Peak oil

[imported_bingobazza]

Since the industrial revolution, oil has been the driver of global increases in GDP. When it runs out, maybe as soon as in 20 years, or becomes too expensive, we will lose all the GDP growth and perhaps revert to a largely agrarian existence without high petroleum based crop yeilds (if we survive the commodity wars) until a suitable replacement for oil is found. What do you think society be like after the oil age has finished?

Bingo.

[Sniper]

There is plenty of oil left to last our lifetimes, and by the time the earth runs dry there will be alternatives to take its place.

Don't pay any attention to the doomsday predictions related to oil.

[James Boston]

My simple theory is this:

There is PLENTY of oil still available. Once we hit the top of the bell curve, we will see prices begin to rise. But, there is a point where the public will react. Gas prices have been rising, and people have been complaining, but have you really seen that many hybrid cars on the roads? No. Gas is just expensive enough for us to complain, but not to react to. If it went to say, $10 a gallon, beleive me...you'd see a change. The big oil companies (which are in the oil business because it's the most profitable) will eventually have to do something to keep the money coming in. The world won't continue to buy conventional fuels regardless of price.

[parttimepro]

We're not going to run out of oil in the next 100 years. We may exhaust easily extracted sources so that the price increases somewhat. But there is an enormous amount of hydrocarbons which are not currently economical to tap. The tar sands of Canada, for example, contain more oil than Saudi Arabia. Similar deposits exist in the Rockies in the US. They aren't being actively exploited (other than a few pilot projects) because of the higher expense of separating oil from earth (as well as the enormous environmental consequences of strip mining huge areas). If oil hits $100 a barrel, these new supplies will open up.

Also, a higher cost of energy will make it much more important to develop alternatives. We'll use more alternative sources like biodiesel, wind/solar/hydro, spend a lot more research nuclear fusion, and possibly build new fission power plants.

At absolute worst, we'll have a severe recession caused by higher energy prices, like the mid-70's, but worse. Sorry, but we're not reverting to an agrarian society.

[RYL]

[ QUOTE ]
My simple theory is this:

There is PLENTY of oil still available. Once we hit the top of the bell curve, we will see prices begin to rise. But, there is a point where the public will react. Gas prices have been rising, and people have been complaining, but have you really seen that many hybrid cars on the roads? No. Gas is just expensive enough for us to complain, but not to react to. If it went to say, $10 a gallon, beleive me...you'd see a change. The big oil companies (which are in the oil business because it's the most profitable) will eventually have to do something to keep the money coming in. The world won't continue to buy conventional fuels regardless of price.

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Excellent point.

[imported_bingobazza]

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Once we hit the top of the bell curve, we will see prices begin to rise.

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I agree, we have already seen 500% rises. Huberts curve has been very accurate so far. Are we at the top yet? Goldman Sachs recently issued a trading udate with a price target of $105/barrell...a 'super spike'. A french analyst said $380/barrell within 10 years.

The oil companies have vastly scaled back exploration, restated reserves downwards, and diversified into solar energy, (BP is the second biggest in the world) and the US hasnt built a new refinery in 3 decades. The tar sands in Canada arent economcally viable...or they would have been tapped by now. There will be no additional capacity brought online if it costs more energy to take it from the ground than it produces. The saudis cannot stop the price increases (and are large users of solar energy). If it took the world 150 years to use the first half of global oil reserves, how long will the second half last at present consumption (and hoarding) rates?

Dont kid yourself that all is well. There is nothing that can replace the scale and economy of oil when it runs out. Thinking there is 100 years left, or there is a super technology waiting in the wings would be a dream...and is.

Bingo

[laserboy]

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We're not going to run out of oil in the next 100 years. We may exhaust easily extracted sources so that the price increases somewhat. But there is an enormous amount of hydrocarbons which are not currently economical to tap. The tar sands of Canada, for example, contain more oil than Saudi Arabia. Similar deposits exist in the Rockies in the US. They aren't being actively exploited (other than a few pilot projects) because of the higher expense of separating oil from earth (as well as the enormous environmental consequences of strip mining huge areas). If oil hits $100 a barrel, these new supplies will open up.


