Why peak oil is probably about now
Posted by Stuart Staniford on March 1, 2006 - 6:12am
This is a quick summary of past analyses with links for further detail.
There's a very good chance claimed OPEC reserves are exaggerated.
Here's the history of how much OPEC nations have claimed to have in their proved reserves (oil that they should almost certainly be able to produce with existing technology and prices).
History of OPEC claimed proved reserves in billions of barrels (also known as Gigabarrels = Gb. A barrel is 42 US gallons). Source: BP Statistical Review of World Energy. Click to enlarge.
Note that OPEC production quotas are in part dependent on proved reserves - giving these countries an incentive to exaggerate. The huge jumps in reserves were not associated with the discovery of any particular large new fields. These time series are extremely implausible on their face and suggest mendacity. The truth may be starting to come out. Recently, Petroleum Intelligence Weekly got hold of internal Kuwaiti documents indicating their true reserves were less than half the claimed value. This is a key point. 2/3 of the world's claimed remaining reserves are in OPEC countries, and all scenarios that assume peak oil is more than ten years away assume that OPEC can substantially increase production from present levels.
World production stopped increasing in late 2004.
As of right now, production has been flat-but-bumpy since late 2004. The peak month of production is presently May 2005. This is true despite high oil prices giving strong incentives to produce more oil. Lack of refinery capacity is often cited as an alternative explanation for this. If this were true, heavy hard-to-refine oil would be cheap. It isn't.
Both OPEC and non-OPEC oil production appears to be approximately plateaued at present:
Average daily oil production, by month, from various estimates for OPEC and non-OPEC as a percentage of their highest month (May, 2005 in the non-OPEC case, September 2005 in the OPEC case). Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: EIA.
Decline rates of existing production are very high
The major international oil companies have not been able to increase production for some time, despite strenuous efforts (the notable exception is BP which has had access to resurgent Russian production via a subsidiary).
Average daily oil production for top 10 publicly traded international oil companies. Source: Petroleum Review.
An analysis of Exxon's production suggests the problem. Their existing production apparently declines at rates varying from 6% to 14% per year. Thus all the new projects they bring on stream each year just serve to offset the declines in their current fields. This strongly suggests they are at or near peak. More recently, it emerged that in 2005, they hardly replaced any of their oil reserves - instead almost all of the quoted energy reserves they developed were actually natural gas (in Qatar). Shell is even worse off - they only replaced 60%-70% of production in 2005, and only 19% in 2004.
The situation does not appear to be much better in OPEC. According to the US EIA, Saudi production is declining 5% to 12% each year. So they have to bring on that much new production just to stay level. Similarly, Iranian production is estimated to decline 8%-13% each year.
This to me is the most compelling argument that we must be close to peak oil production. The amount of new production required every year just to stay level is enormous. We know this was the main symptom of US peak - all quotas were removed (oil production in Texas was managed via a quota system), and despite strenuous efforts to increase production, it never could climb higher. It is noteworthy that a number of OPEC officials were quoted in 2005 saying that OPEC was producing everything it could with effectively no quotas.
Hubbert Linearization points to peak oil
Given that reserves data cannot be relied on in many important cases, peak oilers are fond of using an extrapolation method from production statistics originally due to Hubbert. While the technique has its uncertainties, and may not be applicable to all countries, it did a decent job of predicting the US peak in production back in the 1970s. This method suggests the world is close to peak now. This is the basis of Professor Deffeye's famous Thanksgiving 2005 prediction. My own analysis suggests a peak of May 2007 ± 4.5 years (so Professor Deffeyes prediction, for which he doesn't cite an uncertainty, is within my error bars - there are differences between different production statistics which lead to slightly different answers).
At least one major oil company is warning us
Chevron has been running an ad campaign called Will You Join Us. They are warning everyone that it is getting extremely difficult to find and produce more oil, the world is consuming much more than it discovers, and we should be thinking about conserving. Why on earth would they want us to conserve their principal product if there was plenty of it?
The price of oil keeps going up.
At around $60, prices over the last year or so are the highest they've ever been in the absence of a major oil shock. They are also very volatile - any hint of disruption can cause a several percent change in price in a day. Prices are now high enough that demand has stopped increasing at least for the time being, and stocks keep building - suggesting the market is nervous and wants more oil on hand.There is no evidence of Saudi spare capacity
Saudi Arabia is claimed to have some spare capacity (the only nation for which this is currently claimed). There is no evidence of it in production statistics. Their reported production has been flat for a year, and they did not increase production at all in response to the hurricanes in September 2005. It's possible they have some spare production from the Manifa field; however, it is unrefinable due to high Vanadium levels:
There are geopolitical and climatic risks to the existing production level
Whether its suicide attacks on Saudi oil facilities, tension over Iran, Nigerian rebels, the Iraqi resistance, or hurricanes, little things keep going wrong and threatening to turn into bigger problems. If any one of these situations significantly worsened their impact on oil supply, given the very tight market already, we would immediately be in a serious oil shock that would likely set in motion major demand destruction extending over a number of years.
In Summary
While no one piece of evidence is conclusive, I find the overall picture here to be suggestive that oil production is close to its peak value and is not likely to increase too much more. Whether May 2005 will stand as the highest ever month of production or some month in 2006 or even 2007 rises a little higher is certainly hard to call. However, I would be quite surprised if the world is able to bring enough new production on stream to overcome those high decline rates in existing production for much longer. And with each passing year, it's only going to get harder to do.
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I suggest this post to be left permanently somewhere in TOD's front page, it's perfect for newer readers, and aswers some clamis made these last days by some of them.
Of the four biggest currently producing oilfields two are just entering terminal decline: Cantarell in Mexico, Burgan in Kuwait. There is not clear public data on the other two largest fields: Ghawar in Saudi Arabia, Da Qing in China, but many suspect they are possibly in decline or about to decline. These fields currently provide about 10 mbpd of global oil (all liquids) production of almost 85 mbpd.
EOR (enhanced oil recovery) is now in widespread use. These techniques tend to keep production higher for longer but then it tails off more rapidly = faster decline rates. See information on North Sea fields as an example.
It's fairly clear that we are at or near the plateau of peak oil now, it is almost certainly within 10 years, very probably within 5 years. Then we can look forward to the decline, let's hope it's not too steep.
If you think that alternative fuels, conservation and the like can fill the gap you should read the Hirsch report on mitigation:
http://energybulletin.net/12772.html
In brief it concludes we need at least 15 years of massive action to prepare for peak oil: "...without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking." We don't have that decade, and I see no signs of massive mitigation action.
Perhaps then you will read the doom and gloom sites about peak oil and realise they are, perhaps, not quite as mad as you might otherwise have thought. Peak oil will probably result in the greatest upheaval in human society since its converse: the industrial revolution, but will happen much, much faster.
My paper is at:
http://www.lightrailnow.org/features/f_lrt_2005-02.htm
I have been intrigued by the WW II experience of Switzerland, About 8 months oil in storage, but they made it last 6 years. They functioned reasonably well with minimal oil use by using electrified transportation.
I agree with you in principle. I also think that if we made all our homes more passive solar efficient we could reduce energy by more than 10% per household. The technology and studies are there. The problem is actually doing the work.
People have to spend money and resources changing things. There is no incentive or leadership to do this currently. Our national focus is to spend money on all the wrong things. Like tax breaks for oil companies, Hummers, etc. Until our national policy recognizes and rewards innovation towards energy efficiency (conservation?!) nothing significant will get done. Too many competing interests that want people to spend their money on something else.
The debate has left the scientific/technological arena and is in the political/lifestyle area. We know what we could do. What are we going to do?
Besides my local work in New Orleans (a "Shining City in a Swamp" ? :-), I wrote the referenced paper during my summer evacuation.
I posted it on a Light Rail website (other good stuff there). I eMail EVERY person I see quoted in national media talking about energy (called Hirsch at home during business hours, so far, too busy to talk to me).
I joined this group to get more exposure and convince others here that my ideas are PART of the solution/rational response (with some success I think). I am reasonably well known in Light Rail circles (known in part for antipathy towards Amtrak >:) and have done work for DC & Austin streetcars.
Work, work, work, all unpaid, BUT with some possibility of future, limited success.
BTW, I would appreciate a critique of my paper by anyone interested. I plan on doing a rewrite soon.
Don't forget to link to that (unless you did above and I missed it).. It sounds like a great idea. I have seen different reports on rail, often politically-biased, on how efficiently you can operate rail systems. Though I understand Amtrack was often expected to be able to operate in the black without the kind of infrastructure help such as Highways and Airports would get, and was therefore at an unfair disadvantage, I also wondered about the ability of even 'Heavy Rail' to introduce efficiency developments in their Techn. that would improve their competitiveness.
From an energy standpoint, how does Rail-freight stand up against Trucking, and Busses as opposed to Passenger Trains? I can't imagine that Rubber on the Road stands a chance against steel wheels, but I don't know where to find the info, and I don't know how the Maintenance of Track and other Equip. costs play into the numbers.
http://www.lightrailnow.org/features/f_lrt_2005-02.htm
Critique requested.
Freight rail uses 1/8 as much diesel as 18 wheel freight per ton/mile. OTOH, Greyhound is a bit more fuel efficient than Amtrak (Amtrak moves more steel/pax than buses and other inefficiencies).
I am not a fan of Amtrak.
That's just onr of the reasons I think Hirsh is optimistic wrt mitigation.
According to the Union of Concerned Scientists, on heavily traveled intercity rail corridors where trains are powered by diesel locomotives (like Santa Barbara - Los Angeles - San Diego or Chicago-Milwaukee), passenger trains are slightly more energy efficient than an intercity bus (like those operated by Greyhound) with an average load factor, but 2-3 times more efficient than a Boeing 737, 3-4 times more efficient than a typical passenger car, and more than four times as efficient as an SUV.
On electrified routes, like Amtrak's Boston-Washington D.C. Northeast Corridor, passenger trains are more efficient. The reason is more than just the motive power. High speed trains (including those that Amtrak operates) have regenerative braking systems so that when they slow, electrical power is returned to the overhead wire in such quantity that Amtrak often ends up selling spare electricity to utilities along the route. Thus, the BTU efficiencies work like this, according the UofCS: high speed train is twice as efficient as a Greyhound bus, five times more than a 737, seven times more than standard sized passenger car and nine times more than an SUV.
I hope this helps. But if you really want to change energy usage, build/rebuild communities into compact, mixed-use neighborhoods where people can take care of most of their day-to-day needs within a 15-minute walk or bike ride of home. Anything else that's farther away, that's what the buses and trains are for.
Last time I calculated, Amtrak was 73 pax-mpg and SW was 52 pax-mpg. With new aviation technology, that gap will narrow.
Amtrak consumes about $1.5 billion each year in operating subsidies. The fed share of capital spending for light rail is about the same $.
Light rail is a century+ long improvement that can transform cities, save thousands of lives and massive amounts of oil. Amtrak $ are lost with zero impact the next year.
A $1 spent on Urban rail capital spending is worth $50+ spent on Amtrak operating subsidy when the long term effects are considered.
Intracalifornia and NEC pax rail are worthwhile fro relatively close city-pairs. Lomg distance AMtrak is not, IMO.
* Berliners take DB to Hamburg ALL the time. Very few rail to Madrid or Barcelona, Spain, despite the very expensive & fast rail between the two.
A while back I totaled up ALL of the serious plans that have been considered and ran out of projects before hitting $250 billion.
Among these projects are:
NYC 2nd Avenue subway and extra PATH tunnel underneath Hudson Ocean
LA "Subway to the Sea", Gold, Expo, Downtown Connector
103 miles total "Subway in the Sky" in Miami
BART to San Jose, eBart, Muni trolleys
St. Louis extra 30 miles
New Orleans 35 miles streetcars
Dallas plans till 2030
Houston plans as approved by voters
Salt Lake City 30 year plans (they may vote to triple taxes to build faster)
Portland Green Line + next line
Seattle plans, current + north extension
Phoenix 30 (25 ?) year plans for almost 100 miles
Denver project for 117 miles (?)
Minneapolis-St Paul 11 miles
Memphis plans (~50 miles)
Atlanta extension to north suburbs
Charlotte
DC Purple, Dulles & Green extension to BWI
and more (above from memory)
NOT enough for complete transformation. The US has been exercising "birth control" and pushing buses for a long time. Once the above get funding, many more viable plans will appear. "Stars" for new lines are Miami, Denver, Salt Lake City & Dallas. Likely to be built IMHO.
Once built, even prePeak Oil, they attract development and generate their own ridership.
Note that costs are at least 1/3 higher than they need to be due to low volume and "the FTA process". I think above could be built for ~$150 billion.
Operations: $490.05 million;
Capital/debt service: $772.2 million;
Efficiency incentive grants: $31.38 million.
Second, Amtrak's revenue-to-cost ratio is 72 percent. I would encourage you to look at the revenue-cost ratios for light-rail systems. I love light-rail systems, but I think you're being too reactionary in your dislike of intercity rail.
Third, there is an extensive market of corridors up to 300 miles (an arbitrary number some faceless person decided was the dividing point). Think of all those city pairs in the Midwest, Northeast, Southeast, Northwest, Texas, California and even into Arizona and Nevada. Compare the population density and travel density data of these corridors against those in Europe. I think you will be surprised. Heck, even Ohio has population density numbers that are only slightly less than those of France -- where a 500-mile TGV route between Paris and Marseille is traveled in just three hours (equivalent to Cleveland to New York City, or Pittsburgh to Chicago).
Fourth, I'm sick of people bashing the long-distance train. Show me another mode of transportation that can cover 2,500 miles in less than 50 hours while stopping in more than 50 towns and cities along the way. Prove to me another mode can do it better and for less money than the passenger train.
Now, if you want to debate the ability of Amtrak management and their workers to be good custodians of the passenger train, then I will probably agree with you. But we also should blame Amtrak for the way it is funded. It's a stupid funding mechanism that only Congress could have dreamt up. Oh wait, that's who did it!
My biggest problem with Amtrak is not that it exists, but is has very little social value and hence, is not worth the public subsidies that it gets.
- It saves very little energy
- It kills 70 to 90 people every year (mostly members of the General Public) A quite high rate for the few pax-miles.
- It slows down and screws up operations of the tax paying, and essential freight railroads.
- It provides very little service to small towns, Greyhound does more for less public subsidy.
5)If I was given a choice between 2¢ for building more Urban Rail or $1 for Amtrak, I would take the two pennies in a heart beat !
What do we have to show today for ~$50 billion (2005 $) in Amtrak subsidies ? What would we have if that wasted money had been put into Urban Rail ?
- NYC 2nd Avenue subway
- LA's "Subway to the Sea"
- Almost double the post-1973 Light Rail miles around the country
Instead we have a mode that carries 2/3 of 1% of intercity pax-miles (from memory) and requires $1 in public subsidy for every $ in fares.To your points-
- "Debt payements" are just maintenance under a different name. Instead of paying in the current year, $ were borrowed and paid back later.
- Please note, FY 2004 Fare Revenuw was $1,256,424,267, so $1 in General Fund Subsidy for $1 in Pax Fares. 50% fare recovery looks like to me.
Light Rail is socially useful and worthy of subsidy (local BTW), Amtrak is not socially unseful, see above.3) First, Americans will ride the rails significantly less than Euros & Japanese, NOT more. One reason, every large & medium size city there has good Urban Rail systems to feed intercity rail, we do not outside NEC, Chicago & SF. Intercity rail without Urban Rail is next to worthless.
Any way, it is 250 miles/400 km (straightline) not 300 miles where EU & Japanese stop taking very expensive high speed rail and start flying.
My favorite Example is London-Brussels (~225 miles). Second most expensive rail line in the world. Ditch to slow down cars. Eurostar gets a bit less than 1/2 of the market, BUT when $2 billion more in improvements are made in the UK, they should get a bit more than half. Eurostar is talking abut offering just two trains/day to Amsterdam (with stops in Antwerp & Rotterdam) vs. 9/day to Brussels. Add a bit of mileage and pax % fall off quickly. There is no talk of a non-stop between the MAJOR financial centers of London & Frankfurt. Pax would rather fly "that far".
Same results in Japan.
So rail-centric societies will not take high speed rail for 300 miles (straight-line) or more in large numbers, with superb subway, etc. connections at the station, why will Americans take Amtrak in any numbers ?
4) There is no social or economic need to "2,500 miles in less than 50 hours while stopping in more than 50 towns" WHY ??
One of AMtrak's faults is too many stops. Half or more should be cut out.
Greyhound can service the small towns, and would serve more if it were not for tax subsidized Amtrak. "Ambus" is very much part of AMtrak.
If you insist on cluttering the tracks of the freight trains, get a 2 crew Colorado Rail Car (MUed if there is demand), run one shift between two cities with airports (giving mid-day service to small towns) and unmanned stations along the way. Vending machine food, sleep in a hotel overnight if one want to go further the next day (rolling a steel hotel along is TERRIBLY energy inefficient !! A sin ranking with driving a Hummer)
Better - No "middle of the night" "service", much more energy efficient (no sleepers, much less rolling mass)
Cheaper - Certainly !
5) David Gunn was the best manager AMtrak ever had, or ever will have. HE made it better, downhill from here.
How can I say we've ignored rail when Amtrak has received since 1971 $30 billion (some capital, some operating subsidy, and $3 billion of it railroad retirement for pre-Amtrak employees that count against Amtrak's subsidy)? Easy. When rail's primarily competition (highways) has received $2 TRILLION in the same period, it's amazing that rail has even survived in this country (be it freight, intercity or urban rail).
Are you aware that a number of freight railroads -- Norfolk Southern, BNSF, Kansas City Southern and a number of regional railroads -- have lobbied states and Congress to run operating passenger trains? If I were king for a day, I would eliminate much of the Amtrak subsidy and would allow these and any other interested freight railroads to take a federal income tax credit on the property taxes they pay on routes used by intercity passenger trains. Considering that freight railroads pay $500 million in property taxes each year (and their competition pays none), the credit would help offset part of their costs of operating passenger trains.
We need passenger trains, especially when it becomes to expensive to fly post-peak. I live in Cleveland, and we have more than a half-dozen flights a day to EACH of the following cities within 300 miles of here -- Chicago, Washington DC, Baltimore, Detroit, Toronto, Pittsburgh, Buffalo, Columbus, Dayton, Cincinnati, Indianapolis. I can tell that few people are going to want to sit on a bus for up to eight hours. Why do this when a train can cut that time in half? Just between Cleveland and Chicago, there are more two dozen flights carrying 600,000 people per year -- representing less than 15 percent of the travel market. Much of the Ohio Turnpike was already widened to three lanes each way for $1.4 billion -- offering NO reduction in travel time. Where is the yield in that? Except it made us more dependent on oil.
I'm sure the highway lobbyists love reading your messages. They can say amongst each other "see, even the rail advocates can't agree on a future course. Let's just keep paving." I know, because I've heard them say it for the 20 years I've been in the rail industry.
I'm not your enemy, Alan. We both have much to gain from a nation less wedded to pavement, sprawl and oil. I hope someday you'll come to realize this. Best of luck to you in your future endeavors.
My paper does give an intercity "semi-high speed" (max ~110 mph) electrified freight & pax (freight "carries the freight" with pax an add-on) possibility. Three corridors added to the NEC (which once did carry freight and should again). DC-Miami (NEC extended), NYC-Chicago-KC (IF more cities expand Urban Rail) and San-San in California. Link early in this thread. Quite frankly, I see semi-high speed freight as a way to take market share from air & express trucking (perishable fruit, veggies & fish, packages, JIT inventory deliveries) with pax a very noce add-on.
Amtrak tickets, absent any subsidy, will STILL be more expensive that air past post-Peak Oil. There is a small and shrinking fuel cost advantage for Amtrak. Last time I checked (in 2004 ?), Amrak was 73 pax-mpg for diesel, Southwest was 52 pax-mpg for Jet-A. When the 737 replacement flies, it should be pushing 70 pax-mpg (a bit less for shorter hops).
So unless/until rail electrifies, I quite disagree with your statement "We need passenger trains, especially when it becomes too expensive to fly post-peak". Air has significant labor advantages as well over Amtrak.
And sleepers (a rolling steel hotel powered by a diesel generator) is just terribly wasteful ! MUCH more efficient to sleep in an insulated brick hotel powered by the grid.
Mexico has luxury buses in regular scheduled service, often express. Once oil increases in price, congestion may decline and these may appear here. There is no good reason for buses to take twice as long as AMtrak.
In the meantime, let "who ever" run 2 crew Colorado Rail cars (2 or 3 joined together) between Chicago & Cleveland a few times/day (subcontract the maintenance).
Given the lack of Urban Rail in Baltimore (limited) Detroit, Pittsburgh (limited), Buffalo (very limited), Columbus, Dayton, Cincinnati & Indianapolis, people will want to drive there in any case since they will need a car to get around once there.
My proposal is let any railroad that electrifies avoid paying local property taxes since they are in Interstate Commerce.
I have sympathy for the freights and see them as a major part of any solution. Amtrak is messing up freights in several areas (UP Los Angeles to El Paso, they are double tracking @ 50 miles/year, Sunset Ltd is a headache for them).
There is a market for intercity rail when you have 1) large cities within 250 (not 300) miles straightline apart 2) Viable Urban Rail systems (one can get to most places by rail) in both cities 3) freights have room for extra trains and 3) the cities are large enough.
However, providing intercity rail where there is a market is "not a big deal" outside the NEC. Relatively little fuel saved vs. driving and almost none vs. air. Few, if any, lives saved. No impact upon urban development patterns (Urban Rail affects sprawl significantly, Amtrak doesn't).
In these limited cases, I see intercity pax rail as a "nice to have", not the essential of Urban Rail. I will be greater supporter of intercity rail (in the above cases) WHEN we have a massive building boom for Urban Rail. As stated elsewhere before, "The Best is the enemy on the Good".
Uh... no. There is no way a "737 replacement" is going to be anywhere near 34% more efficient than a current-generation 737. No way. What's your source?
