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> Peak oil, now or when?
TedN5
post Apr 2 2005, 05:51 AM
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With oil trading for more than $55 per barrel and U.S. gasoline prices likely to average $1.25 per gallon in the near future, what is the explanation? Goldman Sachs has even suggested that oil may spike as high as $105/bbl.

In 1956 the renowned Shell geologist, M. King Hubbert, predicted that oil production would peak in the lower 48 states by 1970. His prediction was not taken seriously by the industry or the government, but it proved to be correct. Other geologists have refined and used Hubbert's methods to forecast the peak in world oil production. Their conclusions are that the peak will come from 2004 to 2010. (You can only identify a peak after it occurs). Again, they are not taken seriously by most governments nor the industry. Even if the optimistic estimates of discoverable reserves put out by the USGS and the industry prove correct, peak production will only be delayed by a decade or two. With rising demand in the industrialized countries and the addition of India and China as major oil consumers a bidding war could follow the peak with all kinds of major consequences.

For an introduction to this issue see: Association for the Study of Peak Oil and this Alarmist Article together with associated links.

QUESTIONS FOR DEBATE:
Does the rapid run up in oil prices mean we have reached Peak Oil and if not, when will world production peak? What are the likely consequences of the Peak?


This post has been edited by TedN5: Apr 2 2005, 05:54 AM
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turnea
post Aug 9 2005, 07:43 PM
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I think an important point is being missed here.

Despite the perennial worries over "peak oil" the current price hikes in oil an gas have nothing to do with a shrinking supply of oil.

QUOTE

In part, this is because the oil-price records are an illusion, brought about by inflation. While nominal prices are at record levels, in real (inflation-adjusted) terms they are still well below those seen in the wake of the 1979 Iran hostage crisis, when the cost of a barrel of oil hovered around $90 in today’s dollars (see chart). Consumers are better-off now—in 1980, the median personal income in America was $16,800 (in 2003 prices), versus $22,700 in 2003—and economies are more fuel-efficient. Both of these things should cushion the shock of higher prices.

Some economists also think that there is a big difference between the supply shocks of the 1970s and today’s demand-driven price increases. For one thing, increases caused by growing demand are not quite so sudden. For another, they are far more responsive to market conditions; as the oil price rises beyond the level economic activity can support, growth, and thus demand for oil, should slacken. In contrast, when prices fell from their post-hostage-crisis highs of the early 1980s, the Organisation of the Petroleum Exporting Countries (OPEC) tried to keep them higher than the market could comfortably bear.

Perils at the pump

This issue is rising demand, not shrinking supply and it is not permanent.
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Hobbes
post Aug 9 2005, 08:22 PM
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QUOTE(nivekelly @ Aug 9 2005, 01:15 PM)
The new energy bill will do nothing to slow the rising price of oil, as it offers incentives to big, cash rich oil companies that are producing the crude and natural gas. 


Isn't that the very place incentives would have to be directed to most quickly affect the price of oil? This strikes me as more of the usual 'big oil bad' rhetoric that usually permeates any discussion on energy. The simple fact is that we use so much oil because consumers demand it. I'm curious, for all those against big bad oil...do you drive? do you use electricity? do you ever use rubber or plastic? do you fly? do you ever wear anything with synthetic fabric in it? walk or drive on paved roads? If so, then you are the problem, not the government. Stop using oil or oil based products, and big bad oil will stop supplying it. Demand that your electricity company use alternative fuels, even though that will cost you more. Don't take any form of transportation that uses fossil fuels. Then you will have the right to criticize the government and the oil companies for supplying this resource. But not until then.

QUOTE
But in our current stage in drilling for oil and our president's newly implemented energy bill, there is nothing that will encourage less oil consumption, therefore oil shall go higher.


And as it goes higher, it creates its own incentive for alternatives. This certainly factors into governmental decisions (and also those then made by the oil companies)....increasing demand and reducing supply will naturally stimulate demand and therefore supply for alternatives. However, given the prevalence currently of demand for oil throughout our economy, policies that increase its supply benefit everyone in the meantime. Prices will naturally, and eventually, rise to the level where alternatives become preferred by the market.

We could stop using fossil fuels for power within a few years...but it would cost everyone a lot in the wallet. That's why policies favor continued use of oil...because right now the market demands it. Everyone wants to use less oil...but almost no one is willing to spend more to see that happen. So, as long as oil is the cheaper alternative, the market will continue to demand it.

