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Thursday Open Thread...
Posted by Prof. Goose on December 8, 2005 - 12:42pm
Keep on threadin' in the free world...
“Every time I see an adult on a bicycle, I no longer despair for the future of the human race.”
—H. G. Wells, 1904
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Natural gas soars; layoffs, prices rise
And you think your gas bill is bad...
The oldest and latest data for which engineering bachelor's degrees and graduate law degrees (LL.B and J.D.) overlap in the tables that I could see come from 1985-86 and 2000-01, respectively.
In 1985-86, we apparently graduated 35,844 lawyers and 77,391 engineers. In 2000-01 we graduated 37,904 lawyers and 58,315 engineers. Unless I'm a math doof--which is entirely possible--this represents a 5.75% increase in lawyers and a 24.65% reduction in engineers. The ratio between the two fell from 2.16:1 in favor of engineers to 1.54:1, still in favor of engineers. In other words, although the gap between them is shrinking, we still have more engineers than lawyers (although in my opinion we still have way too many lawyers).
However, I would like to caution you to look at the data yourself. That 1985-86 year seems to be an anomalous spike in the number of engineers. The stats seem to put the mode around 62k, making the 2000-01 decline only about 6%. Also, in the first year the table I used covers (1970-71), we graduated only about 45k engineers, making the 2000-01 year about a 22% improvement!
But I think we are looking at different data for the engineers. I think the right table is:
http://nces.ed.gov/programs/digest/d04/tables/dt04_282.asp
The engineers data is pretty much speaking for itself. With economy growth, the number of graduated engineers steadily grew to 97,099 until 1985-86, which by some coincidence is exactly 5 years after RR entered the White House.
Later we obviously decided that our economy does not need them because the number steadily drops to 77,267 in 2003, while in the same time the population and economy were supposedly growing.
The lawyers numbers stalled around 40K during the previous 15 years, which I interpret as the labor market was already too saturated with them.
But think of it this way. If in your company you have 30 people to project, build and maintain the buildings and the equipment, to design and monitor the production process, to solve production problems and to engineer new products and processes; and 20 people to prepare your documentation and to represent you in court (whom you pay twice as much as the other 30 people), I'd definately say that your company will not survive long.
Plus, I suspect the next big thing will be genetic engineering, and we're at a huge disadvantage there. We try to teach biology without talking about evolution, which is kind of like trying to teach physics without mentioning Newton's laws of motion. And work with stem cells, cloning, etc., is blocked by the abortion issue. The new Lysenkoism...
Sorry for my off-topic and lack of info about some ills of the day, but is this really being done now in schools?
I teach evolution vs creationism as a writing project in my university freshman comp. class.
When I inquire into my students' backgrounds, it turns out several have had no instruction in either Darwin or the Bible.
However, we both agree that no matter how you shake the numbers we have too many lawyers. I tend to think we just have too much law. Our perpetual lawmakers just churn out too much paper. Some of the Founders were fearful of havign a standing army. Maybe they should have equally feared a standing legislature?
I suspect engineering was never the quite same after that.
A) Party, get drunk, and take basket weaving courses, or
B) Work your ass off day and night studying physics, chemistry, thermodynamics; miss all the parties and then when you graduate, you still won't get a job.
If you pick option A, you might become President of the USA or something like that. If you pick B, you probably will not be President of anything. Presidents need to know how to lie, smile, play golf, and manipulate other people into doing insane, unscientific things like believing "victory" is around the corner if only we pray harder and keep wishing upon that star, no matter who we are.
Doh !!!
I had a look at ASPO production figures and have come to a very similar position to Westexas. Making a couple of assumptions, internal consumption doesn't increase (unlikely) and ASPO production figures for 2020 are broadly correct, I came out with about 32 Mbpd of exports from 2000 reduced to about 20 Mbpd of exports in 2020. If there will be only 20 Mbpd of oil available for exports in 2020, USA will take, say, 13 Mbpd, China takes, say, 6Mbpd, who has the remaining 1 Mbpd of available crude? Germany, Japan and South Korea who use lots of oil (>2 Mbpd) but produce virtually no oil themselves will be in trouble. Any ideas or comments anyone?
Actually, oil is fungible (meaning, all oil is substantially the same and interchangeable). If we get into shortages, oil prices will rise substantially. Diverting any oil to internal use will therefore be far more costly than it is today.
In a free market, oil will go to where the money is calling for it. Whether that is for export or for internal use will depend on how much money and demand there is in the two segments. Even countries which are not free face the same constraint. Using the oil internally means giving up a fortune in foreign exchange. Most of these non-free countries are by definition not that responsive to the needs of their consumers. Those governments will export oil to gain funds to support the expensive lifestyles of their officials rather than make sure every farm family has plenty of energy.
So I don't think you can assume that oil producing countries will supply their domestic markets in preference to their export markets. Free or controlled, I suspect that the oil will go to where the money is, just as it does today.
Once a shortage of oil becomes apparent the writing will be on the wall for prices - why sell a barrel this year for $200 when you can sell it for $400 or more in a year or so's time. There will be enough money swilling around to keep the ruling cadres happy.
If the exporting country doesn't supply its domestic market sufficiently there will be a strong incentive for revolution.
Export sales are most likely to go to the country or countries who will defend the exporting country against others who might use force to get their oil.