As for "52 pax-mpg" for Southwest - is that a calculation based on total fuel consumption and total passenger-miles over a certain period? Or is it some extrapolation of cruise fuel burn rates? Turbofans are very inefficient in dense air (almost an order of magnitude more fuel burned per hour near sea level as in cruise, all while travelling half as fast), and it takes a lot of energy to get an aircraft to altitude, energy that is not necessarily returned on the way down, especially if extra drag is required (flaps, spoilers, landing gear). Short flights such as those Southwest operates should be relatively inefficient, especially when considering local maneuvering (e.g. taking off into wind and landing into wind can mean heading in the wrong direction at both ends!). Add in fuel burned taxiing and running the APU on the ground and ... well, I can't find the data online but I'm almost certain your "52 pax-mpg" figure is off. I'd be happy to sit corrected though - what's your source?
85172795000 Available seat miles
60223100000 Revenue pasenger miles (this matches claimed 70.7% load factor)
1287000000 Gallons of fuel burned
Ergo 66.18 ASM/gal, 46.8 RPM/gal
Wow, I'm impressed. I'll bet they're not including fuel consumed for servicing vehicles, but even so, that's quite efficient.
Now some sanity checks:
7.94 cents Operating expense per ASM
6.37 cents Operating expense per ASM, excluding fuel
Ergo fuel is 1.57 cents per ASM
They paid 101.3 cents per gallon, so that's 64.5 ASM/gal, which is close to the above.
The only 737-700 fuel burn statistic I could find was 792 gallons per hour in cruise. Assuming, say, 400 knots (450 mph) that's 0.568 miles per gallon. Assuming a full plane of 149 people, that's 84.6 passenger-miles per gallon. One would expect the cruise figure to be somewhat higher than the overall figure, so it all seems to hold together.
Think of it the other way, though: the most efficient aircraft in the world is barely equivalent to an efficient car at highway speed. With one occupant. A 47-passenger highway coach at, let's say, 6 mpg (right ballpark), gets 282 passenger-miles per gallon. A 3000 hp diesel-electric locomotive is said to get about 0.3 mpg (761 L/100 km is the figure I came across), but it can haul a 10-car double-decker commuter train with 162 seats per car - if it's full, that's 486 passenger-miles per gallon! If you want to get truly silly, consider that it is permitted for people to stand on the train. Bombardier lists the crush load capacity of their bilevel coaches as 365, so in theory you could haul 3650 people at 0.3 mpg, which is 1095 passenger-miles per gallon!
A full diesel train is still a far better use of fuel than a fleet of 737-700s.
Electric traction is even more efficient.
In short: the Europeans have it right.
On another topic: you are mistaken about the distance "limit" for high speed rail. SNCF's market share from Paris to Marseille (783 km) was 45% even BEFORE the opening of the last section of high speed line (which brought trip time down to 3 hours). SNCF's director general said "We thought that three hours was the psychological limit for high-speed rail, but delays to air services have helped rail a lot," Pepy explained. "On average one-third of airline services are delayed by more than 15 minutes, whereas globally 90% of TGVs arrive within five minutes of schedule. It will be a real challenge to maintain this in the future. The Paris--Lyon line is already full. We have reduced train headways from five to four minutes, and we are now aiming for three minutes."
Every four minutes. A high speed train every four minutes!
http://www.highbeam.com/library/docFree.asp?DOCID=1G1:81006309
Air source heat pumps with Natural gas backups for coldest days (rarely below 32 F/0C) works well here. Heat is a minimal concern.
I'm in Ottawa interested in the same thing. Can you provide more details here or email me?
The truth of this statement depends (and will depend) on the price of oil. At $60/barrel, this statement is very likely true. At higher prices, one cannot make the same assumption.
Because we use more energy per capita than any other country our economy may be most vulnerable to its rising cost.
The willingness to hold US $ can be saturated, IMO. When, I do not know.
Herewith another John Maynard Keynes quote:
"When you owe a thousand pounds to the bank, the bank owns you. When you owe a million pounds to the bank, you own the bank."
We owe so much money (i.e. they have bought so many U.S. Treasury securities) that the Chinese and our other big creditors defecate Hershey Chocolate Syrup whenever they think about the the dollar collapsing. The dollar will be propped up as long as possible.
Then it will go the way of the peso.
There are also vicious feedback circles related to: $ as reserve currency / oil priced in $ / US deficits and debt. When the levee breaks you won't believe how fast things change. The US will become, in current terminology, a third world country within a year.
http://www.worldoil.com/Magazine/MAGAZINE_DETAIL.asp?ART_ID=2696&MONTH_YEAR=Oct-2005
I don't believe the United States can remain a functioning democracy and have an Empire that wishes to occupy and control the world's remaining oil supplies. This strategy is not only undisireable and grossly expensive, it's also wasteful of resources which should be diected elsewhere. Let's invest a trillion dollars into research into alternative energy - not the war in Iraq.
Or is the Truth as follows; simply put they've looked at alternatives, realized they don't exist on a realistic timescale and have just decided to grab everything they can, while we still can? Personally, I think this policy is impossible and self-defeating in the long run. One country cannot rule the world, there are too many variables to contend with. It'll take over a million soldiers just to pacify Iraq. Where will the men for an Empire come from and who pays? It's almost as crazy as us trying to "control" the world's climate!
This argument always seems to be a non sequitur to me. It says that they did the sane and rational bit (realise the problem, look for alternatives), then come up with a crazy solution. Surely if they are sane and rational to do the first bit, then why would they suddenly become irrational?
Addtionally, the US has been involved in wars in something like 30 different countries since WWII. Their global domination plan has been ongoing since WWII ended - i.e. they have a consistent policy of controlling global resources. So today's wars really prove nothing about a new realisation of PO whatsoever. They are a continuation of very old policies which assume resources will last indefinitely.
Hisorically leaders have had the ability to analyse situations and see problems in a "rational" fashion, yet subsequently embark on course of action, which in hindsight, appear "crazy" to us. Recognising a problem that's staring you in the face isn't that hard. Finding a solution, among the mulitude of alternatives available, is. I just think the Bush administration has chosen the worst of all the alternatives they (probably)looked at.
I also think we've a new historical paradigm. I call it the "post democracy era". Here, far more than in the recent past, we're going to be using raw military power on a large scale to ensure our access and control of vital raw materials. I don't believe it's just more of the same. I think it's bigger and far more dangerous.
Unfortunately, this is rarely how it is actually done. Usually, the decided course of action comes first (whether consciously or unconsciously), and then the 'fact finding' and analyses are performed to support the decision that was already made. I've seen this done countless times in the business world. The people doing the analyses already know what the leader's desired (albeit unspoken) conclusion is and then fit the analyses accordingly. The process can be very subtle and give the outward appearance of objective analysis, but the analysts somehow usually come up with the 'correct' conclusion.
The Bush regime has honed this process to near perfection.
What the Bush people are doing regarding its effort to militarily dominate the Middle East may be morally reprehensible and a recipe for global disaster, but it is perfectly rational. As best I can tell, the logic seems to go something like this:
- They have the oil.
- We have the most powerful military in the world.
- Ergo, we can take control of the oil.
- If somebody doesn't like what we're doing, that's tough.
Implicit in this chain of thinking is the notion that the US already has a military machine costing over $400 billion per year, so it might as well get some good use out of it. The question is never raised as whether we could significantly improve our energy situation by diverting just a small fration of the total defense budget to something constructive.I see absolutely no sign that the current mindset is going to change as long as the Bush regime is in power. In fact, I don't have much hope that it will change all that much regardless of which party is in power.
Boy is that statement accurate. I have also seen this approach used in business by people who should know better.
This is my biggest worry box with the current administration. They just believe that if they want something to happen (hydrogen fuel cells, for example) they can just lay out a plan and expect success. The world doesn't work this way. Some of the most innovative things (like GoreTex) were complete accidents while looking for something else. And most people still don't see the value even after they are invented.
Innovation tends to work best when there is a clear problem to solve but no known solution. That is a mindset the current administration doesn't have. Not only will they not define the problem, they think they have all the answers already.
I agree!
To amplify on my previous post, it's been my observation that bad decisions are less the result of faulty logic and more the result of faulty premises or assumptions. One's world view and prejudices are usually deeply imbedded in those assumptions.
Faulty logic is usually not the main problem. Many people who are criminally insane are perfectly capable of highly logical 'if-then' thinking and can arrive at insane decisions that flow quite logically from insane premises (e.g., my neighbor is trying inplant wires in my head to control my mind, therefore if I don't kill him I will lose control of my mind). That IS a logical decision; the problem is with the premise.
The fundamental premise of the Bush regime seems to be that the US is engaged in a deadly zero-sum game of Survival regarding diminishing resouces, so we much grab as much of it as we can as soon as we can. The secondary premise is that we must have a military the size of the rest of the world's combined in order to accomplish what is called for by the first premise.
"Once you eliminate the impossible, what remains- however unlikely, is Politically Unpopular, and will therefore be shelved"
We often make assertions of the sort "if we invested the money we spend on military in renewables/alternatives we would not have a problem". That statement may be true by itself but is probably taken out of the context.
Ok, let's say we achieve energy independance. Peak oil does not harm us and the lights are still on. What happens next? Peak NG? Peak minerals? Peak water? Peak "cheap-labor-from-the-third-world-filling-WalMart"? Will we be able to solve all these problems and keep maintaining our lifestyle?
I think what we see now in Iraq is just a part of the long-term military securisation of the resource flow from the Third World to us, the so called "democracies". Up until now we had other means - WTO, IMF, "free trade" etc. They worked while third world countries were weaker, and resources relatively abundant. This starts to change and we need other means. Iraq is not a fiasco. Even the chaos it is now is a warning to the others - see what happens to your country if you don't do what we say?
It's all about keeping our Global Domination. The military force is just one in the arsenal here, others are the threat of military force, supporting corrupt third world goverments, isolating, destabilizing and denying given rights for countries that don't obey (Iran being a bright case) and many others.
I can say that we have been fighting this World War III for decades already and it is simply going to get worse.
This is just like the Islamic extremists - what rational reason would you have for blowing yourself up? Most of us here cannot see that. However, if you alter your base assumptions about the universe, life, etc., then such a conclusion might even become inevitable. So I don't see people acting irrationally necessarily, however I do see them starting from different assumptions which then lead to different conclusions. The challenge then is in getting people to agree on basic assumptions.
Also, how much variance can one expect in the exact date of the Peak using each of these methods?
(This is actually something that I have been thinking about due to a speech by Matthew Simmons that I recently listened to online. I will try to find the link later today.)
Our ability to make longer term adjustments declines as well when a recession hits.
The consequences for the US and poorer 3rd World are likely to be worse than the global average.
My question for you and TOD in general is whether the "peak in light/sweet" that we hear about is more accurate? Are you skipping the detail for a general audience, or do you think that the heavier end of conventional oils (my messy langauge there) are peaking too?
I thought that the new drilling in Sauid Arabia was part of the shift, and that their oil minister's line was sort of "hey, there is no peak oil ... we've got plenty of sour."
API S% WT
MANIFA-LOWER RATAWI 26.00 3.70
MANIFA-MANIFA 30.20 2.80
- more here
Now, with respect to that "wide discount" ... is there a well-known world price for heavy and/or sour crudes ... or are they all different enough to be less fungible?
I've been lurking TOD for 6 months, progressively educated. I find a real interest from relatives, friends and collegues in this subject and often direct them to TOD.
The problem is for the beginner the information is spread out as it is added over time. I would much appreciate a list of the most important series suitable for the beginner. A crash course of PO, CO2 and GW.
Stuarts series on these subjects together forms an exellent introduction, problem is to find it easily.
BTW, motivated by TOD, I cut my carbon footprint 90%, through green energy contract and biogas vehicle. That wasnt hard or expensive and that kind of example is now spreading in my proximity. But it takes motivation to get people into conservation.
Educate to Motivate
Put a Beginners Collection button on the frontpage.
There is a great deal of basics to learn before one can comprehend some of the finer points discussed here.
Each of us comes to Peak Oil with a different set of bags.
To be effective, the introduction sites should be geared to different kinds of immigrants coming to the land of the PO-aware:
I think we should intentionally NOT explain PO to marketing and advertising people (he says with an evil laugh, on his way to a meeting with the marketing guys!).
Twilight,
You are of course correct.
Every profession needs a different analogy to explain the PO problem to them.
We all know how the Invisible Hand provides for all our needs. Just the same, there are limits. There is a finite amount of certain resources ....
We all know how the Great Spigot under bar provides for all our needs. Just the same, there are limits There is a finite amount of certain resources....
We all know how the Great Pot of Foundation Powder provides for all our needs. Just the same, there are limits There is a finite amount of certain resources ....
This site has really made me stretch my mind. Discussions on this site have prompted me to study economics, for instance, a topic that never interested me before. Associating with smart people has that effect...
One general introduction would suffice as long as it is a good one. If the discussions remain as thought provoking as they have been to date, people will keep reading.
Because we saw it coming!
My own story is that I was working at an oil & gas fueled plant on the Gulf Coast about 1970 and going to night school for pre-engineering. We just had the biggest oil discovery in CONUS in a decade at the other end of the county (the Jay oil fields) yet we couldn't get fuel suppliers!
So "what's with that?" I asked myself. The answer was that US production was near a peak and we had to start importing big-time. Add a very messy oil spill on my favorite beach and the die was cast.
After decades of harrassment from looney-toon environmentalists and general lefties, it's frustrating to see the box we've painted ourselves into.
Call it the Cassandra Curse.
Let's get cracking!
My division is of people that choose to make rational and informed choices and people that choose to be affected by cheap words and emotions. In Bulgaria, France and Sweden for example, the left parties support nuclear power even more than the right-wings, for a lot of reasons but mostly because it works (and does not ruin the grid by 'decentralizing' it). In Bulgaria it was a right wing party that sold the national interest in the negotiations with EU, agreeing to promptly stop 4 nuclear reactors in Kozlodui.
The greens are formaly in the left camp, but when you think about it they don't have a lot in common with the left ideas. They stay there because as a tradition the left is more liberal and accepts all kinds of ideas, including idiotic ones. Which of course is its biggest weakness.
As I've said before, If I HAD to live next door to a power plant, I would much rather it be a nuke than a filthy coal-fired one. Which is not to say that nukes don't have their problems; but hell, this is a matter of survival, and we must select the options that provide us with the best hope of making it.
Please understand that my opinions of the critics of nuclear power have been formed over long, hard years of political controversy and bitter fighting.
The methods used by the critics have neither been civil nor have they been constructive. I have often and repeatedly experienced social ostracism, economic discrimination, and downright public hostility to my person. Of course, I lived in Marin County, California, just north of San Francisco.
If I seem to carry on this battle, in the tone with which I have grown accustom over the years, with a presumption of hostility, please forgive me. I'm still getting used to the broader support for nuclear power I have unexpectedly found here.
I will be glad to answer any questions about the technology to the best of my ability.
As best I can tell (and I can't tell very much these days), nuclear power is at the dawn of a renaissance, mostly as the result of desperation, in that the oil game is coming to a close. It should be encouraged, though we all know it is not without its problems .... but what isn't?
We really need something to bridge the long gap between fossil fuel euphoria and the Great Power Down. And nuclear power seems to fill the bill. Perhaps one of its biggest selling points is that it doesn't contribute to CO2 emissions and global warming. Circa 1966 and 1967 I took several courses in nuclear engineering (the technology of the future at the time) of which I have retained next to nothing. Maybe I should start brushing up. Hey, better late than never!
He wrote a famous book called "The Soft Path," that essentially argued for much more efficiency, decentralization, solar and wind power.
He also popularized the concept of "hybrid" cars.
As far as the economics of nuclear power, I think we need to take a clean-slate fresh look at the latest generation of nuclear power technology and compare its economics with that of fossil fuel in a likely post-PO world scenario.
Nor it is just a question of economics, as national security is also a factor. We don't have to import uranium from a Middle Eastern energy cartel, and that fact alone is worth something.
Are the French some kind of super-geniuses that can make nuclear energy work while the rest of us are dull-normal chimps too dumb to make it work? Somehow I doubt that.
- The national government decided to do it themselves. As a government they got ultra-low interest rates to finance the stuff.
- They picked one design (not a breeder) and mostly built just that. Made spare parts a lot easier and got them economies of scale.
- They got public buy-in early-on. They never had cheap oil or gas so the public never got used to it.
- They started when oil was really cheap. Helps a lot on the investment costs.
Now, in the U.S., my guess would be that the only way a reactor gets built is if the reactor builders use their own money. Put up a demo plant somewhere. No public utility is going to sell bonds to pay for what is still the most investment intensive power when they can't show the public anything.Once the public feels a few more of the shockwaves inherent in the energy crunch, perhaps they will be more receptive to all options, even the distasteful ones.
That's the golden quote right there. And it applies to all forms of alternate energy, not just nuclear.
Even in France, it didn't go completely smoothly. There were riots over where the waste would be stored. (Still not resolved, so far as I know.) And they shut down their fast breeder reactor (the largest ever built), because it was so expensive compared to their PWR plants.
Are the problems solvable? Certainly. But it won't get any easier when the cheap oil is gone.
Are we dull normal chimps compared to the French ?
In their hearts, the French believe so ! >:)
if the technical aspects are valid, this analysis would help to explain the lack of investment in nukes: http://www.stormsmith.nl/
That's what happened with the famed turkey parts plant. On paper, it sounded so good that some of the readers of Discover magazine accused them of pushing a perpetual motion scheme when they published an article about it.
The reality was not as impressive. The plant was supposed to cost $5 million to build. It ended up costing $40 million. Rather than the $15/barrel oil they promised, the cost ended up being something like $80/barrel. I'm sure those numbers would improve with time, but I suspect they will never be as good as they looked on paper.
thus making the dollar cost of oil irrelevant. you are right that the cost of oil, whether in dollars or EROEI, will make all alternatives more difficult to implement.
Everything is more difficult when you have no free work spurting out of the ground!
Yes, I understood that. Cost in energy is the only legitimate way to evaluate energy alternatives.
Unfortunately, it's not easy to calculate. Look at the continued controversy over whether ethanol can be energy-positive or not.
sorry
not easy to calculate
maybe not even possible! but i tend to think if the profit is really there, it is obvious and gets exploited forthwith.
confusion being sown over the merits of ethanol is part of the setup for yet another major boondoggle methinks.
not that the self-limiting feature of growing crops for ethanol wouldn't be good for what remains of humanity, and the planet.
What is your opinion of pebble-bed reactors?
I heard a program on NPR the other day where the boosters for this technology described them as inherently much safer, and much less expensive to build. Then again, it was the people who were pushing the tecnology who were saying this, so there is the inclination to take it with a grain of salt...
Of course it is too late for such discussions, but if we fiddle around even more you can imagine what will be the end results. When the shortages begin the public will begin demanding nuclear and the government will hurry to give tax breaks and loan guarantees, while the safety control will suffer severely.
The weakest premise I've seen from people building scenarious about the future is that the society will somehow orderly descend to lower power and give up all those nice civilisation advances. I don't agree - we are going to burn or nuke everything on our way if it starts getting to there. Our only chance to save our asses and the planet is to act rationally and deal with the reality in advance.
It's going to be much harder now that the cheap oil is gone. Perhaps even impossible.
Cheap oil is gone, but there is quite a lot of the stuff left that can be used far more rationally. I can WAG that 50% of what is used in USA for example is pure waste. We can discover another Saudi Arabia here just by imposing a 5$ tax on the gasoline.
Building the nuclear plants and (to a lesser extent) the renewables does not require that much oil per se. The tough part will be building the infrastructure to use the new energy sources, but it is also not doomed in all cases. Yeap, there would be hard times until we fix our mistakes but what's the big deal? Our grand-parents survived wars damn it, and they did not even use oil at all!
What I fear is just one: greed. Greed can finish us, if it makes us stick to the past and not adapt to the future.
However, he thinks it will be much harder to achieve the latter outcome because we waited so long. It may still be possible, but we have to start now, and it has to be a massive effort.
There were a lot less people here back then. Both in the U.S. and in the world. That is my main concern.
And even if we do succeed in switching over to other energy sources...the growth we've enjoyed for the past century will be a thing of the past. I think that will change our way of life deeply, in ways we can barely comprehend now.
I know that nuke steam turbines typically have thick blades unsuited to cycling (but more durable), but how much could they cut back for 5 or 6 hours at night ?
Nukes are not very efficient thermodynamically at max load. How much fuel is saved by cutting back from, say, 1200 MW to 800 MW at night (or is most fuel savings lost to lower efficiency) ?
I see high % wind and high % nuke in the grid as antithetical. A 50% wind/50% nuke grid simply cannot work.
I am a strong supporter for maxing out hydro (still opportunities out there, many small) and massive pumped storage plus lots of wind.
One viable mix would be (by total energy) 60% wind, 15% hydro power, 15% hydro pumped storage, 9% other renewable (geothermal, bio, solar thermal) and 20% nuke (Note 19% into pumped storage during surplus > 15% out @ peak need).
3 MW nuke needs 2 MW of pumped storage to "work" in such a grid since nuke does little to support the weakness caused by a wind grid (hydro is perfect) and cannot be easily "throttled" efficiently AFAIK.
Also, I see the 14 "planned" US nukes as jockeying for the 6 GW of large tax credits, The first 5 or 6 reactors to get the tax credits will be built, plans for the rest will go into dusty files. Your thoughts ?
Its a pity equipment for electrolyzing water into oxygen and hydrogen is so expensive.
Better to write:
Guys & Gals
We do get "all types" here :-)
Some women might like being 'one of the guys', but in my experience, only pre-boomers take being called a 'gal' without a funny look. Maybe it's different in the deep south. One might use 'folks' too, but I'd be inclined to leave it to the taste of the commenter.
"A little knowledge is dangerous ..." the saying goes.
Not that I'm any sort of expert on nuclear reactors, but the plants are extremely complex gizmos. Nothing is as simple as our grade school teachers led us to believe when they gave us those colorful comic books with the black control rods and yellowcake fuel rods.
Did you know for example that Boiling Water Reactors (BWRs) are constantly dumping radioactive material into the air? Right here in the good ole' US of A. Whoa, don't panic yet or think I'm nuts. It's true but it's also a don't care. When water (H2O) passes through the reactor core, it is bombarded with neutrons and protons. O16 atoms in the water are temporarily transformed into radioactive oxygen and radioactive nitrogen. This stuff is "offgassed" into the atmosphere. Luckily they have very short half lives.
