exploited quickly enough and in sufficient quantities. Furthermore, they are more energy-intensive and expensive to process, meaning that even if they could be exploited in large volume, they still would be comparatively expensive. Similarly, it is probably ambitious to hope that alternative energy sources will replace conventional oil. For some uses, such as vehicular transport, alternatives are some time off and not likely to be widely on the roads even in the 2020s. The idea of a ‘hydrogen economy’ likewise assumes long-term change over several decades.

This paints a somewhat grim picture, especially as oil demand continues to rise in emerging economies such as China and India.  With conventional oil output already seemingly strained, there are two further problems. One is that oil is an input into an enormous range of goods. Arguments can be mounted that alternatives will emerge for certain things: recycling and bioplastics could be used in lieu of new plastic production for example.

However, oil is an input into almost everything upon which the economy is reliant—think not just of fuels and heating oils but also of fertilisers, plastics, wax, soapless detergents, chemical-based pharmaceuticals, synthetic fibres, bitumen etc—and the economy relies on these to be affordable.  To think that the economy could absorb substantial, sustained and irreversible rises in the cost of all these products without recession or an inflation-created decline in living standards is delusional. Dramatic oil price rises also are problematic because oil has a negative wages impact and a positive prices impact: that is, it contains characteristics of both inflation (because the price of oil as an input into most goods has risen) and deflation (because consumer and business spending is diverted towards energy and away from other areas, causing profit falls and job losses). This is why it is often held responsible for stagflation, such as that experienced by developed economies in the 1970s, the last time oil prices rose dramatically.

The only question, if oil peaks before a transition away from the ‘hydrocarbon economy’, is how dire the economic impact will be.  (italics and emphasis mine)

Moreover, as a second problem, little is being done to contemplate, much less address, the risk of peak oil. There is an assumption that the hydrocarbon economy will continue in perpetuity, or at least for decades, and an expectation of—even a sense of entitlement to—cheap oil. The widespread rejection of the peak oil concept probably comes from the fact that people have predicted oil shortages in the past, combined with an assumption that market mechanisms or technological advances will solve the problem, plus a resistance to change that will be disruptive or costly. Resistance to change is understandable but such resistance will ultimately make the impacts of the peak all the worse. ” (italics and emphasis mine)

See folks, it aint just me saying we better be preparing.  read the whole thing here: http://www.adfjournal.adc.edu.au/UserFiles/issues/180%202009%20Nov_Dec.pdf

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