...there could be some interesting and delicate equations being calculated between these and similar variables ;)
A shortage becoming apparent will only drive the price up, it will not make the future price more certain, as you are seeming to imply, i.e., it won't be clear that holding on to oil will be a good strategy, as the current price will incorporate the possibility of future price increases.
An increased price reduces the amount one needs to sell and wise regimes will gamble on further price increases if they see shortages increasing and they can encourage that by reducing exports.
I think we may have already seen explicit signs of this in Russia's behavior in the last year or so.
They could take an attitude of "if I can't sell it to you, then you can't take it either" and let us freeze in the dark while the oil glows in the dark for the next several hundred years.
In fact, it doesn't even require nukes to do this. It can be done with dirty bombs, just like Saudi Arabia already has done.
Invade Saudi Arabia? Sure, but say bye-bye to all the oil, which raises the question of why bother? Iran can do the exact same thing now without nukes since they have their own reactor.
what are you talking about? If you hang all the troublemakers, there is zero, I repeat, ZERO incentive for revolution. Were you talking about Norway or Iran? Because it kind of makes a difference. Stalin and Saddam supplied their people with NOTHING, and whoever lived liked it.
Ever heard of Nigeria? Know who Ken Saro-Wiwa was? Stick with peak oil. Predicting geo-politics is not advised. Let's concentrate on the winners we've got in Washington.
You want a revolution. How about here?
When I think about this issue, I think of countries like Mexico and Indonesia and Venezuela, with democracy but less stability than the rich West. As you suggest, revolution can come by democracy. It's very easy to imagine any of the three countries I mentioned having a democratic (we hope) revolution that led to leadership (new or old) more willing to satisfy internal demand for oil than to get top dollar abroad. For that matter Venezuela may already have had that revolution.
Remember it's only a relative loss of money for a government to sell its oil to its own citizens at below-world-market rates. It's only if the country is a net importer (as I believe Indonesia is becoming) that there's a direct cost rather than just a lost opportunity for revenue.
The other possibility, of course, is a breakdown in fungibility as a result of preferential contracts among countries. It's harder for me to imagine how that might play out, and it seems less likely, for the same reason that OPEC was constantly having trouble with cheating during the excess capacity regime. But it could be even uglier than the issue of purely internal subsidies, even if those contracts broke down quickly.
http://www.theoildrum.com/story/2005/12/3/104057/755#129
You are partly correct in saying that a repressive regime can be successful in suppressing revolution and dissent, sometimes for long periods of time, but this is often not the wisest course for those in power and definitely not always successful. Plenty of fairly surprising changes have happened in eastern Europe over the last couple of decades.
Things will become more generally chaotic over the next 5 to 10 years - I counsel you to expect the unexpected. Don't be too sanguine about the USA, either, there is a small but not insignificant probability that the current make up of the USA and its process of government could change quite radically as the effects of peak oil and other upheavals take shape.
You would be unwise (and incorrect) to assume that things will continue 'much as they are', the world will change more in the next 10 years than it has in the past 50.
What is the connection between an oil shortage and water? I'm not sure I understand your statement. Will water become increasingly valuable too as oil increases in price? Why would a country that sells oil today at $60/bb refuse, at $200/bbl, to cash in on it? Price increases, I would think, would mean that oil producers would care more, rather than less, about foreign exchange.
I disagree with your point about the fungibility of oil, it assumes that money is the overriding commodity and that internal markets will be deprived due to the cost implications of supplying local markets when external markets will pay more... On the contrary energy is the true base currency and as we procede into post peak it will become increasingly clear that the oil itself is more valuable than money thus internal energy needs will be met first... It will come down to question of heating your own homes, feeding your people or generating foriegn currency that will buy you what that the energy cannot be used to produce internally...?
Exactly. And the money is there where the oil is produced. Rising oil prices will mean more income for the oil producing countries. Some of it will raise the living standards there. And rising living standards mean more energy consumption. We have reason to believe that domestic oil consumption in the oil exporting countries will increase, even more than before.
Oil producing countries are diversifying their economies, trying to increase the value added of their exports. So less crude and more distillates, petrochemical products, plastics etc. More energy-intensive industries using natural gas. More tourism, more energy consumed in service industries. OPEC countries know that the time of the oil is limited and so they try to squeeze more from their energy resources.
We can see a pattern in energy consumption: more past consumption and present consumption bring more future consumption (high material living standards mean more energy consumption). High past consumption (more developed infrastructure) means better energy efficiency. This makes energy use more competitive there where the use is already high. This has worked for the developed countries, but will now mean that the energy producing countries will consume more themselves.
Background:
http://tceconomist.blogspot.com/2005/12/oil-industry-growth-challenge.html
Opening salvo:
Esser: "As a nation, we have previously gone through periods of deep concern about the adequacy of energy supplies."
translation: Ha Ha. Chicken Little was always wrong before and sound logic therefore assures us the Peakists are flat out wrong this time also
Esser: "Rather than an imminent "peak," we envision an "undulating plateau" two to four decades away.
translation: Ha Ha. Even if there ever will be a problem, which trust us there won't be, it is far far away in a distant galaxy and it's nothing more than a few minor bumps in the road
Bartlett addressed this by commenting that while people may have cried wolf in the past, in the parable, the wolf eventually did show up.