Point is, that nuclear reactors are extremely complex systems with thousands of weird chemical and nuclear reactions going on inside of them. The environmentalists may not be as "looney" as you quickly paint them. Why aren't Peak Oilers looney freaks as well? What makes us different? Chicken Littles have been predicting the end of oil for almost a hundred years. They have always been wrong. New technologies are constantly emerging and surely some of them will prevent any problems from peak oil or from nuclear reactors from affecting us. The markets always provide. --just kidding (had you going for a while huh?) Let's not throw "looney" paint on the environmentalists all that quickly. A little knowledge is dangerous.
Quickly paint them? I've been actively engaged in the public debates for decades!!!!!!!!!!!!!
They have either had hidden agenda or hidden phobias because the logic of their arguments has always been wanting. They are very short on constructive criticism and long on irresponsible fear-mongering. There has been no love lost between the advocates of nuclear power and those opposed.
The recent trend for responsible, forward-thinking environmentalists to support nuclear power is LONG overdue and most welcome.
As to "dumping radioactive material into the air," guess you've never heard of off-gas treatment systems. We delay the non-condensibles from the steam for several half-lives of the activated H2O components so that none is released. Further, other gases are adsorbed on cold activated charcoal or liquefied for storage. Coal plants release more Curies and more radiotoxicity.
As to LevinK's comments, they show insightful analysis but little practical difference in the field in the US. The biggest fear from the conservative elements in the US is that the further investment in nukes will be wiped out by political activists.
Looks like the Marin County lefties got your goad. Time to move down here to the South Bay where the under-employed engineers are more accepting of rational discussion as opposed to emotional hysterics. However, due to San Andreas and Hayward fault lines, I don't think the neighbors are going to be accepting of a reactor in this area.
Didn't know we had so many TOD readers in the Bay area :-)
the Jay oil fields
Well now, that's just a few miles up the road. And there's some wealthy folks around there because of that oil. Missing some teeth, but wealthy. [ducks for the incoming return fire]
Resistance to offshore drilling is pretty stiff around here. The recent hurricanes have shown how fragile our local liquid fuel supplies are. No significant pipelines or refineries nearby. Mostly barged in.
So one of my bookmarked thoughts since my own personal coffee-spitting moment (boy, was it ugly...a very bad day..the "F" word kept coming out in regular intervals in ever-increasing depth and emotion) is to watch how sentiments change around here as fuel starts to get tight. Of course, development time and real world logistics will make sure that hardly any of those gallons ever make it into our tanks. But John and Jane Doe won't get that.
P.S. which oil & gas fueled plant on the Gulf Coast? Just curious.
Last week, I gave an informal seminar to about 20 people in a university. I have been following theoildrum since blogspot days, but I had to spend so much time to just find one basic bit of information. I ended up basing my presentation mostly on the wolfatthedoor.org.uk site.
If you are looking for a post that appeared 6 months ago, you have to spend a lot of time looking for it. The tags feature is nice, and it could have been very useful, but for many posts, the tags are all standard: "peak oil", "hubbert peak", etc. But I'm not sure if more tags would help or just add to the confusion.
For example, suppose you would like to quickly access key points about the Ghawar oilfield in Saudi Arabia. I am sure there must be some posts that exclusively deal with Ghawar, but can you locate them easily? Then, if your attention turns to the general topic of "giant oilfields." Would'nt it be nice to have all the links to various TOD posts in one place?
Maybe someone should start a web site (or even a blog), that is aimed at organizing information at this site. So, more articles like this one are more than welcome here.
Here are the URL's in their full glory:
http://www.theoildrum.com/story/2006/1/20/193723/259
http://www.theoildrum.com/story/2006/2/14/164650/917
http://www.theoildrum.com/story/2006/1/5/31649/28371
http://www.theoildrum.com/admin/story/2006/2/4/4015/39115
http://www.theoildrum.com/story/2005/10/22/16565/298
http://www.theoildrum.com/story/2005/11/16/182053/32
http://www.theoildrum.com/story/2006/2/15/202152/001
http://www.theoildrum.com/story/2006/1/11/6047/13568
http://www.theoildrum.com/story/2006/1/22/04219/1102
http://www.theoildrum.com/story/2006/1/20/162942/196
http://www.theoildrum.com/story/2006/2/24/31343/5317
http://www.theoildrum.com/admin/story/2006/2/24/11925/2060
http://www.theoildrum.com/story/2006/2/4/63551/68914
http://www.theoildrum.com/story/2006/2/3/2193/34505
http://www.theoildrum.com/story/2006/1/4/24729/30210
http://www.theoildrum.com/story/2006/2/2/21034/63481
Not intuitive, eh? I suppose after the story comes yyyy/m/d, but what do the next two numbers mean? Could it be possible to come up with a logical directory structure?
Also, if there was a way to view the site with just the headlines, it would be possible to view links to a lot more posts than it is possible right now. The default number of stories with summaries one can see in a single page is 15, but with only headlines, 50 posts could fit in the same real estate.
The last point is a problem that I have myself. One brother insists that oil will last another 100 years. True in one sense, convential production will still be at 1 million b/day in 2106, but he likes to burn great quantities of gasoline every year (10,000 liters/year for his family, he boasted)
:-((
A couple of points. Some would argue (I don't make this argument myself) that it is merely speculators who are driving up the cost of oil. It wouldn't hurt to add a sentence or two to discuss this point.
Secondly, the conucopians argue that there are new sources just around the corner. Deep water. Oil sands, shale. CO2 injection. Each of these has their own problems and limitations of course. Adding discussion of these things would likely make this type of introduction far too long, but a paragraph with links to some of the previous stories here at TOD could be a helpful reference.
There is no numbers or facts to support that theory. Some Finance or Economist people (ex: Lynch) are saying it's speculation. People in the oil business say it's not. I rather believe in the second group opinion.
- Deep water: maybe but probably small production rate
- Oil sands: a lot of oil but a very small production rate (maybe 10 mbpd in ten years)
- Oil shale: science fiction for now
- C02 injection: maybe on some fields but cannot be generalized.
Evidence of an incoming oil crisis is compelling.Critics will argue also that higher prices will make smaller field economical (lower cut off).
That is if they complete the nuclear power plant to cook the raw material before running out of NG
PO is now, or maybe even yesterday and they still have "plans" for nuclear reactors in a decade or two and probably better hybrids in 5 years. I guess plug-ins will come around 2020 and hydrogen cars by 2070. We are saved.
Speculators just get the price to wherever its going a little faster than it would get there all by itself.
Speculation merely refers to price pressure based on expected future conditions, as compared to today's supply and demand. It is pretty clear that the supply/demand situation today is in good shape. Stockpiles continue to grow. If that were all there is to it, you'd expect prices to fall.
The reason prices are staying high in this situation is because people are concerned with the future. In the short term, supply interruptions are a potential problem; and in the longer term, meeting demand is going to be an increasing challenge. These are the factors which are cited to explain the coexistence of high oil prices with growing stockpiles that suggest a glut of oil.
This kind of concern about the future, the effects of expected future market conditions on today's price, is exactly what we mean by speculation. It is one of the most important and useful aspects of the market system, that anticipation of the future affects price signals today. Speculation and speculators get a bad name because they are said to add volatility to the market, and in the past they may have tried unethical actions like getting into a monopoly position. But the truth is that without speculators there would be no futures markets, and the many important functions those markets provide would not exist.
So yes, speculators are very plausibly responsible for today's high oil prices, but we should be glad of it. They are betting on future tightness in the oil market, and the fact that prices are high indicates that there is substantial agreement on this issue. This sends a price signal today to ignore the apparent supply glut and to continue to conserve, because of likely shortages tomorrow. And that is exactly the appropriate action in this situation.
- Commercial Crude stocks do increase - a little -, because of declining input to refineries since January (far before the seasonal maintainance sessions)
- strategic petroleum reserve (SPR) stays low and isn't refilling
- gasoline stocks increase because of the high level of imports (from where ? Abqaiq ?) and despite a heavily declining domestic production in a context of increasing consumption
- heating fuel stocks are beginning to decline, because of higher consumption, imports don't seem to keep pace (see weekly EIA report)
Meanwhile, consumption for all finished products increases except kerosene (in its jet fuel form). What does that mean while world production of crude oil stagnates ? (In January we could even see a decline in production, at least from OPEC, if we can believe the article forwarded by heading out from MEES). In my oversimplified view this means that some other countries are forced to decrease their consumption. In other words, there is a real strain on the supply/demand equation which means increased competition. Or can anyone demonstrate that world production is increasing, refuting stuarts arguments from confirmed sources ?Now I can shorten it to: "Ditto".
RR > We are certainly in a world where airlines are very nervous about where fuel prices will go. I don't pretend to be an expert on fuel prices, but before we all get too carried away with $100+ per barrel being certain, I've seen 2 presentations recently by chief economists and both said they thought the long-run oil price would be significantly below current levels! Someone pointed out that back in
the 1980s the generally accepted view was that by the year 2000 prices would be $100/barrel in 1980s prices! In the end it will come down to demand/supply balance.
IMO, there is substantial risk of very high fuel prices in the time frames of fleet planning. I wrote my brother that, IMHO, there was an 80% chance that world oil production will drop y-o-y sometime between 2008 & 2011 with "adverse economic consequences".
Russia has stated that they will peak in 2010. Kuwait (Burgun is #3 producing oil field) is in decline, and Mexico is facing fast (12%) to extremely fast decline (44%) in Cantarell (#2 oil field). UK declining steadily, and some experts question the reality of Saudi projections (amidst rumors of higher water cuts in #1 Ghawar). And on & on.
Unconvential production has long lead times (8 to 10 years in most cases) and often resource constraints (natural gas for extraction of Canadian tar) and uniformly adverse effects upon Global Warming vs. convential oil production.
A good technical discussion from the "Peak Oil" perspective is www.theoildrum.com . About 25 topics down they had a good review of Russian prospects.
Alan about to head back out to the French Qtr !
Air fares are to a large extent driven by fuel prices over a period of years. Therefore I predict:
The 787 will use at least 20% less fuel than the 767 it replaces (note intricate details on delta between two models).
I am famous/infamous on "Orders" for predicting that Boeing will EIS a 737 replacement, using 787+ technology, in 2012. The "737E" or 797 will use at least 25% less than the newer 737s and Southwest will launch it in 2007/2008 with an order for 400 a/c. Southwest is at 52 pax-mile/gallon and climbing.
I first made this prediction about 4 years ago, and "so far, so good".
At $25/barrel, fuel was ~10% of aviation costs (including refining costs). At $125/barrel, this translates into ~1/3 of all costs. ALL sorts of variables in that "~10%" number.
Raise average ticket prices by 50% and airlines can make money. Price elasticity of demand (direct, higher ticket prices, indirect, economic recession+) will cut demand significantly. But there will be demand for new fuel efficient jets !
Southwest Airlines is the only US airline that can afford a "refleet". They have saved ~$1 billion already by hedging jet fuel and will likely save another billion by time their last hedge expires in 2009.
We may see 737 size a/c offering direct service between Chicago and Frankfort twice a day and 787 once a day. Transfer to ICE there for high speed rail travel throughout Germany from there. Repeat for MANY other city-pairs.
- If price goes up 50%, then number of tickets sold will go down a great deal. Nobody knows how much.
- If fewer tickets are sold, fixed costs remain the same, thus average cost per passenger mile goes up.
- The way the tourist industry works (airlines plus hotels plus, to some extent, rental cars and cruise ships) is that it is highly capacity sensitive. In other words, lots of empty hotel rooms and half-empty airplanes kill you.
- There is a tendency for the "kinked oligopoly demand curve" to come into effect. What this means is that competitors are forced to match anybody's price cut, but in general most price increases are not matched--even when everybody is losing money.
Therefore, I stand my prediction that oil at $70 per barrel will make a huge difference, and $100 oil a major transformation in tourism.Correlation does not imply causation; we all know that. Nevertheless, take a look at the trend of jet-fuel prices and plot it on a graph against total losses of U.S. airlines. Somebody has done this somewhere, but offhand cannot remember where; actually I think several sources have done versions of this.
Kerosene is too precious to use as jet fuel for much longer.
We will see a major capacity reduction, likely via Chpt 7 bankruptcy (liquidation) of a couple of major airlines at some oil price.
I am interested in the market dynamics (in theory) when there is one player with several, major competitive advantages and the rest are struggling.
Southwest has had 30+ straight years of profits.
Herb is the best airline manager in the history of aviation and he has assembled the best management team in the industry (i.e. managerial advantage) and best workforce in the industry (hire 1 out of 100+). Also now best paid, but near bottom in labor costs due to VERY high productivity. Recent dramatic increases in employee productivity (~10% since 2003).
Debt is half of owners equity, VERY solid financials, which lowers costs of operation. Unlike all others.
Lowest customer complaints in US for 14 straight years.
Fuel hedges at decreasing % till 2009. (From memory, ~60% of fuel required at $36/barrel in 2006, ~30% at $39 in 2009).
Traditionally does not exploit monopoly markets (intraTexas 90+%, intraCalifornia 80%, Texas-New Orleans). Also, not seen as a "predator" by competition, but a fearsome "rational competitor".
Managed growth in 8% to 12% range, decent capacity factors "no matter what" (they idled 15 737s when Katrina hit major market and they redeployed within weeks, and made money).
Boeing will build the 737 replacement (at least one model) to their specs. They alone can afford hundreds of these more efficient (fuel AND maintenance) a/c in US domestic market.
They do NOT aspire to 100% of the market. Their "niche" is large and growing but probably not more than 40% or 50% of US market. They want a 15% minimum growth in profits in 2006.
I cannot recall another industry with a single player with such competitive advantages.
In a shrinking market, what is the likely result ?
Some have blamed low US fares on SW, (evil ones driving everyone else to liquidation whilst they make money), BUT low fares appear in markets not served by them.
BTW, at high enough efficiency (say 70 to 75 pax-mile/gallon), there will be demand for air travel even at $250/barrel oil. Just not as much. 73 pax mpg is what Amtrak uses today.
What will become of the insanely overbuilt hotel industry I do not know. For a foretaste of the future, look at the hotels that were built in anticipation that there would be a "New Economy" and no dot.com bust--look especially within a ten mile radius of the Silicon Valley area. Maybe we should move the hurricane homeless into them, at least then the tall white elephants would not have such horrendous vacancy rates.
The hotel chains are likewise, as you said, in for a lot of pain, but I suspect a higher percentage of that industry will survive as the remaining travel shifts to rail and road.
Don, what happens when you have a contracting market and one player with enourmous competitive advantages that 1) does not serve the boutique market and 2) does not profit maximize when it has a local monopoly ?
My economic theory fails me in that case.
In answer to your specific query, my answer my strike you as unorthodox, but it is based on much observation, research, and thought. My answer is that how well an organization responds to change depends on who is in charge. Two specific examples from universities:
- Under Robert Maynard Hutchins, the University of Chicago went from pretty good to top quality in both undergraduate education (I know; I was lucky enough to be there as an early entrant.) and also research. While I was there, Milton Friedman gave me tennis tips, back when he played with George Stigler and a couple of other bright guys.
- The University of Calif. under Robert Gordon Sproul became what I think without dispute was the greatest public university in the world. He was one of the most amazing men I have ever met, and he broke every organizational rule in the book--e.g. he had over 100 people reporting directly to him, and he knew by name every single tenured faculty member and could recognize them by face when they spoke at faculty meetings, and he had the brilliance to recruit top people and then pretty much turn them loose as much as possible. No president or chancellor of UC since the retirement of RGS came close to filling his shoes, and although UC Berkeley is still one of the first-rate universities in the world, it is not as good as it was fifty years ago, when you had a pretty good chance of taking introductory physics from a Nobel Prize winner, and when not only the physics department was by far the world's best (if you include Lawrence and Livermore and Los Alamos, all run by U.C. Berkeley) but also had many of the finest departments in the world in several disciplines.
So, what is the future for SW airlines? Tell me who the successors of the founders are. How good are they? IMO, those are the key questions.bit below average fuel hedge (for an airline) to becoming the most heavily hedged airline in the world. Perhaps $2 billion saved.
A finance guy, he seems to understand the people culture at SW. He dressed up as a member of KISS for Halloween. "Aw Shucks" personality.
He is seen as being more aggressive than Herb (who started as a 2 plane airline that had to avoid the elephants and not irritate them) and a bit more of a risk taker (better a proactive risk than a reactive risk is my read of his philosophy).
Below him is a very good group of people who get along. Their economic & operational research before moving into new markets is legendary, highly secret and often surprising.
EVERY employee is expected to make decisions and take responability & initiative. Doubly true for middle managers.
I have watched them closely and no apparent weakness in any area; operationally, scheduling, ground operations, maintenance, relations with Boeing, are ALL among the best in industry or clearly THE best in industry.
In the world, their only rival for managerial excellence is Singapore. As I said, manadement is one of their competitive advantages, along with cheap fuel, good finances, etc.
The President is Herb's former secretary, who is in charge of maintaining their corporate culture (which she does well). A few years away from retirement.
Herb was supposed to go to part-time status on Oct 1, 2001. Never happened. Exact roles are a bit murky, but Herb has final say on new cities and rate of expansion.
Southwest "took a gamble" after 9-11-1 and did not lay off anyone, or reduce flight schedules. As a result, they had profits when all others lost $$$$.
BTW: Did you ever contact Twin Cities Transit supporters ?
The airline industry started as an extravagance that only the rich & famous could afford.
It will end the way it started.
110 p-mpg is a reasonable extrapolation from the 787.
http://www.nytimes.com/2006/03/01/business/01flight.html
Several new microjets such as the six-seat Eclipse 500 are due out soon. It's hard to see how this is going to turn out, but the FAA thinks there will be 1,650 such planes flying by 2010.
Alan, you raved about the new Boeing's but did not mention the Airbus A380. I'm inferring you do not think it will fare well.
Also, what happens to Southwest when its hedging contracts run out? Might it not be more difficult to successfully hedge fuel costs in the future?
Southwest will also do reasonably well without future hedges. Remember, they are the only ones that can afford more than a few high efficiency a/c when they become available (I forecast a launch order for 400), they have low operating costs, great management, etc.
Perhaps they will lose money one, or even two years, but this will not imperil the functioning of the company, just disappoint the shareholders.
Let me expound on one facet of the A380-800, the wings. Airbus designed oversized wings so that they could build the next larger variant (the 1,000 pax A380-900) with the same wing. So the current A380-800 gets an oversized wing (too much weight, too much drag). Then they run into weight problems and "re-engineer" the A380 wing with zero margin (required to test to 150% of max loading) to save weight. Wing failed load test two weeks ago at 145.5%. OOOPS !
They are going to try and make corrections w/o another test, just add weight back. Even if they are allowed to do that by JAA (EU version of FAA), they will not be allowed to come out with a higher MTOW version of the A380-800 without a major wing retest (scrap one prototype), much less the A380-900.
The A380 benefits from being a recent design (steady progress in engines, structures, aerodynamics so newer = better) but suffers from a poor design (full double deck > structural weight, oversized wing). Boeing claims the next 747, the 747-8, will have lower seat costs and fuel/seat-mile than the A380-800.
The A380 is a "hub to hub" a/c and the move away from hub & spoke operations will hurt it's basic market.
(8 is a lucky number in China, hence the large #s of eights appearing in model #s)
Don, Amtrak is worse than flying.
Well you get the picture. Next time, take the train.
Transfer to ICE there for high speed rail travel throughout Germany from there.
Where "throughout Germany" is restricted to "major cities in Germany in 1 to 4 hour intervals plus second-tier cities once per day." And assuming you want to pay anywhere from 2-6 times as you would if you chose an inter-city flight to said cities.
I like rail service here in Germany, and in general train rides are quiet and can be enjoyable (outside of fellow passengers). But let's not go overboard and say there is high speed rail available throught Germany, because that simply isn't true. To get to many destinations you'll do your fair share of time on a Regionalbahn, which is the equivalent to spending your time in Purgatory if your goal is to get to your destination as quickly as possible.
Sure, peak oil is going to force us to resort to solutions like this if we want to stay mobile. But it's not going to be fun. There's a reason the Autobahns here are as packed full of traffic during rush hour as the interstate in any major US city. ...
I'm hopeful that these will make a comeback in the future as they should be comparitively energy efficient and easy to make run on something other than liquid fossil fuels. If they weren't private I would consider buying a few shares.
http://www.aerosml.com/aeros-ml.asp
http://www.popsci.com/popsci/whatsnew/18ac893302839010vgnvcm1000004eecbccdrcrd.html
the helium would only lift 2/3's of the crafts weight so technically its not lighter than air. Nevertheless given the shape of the craft I would guess headwinds would still be a problem.
I've been lurking in the shadows here without posting but Peak Oil has been a big concern. I graduated a few years back with a degree in Industrial Design (Product Manufacturing) and discovered very quickly that I was screwed because Peak Oil had not factored into any of my plans. I knew that China was going to be taking manufacturing resources but was assured that design was going to stay strong in the US. Unfortunately the people who assured me of that probably never heard of Peak Oil either.
I'm currently preparing to return to school for another degree before the cost of everything makes it impossible. Industrial Revolution style production is going bye-bye.
I've been telling people lately that the future is probably not going to look like the stone age, but will most likely look a lot like Cuba does today. With supplies from Russia cut and sanctions from the US, Cuba has been forced to reinvent the way they do everything including food production, transportation, and energy creation. Organic farming and urban rooftop vegetable gardens have become a major part of life there and we are probably going to see the same thing.
I do, however, think that technology is going to stay and advance no matter what the power situation is. We might not drop a lot on things like gaming but computer science and telecommunications are going to be more important than ever, especially when the cost of fuel makes travel restrictive. I would expect video conferencing, VOIP, and other communications technologies to continue, although people are going to need a UPS or two on their computers. The idea that we are going to be going back to smoke signals and pidgeons is a little much. But who knows, I might be wrong.
(By satellite offices I mean a place you go to a short ways from your home that gives you an office, a desk, and a network with videoconferencing ability to your boss's and co-workers' desks.)
I also think that the energy efficiency drives that are likely to come are going to spur a lot of product redesign.
Here is why:
We are herd animals.
We don't work well when alone.
We work when we are in a work environment where all the other animals around us are behaving like busy beavers and we want to be part of the frenzy, part of the herd.
Of course, we are also delusional deniers.
It can't be true that we are irrational herd creatures who can't tele-work on our own.
http://www.telecommutect.com/research/CSBoeing.asp
other examples left to the reader.