Put another way...the government could incent alternative energy sources by slapping a stiff tax on the use of fossil fuels, and then using that money to fund development of alternative sources. This will simultaneously stimulate both demand for alternatives and the supply of them. But, it will drive the cost of gasoline to say, $5/gallon, and maybe double everyone's electric bill in the meantime. This would seem to answer all the concerns of those who criticize the current energy policies, yet somehow I doubt this plan would meet with much support. That's why we have the policies we currently have.

This post has been edited by Hobbes: Aug 9 2005, 08:44 PM
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SWM28WDC
post Aug 9 2005, 09:33 PM
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QUOTE
Put another way...the government could incent alternative energy sources by slapping a stiff tax on the use of fossil fuels, and then using that money to fund development of alternative sources. This will simultaneously stimulate both demand for alternatives and the supply of them.  But, it will drive the cost of gasoline to say, $5/gallon, and maybe double everyone's electric bill in the meantime.


I support this idea, but I think it should start small and have a clear schedule of future increases. I also think that the revenue shouldn't be used to subsidized anything but American citizens: some will conserve, some won't, some can't; but another $100 in the pocket every year will offset the increase due to the tax, for the average American. (Assuming the new tax generated $100 per capita). High priced fossil fuels will cause the market to find alternatives (and encourage conservation, by far the cheapest 'alternative'.)

QUOTE
Isn't that the very place incentives would have to be directed to most quickly affect the price of oil?
I think you answered your own question. The oil companies sell oil for what they can get it for, not what it cost them. Government money to them doesn't reduce their selling price. If incentives must be given, it should be to alternative uses: transit, rail, etc.
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nivekelly
post Aug 9 2005, 10:28 PM
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QUOTE
Isn't that the very place incentives would have to be directed to most quickly affect the price of oil? This strikes me as more of the usual 'big oil bad' rhetoric that usually permeates any discussion on energy. The simple fact is that we use so much oil because consumers demand it. I'm curious, for all those against big bad oil...do you drive? do you use electricity? do you ever use rubber or plastic? do you fly? do you ever wear anything with synthetic fabric in it? walk or drive on paved roads? If so, then you are the problem, not the government. Stop using oil or oil based products, and big bad oil will stop supplying it. Demand that your electricity company use alternative fuels, even though that will cost you more. Don't take any form of transportation that uses fossil fuels. Then you will have the right to criticize the government and the oil companies for supplying this resource. But not until then.


Did I say I was against large oil companies? No I don't think I did they have made me a ton of money this year. My point was that the energy bill did not promote alternative fuel as much as it gives tax breaks to companies that don't need the tax break.

There is nothing that will stop oil from going up and I will bet you $100 that oil sees $70 a barrel.

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Hobbes
post Aug 9 2005, 10:54 PM
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QUOTE(nivekelly @ Aug 9 2005, 04:28 PM)
Did I say I was against large oil companies?  No I don't think I did they have made me a ton of money this year.  My point was that the energy bill did not promote alternative fuel as much as it gives tax breaks to companies that don't need the tax break.

There is nothing that will stop oil from going up and I will bet you $100 that oil sees $70 a barrel.
*



Nive, wasn't trying to single you out...just making a generic point. Also, I was trying to demonstrate that the energy bill does indeed promote alternative fuels...as you indicate yourself here. The higher oil prices go, the more incentive there will be in the market for alternatives. Anyone that wants us to develop alternative energies should want
oil to hit $70 a bbl, or $100, or even $200. Imagine the alternatives that will be available then. All these 'alternatives' are available now...they just are economically competetive. So, the higher oil goes, the more they will be adopted. By doing nothing, the energy bill is already promoting them. The other point that I was trying to make is that oil is pervasive in our economy...I don't know if you can buy a single product anywhere that doesn't have an oil component in its manufacture and/or distribution. Think about that...not...one...single....product. Therefore, it is in everyone's interest that oil is around as long as possible, and that the 'peak oil' scenario is put off as long as possible. How to do that? Give incentives to the oil producers and refiners, to ensure that additional oil is made economically viable, and that it is worthwhile to find new stores of oil. So, the energy bill is simulataneously helping the current situation by incenting oil companies to increase supply while also allowing alternative sources to become economically feasible by allowing the price to rise. Isn't this what everyone is after? Minimal pain while still making alternatives marketable?