There is an interesting psychological phenomenon here. If people make warnings and it is a perfect world where there is someone to listen and take the appropriate counter measures, probably the warnings will not come true. Then the crowd will ask: what was that fuss all 'bout? On the other hand if nobody listens, when the fire starts everyone will be too busy to put it up and nobody will be inclined to analyze why this happened in spite of the warnings, which would already be useless. If the fire does not start then these people will be laughed at and humiliated. So it turns out that from pure personal perspective making a warning is a lose-lose-lose enterprise.
At the other end nobody wants to hear predictions, because they somehow remind us that we might not be in a complete control of our destinies. The final result is that usualy nobody does anything until the problem becomes obvious.
I wonder how many are afraid to be a "peak oil" Yourdon? And how many consider Matt Simmons like a Yourdon, just someone out to sell a book on another "crisis-dujeur"? (I actually believe Yourdon was 100% sincere, but just turned out dead wrong).
I can say that definately Kunstler and Ruppert may fall victums of their predictions. Even Heinberg whom I sympatize is going too far, mainly because of his dislike of the industrial society in principle.
Simmons, I don't think so. 200$/barrel in 2010 is a bit more than what I'd say, but the point that the price will rise significantly is quite a safe and I'd say a responsible prediction (200 is too US-centric number, people in the world will start rioting and whole economies will collapse long before that).
In any case, peak oil is a different animal in so many ways; when geological decline is a reality, no amount of human dedication can reverse the fact.
To really f*** things up, one needs a misprogrammed computer.
To truly FUBAR things (beyond all repair), one needs to continue misunderestimating PO until well beyond the peak. Then of course, it's too late.
IMO it will be NG and not peak oil that will awaken the folks in the US to our energy problems. With fertilizer, chemicals, and plastics production moving to foreign locations this may temporarily ease demand for NG in the US, however it will be the farmers that really bring the problem to everyone's attention. I grew up during the 30's and 40's in the corn belt on a typical 160 acre farm, and I have a lot of contact back there with in-laws, nephews and etc. This past fall listening to there conversation was an earful. One farmer says: The way chemicals and fertilizer prices are increasing, If I stopped fertilizer application for a couple years I sure could dig myself out of this hole. The first year I could nearly maintain my corn yields, and the second year I could rotate them with beans and alfalfa. Maybe if we all do this we could knock down the surplus and bring up the price by the third year. Second farmer: Ya well with all the ethanol production coming on line the next few years the surplus is gone. If I can hang on a few more years your going to see big changes in cattle, hog and poultry prices, even eggs and milk, Ya corn prices are going to get the ball rolling for us. Third farmer: Ya but after a few years of high meat prices, all the welfare and fixed income people will be back on pancakes and cornbread, and all the burger eaters will be on peanut-butter and jelly, and we'll all be back in the same old fix again. First farmer: Na it don't work that way, I been reading about NG. This country's running short of NG and when they do look out. Everybody in the world will want it, That's when fertilizer prices will skyrocket and food prices also. That's when the government will step in and try to protect us. When food prices shoot up they'll pass a bunch of crazy laws wait and see. This'll not be like the 30's we may finally get our just reward. Show me somebody that works from sun up to sun down 7 days a week and then some, and I'll show you a BS artist. Second farmer: Ya well you ain't been talking to them diesel mechanics, and you ain't worked on Sunday since your kid started feeding the cattle, and further more you know we still all love it.
High meat and dairy prices. Good. We should all be vegans anyway. Best single thing you can do for your health and promoting sustainability. Between 80% and 90% of the grain the US grows in a year is feed to animals instead of people. Animal agriculture is responsible for a huge (negative) environmental impact (probably no other human activity has the same impact on our planet other than burning fossil fuels).
Maybe we could take all that grain we currently feed to cows and pigs and chickens (more than a billion chickens are killed each year in this country) and use it to make ethanol, butanol, or something else (plastic, fertilizer, lubricant, paint...)
Better yet, plant better feedstock for industry (hemp), but not more corn or soy (they are just subsidized, that is why the get press for biomass, not because they are the best option).
And as long as I'm indulging in fantasy, how much hemp, rapeseed, whatever could be grown with all that land, fertilizer and water we currently waste on tobacco?
For best health, non-vegan foods should be derived from healthy animals that ate a natural, no or limited grain diet.
I think a discussion of Veganism is very on topic for a site like this. Food is the most important source of energy humans rely on, and as long as the majority of our food is produced with massive inputs of fossil fuels (and then feed to animals with a greatly reduced EROEI), it will remain an important part of any discussion about Peak Oil.
Dairy farming is no less wastefull than rasing animals for meat. Humans are the only animals that consume milk after infancey. This is because there is no dietary need to consume milk. Protein from dairy requires more energy and water to consume than protein from plants. Processing animal protein also requires the liver and kidneys to work harder. The process of digesting animal protein also involves the leeching of calcium (the big reason given for eating dairy) from the bones, making animal protein a poor overall source for minearls. Besides where does the cow get all that calcium from? Animals can't produce minerals in their bodies, that is why we need to get them from food; feed animals get thier minerals from the plants they eat.