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The problem with tar sands and shale is that they require an enormous amount of energy to extract. For each unit of energy you are extracting, you are using up 70% of that energy in the process of extracting it. Not to mention the fact that you are burning up natural gas reserves which are also in short supply. Neither of these really solves the problem of the end of cheap oil.

[ QUOTE ]

Also, a higher cost of energy will make it much more important to develop alternatives. We'll use more alternative sources like biodiesel, wind/solar/hydro, spend a lot more research nuclear fusion, and possibly build new fission power plants.

At absolute worst, we'll have a severe recession caused by higher energy prices, like the mid-70's, but worse. Sorry, but we're not reverting to an agrarian society.

[/ QUOTE ]

A transition from a hydrocarbon based economy to some alternative energy source would mean trillions of dollars in research, development, and infrastructure and would have a significant impact on the way we live. It will, in my opinion, be the most important economic event of the next century.

[laserboy]

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There is plenty of oil left to last our lifetimes, and by the time the earth runs dry there will be alternatives to take its place.


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Peak oil is not the point at which the earth runs dry, only the point at which worldwide oil production has peaked. The world will never run out of oil, but it will one day run out of cheap oil.

Consider that there has been exactly one major oil discovery over the past thirty years. North Sea production has already peaked. This would seem to indicate that most of the world's cheap oil has already been found.

[James Boston]

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There is nothing that can replace the scale and economy of oil when it runs out.

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Even Peak Oil fear mongers don't claim we're running out, just that it's about to get so expensive that it will turn the economy upside down. Saudi Arabia, the country who far and away profits the most from oil, doesn't come close to the profits ExxonMobile or Chevron see. Businesses that make that much money have no desire to drive away their entire market by demanding that it pay whatever price they set. Oil companies make oil expensive, IMO, not out absolute dependance on it. A recession in our future? Probably. Mad Max? Nah.

[imported_bingobazza]

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Businesses that make that much money have no desire to drive away their entire market by demanding that it pay whatever price they set.

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I think my point is that their customers have no real choice. If they could set the price, they could just forget oil and make billions in the futures markets. The market sets the price, and while producers have been able to manipulate it in the past, their ability to do so must now be questioned since production is very close to peak to meet demand. And if you have a finite amount of any commodity left, wouldnt you be happy as the price eases higher?

Running out is a bad turn of phrase, depleting economically accessible fields would be more accurate. But the end result is the same.


Bingo

[James Boston]

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I think my point is that their customers have no real choice.

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I obviously agree that we, the customer, can't control the situation. I think you're underestimating how quickly oil companies would do an about-face if the average American consumer completely changed their purchasing habits. Like I said in my initial response: We're worried, we're complaining, but we haven't really changed our habits. If everyone bought a hybrid car tommorrow, what do you think ExxonMobile would do? Think of oil companies as energy companies who sell oil because it's the best thing they've got going for them. Everyone talks about the huge costs of R&D to replace oil. No one's willing to pay it, because they haven't had to. Exxon won't go broke watching people switch to more fuel-efficient products, they'll get in on it.

[DesertCat]

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Once we hit the top of the bell curve, we will see prices begin to rise.

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I agree, we have already seen 500% rises. Huberts curve has been very accurate so far. Are we at the top yet?

....

The oil companies have vastly scaled back exploration, restated reserves downwards, and diversified into solar energy, (BP is the second biggest in the world) and the US hasnt built a new refinery in 3 decades. The tar sands in Canada arent economcally viable...or they would have been tapped by now. ...

Bingo

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Your post doesn't make sense. Oil prices are up 500% yet oil companies are cutting back on exploration?

The reality is that oil is as cheap as it ever has been, and has been getting cheaper over time. You are probably confused by U.S. "gas" prices, which aren't so cheap.