Best,
Matt
In the closing chapter of "A Thousand Barrels A Second," the author pictures his future in 2017:
"After our two sons had left home my wife and I relocated to the West Coast and moved into a townhouse on the edge of a small bay. I had an office on the upper floor with a panoramic view of the Pacific Ocean [...]"
"Like many others, I believed the trade-off was worth it. I enjoyed my rural lifestyle. Between my ubiquitous Internet connection and the incredible advances in video-telephony, there was not practical reason for me to live near an urban center anymore [...]"
Will I have the ocean view townhouse? Probably not ... but I wouldn't mind being a mile or two inland, with the same setup.
Many of us (not me!) become emotionally involved in the lives of characters portrayed on soap operas. That's true all the way from "The Edge of Night" to "NYPD Blue." There's no reason to think that office politics will be any less potent if the people are communicating via internet rather than over the water cooler. Virtual sex seems to do well. Upon what do you base your assertion that we can't engage in "herd" behavior over a wire?
I think all the nay saying misses the main point, and that is - what in hell are we going to be doing over the internet?
Manufacturing design? I doubt it simply because significant design efforts will require huge 3D visualization devices impractical for the home.
Unless we US'ers really believe that the dollar will remain the key currency indefinitely then we need to figure out what we have to trade for the things we import. Right now it doesn't look hopeful.
Consequently, I think our standard of living is going to take a big drop but we do have the infrastructure in place to maintain the internet for relatively modest energy cost. If a community uses the internet as a scheduling device that replaces five trips with one trip then the energy savings could be very significant and would be obvious to all involved. Imagine several families within a few miles of each other forming a buying group. When one needs an item it is simple enough to log on and make an entry on a shopping list. The computer can be quite smart about scheduling to take into account special transportation requirements for bulky items.
There's no need to flesh this out right now but, with a little imagination, one can see there are ways around all the usual objections. The Home Depot website can show much more detail for small parts. Ordering on the shopping list can be accomplished with SKU numbers. Home Depot can be advised in advance of the order and have it picked and ready for a small fee.
And so on.
The internet is an information utility. We will continue to find new uses for it that save considerable energy. My house has several computers, hubs, wireless transmitters etc yet I use less than 300 KWH per month - and that's without trying to conserve. With a little effort I could drop to 150 KWH per month.
Home Depot is 12 miles away and a round trip takes about a gallon of fuel. Unless my calculations are off, each trip to Home Depot requires as much fuel energy as I use in electricity to run my home for four days presently and eight days if I were to conserve.
Put in terms of present USD, a trip costs $2.50 in fuel. My electricity for a month costs $36 (300KWH). In these terms a trip to Home Depot costs the same as two days of electricity.
If 5 families consolidate five trips a week into one trip a week, the savings would be $2 per week per family. That doesn't sound like much but remember it's in current energy prices. If energy prices quadrupled the savings would be much greater. $50 in fuel costs would be reduced to $10 for a savings of $8 per week per family.
The cost of maintaining and internet connection should not quadruple under these conditions because it doesn't require much energy. Furthermore, it is subsidized by cable television. My guess is that people will continue watching television until the bitter end. The coax that brings in cable also brings the internet.
Didn't mean to get tedious with numbers. The point is that a generalized information utility like the internet will facilitate great energy savings in the future. It's here to stay. If we start thinking about the future instead of the past we can use the internet to make life better.
In closing, I bring up a really important implicit aspect of having five families cooperating for shopping trips - it's a basis for formation of community. People who otherwise might not know each other are involved in a manner that encourages but does not compel further interaction. Imagine dropping by your neighbor's house to pick up a tool or some fabric that you ordered. What a natural conversation starter!
To some extent we get the future we imagine. Let's be constructive.
Over time, a LOT of the things I needed or wanted (see French Quarter >:) were along the line or within easy walking distance.
No need to check internet, just walk out there and catch the next one (every 30 minutes past midnight to 5 AM).
I already know all my neighbors, and would pick bulky stuff up for them if they did not have a car.
As the cost of goods and services rise, it is going to become even more important to have virtual resources that communities can share and draw from. I don't beleive that everyone will be moved to some kind of telecommuting job, but for many fields it will become a critical component that they can rely on.
As we look at the global energy needs, networking technology is only going to expand to help solve the problems. It is not going to be abandoned so the IT workers of the world can work the fields. This is one things that really troubles me about PO forums, the quick trigger reaction towards "doom and gloom" stone age scenarios. There are solutions - no matter how late they might be.
One thing that definately will be needed is more centralized control over how electricity is used by the general public. If we were to network HVAC systems across a region it would be possible to automatically turn down peoples thermostats to relieve strain on the grid during peak hours. Other devices could also be made "smart" to allow reductions when needed.
I mean think about how many people left their homes this morning with lights, televisions, radios, computers, and all kinds of other things running. If there was control over that, even on a very limited level, it would save a great deal of energy. It could simply be a matter or having devices know that they aren't being used triggering a sleep mode or switch to local battery or solar backups. The homeowner could even select which devices were open to network control and which "like PC's" were critical and off limits.
Anyway, here's my free idea to start the whole thing off. This thing may even already exist in the U.S.
How about someone investing in a new company that delivers groceries and other consumer goods to the great, sprawling, suburbs? Instead of people all driving in their cars to the mall, lots of small "malls" or trucks come to them! Isn't there a future in this idea? One gives one's order over the internet and the truck arrives with your stuff. Obviously the trucks have to be "green" and there are lots of details I haven't worked out or even thought about. Hey, this is just an attempt at being positive.
Ah yes, the pastoral beauty of telecommuting.
The children sit quite.
The dog doesn't bark.
The neighbor doesn't scream.
The refrigerator doesn't beckon.
Harmony and happiness are all around.
And if, just if, perchance the blue screen of death pops up on the monitor, our happy housewife/worker will know exactly how to cope.
Hum... Let me guess? 5 ft - 5 1/2" | 34-23-31 | brunette?
As of late we have become more "substantial" people.
The getting lost in the psych book section happened recently, which is why you scared me, but obviously it was a coincidental lucky guess.
Anyway, best to work in the office and avoid distrations ... like too much time spent on TOD.
:-) O O (-:
Telecommuting will definitely take some adjusting for the economy as a whole, but it's inarguably true that many people and companies have already made the switch to great benefit. Saying otherwise is just ignoring the facts.
I work from home plenty.
But all things being equal, I'd rather be at the office where MIS help is right around the corner if the damn computer crashes.
I really dont' think the number is that high, particularly in a service economy: burger flipper, soldier, teacher, cab driver, auto-mechanic, solar panel installer, grocery store worker, etc. All of those require you to be around others in the workplace.
BEst,
Matt
That's a weird corner-case ... but it shows that it might go beyond the "office workers" we normally picture.
Let's look at it for a minute and try to hold the upchuck.
I'm in San Diego at a MacDonalds. I order a Big Mac via a VOIP line that connects me to an otherwise unemployable in Sioux Falls. She don't speak too good, either. But at least it's not Hindi, right? She's one of our own. Hooray.
But this all the misses the point. What in hell is she doing? She's taking my voice commands and punching items on her touch screen that get relayed back to within ten feet of where I placed the order.
Where's the value in it?
Would someone please explain why I'm not capable of entering my own order via a touch screen? Is this a sanitation issue? OK. I'll wash my hands.
Voice recognition is much better than it used to be. How about I just say what I want and let the screen show the result of my selection? Who needs a bimbo in Sioux Falls to intermediate?
The Mustache demonstrates the Peter principle yet again. My contempt for the shallow thinking of this hairy lipped little toad turd is visceral. He makes an art form of the trivial. Apparently his audience doesn't notice.
But I try to see what's true "in" something even if I don't buy the whole thing. I think he got the broad strokes pretty well.
So I don't take his telecommuting stories gospel by any means. I just give them some qualified trust (fuzzy logic) on the broad strokes.
And of course Peter Tertzakian in "thousand barrels" reminds me that this relates to transportation issues.
I am very skeptical of those that think Telecommuting will be an overall good thing for them.
If I am a business owner with 1000 employees, and I am able to have 30% of those employee hours telecommuting, I could reduce my building foot print and related facility costs.
The next step is to lay off 30 % of my work force, require the remaining 70% to be in the office full time, and then outsource the telecommuting work to India and save on the actual labor also. In big corporations if enough work can be done via telecommuting there isn't much difference between my home office and an outsourcing office in India.
Telecommuting doesn't have to work for everyone in order to see a (further) upswing.
And please note that I did not say telecommuting would offset peak oil. I just said it might get more popular.
I suspect TOD readers are predominantly the types who work in offices where this type of thing might (in theory) be possible.
The vast majority of American and the overwhelming majority of the world are not like those of us on this site.
This site's readership is representative of a very tiny, very eductated, very wealthy subset of the population. My guess is the average income here is over $75,000. On PO.com, a poll was taken and it was in the $80,000 or so I remember.
Furthermore, the office worker at a software, accounting, or law firm is not going to even have a job as there will likely be less things for them to do once the lower 50% of the population isn't gong to have the money to buy the stuff the company is involved in making, distributing, accoutning for, etc.
So telecommuting is mostly a myth, at least in terms of how much of a pragmatic, real-world differene it's going to make.
Best,
Matt
I think that's "mostly a myth."
I suspect employers will have the upper hand when TSHTF, and they will want people who actually show up in the office.
Is telecommuting the complete answer, or is reordering our housing patterns even more important ?
Note: The US "trashed" much of it's pre-WW II housing stock and thrived despite the loss of capital.
I am very big on walking and biking, and as I've said I think there are more "walkable" communities than people notice.
But I think they're likely to be "even neater" with 10 or 20 years improvement in videoconferencing.
The streetcars are an ESSENTIAL element in retaining our walkable neighborhood, their lack is causing a local crisis (one of many) ATM. I have the good fortune to live in one of the finest examples of "Old Urbanism" in the Lower Garden District.
*Note for Phoenix, "raining" is drops of water falling from the sky. No sprinkler required >:)
We built a hell of a lot of infrastructure during first 2/3 of the 20th century. We had the wealth to do so, not least because we were Saudi Arabia then.
I don't think we'll be able to do it again. Not without a lot of pain and unpleasantness. The problem is exponentially more complicated now, and we don't have the resources we had then. Tainter's diminishing returns applies.
Before the Age of Oil, just coal, horses and manual labor.
Did it before, can we do it again ?
Tainter's diminishing returns still applies. The U.S. was a land rich in natural resources, largely unexploited. As Heinberg likes to point out, the purpose of globalization is to get access to other countries' resources because we've used up our own.
And the population is so much larger now. The country is so much more crowded. We are dependent on our infrastructure in a way we were not when it was first built. Much easier to build a bridge where there was none than to rebuild one that is currently in use.
Peak Oiler's write 1000's of comments, writing in vanishing detail about "future cars." We do not, and probably cannot, post on things that are currently "left field" but will change the need for cars.
We don't, just as in the 1970's Jimmy Carter did not say "let's all use the Internet." Very few people knew what "inter-networking" was at that point. Telecommuting (limited as it is) is a "car replacement" that came out of essentially nowhere in (public perception) 20 or 30 years.
Again I am not, and don't feel any particular need to, set goals for telecommuting in another 10, 20, or 30 years. I don't need to say X% users, or Y thousand users.
But if I want to think about technology trends as they relate to peak oil, I think I should spend a little time thinking about "non transportation" technologies that end up impacting transportation.
But I just spent over three weeks driving 52 miles back and forth every day, because I couldn't successfully telecollaborate with a designer/PM our main office. He was so mercurial that you had to sit in the same draughting room to know what the hell was going on with the project.
I guess it all depends on what you do!
However, times were different then. The U.S. was easily the richest country in the world, swimming in oil. That is not the world we are entering. Do I predict a fascist future for the U.S.? Maybe, maybe not. I think it all hinges on how the American middle-class reacts, will it move to the "Left" or the "Right"?
http://www.globalpublicmedia.com/news/539
Is there any possibility of this? Or should I just go ahead and cut and paste.
Do I need permission?
So LATOC had a net gain of 9 visitors due to mention in the NY Times.
Best,
Matt
2-3% is enough for somebody like Stuart to get a book deal, somebody like me to have a site that gets 7,000/day, etc. but it's not enough that there is suddenly going to be some grand awakening where everybody logs on to latoc, tod, etc. and gets religion.
Best,
Matt
If you look at (reasonably recent) history, different societies at different times make a wide variety of choices when they get very stressed. It's certainly true that, for example, the hyperinflating Germans of the 1930s elected an expansionist psychopath. However, the depression-era Americans elected FDR instead.
I don't think it's predictable at this time what kind of leadership the country will pick to handle this situation. I think we (collectively) have choices. Some of them are very dark, while others are painful but livable. I know I grew up (in the UK) on my grandparent's stories of WWII and the Blitz spirit. It was clear that for them that period was the highest point of their lives, and it was the extremes of adversity the society faced that made it so. Obviously, Churchill's leadership had a great deal to do with this.
When I think of our political process for choosing leaders, when I think of the way our political institutions have decayed, . . . . Then I want to quit thinking and start drinking.
Our system can handle incremental change reasonably well--or at least adequately most of the time.
To make a huge change in our society, e.g. the abolition of slavery, well . . . . Slaves were perhaps the equivalent of cheap fossil fuels (in a metaphorical sense).
Nevertheless, I am an optimist. Why? Because as you so well put it, Stuart, the future has not happened yet. We cannot predict the future. We cannot control it. But with appropriate actions we may be able to influence just enough . . . .
If I was being really cynical and cospiritorial, I'd also say this was a clear-cut plan already in operation. The economy of the U.S. is in many respects in pretty dire shape. A radical reajustment is required, some call this "demand destruction" or a "depression." The defecit is enormous etc... How do we deal with these problems? We let the whole system carry on as usual and "let the market decide."
This is known as shifting responsibility on a grand scale, something we've seen before, many times. Who get's the blame? The Arabs, Islam, the Chiense take your pick?
The leftwingers will blame the Big Oil monopoly.
The moderates will blame all of the above.
(Well, that's the way they see it.)
I'm wary of these comparisons. Had American not provided the six billion of the seven billion barrels of oil the Allies used to defeat Hitler, your granparents wouldn't have had the ability to fight back. Hitler would have invaded the UK and I dobut they would have remebered those years so fondly.
I look at the trends of the last 35 years, and particularly of the last 5 years and ask myself, "How many societies have gone this far down the path we'v gone and managed to turn the whole thing around in the context of worsening economic conditions?"
Best,
Matt
I don't think Americans are going to act more rational when gas is $10 than when it is $2.50.
"I don't think it's predictable at this time what kind of leadership the country will pick to handle this situation."
We don't elect people over here. What happens is super rich people own the newspapers, the think tanks, the university endowments, etc. They control the public discourse. We simply select the more attractive of the two candidates they put out there for us. Like Coke and Pepsi.
I'll go out on a limb and make a prediction: our country's leadership will be controlled by the rich and will do the bidding/serve the interests of the wealthy and powerful
Now, whether the form it takes will be leftist-green or reactionary-right will be and "interesting" to watch.
"Obviously, Churchill's leadership had a great deal to do with this. "
More importantly than Churchill's leaderhsip, I contend, were the east texas oil fields that provided the oil to build and fuel the Spitfires that repelled Hitler's attempted invasion of the UK.
Best,
Matt
It's hard enough to extrapolate oil declines, but extrapolating culture/politics through a major crisis and paradigm shift is next to impossible. You don't know what Americans (let alone the rest of the world) are going to do once they finally get serious about the problem, and neither do I. Analysis that assumes we are certain to fail in solving this problem and we're all going to die strikes me as no more insightful than the cornucopians who assume we are certain to succeed with no great difficulty.
There is no physical barrier that prevents us living with 1/10 the oil we do now while still having a civilization with universities, businesses, democratic government, interesting technology, and enough food. The argument that we cannot get from here to there has to rest entirely on sociocultural factors. Therefore, it is highly speculative how things will play out. We have choices.
I'm not saying there's no danger of the dark future you predict. It is certainly possible if we screw up and it is good that you are pointing this out. But I think falling into fatalism that it is inevitable is not justified by the evidence.
I don't feel that I'm "predicting" the future. I'm documenting it as it unfolds.
Right now, my tax dollars are being used to fund some horrifically dark endeavors. Nigeria, Iraq, Abu Gharaib, 14 permanent military bases, depleted urnanium. I could go on, but I think you get the picture.
The "backlash" from those endeavors is likely to result in increased attacks (terrorism) to US petroluem supplies. That'll push oil up to the $150 range (according to Oil Shockwave). Throw in even higher prices due to depletion and we're talkinb aboug massive economic dislocations in a short period of time.
You are correct in that it is possible will react to this peacefully as a society. ut the chances of extremely low at this point. Conceivable does not mean likely.
The chances of the world being more peaceful, the US and UK economies being better off as seeen from the persepctive of the average person 15 years from now are pretty low at this point
I'm not making an "iron-clad" prediction. Neither were the Oil Shockwave particpatns when they had their little simulation.
Were I a betting man (I'm not), I'd bet the world is a more violent place in 10 years than it is now.
Best,
Matt
Sorry stuart, the sociocultral factors flow from our genetics. And those were forged in an environment where violence and over consumption of resources tended to confer upon you an advantage. The fat man survived the famine, not the guy who lived on only what he needed.
It's not just less oil we have to do with. It's less wealth overall we all have to do with.
I challeng you to prove me wrong. Reduce your income by 90% voluntarily. I'm not willing to do it. If you're not willing to do it either, then what does that say about the prospects of othes doing it?
Conserving energy is not enough. You've got to lower the income. Otherwise, the money saved from conserving just gets cycled back into the economy thus making it bigger and consuming more energy.
Like I said, prove me wrong. If at least you are willing to do what's necessary, my faith will be at least somewhat restored. Otherwise, I remain convinced we're driving ourselves straight to hell and rather than deny, those of us aware should put our minds towards setting up shop in the least hot parts of the world we're creating.
Best,
Matt
I'm not suggesting you're going to shoot your neighbor. But if you do, call me ASAP as you'll need a decent attorney.
Let me ask you: Are you and I in agreement that a peaceful outcome in the long run requires us to reduce our energy consumption (which means income/economic output) by at least 50%?
Assuming you agree with me, I want to see two of the more prominent members of the Peak OIl movement do it: sack up and reduce your personal energy and economic output (as defined by your income) by at LEAST 50%.
If people like you and I are not willing to grab our balls and do what it takes to get through this peacefully, I don't see how we can expect everybody else in the world to do it.
And yes, everybody has to do it. The US, the UK, China, India, etc. everybody. If only we in the US do it, then China will just consume more and pull the whold world down with them.
You really think we have a chance of getting the 300 million people in the US, the 50 millioin (I think?) in the UK, the billion plus in Chindia to peacefully accept such drastic reductions in energy supply?
If you sincerely believe that has anything outside a very remote chance of happening, I have some beachfront property in Kansas to sell you. =)
Best,
Matt
You're already doing this friend.
Our tax dollars are funding the resource grab from our neighbors in Iraq.
The Mad Max world (people shooting each other in the desert for gas) has arrived. We're just paying other people to do the driving and shooting in the desert for us.
Best,
Matt
And if we want to expand it a bit, it did succesfully get Iraq back on the dollar. So maybe you didn't go to your neihbor to steal his resources but just to force him to trade them on your terms. How much of a difference is that/ You'll still imposing your will via the barrel of a gun.
Prior to oil, what we over there for? To control other resources. To me that only confirms what I'm saying: HUman History is the history of tribes cooperating within the tribe to fight over resources with other tribes.
I have trouble seeing how you're optimistic this is about to change.
BEst,
Matt
Why do we have to choose one of the extremes, or else an intermediate ("between") position? Why can't we have BOTH extremes: asceticism AND genocide?
Stuart,
Name some examples that took place in the context of constantly DECREASING supply of energy where the particpants were all armed to the teeth.
We are essentially chimps with the capacity for complex things like the development of language and the manufacture of nuclear bombs.
Put 10 chimps into a confined cage and start lowering the food supply. You're right, I can't predict for sure what the cage will look like before long but I can take pretty darn good guess.
BEst,
Matt
In the 1920s, the Swiss made a decision to electrify their rail system (and keep their urban rail/tram system) and run it off of of domestic hydroelectric plants.
Please look under CO2 emmissions for liquid fuels.
1937 329
1938 347
1939 358
1940 238
1941 93
1942 73
1943 60
1944 49
1945 25
1946 330
1947 608
Please note the annual decline (and Allies were not in a hurry to get oil to Switzerland in 1945 after hostilities ended.
Sweden (Hi Magnus)
was
1937 992
1938 1118
1939 1246
1940 453
1941 110
1942 90
1943 123
1944 115
1945 1537
1946 2594
1947 2791
What would have happened if the numbers kept going down?
Best,
Matt
North Korea got hit by a tsunami that ruined their best farmland, and suffered other natural disasters as well. Plus their climate does not allow year-round food growing as Cuba's does. One thing that can be held against their government is that they did not ask for international aid until things were really bad. However, asking for international aid might not do us much good, if everyone else is suffering at the same time.
Could we cut back 90% and survive with few losses? I am sure we could, if "we" is the U.S. For a year, or five, or ten. In the long term...I have serious doubts. What cheap oil has given us is insurance against bad times. It allows us to grow a surplus of food and ship it wherever it's needed. As Tainter points out, the number of problems we can face is infinite. Unpredictable weather, soil exhaustion, disease, drought...so many things can go wrong. And we'll be losing our ability to deal with these problems, as our population increases and resources deplete.
Again (realistically), are we likley to go the way of which of the following cities as "the shit hit the fan":
Havana following the oil withdrawl
New Orlenas following Katrina
Detriot following the withdrawl of the auto industry
Munich following the financial collapse of the 1920s
London during the plague
We're facing all of those crisis at once: energy supplies shrinking, extreme weather, economic and financial coollapse and killer plagues.
Cuba is a very useful example, but comparing America (a highly networked, ultra-industrialized, increasingly factionalized, sprawled out country) to Cuba has always been a bit of a stretch to me.
If that's the best example you can offer, I think I have little choice but to continue believing the country's going straight to hell.