Cutting out animal agriculture could free up a large amount of fossil fule inputs. It would greatly reduce humanities impact on the environment (from fertalizer run off - nessecary to support large scale industrial agriculture that is largly used to produce meat - to soil erosion and deforestation). If we were to stop raising so much grain to feed to cows and chickens (which naturally evolved to eat grass - feeding them grain is a means of fattening them) it would also free up millions of acres of farmland for biomass crops.
Responding to the point about long term health effects, it is impossible (many have tried) to design a diet based only on plant foods (no meat or dairy) of sufficent calories that will not deliever all the nessecary protein, fact and carbs a human needs to live a healthy life for themselves and the planet.
On the health issues, I simply will recommend for others wanting to pursue nutrition reality for optimal health do their own investigation via google, browse an internet health board or 3 to find out what others experiences are with various diets, and experiment with their own diets if they feel they can do better or have some health concern that may be diet related.
A few Google search phrases: Mercola Diet, Weston A. Price, Natural Hygiene Society, Soil and Health Library
Just to let you know, you only need at most 6mcg/day of
B12 (cobalamin), a cobalt-containing compound
that controls blood formation
and neural development and function.
B12 is produced by dozens of micro-organisims in our
environment and in our bodies.
Its generally over-hyped as a down side to veganism
since its the only thing you can't get from plants. However
since it is produced so many places in our environment it is
easy to get. The dirt on plants you eat can supply you with enough, and for most people B12 supply is not an issue.
No matter what you read look at the medical books first.
After whey you have cheese, then fish, beef is way down on the list.
So yes in one sense our love of the hamburger is pure fast food advertising.
But a totally vegan diet is not going to happen for the 6.5 billion people you are going to have to feed.
You can't feed them the corn that you can feed a cow! You can't feed them the silage you feed a cow! You can grow soy beans but they do not provide a full complete protien, you need to add things to it, to get the total health.
So sying that we can totally go meatless is not as forth coming as the "india" vegan diet is, they have a lot of fresh leafy greens in their diet, and a lot of beans, and rice, and fruits.
The USA is not geared toward that just yet.
Just saying what we should do and doing it are two differant things
If your not growing corn for cows you have plenty of land to grow a variety of cereal crops. Upwards of 85% of the grain we grow already in the US is feed to animals (corn and otherwise), why not use that land to grow food for people? A variety of foods. Large monoculture farming is more prone to parasites and diseases. Crop rotation helps replace nutrients in the soil, lessing dependence on fertalizers.
Why not add things to soy beans? Soy and brown rice provides a complete protien. I said it before but it needs repeating it is not possible to eat sufficent calories and still not get enough protien. Nutrition is not just a matter of protien. You need fats and carbs and vitamins and minerals, all of which are provided in better forms, and in plentiful amounts by plant and fortified foods which have a greatly reduced environmental impact.
We have lots of beans and rice and fruit too. We could have more if we devoted more agricultural land to rasing them. If there is a demand, there can be a supply.
What's your point? The USA is not geared toward alternative energy just yet. Just saying what we should do and doing it are two differant things. So why not do it already?
We as humans have been getting cheese as a protien for almost as long as we have been getting beer.
One way around this is to eat yogurt, as they do in India. Yogurt is more digestible than milk. In Asian countries like China and Japan, consuming diary products once you were weaned was unheard of.
But I agree that humans are not meant to live as vegans. We can, but that's not what nature intended. The American diet is far too heavy in meat and fat, but there's a reason for that: nature programmed us to crave these foods. It didn't do any harm when they were scarce and hard to acquire.
There are a couple of different ways of looking at futures prices. Basically these prices are for contracts to buy or sell oil at a fixed date in the future. The simplest way to interpret them is as the market's guess at what the actual spot price of oil will be at that future date.
This makes sense because if a future spot price were known to be different from the price of the corresponding futures contract, people could make a guaranteed profit by buying or selling the futures contract. This would move the futures contract price until it was the same as the expected spot market price.
However another way of interpreting futures prices sees them as basically the same as today's spot prices, with some small corrections due to carrying costs (eg costs of oil storage) and opportunity costs. This explains why, when oil goes up a dollar today, futures contracts all move in lockstep. Oil for delivery a year from now will move up almost a dollar, and the same for oil for delivery two and five years from now. They all move together.
So how do we reconcile these two views? Both of them have logic behind them.
The answer is that both are right. Futures prices predict future spot prices, and futures prices are based on today's prices plus some small modifications.
How can both be right? You just have to apply logic. The answer is that today's prices reflect expectations of future prices.
With a storable commodity like oil, prices do not reflect just today's supply and demand. They also depend on expectations of future supply and demand. If it is thought that there will be a shortage in the future, today's prices will rise, as oil is stockpiled against this anticipated future need. If people expect a future glut, today's prices will similarly fall.
Understanding this effect allows us to reconcile the two models of oil prices. Futures markets do predict future prices. But future prices are tied closely to today's prices (and to prices even farther into the future).
I have occasionally commented that in my opinion, oil futures prices are not consistent with near-term Peak Oil models, at least the more drastic ones. If we see significant depletion in oil, say if 2006 produces 8% less oil than 2005 as some here seem to expect, that is going to send oil prices far higher than they are today. Only such high prices could reduce demand enough, given the still-surging economies in the West as well as in China and much of the third world. Recall that Matt Simmons predicted $100+ oil, and this is what I would expect as well.