The reason that oil has recently gotten expensive in the U.S. has nothing to do with supply, it's caused by the declining value of the U.S. dollar and increased gas taxes over the last thirty years. Oil prices in Euros haven't changed much. As long as we run big deficits, our currency is likely to continue to depreciate and imported goods (such as oil) increase in price.

But even with this artificial boost to U.S. prices, look at oil prices vs. income and you'll see that oil is much cheaper now that it was 25 years ago, or 50 years ago. That's why oil companies aren't looking for more. That's why U.S. reserves and production peaked. No-one invests billions of dollars in new exploration to find something that's cheap and getting cheaper.

If we ever were really close to Peak Oil, prices would actually go up. We'd be paying $5+ a gallon, and over 100 Euros per barrel. Oil demand would plummet as people start lowering their consumption through very cheap and simple means (car pooling, mass transport, hybrid cars, not buying damn SUV's and buying econoboxes instead).

But since oil is still cheap and plentiful it doesn't make sense to do that now. Hybrids don't even pay for themselves at todays prices.

Most estimates are we are about 50-100 years from getting close to running out. The peak oil guys aren't very credible because they keep predicting doom in five years, and when it doesn't happen, they just move out their predictions another five years.

[imported_bingobazza]

ok, Im not here to say I am for or against this oil thing...I hope it never happens. All Im saying is that it is real, based on the facts that western governments, scientists and the oil companies freely admit and are now openly discussing. In the interests of a reasonable debate about this, here are a few links to some articles that may enlighten some of you to the true state of play. Also, do not overestimate how much global oil production is used in private transportation....its a small fraction compared to agribusiness, plastics, shipping, the chemicals and computer industry, air conditioning, heating, power generation, construction and manufacturing of every kind.

http://www.technologyreview.com/articles/05/02/issue/review_oil.asp?p=0

http://news.bbc.co.uk/1/hi/business/4077802.stm

http://www.energybulletin.net/5429.html
This is US Congresman Bartlet talking last month about what peak oil is and its implications.

Eventually it will be good, as our children will depend on clean an renewable resources...but we will live in a very different world until other methods takes up the slack, if they ever do.

Bingo

[natedogg]

Oh man, not another peak oil sucker. There has got to be a way to profit from these loonies. Any ideas anyone? How to get rich off of peak oil fears?

natedogg

[DesertCat]

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All Im saying is that it is real, based on the facts that western governments, scientists and the oil companies freely admit and are now openly discussing. ...

Bingo

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There are many scientists, and politicians who say and believe goofy things. Peak Oil is not a mainstream theory at this time. Most peole involved in oil exploration don't believe it (and some who claim to may be using it to convince congressman to provide more government subsidies to the energy industry).

Oil is still historically cheap. That by itself is strong counter evidence against a near term peak in oil production.

Rising prices reduces usage, even in agribusiness, plastics, shipping, chemicals and the computer industry (where'd you pull that one from???). It's how free markets work.

And we also have other energy sources that will become more attractive as oil increases in price, nuclear, coal, etc.

If you had any understanding of the power of free markets, you'd stop being so histerical.

[imported_bingobazza]

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Oh man, not another peak oil sucker. There has got to be a way to profit from these loonies. Any ideas anyone? How to get rich off of peak oil fears?

natedogg

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Sure, sell oil futures. Good luck with that.
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[imported_bingobazza]

[ QUOTE ]
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All Im saying is that it is real, based on the facts that western governments, scientists and the oil companies freely admit and are now openly discussing. ...

Bingo

[/ QUOTE ]

There are many scientists, and politicians who say and believe goofy things. Peak Oil is not a mainstream theory at this time. Most peole involved in oil exploration don't believe it (and some who claim to may be using it to convince congressman to provide more government subsidies to the energy industry).

Oil is still historically cheap. That by itself is strong counter evidence against a near term peak in oil production.

Rising prices reduces usage, even in agribusiness, plastics, shipping, chemicals and the computer industry (where'd you pull that one from???). It's how free markets work.