Best,
Matt
So now you need an argument that although it can be done in other countries under other circumstances, Americans in particular are certain to be incapable of doing this. So at this point, your certainty that it cannot be done rests on the idea that American development is too spread out? Or do you have another analysis for why we couldn't possibly do this?
My impression is that you are determined to come to that conclusion regardless of facts and logic.How bout we call it a draw at this point. I suggest in six months we return to this issue. If things have objectively improved signifincantly way in any of the following areas, I consider some cautious optimsim to be in place:
- Less war in the oil-rich parts of the world.
- A significant shift in the budget for renewable energy versus the budget for defense
- Improvements in the various ecological crises we're facing
- Major institution of a domestic conservation program
- Halliburton profits
- Reduction in the US budget deficit
etc . . .You can propose others indicators.
Let's hope you turn out to be right and this petroleum powered war machine we'll all riding on starts turning itself around, and quickly.
Best,
Matt
Instead, we wait until the problem is really bad, and then we start figuring out what to do. To take an example from the other day, the UK only implemented clean air regulations after many thousands of people died in the 1952 Great London Smog, which was so extreme at times that one couldn't see one's hand in front of one's face.
Clear air regulation was not on the political map prior to that incident. So peak oil is not going to be adressed meaningfully until it starts to become really, really clear that business as usual is becoming unworkable. We are only in the very early stages of that recognition as a society. But, once we are in crisis mode, it will become a central preoccupation. All kinds of solutions that are politically unthinkable now will be put on the table. All kinds of conservation measures that "the American people will never accept" will be done without much fuss because people will do what it takes.
Now, will we make wise and foresightful decisions at that time? Or will we start invading more countries? I don't know. My impression is that quality of leadership - both political and cultural - has a great deal to do with it. I don't think Al Gore would have invaded Iraq in response to 9/11 - that was a choice we had and the leadership we had chosen made the choice they did. OTOH, perhaps if we hadn't invaded Iraq, we would have done something even more stupid in the future, whereas this way we might have learnt the lesson that it is not an effective way of increasing the oil supply. At any rate, I don't think it's a foregone conclusion. We have many options, and depending on the wisdom and skill we employ, we might encounter total disaster, or we might survive after a period of some difficulty and struggle.
It's only temporary as this chimp has matters in his corner of the cage he needs to attend to.
Anyways, you ever work with addicts? I don't mean the typical addicts. I mean hardcore ones who have resorted to severe ciminality to feed their addiction.
Every once in a while one will wake up and "see the light" get in rehab, clean themselves up. But once they've progresse to the point where they're shooting at people and attempting to secure their fix via violence, the story almost always has a sad ending.
I'm not pinning my hopes on the story of our national addiction ending all that differently.
Best,
Matt
Exactly!
I'm not saying it can't be done. I was once at a baseball game where the Dodgers were up 12 to 1 in the ninth inning. The Phillies came back and beat them 13 to 1. So sure, that is proof that once in a great while a team can come back from an 11 run deficit in the last inning.
But if your team is down 12 to 1 in the ninth, the outcome is guaranteed 99% of the time.
At that point, if had bet money on the game you better start figuring out how to pay your bookie.
Best,
Matt
Like the war in Iraq and the 100,000 dead civilians adn the Civil war breaking out? Nigeria? Or the "war on terror" that will not end in our lifetimes? Like the Bush administration? Like the defense budget compared to the renewable energy budget? 20,000 nuclear bombs floating around, many of them in the hands of less than rational people?
I'd really like some evidence that contradicts the weight of these peices of evidence and others I could start citing if you would like that shows we're heading in anything less than a tragic direction.
As far as fatalism, I'm not fatalist about my own personal prospects. Only the society's prospects.
Best,
Matt
Peak oil, over population, depletion of natural and mineral resources, climate change - these imminent problems will not be solved in a non-catastrophic way by humankind as it currently mostly thinks and behaves.
There are some signs of positive shift, the commitment of Sweden to become independent of fossil fuels by 2020, for example, but the signs are few.
We, as a species, are going to have to grow up and become a lot wiser mighty fast if we wish to avoid perhaps a halving of global population within the next 20 years. I'm not optimistic.
Maybe the ones who survive will learn and the society that they shape will be wiser and fairer to all. If not their descendents are likely to be doomed to repeat our mistakes. Every time the cycle is re-enacted this planet's non-renewable resources are fewer, and the climb back will get harder.
We are fighting some wars and a lot of people have died. I follow you thus far. And I agree that it's not a good thing at all.
But to have a logical argument that this somehow implies that peak oil means collapse via violence, you need to make the case that this is getting worse, and will necessarily get much worse again in the future. I'm not seeing even the beginnings of that case in what you have written. On the contrary, the level of violence and bloodshed in the world at the moment are nowhere near the levels in the first half of the last century.
Best,
Matt
Social constraints can be just as limiting as the laws of thermodynamics.
Because our political system is so strongly resistant to major change (in the absence of mobilization for total war), I think things will have to get much worse before drastic changes can be made.
Even the pain of the Great Depression did not bring forth adequate political changes. It was World War II and not the New Deal that solved the problem of the Great Depression for the United States.
Some of my most informed and intelligent friends are seriously scared about the rise of the religious right in the U.S. After TSHTF, one possible and plausible scenario is political takeover by a fascistic and totalitarian religious right. Perhaps the most brilliant working out of this scenario is in the novel by Robert A. Heinlein, "Revolt in 2100."
The let's line up the evidence pointing towards things getting better and give each a piece a certain amount of weight.
Then compare?
My contention is pretty clear: the world's going straight to hell. So let's figure out who in hell is doing decent and then become those people. That to me seems a btter use of our time then figuring out the 1 out 1,000,000 way things might turn out good.
I call this the "Somalia internet provider" theory of preparation. I can explain that more if you'd like, my guess is folks on TOD know what I'm talking about. (Interent providers are taken care of in what is the living hell of Somalia)
Stuart,
One more thing I thought of. Predicting decline rates is very difficult, but the overall bottome line is production is going to go down, correct?
The same thing for how well-armed humans will react to a declining avaialbility of energy. Nobody can predict exactly how we will engage in the violence, but you be pretty darn sure there will be lots of violence as there is now.
Consider something somebody in the Middle East said to John Perkins back in the 1960s. This guy said the US would come for the middle east oil and start killing muslims a generation or so after Vietnam. The guy didn't need to be a futurist or to have evaluated every little aspect of culture and politics to predict that. It was pretty obvious if you undersstand human history.
Best,
Matt
You're arguing that you know for sure this will happen (peak oil implies for sure collapse via warfare/violence). I don't see how you've made the case at all.
We are fighting "long" wars in the Middle East and in Africa. The vast majority of the Peak Oil punditry, from the optimistic to the pessimistic, seem to be in agreement these wars are related to peak oil.
Am I predicting violence will break out as a result of Peak Oil? No, I'm telling you it is already happening.
I'm not sure how any clearer I can make that.
When the troops all come back and we shut down our military petroadventures, I'll be inclined to believe your cautious optimism about violence not breaking out over the dwindling oil supply is warranted.
Best,
Matt
You jest, surely?
-------
In his book, The Dark Side of Man, anthropologist Michael P. Ghiglieri writes:
"War analyst Stanislav Andreski concluded that the trigger for most wars is hunger, or even `a mere drop from the customary standard of living.' Anthropologists Carol and Melvin Ember spent six years studying war in the late 1980s among 186 pre-industrial societies. They focused on pre-contact times in hopes of collecting the `cleanest, least distorted' data. Andreski, it seems, was right. War's most common cause, the Embers found, was fear of deprivation. The victors in the wars they studied almost always took territory, food, and/or other critical resources from their enemies."
"This also holds true among modern nations. For instance, after studying recent global conflicts, political scientists Thomas E. Homer-Dixon, Jeffrey H. Boutwell, and George W. Rathjens concluded, "There are significant causal links between scarcities of renewable resources and violence. In short, many wars seem to be a mass, communal robbery of another social group's life-support resources."
Citation:
Michael P. Ghiglieri, The Dark Side of Man: Tracing the Origins of Male
Violence, p 190 as cited by Jay Hanson, "A Means of Control" Brainfood
(January 1, 2001). Archived at http://www.dieoff.com/page185.htm
Best,
Matt
Ok, I actually dug up some data. Apologies to those who find this ghoulish, but from this page, we find annual deaths in war, massacre, and atrocities:
You will notice that the trend has on the whole been quite encouraging for the last fifty years (and this would be much more strongly true on a per-capita basis since population has been growing so fast). I stand by my contention that the main suppressant of the body count has been nuclear deterrence. Nuclear deterrence is certainly not a risk free thing, but I see no basis for your assumption that things are now almost certain to go to hell. I believe you asserted somewhere in one of these threads that you confidently expected 3 billion to 6 billion deaths. Spread out over, what, fifty years? Or would you like a whole century to knock them all off? So that's 30-60 million unlucky souls per year. Ie your average death rate of this kind has to be 4-7 times higher than the peak rate due to violence of the twentieth century, and that needs to be sustained all century. And that's just in absolute numbers - the per capita ratio would be vastly greater.I don't buy it. You have no basis whatsoever for such certainty in your ghoulish projections. They're about you, not about the facts of the situation.
First of all, do not imply that I want this to happen. That is exactly what you are attempting to do when you write:
"you confidently expected 3 billion to 6 billion deaths. Spread out over, what, fifty years? Or would you like a whole century to knock them all off?"
The use of the terms "confidently" and "would you like" are there to imply I relish that.
I'm going to respectfully ask that you NOT imply that type of thing about me in the future. You are enough of gentleman that you need not resort to those sort of baseless and crass accusations.
On to your chart/point:
First, I'm going to ask you to reread what I posted about the cause of war. Here goes:
In his book, The Dark Side of Man, anthropologist Michael P. Ghiglieri writes:
"War analyst Stanislav Andreski concluded that the trigger for most wars is hunger, or even `a mere drop from the customary standard of living.' Anthropologists Carol and Melvin Ember spent six years studying war in the late 1980s among 186 pre-industrial societies. They focused on pre-contact times in hopes of collecting the `cleanest, least distorted' data. Andreski, it seems, was right. War's most common cause, the Embers found, was fear of deprivation. The victors in the wars they studied almost always took territory, food, and/or other critical resources from their enemies."
"This also holds true among modern nations. For instance, after studying recent global conflicts, political scientists Thomas E. Homer-Dixon, Jeffrey H. Boutwell, and George W. Rathjens concluded, "There are significant causal links between scarcities of renewable resources and violence. In short, many wars seem to be a mass, communal robbery of another social group's life-support resources."
Source:
Michael P. Ghiglieri, The Dark Side of Man: Tracing the Origins of Male
Violence, p 190 as cited by Jay Hanson, "A Means of Control" Brainfood
(January 1, 2001). Archived at http://www.dieoff.com/page185.htm
If you look closely, the chart you posted backs this up Ghiglieri's point:
Note when the most killing took place: just after the 1930s when Germany and the US saw a huge drop in their perceived standard of living as a result of the Great Depression.
The fact that the most blood was spilled after the Great Depression tends to confirm what Ghiglieri is saying, which is what I'm echoing.
Note that as living standards improved through out the later half of the 20th century (mostly as a result of energy availability), there was less killing.
I think your chart tends to confirm my point: a drop in perceived standard of living leads to war as it did following the Great Depression. Improvements in perceived standard of living lead to more peace, as they did beginning in the 1950s.
Another quote which backs up what I'm saying and what your chart tends to show also particularly since I think we're in agreement high oil prices will almost certainly lead to a stangant or shrinking economy. What we disagree on are what will the likely social and geopolitical fallout of that. Consider the following:
"A stagnant or shrinking economy will have a major effect on society's expectations. With few exceptions, each generation in the United States has become materially better off than the preceding one. This pattern of increasing wealth has become an indelible part of the American Dream; a higher standard of living than our parents is practically a birthright. These expectations are the standard against which actual performance is judged. During times of failed expectations, a society is especially vulnerable to a person or philosophy promising to restore it to its former glory. The fall of the Weimar Germany is probably the best example."
-John Gever, et al. Beyond Oil: The Threat to Food and Fuel in the Coming Decades
So now the question is, "Does Peak Oil virtually guarantee a drop in the percieved standard of living?"
I contend that it does/will. I suppossed we could debate that it might not but perhaps that is for another thread.
Best,
Matt
I have trouble believing it to be a conincidence that:
- the defense (war) budget was jacked up to all time high and
- a war that will last our lifetimes that was launched
- just as oil is close to peaking.
To me, the connection between the 3 seems obvious.Like I said, if the ratio of defense spending to spending on renenwable energy begins to reverse itself significantly at any point in the future when the crisis becomes even more obvious than it is now, then I contend that your cautious optimisim is warranted.
But so long as we're spending way more on preparing to kill others to control the oil supply then we are on getting off the oil, I think my pessimism about where the globe is heading is a more accurate model of reality heading then your cautious optimism.
And like I said, I hope by some freak miracle, you turn out to be right and 20 years from now I'm left saying, "damn, should have had more faith in humanity."
Best,
Matt
I did read what you wrote - you don't need to repeat it.
However, your analysis doesn't fly. It's true that the Depression preceded WWII and I think it's reasonable to argue that the deprivations of that time had an effect especially on Germany's evolution. However, the depression had nothing to do with energy issues. Furthermore, the First World War was immediately preceeded by a period of considerable prosperity in Europe - that was triggered more by competition between a rapidly rising German power, and the incumbent empire of the day (Britain).
The growth rate in energy usage was much higher prior to the 1970s than afterwards, and yet deaths were significantly lower after 1980 than during the 1950s to 1970s. Global energy usage contracted sharply after 1979, but there happens to be a low point in the violent death rate there.
Furthermore, it appears to me extremely likely that NATO and the Soviet Union would have fought a third world war except for nuclear deterrence.
In short, the correlations between the growth rate in energy usage and deaths appears to be quite modest. I don't say there is no correlation, but it's clearly very far from the only factor. This conclusion is further reinforced by the fact that we were able to cite to you a number of examples of societies that had undergone radical sudden losses in oil or energy that had not collapsed or experienced an elevated death rate.
Now, I am not saying societies never collapse, and that resources never have anything to do with it when they do. The archeological record makes it clear that the risks are real (I don't think "cautious optimism" exactly captures my position).
But you're arguing that the causal relationship from the energy growth rate to violence is so strong that only a "freak miracle" could avoid a violent die-off that is two orders of magnitude worse than anything that happened in the twentieth century (O(5 billion), versus (O(50 million) for the second world war period). If the causality were really as strong as you claim, then
- there would no counter-examples of societies that had survived sudden resource contractions without dissolving into violence.
- the past violent death count would be strongly correlated with past changes in the energy growth rate. Eg the 1970s oil shocks should have triggered a pretty noticeable spike in deaths.
Neither is true. Your position doesn't hold water. If fact it's leaking like a Louisiana levee.Recall that the Oil Shockwave exercise simulated the effect of a $5.32 gas prices would do to the economy: it resulted in a major economic downturn.
Amplify the effects of the terrorist attacs with the effects of 5 years of cumuluative decine in production and the major economic downturn predicted by the Oil Shockwave exercise is likely to turn into another Great Depression.
As your chart so clearly shows, that is likely to lead to a major upsurge in war and death around the globe.
Best,
Matt
Consdier the following as my basis for my projetions. This is a bit more succint then my posts up top:
- Ghilgieri contends that drop in living standard leads to war. I'm echoing his contention.
- As your chart shows, the most killing took place following a major drop in living standard. (the Great Depression)
- The Oil Shockwave exercise, which simulated only the effects of terrorist attacks, predicted a major economic downturn as a result of a relatively minor drop in the available oil supply. (only a few mbd if I recall correctly)
- Couple the predictions of Oil Shockwave with the cascading effects of 5 years or so of decling oil production from geologic factors and I contend that major economic downturn predicted by Woosley et. al. is likely to turn into another Great Depression.
- As your chart shows, a Great Depression likely to lead to a major spike in warfare and killing.
- Unlike the 1940's and 1950s, we don't have an abundant and annually increasing oil supply to help pull us out of the economic tailspin. Thus the warfare is likley to continue until the last man is standing.
That's the basis. Wish I could see things the way you do. But your own graph, sadly, tends to confirm my views.Best,
Matt
Wrong.
The most killing takes place after technological advances fueled by things like petroleum (and other energy forms) to advance both the killing and the refinement of those technological advances.
If you need more help with what I am going to say, please ask for it. I will only lay out the basics here.
Compare WWI(1914-18) with the 30 Years War(1618-1648), 300 years previous. Note the major difference. And remember, The Thirty Years War is the "real" World War I. The difference is the destruction to structures. Why? Firepower. Why? Technological advances. Explosives. Artillery barrels, ballistics, metallurgy, machineguns, etc. Most of the "deaths" in the 30 years war were due to factors other than the actual war. Disease, starvation, etc.
Industrialization and fuel-use are obviously huge factors in why death rates have gone up.
Not "drops in living standards," but just the opposite.
The perceived droop living standard in 1920s Germany, 1930s America led to world war.
The perceived drop in living standard during the 1970s led to Ray-gun's administration, which set us on a path to perpetual world war.
But I understand your points and it is more a reflection of the poor nature of Stuart's graph than the invalidity of my points. We may confusing "waging war" with "deaths from war." This was a point I considered making when Stuart posted his graph but I thought it might be too fine a point. The current war in Iraq is a good example of what I'm talking about. The amount of war we're waging is up, but the death toll is not as high as it would otherwise be because advances in battlefied medicine have improved our soldiers' survival rates. While that is certainly a favorable development, it doesn't mean we're more peaceful.
Best,
Matt
PS
This is an inherently depressing topic and while I like a good debate, this is going to be my last post.
I agree with you regarding "death rates."
I think if we wanted to get an objective measure of "war", we'd have to look at other things such as military spending and overall casualties (including injuries) to get a better grasp on answering the question "how much war is fought?" Stuart's the one who posted the graph of "death rates", which seemed to assume "death rate = measure of war being raged."
Many of the deaths in 1940-1944 would have been prevented had we had antibiotics at the time. That would not have indicated we were any more peaceful simply because the death rate were lower.
I contend that the drop in living standard creates a fertile geopolitical soil for war. Your point, that industrialization raises the death rate of wars once they are initiated, is not at odds with my point.
Best,
Matt
Penicillin was used to treat WW-II wounded and as it had only recently been discovered, the bugs hadn't developed immunity to it yet. The fatality rate was more attributable to transport time. What they did not have was helicopters. Another factor was the technological equality of the combatants. All of the militaries possessed huge numbers of artillery pieces that made many of the casualties instantly dead.
In the more recent wars, we've been careful to pick fights with technologically inferior forces. Since we don't count the enemy casualties, or make up numbers that suit TPTB, I'm pretty sure we really don't know how deadly recent conflicts have been. SIDE NOTE: I read somewhere that we don't report our own casualties, if they don't happen to be US citizens. I have no idea if that is true.
Regarding your contention that a falling living standard disposes people to war. I think the idea is stronger with a little refinement. Many years ago, I read a book (can't recall title or author(s), but I'm pretty sure it was different from what you've been citing) that addressed the same question.
I recall that the conclusion was that war is most likely when nations have roughly equal power and a rivalry situation, but one power perceives it is falling behind it's rival. When the receding power comes to believe that it has a closing window of opportunity to compete militarily and doubts its ability to catch up economically, it will be inclined to resort to war in hopes of restoring the power balance.
I'd say it means that actual living standard decline may not be as much of a factor as believing that you are not keeping up with the neighbors. Now the possession of nukes, as Stuart has made quite a point of, has jiggered the equation a little. Because, nobody starts a war they KNOW they will lose. Since there are many countries that do not have nukes, I confidently forecast that there will be lots of warfare in the years to come. Of course, the Cheneyites already told us that.
Both Germany and UK (longtime rivals) needed Mid East oil in order to fuel their new oil-powered navies. Iraq (Ottoman Empire back then) had given the oil deal to Germany, not the UK. The Archduke was assasinated on the last link of the "Baghdad to Berlin" oil railway in June 1914. Six months after the assasination, the UK invaded Iraq.
Gels with your theory perfectly, both the UK and Germany were afraid of being outdone by one another. Both were relatively matched technologically and otherwise, at least to a degree where each thought they would win.
Best,
Matt
Not until D-Day, which was August 1944 I believe. Hence, I qualified my statement by saying 1940-1944. (should have said 08/44 to be precise)
http://inventors.about.com/library/inventors/blpenicillin.htm
No, I'm stating a drop in perceived standard of living tends to lead to war. 100% every single time? No, but a strong correlation between the two as show by Ghilgieri's citations.
"However, 1979 managed to trigger an extended period of reduction in oil usage without either a great depression or a major spike in warfare and killing. How do you know that couldn't happen again?"
1979 triggered a deep recession and helped "Ray-Gun" get into office. He promptly jacked the defense budget into the stratoshpere, militarized the US foreign policy to a degree far greater than before,k and set the US on the path to the 1991 and 2003 gulf wars.
So there is a direct connection, imho, between the oil shocks of the 1970s and the increased in warlike behavior of the 1980s on. Many of the people planning and executing the "war that will not end in our lifetimes" were swept into power following the 1979 shock. I don't think that's a coincidence.
Why did these warmongers get into office? Because during the 1970s, people perceived a drop in the customary standard of living and they elected the reacationaries. This is consistent with Ghiglier's thesis.
"'economic depressions cause major wars', and we use a single data point to test the hypothesis, how strong is the evidence for our conclusions exactly?"
That's not what I or Ghiglier are saying. He said a drop in the customary standard of living. The single data point you're referring to is the biggest data point from YOUR chart. Check out my quote from Ghilieri's book The anthropolgists referred too went through hundreds of data points to come to their conclusiions.
"Even if the data point is true - the causes of WWII are really a little more complex than there was a depression so they had to have a war."
What allowwed Hitler to come into power in 1934? The financial collapse of the 1920s Weimar repuplic. (EG, a drop in the standard of living) He then jacked up the defense budget and plunged the world into World War II.
Not to comapre Hitler and Ray-gun directly, but what allowwed Ray-gun to come in to power in 1980? The malaise of the the 1970s. (EG, a drop in the standard of living) He then jacked up the defense budget and set the world on a path towards World War III.
"I've formed a strong impression that your conclusions are impervious to reason."