But the markets don't predict that. They see oil prices at about the same level they are today.
Some people objected, saying that markets always see oil prices at about the same level as in the present. That's true, as I noted above. But it's also true that markets are predicting future oil prices, as I also noted. The point of this note is to reconcile this seeming contradiction.
The reconciliation makes my point still valid: today's price is based on expectations of what will happen in the future. If markets thought there were going to be an 8% drop in production, futures prices would be much higher, and today's prices would be much higher as well. The fact that they are not means that the markets do not see a major Peak Oil crunch in the time frame of the next few years.
(As for the predictive power of markets, I have posted on that at length before, but to summarize, if there were known, public information that said that the futures price of oil was wrong, people would take positions in the market to exploit the mispricing and lock in a profit, and by doing so they would move the market price until the profit opportunity disappeared. Markets are therefore an institution for incorporating all available information into the price structure.)
The big question mark is China, will it have a year of flat oil consumption, or will it start increasing exponentially again? Who knows what is going on there, it is pretty opaque.
Overall I think the odds are against a year of flat oil consumption, reasonably economic growth, and oil staying in the $60/bbl range, but maybe there are scenarios where that happens. I still think the more reasonable interpretation of market prices is that oil production will continue to increase modestly this next year.
I think given the general uncertainty in demand elasticity, recent market pricing history is reasonably consistent with either your view or mine.
More generally, I agree with much of what you say about the efficient market hypothesis in the oil market. A way that I have started thinking about it is to imagine the frequency spectrum of price movements. I conjecture that very high frequency components of the spectrum in the market are mainly about short term factors. However, the low frequency stuff is looking further into the future. So this or that movement of the day is about inventories, weather, etc. However, the fact that prices have been $60+-$10 for quite some time is a forward looking statement about the need for alternatives for conventional oil (many of which are profitable at these price levels). Those prices tell me that the market does not believe conventional oil development as we have known it can satisfy future demand.
I imagine economists must have Fourier transformed price data and thought about this stuff, but I'm not familiar with it. Do you know?
The first realistic argument against is there isn't enough money to pay for it. The second is we can't possibly manufacture enough steel and aluminum. Thirdly we don't have enough people trained to build ships and airplanes. Finally we don't have enough factories and shipyards. But America did do it and kept on doing it for decades after that.
I've been reading these kinds of arguments being made about converting to a renewable energy economy. Its not just a 'New Manhattan Project' that America needs it's a 'New War Production Board' that's needed. Peak Oil is the most powerful threat to national security and our civil liberties that has ever existed. Business in its usual unpatriotic way cannot continue. Peak Oil will end economic expansion if the free market has its way.
One of the early faults of the environmental movement was it only talked about the problem. Eventually the theu grew up to invent new ways of doing business which created new industries like catylitic converters and electronic fuel injection. BTW Bosch manufactures its fuel injectors(about 90% of the world total) in Kentwood, Michigan. In less than 10 years we doubled average fuel mileage at the same time pulling Chrysler from the brink of bancruptcy.
The neocons wouldn't even be talking about clean coal technology if young environmentalists hadn't grown up to invent it. The same thing for the next generation of meltdown proof nuclear reactors. Green manufacturing techniques have shown themselves to be profitable. Companies like Nanosolar wouldn't have happened if environmentalists kept talking only problems. The same goes for the rapidly expanding wind farm industry. Those soon to be abandoned GM and Ford factories could soon be making thin film PVs and lithium polymer batteries and in-wheel motors. The Oil drum community can help reframe the issue as a patriotic value and a business opprotunity way to the future or we can let the whiners frame the discussion.
But reality is rarely as smooth as realistic forecasts suggest. In that vein I offer you a maybe plausible more spikey future that I concocted a few months ago:
How to get $500 bbl oil in 3 months
I'm amused by the shock some folks express when a price for oil of $100 or $200 is predicted in the next few years, and by diehards who say it will drop back to $30 (not before US unemployment nears 20% I'd guess), so here's a scenario that could easily result in $500 bbl oil in 3 months...
March 2006
Israel bombs Iran nuclear facilities ; oil $130 from $70
(note: overflies Iraq, avoiding Saudi airspace, USA complicit)
China begins noticeable selling of US securities, $ drops 10% in a month
April 2006
Widespread uprisings assisted by Iran in central & southern Iraq ; oil $160
US casualties in Iraq over 1000 in one month
May 2006
US Invades Iran "to secure Iraq border" ; oil $240
Revolution in Saudi ; oil $360
US too stretched to intervene in Saudi until too late
US$ plunge continues China revalues Yuan to 5 per US$ ; oil $400
Note that approx 20% of global oil production comes from Saudi, Iran, Iraq; a fair bit of that will be off the table for some time, at least. I guessimate that there would be an approximate 50% increase in the oil price for every 2% of global supply reduction due to short term disruption, on that basis a reduction of 10% of global supply (that is 5 multiplicative 50% price increases) would result in a jump from $70 to over $500.