And we also have other energy sources that will become more attractive as oil increases in price, nuclear, coal, etc.

If you had any understanding of the power of free markets, you'd stop being so histerical.

[/ QUOTE ]

OK, you have convinced me that the stock markets are the answer, and their wisdom will prevail, as it always has in the past. After all, they are the most efficient thing we have. If every chemical and agribusiness goes broke through using less oil and therefore producing less, why would I be worried, I dont work for one of them. I feel so stupid for thinking about a thoery that not everyone agrees with. Obvioulsy all those politicians and scientists, and the sneaky oil execs are conspiring against us...I dont know why I didnt see it. Now I see how wrong I am, but my girlfriend slapped me, and Ive come to my senses. Im off to buy 3 solar panels to run my light bulb.

Bingo

[PokerMatt]

Interesting thread, there are some good thoughts going around. I thought I'd chime in with some of mine.

First, it's been said but let it be clear that oil isn't going to suddenly run out per say. Rather, the ability to produce oil is going to reach a peak and then slowly decline over time. People point mostly to the large increases over the past several months as evidence that we are at or near that peak. That alone isn't really enough to prove the existence of peak oil, however.

The strongest evidence is that the discovery of new oil fields has dwindled signifcantly and is now at the point where the oil companies are losing money on research of new fields. The oil companies do have many untapped fields that they are sitting on, which will be enough to last decades. The problem is that those fields tend to contain less oil and are harder to extract; the companies do not have a vested interest in tapping into the less profitable fields unless they need to (I'm not saying the companies are right or wrong. It's simple economics and I would do the same thing).

There will be oil for a long time, but it's going to get more expensive and there isn't a viable alternative at the current time. The oil sands that were mentioned earlier return about 1.5x the energy put in to extract it. Crude oil, on the other hand, yields 30x. All of the other alternatives don't approach oil's rate.

Without a cheap energy source, the world economy and basic way of doing this isn't going to be sustainable anymore. Cheap energy is the foundation because with it you can have a globalized economy. It allows you to mass produce goods in centralized locations and ship it cheaply all over the world. The airline industry, similarly, is already losing tons of money because the costs of flying everyone is getting much more expensive. Changes in costs of food production, both in pesticides and transportation (your average piece of food travels 1500 miles before it reaches your plate) will force agriculture to move back to a more localized economy.

The idea of peak oil isn't a conspiracy myth designed to make you think the world's going to end. Rather, it's acknowledging that cheap energy isn't going to be there forever (based on current and projected near-future technology). It's not going to be a sudden transformation where we're all of a sudden in a world war, but more of a gradual change over time as production drops from its peak. There will undoubtedly be significant adjustments to our lifestyle, as this will be the most significant development of the coming decades. So enjoy it now while you can! /images/graemlins/smile.gif

[DesertCat]

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OK, you have convinced me that the stock markets are the answer, and their wisdom will prevail, as it always has in the past. After all, they are the most efficient thing we have. If every chemical and agribusiness goes broke through using less oil and therefore producing less, why would I be worried, I dont work for one of them.

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boy, you really are all over the place. I said "free markets" not "stock markets", do you understand the difference? And if input costs rise uniformly for all agribusinesses, those costs don't bankrupt agribusiness, they are passed on to customers (though demand is lowered through the higher prices).

And in response to PokerMatt. There have been no large increases in oil prices recently. Review oil prices in Euros and tell me how big the "surge" was. And airline's aren't going bust because of oil prices, but because we have too much capacity in the airline business. Those airlines that are hanging on (and should be shut down IMHO) are praying for low oil prices to help keep them alive, but the real problem is they can't raise prices to compensate for higher costs with so much capacity.

As far as impacts on our economy, energy has been getting cheaper for hundreds of years. Energy accounts for a much lower percentage of our economies input costs than it did 25-30 years ago, so if it rises in cost, it's going to have a much smaller impact. A big part of this reason is technology, which tends to make most of our activities more efficient users of energy.