My conclusion is our society will respond to Peak Oil primaily by going to war in the oil-producing natioins of the world. I'm having a lot of trouble seeing why or how this conclusion is impervious to reason. At the risk of being sarcastic, I know you pay attention to current events so I'm hard pressed to see why this is so hard for you to believe.
"Therefore, I'm done with the discussion."
As am I. It has been an intellectually stimulating, (albeit depressing) exchange.
And like I said, here's hoping you're right and I'm wrong.
Best,
Matt
Kunstler and LATOC were the first PO sites I read, and they are among the most pessimistic. Since he posted his charts and derivations, I've considered Stuart's 'slow squeeze' as the most optimistic of the PO-realist scenarios. Neither of them make a conclusive case to me, so perhaps what separates them is a matter of underlying optimism and pessimism.
I intend to plan for the worst and hope for the best. As far as living on 1/10th of my income, or whatever it was, I think many of us are allocating a large portion of our incomes to prepare for a depleted future, and spending far less on beer and skittles. I know I am.
That being said, I have not taken a very close look at your numbers so far, but intend to very shortly. If you are off, you can rest assured I will set you straight.
It takes guts to draw the fire which will come from this post. I admire that.
I have always admired your fascination with numbers. I hope you will continue to look at the numbers of "war."
War begins when two sides disagree over who is stronger. War ends when there is agreement.
How have they been determined through ALL of human history, including our pre-history when our subconscious, genetic tendencies were formed?
"We haven't had a major world war for fifty years for one overwhelming reason: nuclear deterrence."
Most of the wars the US fought during those fifty years went unreported in the media. They were fought, you just didn't hear about them.
There was some that you did, like Vietnam. Three million vietnamese were killed so we could prevent China and Russia from getting to the oil depostis in the South China Sea.
"Nuclear deterrence is going to operate just as much in the future as in the past."
Mabye, but the world is multipolar now. Lots of people have nukes. Back in the Cold WAr it was two major blocks.
There is, furthermore, no guarantee that if you "reran" the last 50 years the result would always be the same.
Finally, the deterrence of the Cold War has given way to the era of the dirty bomb and rogue nukes where it is possible for anybody and their grandman with enough money to procure one.
BEst,
Matt
Luckily for Japan, that was the line of logic Truman subscribed to in August 1945.
All sarcasm aside, going to war in an oil rich part of the world is likely to make a country's resource problems wrose. That didn't prevent Bush from going to war in Iraq.
BEst,
Matt
Still, whether something makes "sense" is not how politics and wars are decided. It's whether those in power and their rich buddies stand to benefit. That's how decisions are made.
If "sensible" decisions were made, do you think we'd be in this predicament? Do you think we'd be in Iraq?
Best,
Matt
Fast forward to the last scene.
Pretty obvious how that game is likely to end at that point.
Best,
Matt
Well, you get the picture. Truly, it is not over until the Fat Lady has finished the love duet.
As the Yogi man said, where humans are concerned, never give odds of more than five to three.
Kassandra was always right, and she was never believed because a god put a curse on her. She was the last prophet who batted 1.000
For one thing, the Tigers are not going to afford to sign the top 19 year old out of Cuba. The Yankees are going to have won that bidding war shortly after the guy defects from Cuba. Because the guy from Cuba is a human male, he's going to sign with who can give him the most inclusive fitness (fame, money, women). That's going to be the Yankees, not the Tigers. So right off the bat, he's playing for the bad guys if your scenario was based in reality.
If you got your money (or your life) riding on the outcome of the game when it's 15 to 1 in favor of the Yankees over the hapless Tigers in the sixth inning, the most likely course of events is you're going to be paying your bookie.
Placing a bet against the Yanks at that point and thinking there is a realistic chance your'e going to win ain't too wise.
Your example is akin to Bush and Cheney announcing, "guess what folks. decided to call off that whole war on terror thing!"
Sure, it could happen. But realistically?
Best,
Matt
- The chart you posted up top which showed the most warfare taking place following the Great Depression
- The predictions of Oil Shockwave (economic downturn)
combined with3. The likely effects of geologic declines, turning the economic downturn of Oil Shockwave into a second Great Depression
combined with
4 The adavnaced weaponary of today's armies
combined with
5. The less than rational leadership of our leaders
. . . we can get a pretty decent idea of how these drastic changes will play out.
Best,
Matt
I agree. I had this horrible nightmare the other night that some hard right evangelical from Texas stole the presidential election and then passed all these horrible laws in the name of patriotism and launched a bunch of wars and appointed other extremists to the Supreme Court and drove the country's finances into the ground.
Oh wait a minute . . . .
Best,
Matt
A true Christian president would lobby for the decriminalization of prostitution and the distribution of free liquor. So if one ever runs, I'll move to a swing state like Ohio or Florida and vote for him 5 or 6 times.
Best,
Matt
It's going to be a play of depletion rates, human response, and random events. One hundred posts about guns and neighbors will not make it any less "speculative" ;-)
A nice bit by Nassim Taleb on unpredictablity is here:
http://www.edge.org/q2005/q05_7.html#taleb
Did anyone do that last night? ... a "narrative-style story from past information, without experimentation?" ;-)
IMO, it depends on what you mean by "we." Is "we" just the United States? The U.S. and other western nations? Or the entire world?
If the latter, I would say there is a physical barrier.
(The world "physical barrier" probably are not that useful in a literal sense.)
I can think of dreadful futures, in which the rich drive SUVs while the poor starve. I can also thing of better futures where luxuries are yielded, and transportation is directed to the most vital.
I'm also thinking about futures in which the decline to 1/10th takes ... 50 years? 75 years?
That's a long ways down from current production, and I think you get into "unusual events" to make it happen faster.
But those unusual events might happen too. The purpose of these stories we tell ourselves, I think, is to prepare us for the range of outcomes we currently forsee. Sadly they do not prepare us for the range of outcomes we do not see.
How many are willing to make type of sacrifices (massive reduction in personal wealth) would be necessary for us to navigate this peacefully?
What percentage people would be willing to do that?
I'm not sure I'd even be willing to do that, not voluntarily to the degree necessary and not if I thought it put me at a disadvantage compared to the next guy.
Best,
Matt
Make Cuba a totally closed system like Easter Island. They will go the same way till they reach eco-sustainability. The loss of fossil fuels is just an interim decline step forcing downward adjustment to a pre-industrial lifestyle. Eventually, the Cubans will be totally out of usable metals and other vital basics. My point is that we tend to vastly underestimate how dependent all of us are on trans-habitat resource sharing. Declining net energy inevitably shrinks trade--increasingly we will be forced to survive on what is available within a day's walk, period. This is the long view.
The short view is that most hi-tech detritovores are willing to delude themselves and accept the elite-promulgated 'Nuke their Ass--I want Gas' philosophy to maintain their lifestyle as long as possible. 'No Thanks--I like Empty Tanks' is the obvious and correct moral choice, but I agree with Matt that very few of us will volunteer for a 90% income reduction-- We will prefer to keep the Dieoff Pendulum swinging overseas as long as possible versus welcoming it to swing across our homeland.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
But until then, this post and Bubba's on 2005 exploration results makes for some pretty depressing reading this morning. Your summary puts together in one place all the disparate things that have been rattling around in my head. I haven't much doubted that we had peaked more months now. We may still see somewhere between 86 and 87 mbpd but I would say that would be it as far as growth goes. Looked at another way--if we hadn't gone off and taken 1/mbpd of Iraq's production offline that's where we'd be.
I guess oil can now be regarded as a weapon of mass destruction.
best, Dave
What sort of effect would that have on peak oil. Of course it would be purely speculative, but at least now with Kuwait we have a bit of a guide as to the extent of the overstatement.
Excellent post. I am keeping it permanently linked on my blog.
Instead of probably being just about at peak oil now we would be 25% (in terms of remaining reserves) down the slope or, in CERA fantasy terms, approximately at peak now.
In reality all reserves are only "50% based on reality" - until you drill it and, to some extent, until you produce it, the oil is fiction.
This leads me down a lane I'd not considered seriously before. If the geologists say that field 1 well A has a probable production of X1 at cost Y1, and field 2 well B has probable production of X2 at cost Y2, then the company will develop the more cost effective.
So, companies will develop fields / wells with the highest probable profit. Hmmm. Might that mean that the booked reserves of the undeveloped fields are perhaps a mite less juicy than stated?
Wow, what another freakie,freaking freak show
we have on our hands now with that bunch of neo-milk milkfaces running around Washington spreading misinformation and profiting immensely.
Top 5 Waste Hall of Fame:
1 rush hour with 1.1 people per car
2 large houses and building more
3 waste heat at ALL levels of every
day life,and no way to convert it!!
4 modern habits,transcontinental every
thing
5 general ignorance spread by lack of
knowledge of the important changes that
must be made.
"There's a very good chance claimed OPEC reserves are exaggerated."
It's true that OPEC countries increased their reserves suddenly, probably for political purposes. Nevertheless that doesn't mean the old reserve values were correct. Those values were based on 1970s technology, and with modern techniques to enhance extraction and protect fields from premature decline, it is plausible that reserve values may have increased over this time frame. It's certainly true that there is a lack of transparency into the true reserves of OPEC countries but that doesn't mean that they are about to hit a peak.
"World production stopped increasing in late 2004."
Yes, it did, but it has stopped before, most recently in 2000; also in the late 90s; also around 1990, and of course production fell enormously after 1979. None of those times turned out to be Peak Oil. Some observers point to the low oil prices of the 1990s as having led to under-capitalization of oil development infrastructure, leading to temporary shortages and high prices today.
"Decline rates of existing production are very high"
Major international oil companies no longer dominate the oil market. Most oil is produced by government run or locally owned oil companies. Exxon and Shell and the others are no longer that big a factor in international oil. They have gone about as far as they could go in terms of exploiting the oil available to them. At this point the remaining oil is in countries that have not been so friendly to Western investment in the past.
"Hubbert Linearization points to peak oil"
The Hubbert Linearization method is fundamentally flawed, because it neglects the special circumstances that will occur in a worldwide Peak Oil situation. Its success in the past have been when a specific country or region runs out of oil, in a global context where there was plenty of oil elsewhere. Once we get into a circumstance where there is no such "elsewhere" to go to, economic incentives to improve oil production from existing fields will be very different from what has ever been seen before in a Hubbert Linearization analysis. There is no logical basis to extrapolate from one country running out of oil to an entire world running out of oil. The response is likely to be very different, making HL extrapolations inaccurate.
"At least one major oil company is warning us"
There is plenty of evidence that oil companies are not acting like they believe in a near-term worldwide Peak Oil scenario. Econbrowser discused a few days ago how oil companies continue to assume a baseline oil cost of $15-$30/bbl in judging whether to invest in oil production efforts. Stuart himself was the first commenter in that thread and confirmed this data point. Is it really plausible that oil companies themselves are less informed about the Peak Oil situation than readers of this blog?
"The price of oil keeps going up"
Yet oil prices are arguably not nearly as high as they should be if oil market insiders truly anticipated a near term Peak Oil scenario. In fact, futures market oil prices are actually one of the strongest arguments against the concept. Peak Oil expert Matthew Simmons famously bet a few months ago that oil would hit $200 by 2010. This is the kind of price that one would expect once oil production can't meet demand. Yet oil markets are actually predicting that oil will be less expensive in 2010 than later in 2006! And these are not idle predictions, people are putting their money behind them and you can actually contract today to buy oil at that time for those prices. Futures market insiders bet their livelihoods on their predictions and have every incentive to use all available information. If Peak Oil were as certain as the information presented here suggests, future oil prices would be far higher than what we see.
"There is no evidence of Saudi spare capacity"
There is very little evidence one way or another on this. In any case, spare capacity is largely a matter of past capital investment decisions. Spare capacity is defined as capacity that can be brought online within 30 days. The Saudi's still have many oil fields they have never tapped and could undoubtedly add capacity if they were willing to spend the money.
"There are geopolitical and climatic risks to the existing production level"
Yes, geopolitical risks are real and we may see some ups and downs in production. But we have taken real hits in the past year - Gulf of Mexico oil production has not yet recovered from hurricanes, Nigeria has recently had production reduced due to terrorism, and Iraqi oil production dropped precipitiously at the end of 2005 - and still oil reserves have continued to rise over the past month or two. The world is continuing to get along OK even with these kinds of hits. Recall how fast prices came back down after the hurricane spikes. As far as climatic issues, this is a highly controversial area and in any case it does not bear on the question of whether the world is hitting a production peak.
"In summary"
No piece of evidence is conclusive; but when you combine a bunch of inconclusive data, how much confidence can you have in your conclusion? I don't see a strong case emerging from lots of circumstancial evidence. The situation appears to me to be highly uncertain. The biggest argument against Peak Oil is that it seems that insiders are not acting like they believe it. It's possible they are all being stupid, that Stuart is the only person smart enough to see what the whole rest of the world is missing, and that in a few months or a year we will all see that. I will be happy to acknowledge it and give him full credit if all this turns out the way he predicts. But at this point I would still put my money on the wisdom of the much greater number of people who do not see the kind of near-term Peak Oil scenario that his facts and figures suggest.
One of the few things of which I am reasonably certain is that we live in times of increasing uncertainty.
In other words, the fecal matter that hits the fan is uncertain in quantity and variety. Chicken manure we can handle in reasonable quantitities, but when an elephant moves his bowels over the wind turbine, then I think expectations will change rapidly.
Note that even if production can be increased at a 2% per year exponential rate for the next twenty years, that will not be enough to meet the projected increase in demand. Probable result:
Either much higher prices in real (inflation-adjusted) terms or
Global depression--because that is the most likely result of only slow increases in output in oil and ensuing financial consequences, given the dynamics of what is going on in China and India plus the financial weakness of the U.S. in an economic future of slow-growth or no-growth in GDP.
And of course we can have accelerating inflation along with severe increases in unemployment. How much investment do you think we'll have when the prime rate goes up over 20%? Remember 1980?
I have paid close attention to your posts for quite some time and recognize you as one of the premier skeptics. You make excellent, well-informed arguments. You are crucial to raising the level of this debate. Keep up the good work. I hope to see alot more from you.
Since stocks have increased in the interim, I would assume you would also agree that demand (at the then current price) has been approximately flat for the last year plus?
Normally, in the absence of a recession, we would expect demand to have gone up in that period by several percent, yes?
So prices are high enough now to cause demand to stop going up and become flat over time instead. Agreed so far?
Now let's suppose hypothetically that we could surreptitiously control the market price of oil in the near future. So if we wanted to arrange for demand to continue to stay flat for another year as for the last year, what should prices do?
If we wanted demand to resume rising in a normal manner, what should prices do?
And if we wanted demand to start dropping in the future, what should prices do?
Yes, that's fair.
Yes, I agree with the thrust of this; maybe not "several percent" since late 2004 but at least a percent or two.
Here's where I am going to disagree. The problem I see with this is that the response to price changes will be different in the short term vs in the long term. So I can't agree with your statement as given, because it implies that these prices would keep demand flat forever.But I doubt that that is the case, for a few reasons. The short term response to a dramatic price increase such as we have seen in the past few years is somewhat reflexive and is based on the surprising nature of the change. As you know, studies of historical response to oil price shocks include just such a term, and it is a necessary component to accurately model how demand has been affected. Over time, people will get used to $70 oil and $2.80 gasoline and it will no longer seem shockingly high, hence demand will no longer be suppressed as effectively by those price levels. Another factor is that there may be "pent up" demand if the economy continues to grow at the rate it did last year. A constant high price may be enough to suppress one year's worth of demand growth but not two or more years.
My crystal ball is on the blink so I'm having trouble answering these questions. But I understand the implication to be that Simmons was wrong to predict $200 oil by 2010 and I was wrong to imply that that was the implication of a "peak oil about now" scenario. Maybe oil does not have to be so very expensive to suppress demand enough to accommodate a 2005 peak.Is it really credible that $65 oil can do it, though? Could Simmons be so far wrong? He's an investment banker, he knows finance, he knows the oil business. I don't know where he got the number, but he is far from alone among Peak Oilers in forecasting that kind of price. I've seen analyses that go like this: production will drop 5% by then, and consumption would normally have grown 10%, so that's a net suppression of consumption by 15%, then we pull some magic demand elasticity number out like 10%, so we have to increase price by 10 times the amount we want to reduce demand, so we need to increase price by 150% to decrease demand 15%, and that puts us at close to $200 oil. It's not the most convincing line of argument, but it is widely used in the commmunity.
When we consider the voracious appetite in the Third World and especially China for economic growth, can $65 really keep the lid on indefinitely? They're sitting on a heck of a lot of dollars - it's just green paper to them - wouldn't it make sense to use all that otherwise worthless foreign currency to get something they desperately need, like oil? This has got to drive up the price necessary to suppress consumption to that degree.
I'm certainly not committed to this $200 figure. The future is highly uncertain and I am frankly a very poor predictor. I have played the FX prediction game for over 10 years and my score is almost exactly 1.0, which is the same score I could have expected by flipping a coin for every one of my bets. So don't look to me for advice!
But I do think it is a fair summary of the position of most of the Peak Oil community, that a peak today would lead to those kind of prices. Certainly you can make a prima facie case for that expectation. And if we were seeing $200 oil on the 2010 futures, I don't think anyone would be arguing that this was evidence against Peak Oil. Maybe you can explain away relatively low oil prices with various scenarios, but it is another burden on the case for "why peak oil is probably about now".
So if we wanted to keep demand flat for 2006 also, possibly $60ish is enough, but one could also argue it might need to go up a bit higher as people get used to the high prices and growth continues to grow the demand for oil (given the fairly high income elasticity of oil demand). However, I don't think anyone would reasonably contend that $200 oil would be required to keep demand flat in 2006, given that $60ish was enough in 2005. Maybe we'd need $70ish oil or something in that general range. If we needed oil demand to go down a little bit in 2006, we'd need to go a bit higher again - maybe $80ish.
However, the effect of $200 oil this year would be comparatively dramatic. That would be more than twice as high as the price from the 1979-1980 oil shock, which was sufficient to trigger four years of average 4% year-on-year declines in usage.
Ok, so what of the futures market. As I believe we agree, the storage arbitrage argument implies that the 2010 oil futures price cannot go much higher than the spot price. The difference cannot exceed the cost of storing and insuring the physical oil for five years, which isn't very much. Let us approximate it as zero for purposes of discussion (we could always add it back in). So given this, the near-term price and the 2010 future price are highly correlated. The near-term price, in effect, has to try to manage two things - it has to accomplish the right effect on supply and demand this year. It also has to do it's best to accomodate any available information about what the price might be in 2010 (and all the other years, but let's ignore that detail momentarily).
Now, is the near-term price going to be more influenced by the needs of supply and demand this year, or is it going to be more influenced by anticipated price conditions in 2010?
Well, Matt Simmons notwithstanding, I would argue that price conditions in 2010 are very uncertain. As we know, prices in fairly efficient markets tend to look like a random walk. In the oil market especially, price is very hard to predict. It is much, much harder to predict than either supply or demand, which are themselves non-trivial to predict. The reason is that the price depends on small differences between supply and demand, which are themselves large numbers. The difference between two large almost equal numbers is generally a volatile unpredictable thing. Not only that, but oil is very price inelastic, so small changes in the supply-demand balance produce large differences in price.
Therefore, even if we had perfect knowledge that peak oil was in May 2005 and oil supply will now decline by 1.3 ± 0.05% annually, we would still have a hell of time predicting the price because we would find it very difficult to know how exactly demand would respond to price, and how its small failures to follow supply perfectly would reflect in later prices.
For example, I think it's a perfectly colorable position to argue that peak oil will trigger a significant economic slowdown (which was likely to happen before too many more years passed anyway given the state of the US housing market and trade deficit), and that demand will by 2010 have gone down more than geology alone would require, so that prices will actually be lower in 2010. OTOH, we could certainly argue that prices could be higher if demand proves very resistant to supply's nudging and the economy has recovered again by 2010.
Given that 2010 prices are extremely uncertain, we would expect the market to weigh them lightly when it's deciding how to set the near-term price this year. We might suppose that our current information (in an information theoretic sense) about future prices decays exponentially with a pretty short half-life - not more than a year, I'd guess. The further we go into the future, the less we know currently.
So what we'd expect to see is that the near-term price incorporates mostly information about current conditions. It knows a bit about price requirements for later in 2006, a lot less about 2007, and not much at all past that.
Now, since we agree that the current price is sufficient to make oil demand flat (versus time) in 2005, we agree the price is sufficient to accomodate the current conditions obtaining at peak oil (ie that the derivative of supply with respect to time is zero). So I argue that the only situation where the current price could be inconsistent with the peak=2005 hypothesis would be a situation where we also could foresee significant declines in 2006 and/or 2007. If we wanted to start going down a few percent a year immediately, we'd presumably need to get up in the range of $100. However, that's not a necessary part of the peak oil = 2005 hypothesis. We perfectly well could have a peak that's a little bumpy for a year or two and then only decline quite slowly in the first year or two following the actual peak.
Thus there's no inconsistency between current market prices and the "peak oil is about now" hypothesis.
See: http://www.orionfutures.com/
Go to quotes and than to energy.
"But the futures market is now sending a radically different, and disturbing, message. Until 2002, oil futures rarely moved above $20 per barrel, and by 2005 they still lagged current prices. But in the last year long-term futures prices have been soaring, reaching $62 per barrel for benchmark West Texas Intermediate crude for delivery seven years out. Paul Horsnell, an analyst at London-based investment bank Barclays Capital, says the markets are sending a message: "Whatever the long-term price is," he says, "it is not $20 per barrel."
Horsnell and other analysts believe a profound rethink about prices is occurring, with the market trying to figure what price will spur new production without killing demand."
http://www.businessweek.com/@@qvbh84YQ3AOB0QIA/magazine/content/06_06/b3970078.htm
Floyd Norris of the NYT also did a story on 1/21/2006 called "OFF THE CHARTS; Oil Price Soars Again, and the Market Gives Signs of a Lasting Trend," also behind the Times Select paywall but at
http://select.nytimes.com/search/restricted/article?res=F70F16F9395B0C728EDDA80894DE404482
Unfortunately, his charts of long-dated futures prices are not in the electronic edition.