June 2006
Impeachment of Bush and Cheney begins (ostensibly for illegal war but really because of oil shortage and price)
New Saudi regime ceases all trade with USA, signs agreements with China
China annexes Taiwan peaceably (almost totally)
OPEC bans all oil exports to USA
US$ 50% of Dec 2005 value ; oil $500
July 2006
Bush and Cheney resign, put under arrest
Senate and Congress unanimously request ex-president Jimmy Carter to serve till 2009 with John McCain as VP
US pulls out of Iran, begins negotiations for pull out from Iraq at UN
Oil $450, US gasoline $20 / gallon
Goldbugs who took profits at $1000 per oz back in early May are unhappy
Subsequently...
OPEC oil is no longer sold for US$
World Court requests extradition of Bush, Cheney and others on war crimes charges
Saudi requests extradition of Saud families and their money from USA (to where they mostly escaped) as a precondition for them and OPEC resuming oil exports to USA
(USA endorses World Court, extradites Bush, Cheney, Sauds - neatly avoiding divisive US trials)
US economy shrinks by 25% over 2 years
Oil price drops to $300 by end of 2006 but mid east output still 25% below 2005 levels
2004 becomes recognised as the probable year of peak (conventional) oil
I know some of the this is a bit fanciful, particularly the JC for president bit but it would be deliciously ironic if he could at last implement his energy plan of 25 years ago. I think most of these events are plausible and many less predictable things have happened. Note that no terrorist acts against the USA, no newks, no plagues, no major wars, were needed to conjure $500 oil, so there is plenty of scope for $1000 oil!
Carter for president. I didn't see that one coming.
Carter was on the Daily Show earlier this week. He has a new book out - "Our Endangered Values : America's Moral Crisis".
Bird flu jumps from person to person in Africa and spreads quickly throughout the world..."oh crap" says humanity.
The 1918 "Spanish" influzena virus had an overall mortality rate of 2.5%. This rate could be higher in certain populations, for example, India may have had a 5% mortality rate. I think the most that we could expect for bird flu is 5% mortality in a pandemic.
Losing 1 in 20 people would be a serious perturbation to society and the economy. I think that with 50% mortality, oil would not have a price. It and many other products would not be generally available.
This high mortality rate is hopefully largely due to it not being a human to human transmissible strain. If it mutates into a human to human transmissible variant it should be more recognisable by our immune systems and the mortality rate should be lower. That seems to have been the pattern in past similar pandemics. It seems that similar mutations in the past have often gone via pigs which are much more immunologically like humans than poultry are, so any signs of it getting into pig populatons would be ominous.
There was a reasonable brief article on Marketwatch this week:
http://www.marketwatch.com/news/story.asp?guid=%7B80E760E2%2D9CF1%2D437F%2D93BF%2D7F0DF3EE2E30%7D&am p;siteid=mktw&dist=
Their 'severe case' would be: "If a pandemic similar in scope to the 1918-19 Spanish flu outbreak were to occur, 30% of Americans would become ill and 2.5% of those would die, the CBO said." resulting in 2 million US deaths.
So, 30% infection with 2.5% mortality for those who caught it = 2 million US deaths.
You could entertain yourself by varying the probabilities but until the pandemic strain emerges those guesses seem as reasonable as any. This european site has more detailed and tech info:
http://www.eswi.org/
And here's one on the 1918 US pandemic:
http://www.pbs.org/wgbh/amex/influenza/
Attack on Iran triggers widespread retaliatory insurgency into Iraq, causing US to seal the border by partial invasion. China sees economic trouble coming and begins to convert its $ holdings to spread risk. Revolutionaries in Saudi take advantage of US action in Iran. China knows the only US defence of Taiwan at that moment could be a nuclear strike and annexes.
I don't propose this as a prediction but each event, starting with the initial attack on Iran, dramatically increases the probability of each subsequent event.
Even when there is near independence between such events I think there is a tendancy for such unlikely events to cluster. Probably due to uncertainty increasing as a result of the first making further abnormal events more probable.
It was meant as an artificial example to say that extreme events could happen and change everything. I happen to think that there is a higher probability of something like that than there is of oil prices dropping to $30 bbl for a decent spell.
http://www.reason.com/hitandrun/2005/05/the_saudi_optio.shtml
That could mean NO Saudi oil for years to come, easily pushing the $500 bbl oil to $750+.
Suart,
Did you mean "Oil Storm"?
Looking at the way the world is going, IMHO,
Russia will come out quite strong: She has oil,
She has lived through a technical peak that
precipitated the collapse of the FSU and therefore; She knows what to expect;
The value of oil will increase; Putin is taking
back control of his country's oil. Her people are
used to hardship in spades. She has nukes. Were I
a betting man, I would rate Russia's chances of
coming through PO in better shape than any of
the G7 countries and China and India. She still
produces more Engineers than Lawyers or MBA's...
I've just read the first and it is magnificent, feels very real, and the humour is 99.9% gin martini dry, try this:
- "The ultimate cause of Soviet Union's spontaneous collapse remains shrouded in mystery. Was it Ronald Reagan's Star Wars? Or was it Raisa Gorbachev's American Express card?"
and
- "I went back a year later, and found a place I did not quite recognize. First of all, it smelled different: the smog was gone. The factories had largely shut down, there was very little traffic, and the fresh air smelled wonderful! The stores were largely empty and often closed. There were very few gas stations open, and the ones that were open had lines that stretched for many blocks. There was a ten-liter limit on gasoline purchases.