My laptop uses a fraction of the power of my first PC. My SUV gets better gas mileage than the typical 1970 car, while offering many more features and benefits. Current jetliners are much more efficient, and the A340 & 787 will be more efficient yet.

I agree with you in some of your points, oil is just too damn cheap to make it worthwhile to find more right now. But if oil prices increase it opens up the market to alternative sources. Higher prices makes Nuclear, Coal, Solar, Wind, Tidal, etc, etc, all more attractive.

Even today, powering electric cars from our electric power grid is cheaper than powering gas cars with gasoline. If oil prices increase dramatically, it's just going to make electric and hybrid cars more attractive (or their trade-offs easier to stomach).

I'm not tryin to tell anyone there is a conspiracy for or against peak oil. But as a theory it offers certain benefits to oil producing companies and states, so you'd have to think their executives and congresspeople are going to look favorably on the theory, whether it's true or not.

[imported_bingobazza]

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And in response to PokerMatt. There have been no large increases in oil prices recently. Review oil prices in Euros and tell me how big the "surge" was.

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The dollar has depreciated about 40% against the euro, but the price of a barrell of oil has gone up 5 fold. I think you are confusing oil prices with the price of fuel for your car.

[DesertCat]

In 1981 Median U.S. family income was about $19,000, oil prices were about $32 per barrel, so the median family could buy 600 barrels with their yearly earnings.

Median family income is around $45,000 right now, so with oil prices at $54 the median family can buy about 800 barrels with their earnings. That's cheaper.

And if we hadn't depreciated the U.S. dollar by 40% the price of oil would be $30, and the average family income would equate to 1,500 barrels. That would be way cheaper.
You are only looking at the fact that we averaged around $15 per barrel from 1986-1999 (including for a very brief period in 1998, $10 per barrel), equivilant to 2,000 to 3,000 barrels per family.

That was the cheapest oil in history, but not 500% cheaper. And back then we weren't filling the strategic oil reserve, Venezuala's oil industry wasn't under the thumb of a nutty dictator, we weren't fighting a war in Iraq (cept for 1990 when oil prices jumped to aha! 1,500 Barrels per family median income) and the dollar was much, much stronger.

I tend to think any short term changes in oil prices has more to do with those factors, than peak oil predictions.

[wiseheart]

1st: we should be talking about peak natural gas,
which is happening as we speak, as opposed to peak
oil which is in the near to far future

2nd: anyone investing in oil future contracts
or ethanol contracts?

[GeorgeF]

http://www.jamstec.go.jp/jamstec-e/odinfo/sdsreport.html

I say Chikyu finds a sea of oil on the bottom of the ocean. Lets go Team Japan.

[imported_bingobazza]

[ QUOTE ]
In 1981 Median U.S. family income was about $19,000, oil prices were about $32 per barrel, so the median family could buy 600 barrels with their yearly earnings.

Median family income is around $45,000 right now, so with oil prices at $54 the median family can buy about 800 barrels with their earnings. That's cheaper.

And if we hadn't depreciated the U.S. dollar by 40% the price of oil would be $30, and the average family income would equate to 1,500 barrels. That would be way cheaper.
You are only looking at the fact that we averaged around $15 per barrel from 1986-1999 (including for a very brief period in 1998, $10 per barrel), equivilant to 2,000 to 3,000 barrels per family.

That was the cheapest oil in history, but not 500% cheaper. And back then we weren't filling the strategic oil reserve, Venezuala's oil industry wasn't under the thumb of a nutty dictator, we weren't fighting a war in Iraq (cept for 1990 when oil prices jumped to aha! 1,500 Barrels per family median income) and the dollar was much, much stronger.

I tend to think any short term changes in oil prices has more to do with those factors, than peak oil predictions.

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Well, if you are smarter than the best geologist that has come out America in the last 50 years in relation to oil prediction, theres obviously no point argueing with you. I bow to your knowledge.

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