The crude oil and many petroleum products futures markets are increasingly in contango, meaning prices for long-dated contracts are higher than the price for the front-month contract. Halfin correctly noted that the price for 2010 contracts is lower than that for contracts in later 2006, but there are plenty of pairs of dates for which the price for the longer-dated contract is higher than the front-month contract. For example, yesterday's (3/1/2006) NYMEX Light Sweet Crude settlement for April '06 was $61.97 and for June '07 was $68.20.
I think the real story in oil futures is in the steady rise on the prices of the long-dated contracts over the last few years, and the transition of the futures market into contango.
because you have earlier declared a belief in efficent markets:
Someone who does not believe that the random walk has such a close association with efficiency (or rationality) might think we are on that much looser ground.
Of course people tend to focus on very short timescales (IMO unpredictable timescales) for investment purposes (or survival, if your personal Defcon is less that 3). I think history will ultimately judge peak oil as the decade, or decades, over which it happened. Looking at things +/- a few years, if you ask me, just hides the story in the noise.
The one issue I'd like to see explained is why we do not see a greater degree of "contango", the phenomenon where future prices are substantially higher than present-day prices. I've been studying the oil markets for the past several months, and in my experience future prices tend to lag present-day prices. Where spot prices are on a down trend, future prices tend to be somewhat higher than today; when spot prices are going up, future prices tend to be lower than today. There is no consistent pattern of future prices being higher than present prices.
If traders really did believe in a likely Peak Oil Now situation, but the phenomenon Stuart describes keeps oil from reaching as high a level in 2010 as some Peak Oilers forecast, then I think we would still expect to see that 2010 prices are nevertheless substantially higher than today. The Hotelling model predicts that prices will rise at the rate of interest, about 5-6% today. There are other reasons as well that such a rise in prices would be very sustainable and stable in the markets. This would imply a price by 2010 of 20-25% higher than today, or about 80-83, rather than 66.
Taking into consideration Stuart's very good argument for today's prices constraining how much future prices can rise, nevertheless wouldn't we still expect to see a 2010 price of more like 82 if and when oil traders really accept that oil production peaked in 2005?
Your observation about price movements and contango is very interesting - I'll have to think about that more. Is historical data for the various futures contracts available somewhere?
Now, here is where it gets tricky. Most of the time expectations are "adaptive," i.e., they are based on a weighted average of recent prices or a naive trend line of the recent past, with more recent years getting heavier weights. Hence, much of the time you get pretty good predictions using an adaptive expectations model.
However, periodically, TSHTF, and there is a supply shock (or a Great Depression or World War II or something else not built into an adaptive expectations model). Then what happens? Here is where there are no clear answers. One school of economists believes in "rational expectations" in which speculators (and others) rationally evaluate new information and act accordingly. Maybe that kind of change happens sometimes. But I do not think can explain big and fast price changes, such as those that happened in the stock market on That Day in Sept. 1987.
Abrupt and huge changes in prices of commodities are not rare in history. Seldom have they been driven by fundamental factors such as supply and demand or changes in the rate of growth of real gross domestic product. The big changes have been driven by collective behavior--contagious fear, greed, panic, despair, or irrational exuberance. Forget rationality. Look what happens in panics. We've had plenty, Panic of 1837, Panic of 1873, Panic of 1907, and indeed the "P" word was so scary that in 1929 the authorities came up with another word that did not have the fearful connotations of "Panic."
That word was "depression."
I think we will not a rerun of the Great Depression, because the invention of macroeconomics has given us weapons--fiscal and monetary policy--that if used on a huge enough scale can avert another Great Depression kind of event. Thus, in my opinion, those who worry about a collapse of the banking system or deflation worrying about something that is not going to happen.
At some point, there will be an abrupt change in expectations. I do not know what will trigger it, and indeed the particular trigger does not matter much. What triggered the dot.com bust? Who remembers? Who cares? But obviously it was coming. Just as obviously, much higher (real) prices for petroleum are coming.
I'll give odds of five to three that Matt Simons is about right in his prediction of $200 oil in 2010. However, where I'm not willing to stick my neck out is the question of what the dollar will be worth in 2010. At some point I expect the rate of inflation to increase abruptly, but whether that will be next year or in 2009 is impossible to say.
Why will the rate of inflation increase abruptly? Because when the U.S. unemployment rate rises to 10% as a result of recession, I expect massive deficits (five to ten times more than we have now) plus monetization of the deficits by the Fed to cause an abrupt and major change of expectations.
"Abrupt and huge changes in prices of commodities are not rare in history. Seldom have they been driven by fundamental factors such as supply and demand or changes in the rate of growth of real gross domestic product. The big changes have been driven by collective behavior--contagious fear, greed, panic, despair, or irrational exuberance. Forget rationality. Look what happens in panics."
Where I disagree, as you know, is in regard to the power of the Fed to choose inflation over deflation. I don't dispute that they have the power to monetize the debt on paper, but I don't see their potential intervention playing out in the way they intend. They could do enough to push the dollar off a cliff in comparison with other currencies, but I would still argue that domestically the value of cash would rise in comparison with the value of many asset classes as desperate individuals try (and mostly fail) to cash out. Liquidity would be lost from the system and very few individuals would retain any significant purchasing power. You could say that I see the power of panic as being greater than the power of the Fed.
Note that during the German hyperinflation of 1923 many middle-class people did "cash out," sell their homes and pay all debts. Of course, they were ruined and later many of them became Nazis. (Historical note: By and large, Jews did not "cash out" in Germany; a goodly number of them had contracts with gold clauses written into them and became wealthy from the hyperinflation. The enormous enriching of a few Jews from they hyperinflation was a major element in the great popularity of antisemitism of Germany in the 1930s. The perception, encouraged by the Nazis, was that Jewish money manipulators caused the inflation and thereby ruined hard-working Christian people.)
Personally, I am far more concerned about the probability of deflation and have been preparing accordingly for several years, although my bets are hedged in a sense by investments in a farm, home renewable energy, hand tools and other instruments of self-sufficiency (hardware and 'software'). Either deflation or hyperinflation (or one followed by the other, which is a distinct possibility) are likely to produce enough disruption that basic self-sufficiency measures will be advisable IMO. My fundamental strategies could be described as maintaining flexibility in the face of uncertainty and minimizing the cost of being wrong.
I don't think we'll have long to wait before we see which direction financial events will take. I would expect the stock market and real estate to lead the charge to the downside this year, or perhaps next.
No collapse in the money supply (typically caused by cascading bank failures and failures of other financial institutions) means no deflation. It is just that simple.
The Fed could legally lend ten trillion dollars to the FDIC if it had to--and it would. Although I could be mistaken on this point, it is my strong belief that the Fed in cooperation with the U.S. Treasury will do WHATEVER is necessary is necessary to prevent deflation, up to and including having the U.S. Treasury print notes and dropping them over cities from FEMA helicopters. (I'm not serious about the last idea--but it would work and is less inefficient than plenty of other things done by our Fearless Leaders.)
I do not expect hyperinflation this decade.
First we are likely to get a recession--probably within eighteen months. If the recession is mild and brief, then we dodge the bullet one more time. Could happen.
If the recession gets worse, then the "automatic stabilizers" come into play and the deficit gets much worse, say in the one to two trillion dollar range--because tax revenues go way way down while mandatory expenditures of government on income-maintenance programs go up. Ten percent unemployment for more than a few months in the U.S. is intolerable now--would probably lead to massive urban rioting, for one thing.
Now, what happens when unemployment goes up to the 20% to 25% range, as happened in the early 1930s? Soup kitchens? CCC? WPA? Maybe, but what I see is massive tax cuts coupled with massive increases in federal spending, to send deficits up above five trillion dollars. A trillion here, a trillion there, pretty soon we're looking at some serious money.
IMO the only way to finance one to five trillion dollar deficits is by monetizing the debt.
BTW, the smartest people make the hugest mistakes. Sewall Avery, the genius who got Montgomery Ward through the Great Depression expected another depression after the Second World War and caused Wards to hoard cash in preparation for it. This strategy in an inflationary and expansionary economic environment eventually contributed to the decline and demise of Wards.
So, what to do?
Take sailing lessons.
Buy an axe, a bow saw and some wooded land.
Get some bicycles and adult tricycles and learn to fix them.
Dance more.
Now, if Jews weren't allowed to be civil servants or have pensions, then those pensions couldn't be taken away by inflation. And if Jews were more or less forced into professions or small business, then they would be less likely to be harmed by inflation. That's a possible scenario, but it's just idle speculation without access to a German census from before and after the hyperinflation.
Begin with the classic, "The German Inflation of 1923" by Ringer. There is an immense scholarly literature on this topic.
Bush quietly reshaping the Fed
Great. We'll have a bunch of amateurs setting monetary policy, whose main qualifications are being related to Bush's campaign contributors.
I remember the details of the dot-com cycle because it was an interesting time for me. I'd read The Winner's Curse at night, and go in the next morning to the dot-com, to see the behavioral economics play out all around me. I'm reading Fooled by Randomness now, and still getting a better perspective.
A lot of our worldview, including our Peak Oil expectations "are based on a weighted average of recent prices or a naive trend line of the recent past, with more recent years getting heavier weights" be that the carefully calculated kind or the gut feel (what we see at the gas pumps) kind.
... Nassim Taleb (author of "Fooled") suggests that random events upset those trends far often than people acknowledge. That it's not just the big "TSHTF" but the little ones too ... in oil they seem to be happening every week or so. And of course the random events head in both directions, up as well as down.
It's interesting that many people here have gained confidence in $60 oil continuing, or that we'll see $100-200 X years from now. They have named specific events that might derail those predictions (bird flu, recession, war). I'd say it is important to remember that oil can also fall for no discernable reason. And then once it does, people will decide in retrospect, what the "cause" was.
There are fundimentals in any market, but I think I buy Taleb's argument that we generally deceive ourselves about how much is noise.
So what are you waiting for? If you really think the chances are 5/8 that this will happen, and money at 20 to 1 is lying there on the table, why not pick it up?
And oil doesn't have to go to $200 for you to win. As long as it gets above $105 you'll come out ahead. If you think there's a 5/8 chance of $200, you must think $105 is almost a sure thing. So again, why leave a fortune just sitting there when in your model it's almost certain that you could have it with almost no risk?
Now, I don't mean this personally. The point is that markets are extremely skeptical about prospects for very high price oil, as is demonstrated by the relatively low prices for out of the money call options. As you have emphasized, sometimes markets are wrong. But it's also true that markets are frequently right. Which is it in this case? There's the rub, to know in advance whether this is a case where the markets are being blindsided or whether it is the (more common) situation where a few extremists are predicting doom but the market accurately predicts business-as-usual.
I don't know which it is, but I do know this. When something sounds too good to be true, it usually is. The existence of a risk-free investment that has better than 50-50 odds at making you 20 times your money sounds like something too good to be true. The mere fact that someone is willing to take the other side of the bet is evidence that maybe this "sure thing" isn't as sure as it sounds. I have to believe that there is more risk here than you may be recognizing.
Now my funds go into more important things than making me richer, though it is a tough call: Do I have a moral responsibility to make as much money as possible to keep giving more to The Nature Conservancey? I decided I did not.
Suppose you put me in a corner and put a gun to my head and say: "All right now, tell me what you really think is going to happen to oil production and prices over the next four years!"
What is my reply?
Well, of course the truth is that I do not know and do not want to venture an opinion in public. You chamber a round and start to froth at the mouth, O.K., I better come up with something. Here goes:
I think output can be maintained roughly at current levels over the next four years--but only at a great increase in cost and hence prices. In other words, yes, we can maintain output, but it is going to cost one helluva lot more than it does now to get gasoline, diesel and all the rest out of sour crude, bitumen, tar sands, and maybe around 2010 even Montana coal to oil.
Thus I still think Matt Simmons is probably right, and for three reasons:
1. He knows more than I do.
2. He is probably smarter than I am.
3. I think he is honest.
In addition, Chinese subways are being built at breathtaking pace. Each one that opens takes buses & cars off streets.
Better energy efficiency is a stated goal in the current 5 Year Plan.
(By 2010, Shanghai will rival London or NYC in subways, with more coming per plans).
So GNP growth and flat oil consumption can mix. Although I expect oil demand to grow in China in 2006.
Where have you been? Have you been vacationing on a desert island for the last couple of years?
The US, China and India have only increased consumpion because there is MASSIVE DEMAND DESTRUCTION in the poorer countries of the world!
Stuart's graphs are based on EIA data. If you bothered to actually follow the links that he cites to previous posts you will see links to the actual data tables on the EIA website.
Are you claiming that the EIA is deliberately cooking the books to make it look like we've plateaued these past couple of years? Why on earth would they do that? In fact, each month they come out with estimates of Oil Production for that month which have been 'downsized' several months later (see Stuart's close, but no cigar post for an example)
Perhaps you need to do more research before you start questioning the truth of other people's posts.
If you think that is true, why have I read NO NEWS STORIES at all on the subject, and I read fairly carefully and extensively. You may be right, but I'd like to see some evidence. (Incidentally, China and India ARE among the poorer countries in the world. Are you suggesting that lower oil use in Africa offsets their increasing use?)
Second, Stuart's numbers are based on a US agency and an int'l agency that are only estimting numbers which are not always reliably reported. In fact, even Stuart states that the numbers are "believed to be all liquids" - he doesn't even know for sure what they are supposed to represent. We're not talking the quality of estimates of, say, US GNP - which itself is only a gross estimate.
Third, in response to the post about China, no amount of new subways and mass transit or even the elimination of inefficient deisel power for factories can offset the millions of new cars on Chinese hyways last year or the 9% reported GDP growth rate. No way was oil use in China down last year. No way was it down in the US. And it was up an average of 500,000 bpd in just in OPEC countries themselves, from the estimates that I have read.
I'd love to hear some explanation for how all that could be happening while global production was flat. Simply does not make sense.
They almost never make U.S. news sources. I find them in the English versions of foreign news sites, and at sites like AllAfrica.com (a site that indexes hundreds of overseas news sources).
In many developing countries the supply of gasoline, electricity, water cannot be taken for granted and is often on a variable and interrupted basis. When TSHTF it will make relatively little difference to them, it is those who presume reliable supply who will be f*cked.
It's estimated that about half of our improved "efficiency" since the '70s is due to moving energy use overseas, while half is due to actual improvements in efficiency.
Of course, these will be the same news sources that tell you that the war in Iraq is going really well and hardly anybody is dying over there and they love the US to bits!
"Second, Stuart's numbers are based on a US agency and an int'l agency that are only estimting numbers which are not always reliably reported."
So, you are not content to call Stuart a liar, you also have to claim that two highly respected International organisations are also liars. Having a good day, aren't you?
So let's just ignore that last point and assume that the EIA data is the best we can lay our hands on. Let's look at your assertions about demand.
Here is a graph of Oil Supply and Demand (EIA's own terms) by quarter from Q1'04 to Q3'05 (Q4'05 is not 'in' yet):
Now there are several things to note about this graph:
- Demand for Oil (or rather consumption) has indeed been growing year on year. Q1'05 is significantly higher than Q1'04, as is Q2'05 and Q3'05
- Supply of Oil (or rather Production) has remained reasonably flat since Q3'04. In fact Q3'05 is only 0.3mbd higher than the same quarter in the previous year (an increase of only 0.36%).
- Here's the interesting point. The 'demand' line is (on average) below the 'supply' line. In other words, demand is lagging behind supply. This is probably why we have inventories and SPRs.
I believe there is still some 'slack' between consumption and production, but this year demand is going to reach a limit as it catches up to a plateauing production.Now Q4'05 looks like it didn't reach the previous peak in Q2'05, and Q1'06 is looking even less promising, so consumption is hard on the heels of the Production.
Another point that I will grant: there has probably been very significant demand destruction in Iraq - in fact probably equal to the amount of supply destruction in Iraq, which I believe is close to 1 mbpd, not insignificant.
My own bottom line on the "significance of the price" discussion theme of this thread is that there is an extreme amount of "noise" in the system covering the past year or so that distorts a lot of the already-questionable statistics generated by the organizations that provide them. Iraq, Katrina, SPR's, China's changing energy patterns. The one thing we know is that there is plenty of oil around right now.
So my take on $63 oil at this point is that it represents a growing understanding among the energy suppliers and users that we are getting close to a peak, meaning a matter of a few years, most likely. As has been stated many times, we won't be able to see it without the perspective of a few years after "it" happens. So maybe it is peaking now, or last year. Or maybe it happens in 2008. But the market is clearly saying that there's a real problem with oil. Otherwise, given the growth in inventory, it would not be selling at $63. Contrast this with NG. There the market is telling us that the problem is not so imminent.
Anyway, I did not intend to slur the work of Stuart or anyone else. I simply think that the above discussion based on the reported supply/demand numbers for the past six quarters or so is too literal an interpretation of what is essentially an impressionistic painting of reality.
Smart, Clean, Civilized, and Tuff. Beats anything going on in heavyweight boxing. This is your future, citizens of the world.
The geology and other tech orientated oil industry insiders are the ones who are most vociferous in proclaiming their belief. What you are saying, IMO, is that the markets and economists are not acting like they believe it. I have some sad news for them and you: ultimately geology trumps economics when it comes to oil reserves and production.
I do appreciate and welcome your arguments here. At some point, however, the markets will make a price that you might accept as indicative of the reality of soon foreseeable peak oil. I would ask you what that is. Let's take a 3 month average, next month Nymex SLC, before 2010.
We have made the geologic etc arguments, you have made the economic ones. I ask you to draw your line in the sand so we may, in future, decide this joust.
You are correct, John. Unfortunately, this doesn't advance your argument. Halfin is quite aware of this.
Halfin has pointed out the difference between PO in a vacuum and PO now. "PO now" is inherently different because it is not in a vacuum.
This is a debate about the forces of geology, politics, economics, society, and philosophy.
You certainly are capable of engaging on every one of these levels. Please do.
Halfin doesn't need to draw any lines. He has defined the debate already. And he is winning - Agric, it is you that needs to shore up his position.
Why I asked this is Halfin shows some scepticism about soon peak oil precisely because the markets do not seem to reflect that possibility. I find that argument fallacious since I do not perceive 'the markets' as being 'all knowing', in fact I think they are wilfully blinkered.
I will and do engage in debate on the aspects you mention. Halfin will continue to win this argument until the markets price in the imminent probability of peak oil, I was seeking to elucidate what price would indicate that. Seems you know who I am, I'm curious who you are, would you email me?
I have a request that is somewhat off topic.
I am looking for a website that discusses and allows for debate on current economic trends from a realistic, informed group of commentators. I hope it will be as informative and eye opening as TOD.
I'm looking for perspective on the world's economic standing in light of current conditions and events i.e. PO, climate change, political unrest, economic competition between the major players etc.
Please know that I am a biologist by training and not well versed in economic concepts and the "ways of the economic world". I seek to look past the Greenspans and Bernackes of the world and get the truth, not just what the consumer needs to hear. I want to make my own INFORMED decisions.
Thanks in advance.
SP
The financial markets are the aggregate dollar vote of all the smart and not-so-smart people on the planet - so todays 'perception' is priced into the market - for everyone on this site that believes in dollar crash and $200 oil there is a person somewhere else in the world that believes in a euro$ crash and $20 oil.
Good luck.
To be honest, my personal economic indicators are limited to my limited world view.
When I went shopping for wedding rings, the price of gold made my jaw hit the floor. My discretionary income is shrinking Castanza in the swimming pool. This can't be good.
I'm not really looking to make a fortune, I just feel like I'm driving down a dark country road. It would be nice to have some high beams before a deer jumps out in front of my financial future.
(sorry for the mixed metaphor)
SP
Final thought: Honeymoon in Jamaica--great country. Just avoid Montego Bay and Kingston; NE corner is very nice, site of "Blue Lagoon" movie.
JDH also has a gift for explaining abstract economic matters in a concrete manner that is very helpful for the layman. The comments are generally of high quality, and it's a great place to learn more about energy economics and finance in general. He also occasionally touches on political issues, generally from what I see as a moderately conservative perspective. It's not too high volume; JDH posts probably once a day on average, so it's not as free-wheeling as TOD. But definitely worth checking every day or two.
"No piece of evidence is conclusive; but when you combine a bunch of inconclusive data, how much confidence can you have in your conclusion? I don't see a strong case emerging from lots of circumstancial evidence."
How can you be so sure that PO data is inconclusive? Which part do you find weak? Declining oil production in a majority of countries? Declining oil production at Cantarell, at Burgun, at Ghawar? Supply stalling at 85 mbd? The amount of seawater needed to keep Ghawar looking young? Our sudden interest in tar sands? Our oil addiction? The popularity of TOD?
These are tracks in the sand. While faint, they have direction. My bet: Stuart's analysis will prove more logical, more dead-on than the "Insiders", but then they haven't shown up at the TOD coliseum with their swords, their graphs, their charts. Fear? Loathing? Or Empty Rhetoric?
To Matt,
Great arguments...I hope your wrong.
Great post tonight....
IMHO Peak Oil is here. This makes US $ 65.- for 2011 futures probably the bargain of the century.
The big question to me, which to my surprise is not been given the attention it deserves here at TOD, is for how long will the world be able to maintain the bumpy plateau of peak production(assuming PO IS here indeed)??
Any suggestions on this one, Stuart?
Also with regards to the lengthy discussion on telecommuting and technological advances decreasing dependence on oil, I would like to add that when the grid goes down all this, as well as the internet, is history.
Now, I don't mind a good debate, but guys, maybe you just disagree about how the world might end! Hell, just agree to disagree! Is it all really about territory or is it status? Christ, if it is, can't we drop it and move on to something more inclusive for the rest of us?
I was gonna jump in on Stu's side in this "war of the words", I felt he needed some reinforcements on his southern flank, that Alfiemoron can sure dish it out! But then SS comes back all guns blazin' for the home team and fights Alfie to a bloody standstill, well almost.
Then I decided to play/stay neutral and carry out my own attack on both of them when they'ed exhausted themselves and capture TOD for myself!
Forget the testosterone issue: There are legitimate differences in opinion between Stuart and Alpha--differences not so much on what the facts are but on what the facts MEAN.
By themselves, data are meaningless. The trick is to get a powerful interpretation on the data that is most relevant to an issue, and one of the big problems with Peak Oil is that--by its nature--it is an interdisciplinary, multidisciplinary, transdisciplinary problem. Thus, nobody (except me:-) knows enough to understand what is going on.
