Diamond, Heinberg, and Kunstler, all in one post...

Fo4 over at FTD points us to an article by Shepherd Bliss entitled "Volcanoes, Oil, and Prophets." It's a long piece, integrating ideas from Heinberg, Kunstler, and Diamond ranging from geology to psychology. Worth the time.

A snippet:
We live today under the volcanic threat of peak oil, yet most people remain in denial about the potential dangers. According to geologists -- experts in volcanoes and oil -- slowly flowing crises face humanity as our supply of non-renewable fossil fuels dwindles. Few admit how disastrous peak oil could be.

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About half of oil futures traders are betting on 60$/a barrel in August, meaning they think oil will be trading above that price at that time.

I'm thinking $70 to $80 by the end of the year -- watch the futures market.

Jim Kuntsler's signature on his e-mails is:

"It's All Good"

Sure, here we go, couldn't have said it better...

Dave is right that Nymex futures market prices are close to $60 ($59.84) for August '05. You can also lock in prices of $61.15 in January 2006 and $55.72 in December 2010.

So if anyone is sure that oil prices are going to skyrocket, buying futures is a better way to prepare than planting your own food. In fact, if all peak oil believers bought oil futures, and are right, not only would they all be rich, but the investment would raise prices early and help drive policy.

I think that one of the best ways to convince people that peak oil is real is to invest a lot of your money in oil futures (or Royalty Trusts), then tell everyone repeatedly. Write it doen on paper and make them keep it. If you are right, then you can wave money in their faces in six months or a year. Now that would be more convincing than most other methods I've seen suggested. Of course, if you are wrong, it would be expensive and embarrassing.

This is a bit tongue in cheek, but I do think there is a useful point to be made. There is still a lot we don't know. We were only six years further away from peak oil in 1999 and the price dropped to close to $10.

Sorry Jack but the reason I won't bite on oil futures just yet is the fact that the SPR represents a wild card that Bush can pull out of his ass anytime that he feels like it. It would be completely hypocritical because it is contradictory to everything they've been saying about the use of SPR, "It is not to control prices etc" but in its own way, that would be completely in character for these people. The thing is topped off. And they could spring it at any time which would have a dramatic effect on the futures market. So regardless of geology, you could get hosed at any point in time. It is like betting on the horses. You might be so inclined if it weren't for the damn jockies!

A biodiesel fanatic pointed me to this article: Widescale Biodiesel Production from Algae. I am pretty sure that because this sounds to good to be true, it probably is, but I haven't yet figured out why it won't work. Figured TOD readers could probably take it apart and figure out if its feasible or not. Any takers?

"In fact, if all peak oil believers bought oil futures, and are right, not only would they all be rich, but the investment would raise prices early and help drive policy."

Yeah, but.

The big problem with this is that current price of futures contracts for real oil is at right about the point where fake oil becomes economically worthwhile (Google "Fischer-Tropsch"). There's not a lot of long-term upside to oil futures from here (short-term supply shocks are, of course a different matter).

And this, incidentally, is incontrovertable proof that Kunstler's neo-Luddite doomsday fantasy is a load of hooey. Civilization is getting along just fine on $60/bbl real petroleum, therefore there is absolutely no reason to doubt civilization could continue to get along just fine on $60/bbl synthetic petroleum (from existing, well-proven technology) for the foreseeable future.

There is problem with the algae biodiesel production scenario. To produce these algae, you need lots of fresh water (Think ponds and lagoons). There is a worldwide shortage of fresh water. Then there is the isuue of this algae production polluting the waterways. Think Colorado river at the US-Mexican border.


However if salt water was used, and no coastal land used in the production, then it may be a possibility -- though in that case, its impact on world fisheries would have to be considered.

I look at oil futures essentially as a hedge. A hedge? even though I'm not a trucking firm or an airline? Well, the way I look at it, if we get $100+ oil, then my retirement plans are going to be in a world of hurt. (The way they are structured, can't move it all to cash.) Plus cost of living will skyrocket. So, if we're back to $30 oil through the some technological breakthrough, I'll be happy, because financial disaster is averted.

Of course, you have to have the wherewithal to tolerate the risk of a drop in prices. But the way I see it, $150 oil is as likely as $30 oil by 2010. (Caveat: I'm no expert or insider.)

And, the runup in oil prices in the past year I understand to be demand driven. That is, unexpected increase in demand is the driver (granted versus a static supply ceiling). A realization of Peak Oil will be when the market is supply driven--or to be more precise--depletion driven. People seem to recognize a tight supply-demand situation; what they have trouble with is the prospect of ever decreasing supply, year after year.

Two comments:

First, about the biodiesel:

Nothing means shit without a decent cost estimate. It's certainly feasible to completely replace petroleum with biodiesel, just like it's feasible to orbit solar power satellites. Someone will have to figure out how long it will take to build giant cement ponds in the desert, build the irrigation canals to the sea, grow the algae, and install the harvesting pumps. And more importantly how many trillions this is going to cost.
My own opinion, FWIW, is that biodiesel is great on a small scale, especially when you're using waste vegetable oil. On a large scale, you need vegetable oil to be available at around $2/gallon in bulk, and I don't see that happening.

Second, about buying oil futures:

If H.O and P.G. are right, and peak oil is right about now, 10 year futures are the last thing you should buy. Ten years from now there will be no commodities market in oil, it will be totally controlled. Every nation will do it because of national security. You can have all the contracts you want for ten years from now, but there might be a good chance they would be worthless.

After hearing about the algae into biodiesel project at last year's SolFest, I did very major research as I cast about for appropraite parcels of land. But around December last, I had pointed out to me a major EROEI drawback to the whole idea: the algae must be dried substantialy prior to being processed which requires a heat source and fans for ventalation. This and other aspects of the process that seem negative from a permaculture pov changed my mind about algae biodiesel production here in Oregon since I believe we have excellent feedstocks already. But this is a regional outcome. I think Baja would be a great place to produce algae biodiesel because the hot/dry climate solves the drying issue. I presently favor castor beans for my area. And as I've said before, I do NOT intend production levels of biofuels to totally replace the amount of fossil fuels being used today in transportation. Our pleasurable trips via personal automobile to Alaska, the Pacific Northwest, Canada, Mexico, Vail, Vegas, Disney World, etc, will become artifacts as will CheapTickets' Hawaii air/hotel accomodations.

When? I think it's easier to gauge this through the price of gas in the USA and how I believe the economy and people will react, so it's highly subjective: when we hit $4/gal as we slowly climb to $5, we'll see the rapid decline of suburban service businesses and rise of all food prices, while SUV resale prices plumment, which leaves many families stuck with an even greater debt albatross. When? 2008.


If we use 20 million barrels of oil per day, and 70% is for transportation. We need to 14 million equivalent barrels of biodiesel by products + the amount of fuel needed for the production and conversion process.

Now how many cement ponds in Baja will that take? How much water? How much in bribes or military costs to control Baja?

And that's just for the US, what about the other 5.7 billion people?