Since there was nothing better for us to do, my friends and I decided to take a road trip, to visit the ancient Russian cities of Pskov and Novgorod, taking in the surrounding countryside along the way. For this, we had to obtain fuel. It was hard to come by. It was available on the black market, but no one felt particularly inclined to let go of something so valuable in exchange for something so useless as money."
Here are direct links to the three parts in sequence:
http://www.fromthewilderness.com/free/ww3/060105_soviet_lessons.shtml
http://www.fromthewilderness.com/free/ww3/062805_soviet_lessons_part2.shtml
http://www.fromthewilderness.com/free/ww3/071805_soviet_lessons_part3.shtml
To make a long story short, the FSU was producing 3x Saudi production, and in 1985 Aramco started a price war, flooding the world with oil driving down prices below Soviet cost of production and transport. This dried up a vital source of hard currency for the FSU and resulted in severe shortages of goods. It only took 6 years for the FSU to collapse.
These right wing memes are really uncovincing.
The FSU did participate in the global market. They liked to pretend otherwise, of course.
See also this by the same author: http://survivingpeakoil.com/article.php?id=our_village
http://www.lifeaftertheoilcrash.net/PostOilBulletin/IssueNumberTwo.html
Issue #2: "Navigating the Age of Collapse"
"Thriving in an Age of Collapse"
by Dmitry Orlov
"Peak Oil: A Survival Guide, Part I" (Reprint from Museletter #161)
by Richard Heinberg
"Mapping Out the Age of Collapse, Part I: The Effects of Urbanization"
"Mapping Out the Age of Collapse, Part II: Industrial Civilization at Night"
by Matthew David Savinar
Russia can still order itself into a 'command
economy'. Western Free Markets could panic
themselves into a crisis. Putin could control
the flow east, west or retain sufficient oil to
be the last man standing. Oil is only fungible
if you have something to trade. Paper based
fiat currency? Grain?
Corporate Law Specialists and services?
What will become important is that Russia, (which
is probably close to Peak), has a government that
can decide to trade or retain oil for internal
use. The West does not have this luxury,its
politicians are as much at the mercy of of global
trade disruptions as anyone, whatever they may
like us to believe.
A strong Russian Leader could appeal to
patriotism; defer progress (again);hunker down
and wait.
The West requires perpetual economic growth to
stay stable. All will be affected, but I cannot
help thinking that Russia is in the best position
to tough it out for longer.
src: cnn
:-)
But I think that a very sharp US (and subsequently global) recession would be a necessary precondition, with US unemployment reaching 20% or worse. Unfortunately (for the US) this would result in some of the global economic imbalances unwinding and a consequent significant drop in the international value of the US$... raising the $ price of oil.
So, I'm confident in saying it is a very small possibility and the probability of $100 oil is very much more likely and imminent. Best you don't wish too hard for $30 oil, methinks, it would come with some very nasty associated problems.
But if you'd like a cheery comment from me, I think oil will stay below $100 longer than HH stays below $20. (Have a nice day!)
I'm not making any wild suggestions that these two energy sources are interchangeable but it is very interesting to remember that NG was selling for $3 per 1000 cu. ft. back when gasoline (and fuel-oil) was about a buck fifty per gallon. That was a four to one price advantage for NG vs: gasoline/fuel-oil. Fuel-oil heated homes in the colder climes could heat for 1/4 the price when they switched to NG.
Those days are over.
And therein lies the problem...
right here
Based on Hubbert/Deffeyes (Linearization) Method, the remaining combined recoverable oil reserves for the North Sea (Norway, et al), Iran and Saudi Arabia are approximately 160 Gb, versus current annual combined production of about 6.4 Gb, a Reserve to Production Ratio of 25 years.
At current rates of production, 10% of their reserves will be exhausted in 2.5 years. In other words, the current rates of production are unsustainable, and of course the North Sea is already crashing.
Clearly the Saudis enjoyed incredible power in the world by virtue of their status as swing producer. Why give that up to be yet another "just in time" supplier?
To me, the answer is obvious. They have no choice because they do not have the reserves or capacity to do this anymore. They may also be trying to take themselves out of the neocon gunsights if they fail to deliver all the oil that IEA says they should deliver.
"I haven't heard this term - swing producer - for a long time, and we do not intend to be the swing producer in the future," Mr. Naimi (Saudi Oil Minister) said.
In my opinion, this is the key portion of this NYT article. Texas was the swing producer from about 1935 to 1970. Saudi Arabia was the swing producer from 1970 to 2005.
The new "swing producer" is oil from emergency reserves. The problem is that will probably be impossible to rebuild the emergency reserves.
Makes sense, provided the Saudi's do have the true capacity. But who really knows?
So you are arguing that their prior position hurt them? They were the most powerful oil producer in the world and now they are becoming just another player. You also appear to be saying they have a willingness to trade in that power just to avoid creating a supply glut which they can avoid anyway just by turning down production if they had the excess capacity (and which they have done historically).
It doesn't add up, unless, as westexas noted, they really are not the swing producer any longer, just as Texas stopped being the swing producer when the US peaked.
It seems to me, between the Saudis actions implying the real state of their reserves, coupled with the Kuwait, Burgan, and other revelations this year, that Deffeyes may have been spot on the mark and this is it - 2005 is peak.