I think Alpha is sticking his neck out too far in his prophecies of doom; to me he is no more convincing than the doomsayers of the fifties ("World War III is inevitable! There has never been a huge arms buildup without major war!!), the doomsayers of the sixties ("Communism is the wave of the future, . . . missle gap . . . they will bury us."), the doomsayers of the seventies (e.g. Roberto Vacca, "The Coming Dark Age" and his ilk), the doomsayers of the eighties (Ronald Reagan is a right-wing nut who will nuke those Commies because they are growing economically faster than we are!), and the doomsayers of the nineties who assumed that just because Clinton was getting oral sex in the White House that the nation was going to hell in a handbasket.
Given my reading of history, sociology, economics, geology, political science, and philosophy, Stuart is winning on points. Both Stuart and Alpha have refined and strengthened and clarified their positions through the dialogue, and I think that is useful.
BTW, I challenge anybody to a duel: Horse manure at twenty paces.
I of course try to rise above that ;-)
Best,
Matt
Ha, lol. I second the motion - only Don Sailorman's staggering intellect can save us!
"Horse manure at twenty paces."
I decline your duel invitation, but I thank you for providing me with the title of my next poem.
And what of me ?
Unlike most here, I have seen this coming since high school ~1969/70). I was first going into Plasma Physics (fusion) but found that I was not good enough to be more than an average PhD, so I left. I remember the "Ah Hah" when the 10% limit on oil imports into the US was lifted (1972 ?) due to lagging US production.
I have followed energy issues for decades, and tried to find "doable" fixes and ways to get them implemented. I know "Dr. Hydrogen" Bragi Arnason at the University of Iceland well as a single example.
I do not see the future as immutable, but changeable "within limits". I want to push the limit on the good side, as much as I can. How bad will the best reasonable outcome be ?
My hope is a repeat of the postWW II UK for the US; a decline in living standards, influence, military power, etc. but institutions intact and quite livable and no worse than that elsewhere.
My hope is to spread "good ideas" around so that when people start looking for realistic solutions/patchs, they can grab onto some workable concepts. (Note: I eMailed the Cal Tech Vice Provost mentioned in the NYT article this morning. Another small effort).
I am less concerned for my personal welfare (although I will "take measures") than the collective welfare.
For me, the issue is not "What will Happen", but "How can it be made better ?"
Well put. That is exactly why I enjoy your posts, and TOD overall - solutions are proposed and most here try to realistically assess this thing we've got facing us.
To paraphrase a line from Kurt Vonnegut, "We'll help each other get through this thing, whatever it is."
For a Johnny Come Lately, you are doing pretty well. I first became aware of problems that would be related to increasing costs of oil in 1949 and have been studying issues related to that topic ever since. I have been a big fan of nuclear energy ever since reading Heinlein's "Rocket Ship Galileo" wherein his heroes used atomic rockets and zinc reaction mass to get to the moon and foil a Most Evil Nazi plot.
:-P
http://theslide.blogspot.com/2006/01/who-killed-american-dream.html
My philosophy has been similar too: try to inform people, get them interested and self-educated. That has been a disappointing experience. It's only the last couple of years that I have made significant changes to my life like drastically reducing energy use, growing most of own food, but I have been relatively frugal and aware before.
Now my focus is shifting. I will continue to try to inform but that is a sideline priority. I've wondered if I want to survive in the coming world (I'm 51 and healthy) and if I should take resources in it. My conclusion: only if I have the skills and ability to make a worthwhile contribution. I'll be focusing on developing skills, collecting and storing useful knowledge. I don't know if I really want to live through it (I am possibly more aware of what it will be than most here) but if I do I am determined to do my best to make what comes after a more wise, fairer and better society than this.
The site also has listings of many ecovillages around the globe in addition to these training centers. This should be a valuable resource for Oil Drummers who would like to locate an already established community that is sustainable or working toward it.
Interestingly a surprising proportion are too Christian for me (I have fundamental disagreements with what I consider is their distortion of what they term 'God') or too vegan / vegetarian (which I think is unsustainable for small scale, near closed system, agriculture).
Christian ecovillages - hmm. That's not something I'm aware of being a strong trend in the US. Now vegetarian, more likely. My info is spotty and I would have to study all those links from the GEN website to form a more solid impression. Of course these places may have plenty to teach even if one would not choose to live there. I'm considering doing a permaculture/natural building workshop in June at Lama Foundation in New Mexico, which may or may not be listed with GEN (I can't get access to their directory right now). They are primarily an eclectic spiritual community and retreat center that hosts retreats from all traditions, plus they have gotten seriously into permaculture since the land was ravaged by a fire in the late 90s. I've been there 4-5 times though not since the early 90s, and it's a wonderful place, according to me, but obviously in a part of the country that has serious water issues.
On energyresources poster David Delaney made the following back of the envelope calculations:
"Assume a rate of decline of world oil production of 2% per year when the rate of production is passing downward through 25 billion barrels per year (25e9 bbl/yr).
This rate of production decline is 0.02 x 25e9 = 0.5e9 = 0.5 billion bbl/yr/yr.
This rate of oil production decline is equivalent to a rate of energy production decline of0.5e9 bbl/yr/yr x 6e9 joule/bbl = 3e18 joule/yr/yr.
This rate of energy production decline is equivalent to a rate of power generation decline of 3e18 joule/yr/yr /(365 x 24 x 60 x 60)= 1e11 joule/s/yr= 100 gigawatt/yr.
I.e. to maintain a flat energy output (no decline and no growth)to humans would require, for example, the commissioning of 100 1 GW nukes per year, or approximately 400 gigawatt/year (400,000megawatt/year) of PV nameplate capacity or wind nameplate capacity.
ASPO projects that oil production will be down to 25e9 bbl/yr in2017, and that production will then have been declining at about 0.5billion bbl/yr/yr for about 10 years, and will continue to decline at about the same rate for another 30 years."
I haven't crunched these figures myself, but would be interested in other peoples' feedback on things like
- how big the energy 'gap' will actually be (is above scenario too conservative?)
- will simply 'flattening out' the energy available as suggested above allow for increasing efficiency, 'demand destruction', and conservation.
- will there be any 'extra' energy available for needed infrastructure changes.
- etc. etc.
It might be nice to see a lead-off post going into this subject in more detail.Orders of magnitude savings are quite possible. Diesel truck to diesel rail saves 7/8 of the oil. Electrify the rail and energy savings can approach ~19/20s (with the only oil a few drops of lubrication).
So Urban Rail can save 99% of energy used, and that energy is non-oil; and moving from 18 wheelers to electric rail might save 94% or 95%, with the energy used being non-oil.
Substitutions on this order of magnitude CAN offset major drops in oil production. We just need to build a LOT of them, and quickly !
As you know, we are in serious trouble along these lines in Atlanta. I'm sure you're familiar with the fundamental problem with our rail system (MARTA), it being funded by only the City of Atlanta and two counties, not including the 3 other major metro counties. Not to mention that it is, I gather, the only one of the 10 largest transit systems in the country that receives no aid from the state. So MARTA is in an endless round of raising fares, declining ridership, service cuts, ad infinitum.
As it happens, one of my neighbors is a top aide to Atlanta Mayor Shirley Franklin, and another neighbor is her assistant for environmental issues. We all live in a cohousing community, so though we are not close friends, we're connected; virtually everyone here shares strong environmental values, including these two women in particular. Maybe we could strategize as to how to hook you up with them and get you here. Why don't you email me?
The problem is that you cannot have a flat energy output because of population growth (just for the US, the population is supposed to top 400 Million in 2050). The consequences of a falling energy per capita are unknown.
It seemed one was incredibly pessimistic about the future and the other was far less so. Any newcomer to TOD reading the debate could well have got the impression folks around here were slightly round the bend. I mean Alpha seems to be insistant that his dystopian view of the future is correct and everyone else has to accept it. Stuart appears far more calm and inclusive in his posts. He is not a pessimist heading for the hills. I agree with him. The future is not yet written. I think Alpha's line could risk becoming a self-fulfilling prophecy taken to extremes. Is this a sensible strategy?
I also believe one has to think about how one portrays the whole PO issue in relation to the 99% of the poplulation who have not only not heard of it, but will almost have to go back to school to understand it! I think people react emotionally to bad news. Like a death in the family. Peak oil is Really Bad News.
I prefer Stuart's strategy. It's calm, collected and rational. This Alpha guy goes over the top. His visions about the future are so frightening I think they are counter-productive. The end is nigh, prepare to meet they Doom! I believe people will simply turn off and stop listening to stuff like this. I don't think it's a sensible way to present PO to a wider public.
I think we are living in not only interesting times, but very emotional times. Appealing to folk's intellects is going to be an uphill struggle for a number of complicated reasons. But if we also turn them off emotionally, well forget it.
On the other hand, as the octopus said, fear and hatred can be great motivators. Oh, my lovely memories of World War II. Such songs we had then. Here is one I remember from nursery school:
"Whistle while you work,
Hitler is a jerk,
Mussolini bit his weenie,
Now it doesn't work!"
Now why can't we have songs like that about Usama bin Ladeater, or whatever his name is and Soddomy Hashhish or whoever that Iraqi guy is?
Anyway, they both eat pork.
"our society probably only gets one chance to manage our oil peak. And that means gathering all possible points of view and pieces of evidence, examining them as rationally, fearlessly, and open-mindedly as possible, and debating each other; debating fiercely, yes, but respectfully . . ."
http://www.theoildrum.com/story/2005/9/26/32311/2127
Was there a bit of rhino head smashing? Yes of course, we are human males after all. That is only inevitable. I don't think there was any blood spilled though.
The difference between our beliefs likely comes from where we see ourselves increasing our inclusive fitness. I get mine from exposing the raw and dark underbelly of humanity.
That's an underbelly that, if you want to minimize its exposure, you had better accept as existing in all of its power.If you consider what I wrote up top for instance, you'll realize that one of the most important things you can do to mitigate peak oil in your area has nothing to do with writing your legislator or growing a garden. It's starting a business and creating some jobs. That will mitigate the economic decline in your area, thus improving the chance that those who grow gardens don't see them stolen. People, particualry young men, who have jobs are less likely to get violent. Take away the jobs in your area and youre going to get gangs, drugs, and extremism when the shit-hit-the-fan.
Stuart is interested in creating a mass political movement. His thoughts on the Peak Oil movement from a few months back:
"It is tiny and utterly powerless now. It will be somewhat less so next year, and the day will come when politicians will quake and run as fast as they can to get out in front of it. . . this movement is going to grow into a political force comparable to the Civil rights movement, or the Suffragette movement, or Bolshevism, or Fascism in its historical impact."
I'm not interested in mass political movements for a variety of reasons, not the least of which is the people at the heads of those movements usually end up dead.
Best,
Matt
Somedays this whole debate has me swinging one way and then the next. Somedays I almost feel like a hanged man turning slowly in the wind, first one way, then the other.
Somedays I'm with you, if I'm being brutally honest with myself. Other days I swing towards Stuart.
Peace and respect to all!
The world of tomorrow will not be much different than the world of today except for the percentages.
Even today, we humans have areas of our planet that enjoy cornucopian oppulence: gated communities, golf courses and swimming pools right in our back yards; upscale retail stores with clerks that bow to our every whim.
At the same time we humans have areas of our planet that suffer horrific tragedies: genocides, famines, unemployment and no hope of any better future, crowding into overpopulated stink holes, children scavenging through toxic garbage dumps, etc.
It will be the same tomorrow ...
except that more of us will be in the heading SouthWest, Group "B" rather than in the "A" crowd ... it's just a minor change in the percentages. :-((
I would cop out and give a very marginal split decision to Stuart, but many judges could fairly give it to Matt. The latter half of the discussion contributed little to real understanding.
Matt is very upfront in his apocalyptic perception, Stuart is, as you say, the epitomy of British rationality. But Stuart hints at a deeper, darker, understanding if you look closely. After all, he claims that PO may be now or passed, on a very rational basis.
Maybe Stuart's rational argument here is just that, maybe he feels things are not quite as can be rationally argued. Maybe he noes or doesn't noe that. (noe = 'intuitive' know)
Matt is the more outspoken, apparently less rational and reasoned, and extreme. Unfortunately, when it comes to the future, I am sure he is correct (and probably understated).
OK, one does have to consider how one portrays and argues the PO thing in public. But we all have our own journey, sometimes some of our steps may be in public. That is brave and above criticism.
[I apologise to both Stuart and Matt if I have presumed incorrectly, the above is my perception and surmise and should not be taken as a valid interpretation of their positions]
Best,
Matt
What is a FASCIST?
- Somebody who wants to impose his world view on another, by force if so required.
Who fits?
Osama.
Bush
God - bothering Rapture Artists
Islamonazis
Cheney (I once met this SOB in a Big Red urinal and now wish I had worked out other uses for a necktie)
...well...thats me on an NSA list...Ha Ha, but Ive done my travelling...except that we now have this strange arrangenment whereby UK citizens can be spirited away to the US on practically no evidence.
Hitler, Stalin, Mao, Napoleon.
In short, the usual types.(mostly small, inadequate with sub -optimal penis sizes)
I digress.
Peak Oil and Fascism:
Life after PO WILL GET VERY STRAINED.
There are many poliitical websites for mainsteam and fringe parties in the UK. Only one devotes any real time to PO.
Guess who? -The BNP.
They know whats coming. They see it as an opportunity.
The BNP Heartland (or Heimat)is the dissaffected white working class. They also know and understand that old north english saying:
''When poverty knocks at t' door, love flies out t'winder''.
In many ways, polarisation is upon us EVEN WITH THE CUURENT ''DEMOCRATIC'' REGIME. It is aided and abetted by the current political psychosis in the UK and
US. Habeus Corpus? - forget it; First Amendment? -Kiss it goodbye; Trial by jury? - How rich are you?. Extradition treaties? - When the US says yes, the UK poodle says fine.
PAX ROMA!
IN DULCE ET DECORMUM EST PRO PATRIA MORI!
One additional point that helped me to that POV was the MMC data for oil in the Gulf of Mexico and the fact that it appears that it will occur somewhere between 2006 and 2007. The fact that the 2005 hurricane season was so incredibly bad might push that back a little but all that really does is "smooth" the peak a little.
Another point worth noting. If global oil production is supposed to keep growing at these amazing rates, where are the oil tankers that are going to transport it. Tanker tonnage is virtually flat and there are a large number of ships scheduled for retirement. Just as oil companies are pretty much turning down the opportunity to invest in refineries, so too is the opportunity around new tanker tonnage being ignored.
Maybe we are reading too much into the tea leaves, but they all seem to be swimming in the same direction.
I look forward to the day when the last one is melted down for scrap, and though I will not live long enough to see that day, my children probably will.
Transporting large quantities of food or essential fuel for long distances is not a good idea (except in certain cases of warfare).
Altogether, I think there has been a marked increase in the number of contributions to threads here lately. 200 contributions used to be exceptional, but now it is almost becoming routine. Another sign of increasingly broadened consciousness about Peak Oil, I suppose.
The real discusion should focus on the "rate of (resource) conversion" which has many bottlenecks and impediments. Some of these "bottlenecks" or "choke points" are: available personnel, rigs, investment capital, access, environmental restraints, water sources, infrastructure, markets, resource habitat, field size and geographic location, available tankers, refining capacity, truck tires etc.
We can think of the "rate of conversion" at the oil field level where the initial rate may be, say, 25% of the estimated ultimate recovery per annum or at the basin level - a basin containing 100Tcf but producing 3 Tcf per annum, has an annualised "rate of conversion" of 3%. For the Canadian oil sands, even an annual production or manufacture of 1 billion barrels (3 million barrels per day) of synthetic crude, the rate of conversion may be less than 1% of the reported resource.
The oil and gas industry is working "flat out" and its capacity to do more is stretched and limited. Exploration success is a function of the "rate of conversion of speculative resources" to reserves and capacity and we know that "rate" is a lot less than the present rate of current extraction or use.
The rate of conversion of unconventional gas resources (e.g.coal seam gas, gas from shale, gas from tight sands)is another example - perhaps a huge resource but "extraction rate" limited.
Think rates! These might be "peaking".
Keith Skipper P.Geol.
Oil man, T. Boone Picket said he doubts we will get much higher than 85 million barrels per day. That is what all those "no cigar" posts have been about. Despite brave talk by all the "producers" and cornucopians, we don't seem to be surging well above that 85mbpd level
Your point is one that people often forget. Maybe you should re-post it on a more current open thread. :-)
- I don't believe peak oil is imminent any time soon.It is real but I think it is decades away.High oil prices are a recent event, exploration and production increases will follow these prices as will alternative fuels development.
Higher prices are positive...to a point, they are the only REAL driver for incresed production, conservation and new technologies.
- I believe oil production will eventually reach a plateau around 2030 and stay relatively constant for a substantial period of time.Oil prices will rise and trigger a massive shift to alternatives.This is a positive thing not a "doomsday event".Mankind has survived a few shifts in fuel sources through history and has always come out the better for it.
-It may be true that the days of "cheap " oil are over.Is this negative? I don't think so.It is the only way for society to get serious about superior forms of energy.The hydrocarbon society we live in is one we are used to...not necessarily the best possible one.
I am wondering whether anyone would like to comment on this presentation I found by Dr Leondidas P. Drollas, Director and chief economist for CGES. The talk is enititled "Oil to 2020 - will supply constraints become binding".
A pdf of the talk is here
I think the conclusion of the talk is similar to the prediction made by RAILGRADE above. One of his main points I think is summerized on the slide where he presents the two hubbert curves. I found it very interesting to compare this slide to Stuarts analysis here:
I would hazard a guess that a guassian approximates production over time as long as that production is not subject to reductions by a cartel (ie 1973).
Does this affect which of these supply curves you choose? Does this make a difference anyway? Why the difference in mid point date prediction?
I am new to TOD (also, I'm a biologist, not an oil expert).
Cheers,
Marcus.
This doctrine is, in some senses, valid even today. The problem is how to measure Non OPEC producers' marginal cost. Russia and Mexico are two important Non OPEC producers. But both of their oil companies are controlled by their governments which serve the interests of their states, and both of them have an OPEC observers' statures.
So, oil majors set up the price of the Non OPEC production costs. Like TOT, British Petroleum, XOM operates in 40 countries. Its cost should represent the cost of Non OPEC producers. We should not measure its production cost by counting its fixed assets. A lot of oil fields XOM acquired 10 or 20 years were on $15 to $20 oil and many of them have been written off. What we are concerned is present or 10 years off production cost.
One easy way to measure its marginal cost is to observe its shareholders' perception and expectation of XOM's future production cost. Today, XOM p/e is 10, BP is 10, COP is 6. That means millions of individuals and institutional share holders do not believe and do not expect XOM, in 10 years off, will enjoy a low marginal production cost and big volumes of future output. It is a common sense that investors will give a company high p/e ratio if they believe the company will have means to reduce the operating cost and increase output volumes.
In 1980, the oil price was high like today in real price terms. The oil majors enjoyed an average p/e ration above 30. And oil companies and oil service companies accounted for 30% of S & P 500 value. Because 25 years ago investors believed that oil majors had the capacity to hand on the low cost of the oil fields and increase output (output increases itself means cost reduction).
At the oil price of $72 today, shareholders believe that the future XOM's production cost will be $64 a barrel, because they put the former XOM's p/e ration at 9.
Every 18 months Atlantic monthly runs an article claiming that an eternal depression will come with in 6 months. They have been doing that for over 10 years. Religious nuts claim that Armageddon will be next week and political left makes about the same prediction. It gets people excited and is a good money maker.
Firstly there is non-conventional oil such as oil from Canadian oil sands. Then there is coal, about 200 years of production. Coal can be gasified, converted to liquid fuels or even hydrogen using commercially available technologies. It may even be possible to exploit these technologies without harmful emissions (see EIA clean coal technology website). At todays oil prices these technologies can't be out of reach.
Renewables might fill some of the gap given time, and then further down the pipeline we might find ways to exploit gas hydrates, buried deep in the ocean.
Although susbtitutes may be more expensive they will surely soften the impact of declining conventional production. So why does everyone get so worked up about oil?
Any tips, comments, corrections, more than welcome.
http://groups-beta.google.com/group/climatechangeaction/web/peak-oil-climate-change-and-canadian-oil -sands
I can also recall the 1950s when gas guzzlers truly did guzzle and everyone rode around in V 8 engined cars that made sucking noises when you put your foot down. Now, diesel-fueled cars routinely deliver 5 litres to every 100 kilometres driven.
It seems to me that simple extrapolations into the future are nearly always wrong because they ignore the possibility and probability of technological change.
A classic example in the early 1900s was the confident prediction by all the experts that by 1940 London would be 9ft deep in horse manure because of the growth in carriage traffic, population, and the inability of the sanitary service to cope.
1940 came of course and when it did you would have been hard pressed to find a horse anywhere in London.
The same goes for cars. When there are too many and the smog becomes unbearable a new method of getting around will be economic to use. Human ingenuity is the great wild card in all the doomsday senarios but it is too often left in the box.
I don't say we should be complacent about pollution or a future oil shortage but we should encourage a healthy skepticism lest we all join a gadarene rush to adopt silly " solutions".
One thing that bothers me more than anything about the green movement is that in the 20th century the first Greens were the Nazi's and we all know where that led. Remember how the theory of eugenics in the 1920s was the answer to every human ill -- out of that came Hitler's euthenasia programme and out of the euthenasia programme came the Holocaust.
I have similar doubts about those that would ban all nuclear power stations. France supplies some 80 per cent of its electricity through Nuclear generators with no ill effects ( apart from to their foreign policy) as far as I can see. And France's CO2 emissions are consequently less than anybody else's.
I could go on. Greenland is called Greenland because it was once green and grapes used to be grown in Northern England in the 12th century when it was obviously much hotTer than it is now. Far from disaster striking the English in the 12th Century they seem to have enjoyed unprecedented good times.
In the 1880s a correlation between sun spot activity and climate was postulated by some scientists. If they were right and there is such a connection, it seems to me that there is nothing we puny humans can do about it.
But there is something we can do about running out of oil which will happen sooner or later and that develop alternatives. Because there are alternatives out there. They are just too expensive right now. Only when the crunch comes -- as it did with the rising levels of horse dung on the streets of London and, I guess, New York as well -- will the alternatives come to the fore.