They can not create supply glut by increasing capacity, they can do that only by increasing <bproduction</b>. The difference is like between "I can" and "I will".
Sounds like another typical Saudi pie-in-the sky talk. Sorry we can not supply more oil right now, because we are so good that we fear ourselves... Give me a break...
Today's NYT has an ExxonMobil ad with a chart
of US NG supply, consumption, imports--Cananda
and LNG. The chart goes from 1990 to 2025. The
interesting part is that the graph is a little
bumpy not only up to 2005, but all the way up
to 2025! Not only can they predict the trend,
they can predict the bumps. Very impressive.
The LNG import line is pretty straight (one
bend) and widens out above US and Canadian
supply (with bumps.)
http://www.mms.gov/ooc/press/2005/press1208.htm
We shall never know how much new production has been lost due to the effort required to repair what has been shut down. Many of the people working on repairs are the same folks who would be working on new production.
"The average daily production was about 2 470 000 barrels oil, about 244 000 barrels NGL and about 107 000 barrels condensate."
"Preliminary production figures for November shows a small increase in oil production. Average daily production is about 2.518 million barrels oil and 0.414 million barrels NGL and condensate. Final figures will be published in the beginning of January 2006"
If the next few months come in like October, then Norway is in the steep decline stage of depletion.
Link to the web page is :-
http://www.npd.no/English/Aktuelt/Pressemeldinger/2005/pressemelding_23_2005.htm.htm
Huh?
The article goes on to detail supply increases of between 1.3 mbd and 1.6 mbd, but also a worldwide demand increase of 1.5 mbd! That strikes me as an equally tight year as this one. No cushion whatsoever. So why is the whole article written so as to make it seem like we're looking at a supply glut?
One, this is what we will face when people are disparate. One's horizon gets very short in troubled times. The only thing that will matter when things get difficult is where the next meal is coming from, how will I stay warm today?
Secondly, even though the situation for most Americans is quite different from destitute Brazilians, in some ways the situations is similar, in that it is very hard to establish new patterns of thought in people. We have not ever had to think about energy, and we have not been taught to think critically about our actions. More and more we are pushed to accept without questioning.
I also heard another segment about how employer's matching contributions for worker's 401Ks had very little effect on the rates of participation. Apparently, there was not that big a correlation to income either, at least not until you got to salaried professionals. It was not until the programs were set up so the worker participated by default that people stayed in the program.
All of this reinforces my view that we as a nation will do nothing significant in anticipation of PO (or GW). Depressingly, I think it will be everyone for themselves, with most having no clue and not being prepared. There are simply too many people who will refuse to think about it no matter what. It's very hard to comprehend - just like I cannot imagine taking every penny of retirement matching contribution (unless I was truly flat broke), but it is important to recognize that lots of folks just think differently. I believe that anyone who posts on a blog such as this is inherently more of a critical thinker, and interested in analyzing information for themselves, and we tend to think that everyone else thinks similarly. We need to remember that many have never established such thought patterns, and never will.
I wish there were an edit feature!
http://www.themint.org/about/adultsprove.php
For some here, they don't think they'll ever be able to actually retire, so what does it matter. They will work until they die, or are forced to leave out. The prevailing sentiment among these folks is one of abject pessimism and resignation regarding the future.
Others simply cannot afford even a 1% reduction in their takehome pay, it is all they can do to make ends meet presently. They are average Americans, failing to save even 2 cents out of ever $USD earned, and like the average American, owe $8500+ on credit cards.
http://economics.about.com/cs/moffattentries/a/us_and_japan_5.htm
http://moneycentral.msn.com/content/Savinganddebt/Savemoney/P36019.asp
And if one really does not believe that the money put into the 401K will be there at retirement, then neither will the matching funds, so why bother. Personally, I don't have a lot of confidence that my 401K will be worth much when I retire - too many chances for it to be wiped out by inflation or crashes in the particular investment choices I make. But I'll keep a wary eye on it and keep sucking up what I can. Nonetheless, I'm still skeptical that the latter has much to do with it, because it would require some serious analysis of the world situation, and I doubt that is happening much.
The most very basic fundemantal desire to sustain life is Firstly: Physiological needs (warmth, Shelter, food), these are the basics man. When our world of comfort is rocked to it's core, from peak oil, political unrest, terrorism, etc we will all resort to these basic needs.
The second most important need is: Security, protection from danger. Our danger will be from other people, uh anyone remember those images and stories from New Orleans during and after hurricane Katrina?
Third is Social needs. (love, friendship, comradeship)
Fourth is Ego needs (self respect, personal worth, autonomy)
And lastly Self Actualization needs i.e. full potential
And while most people never acheive the 4th and 5th need, many seem to botch up the 3rd so bad, that the spouse gets to keep the first two needs anyway!
I just thought i'd post that all here as a reminder that when the crap hits the fan, (whenever that will be) the first and second needs will be all that matter. Just be prepared, and the more i put the interact with others and observe the world, the more convinced I am of how the ole Boy Scout motto of "BE PREPARED" really holds true.
Unfortunately many Americans have guns and may be all too convinced that their possession and use will provide needs 1 to 4. Y'all take care, now.
Gun control? remember gun control is the ability to hit the target twice with only one hole showing!