QUOTE
I think you answered your own question. The oil companies sell oil for what they can get it for, not what it cost them. Government money to them doesn't reduce their selling price. If incentives must be given, it should be to alternative uses: transit, rail, etc.


I probably did, but not the answer you're thinking of. You're right in that the government incentives don't reduce the selling price...but that was not the goal intended. Consider the problem being discussed...lack of supply. The best way to increase supply is to increase the cost of oil, not reduce it. If the price stays high, and oil companies are incented to discover more oil, or make more existing oil economically viable, they will. It's a matter of economics. What does more good for more people...$1 given to oil companies to increase supply, or $1 given to alternative energy sources. Oil wins that hands down. First, it is already the most economic energy source, that's why it's so prevalent. So, you get more for your $1. Second, it's used in literally everything. Anyone thing we're anywhere close to converting solar energy into asphalt or synthetics or rubber or aviation fuel? $1 spen t there isn't going to get anybody anything. So, much as people decry the current situation, it's in everybody's interest (not just the oil companies) that peak oil is put off as long as possible. That's why the energy policies are what they are...because it really is the most economic solution.

There is another aspect of our oil independence that doesn't seem to get any attention. Everyone wants us to eliminate our dependence on foreign oil. But, what happens when the Middle East money spigot stops generating revenue in that area? They're already in economic distress. So, one of the outcomes of reduced oil dependence is likely to be increase distress in the Middle East, and associated increase in terrorism...particularly if the perception is that our reduction of need for Middle East oil is what led to their economic collaps (which the governments there would probably only be too happy to have take the blame, rather than their failure to capitalize properly on their oil revenues). Again...is this what everyone wants? I doubt it.
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Bill55AZ
post Aug 9 2005, 11:34 PM
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QUOTE(Sevac @ Apr 3 2005, 12:41 PM)

If someone is travelling to Europe the near future, don't be surprised about our gasoline prices. Average is 1.2 EURO/Liter, about 4,5 EURO/Gallon = 6 $/Gallon. At those prices there would be a huge demand for pubic transportation in the States.
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There are major differences between Europe and the USA. We have a LOT of empty land between our cities, especially in the western states. Our population density is a lot lower. I think more mass transit would work very well where it is already working, in the super high density areas of the east and northeast, and parts of California.
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TedN5
post Aug 11 2005, 05:43 AM
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I think there is a lot of wishful thinking being expressed on this thread. I've explored this subject enough to be seriously concerned that peak oil is occurring now or in the near future. If not, it is certain to happen within 10 to 20 years.

I tend to agree with turnea that the run up in oil prices so far has thus far been created by tight market conditions created by rising demand and under capitalization of some oil facilities. (However, I fail to understand why how lack of refining capacity in the U.S impacts the world spot market price of oil - gasoline prices, yes; oil prices,no).

If you believe Matthew Simmons, the run up in oil prices will be by a factor of 5 or 10 times current levels when it is obvious that we've peaked. I still recommend reading his book, Twilight in the Desert. You can start by reading this interview.
Matthew Simmons Interview

After reading Simmons you might want to think about Plan B. Here is a short article on what could be done with a little leadership and effort. Lovins Article

If you want to dig a little deeper into Lovins approach, see Winning the Oil End Game.
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Hobbes
post Aug 11 2005, 07:07 AM
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QUOTE(TedN5 @ Aug 10 2005, 11:43 PM)
I think there is a lot of wishful thinking being expressed on this thread.  I've explored this subject enough to be seriously concerned that peak oil is occurring now or in the near future.  If not, it is certain to happen within 10 to 20 years.

I tend to agree with turnea that the run up in oil prices so far has thus far been created by tight market conditions created by rising demand and under capitalization of some oil facilities.  (However, I fail to understand why how lack of refining capacity in the U.S impacts the world spot market price of oil - gasoline prices, yes; oil prices,no).

If you believe Matthew Simmons, the run up in oil prices will be by a factor of 5 or 10 times current levels when it is obvious that we've peaked.  I still recommend reading his book, Twilight in the Desert.  You can start  by reading this interview. 
Matthew Simmons Interview

After reading Simmons you might want to think about Plan B.  Here is a short article on what could be done with a little leadership and effort.  Lovins Article

If you want to dig a little deeper into Lovins approach, see Winning the Oil End Game.
*


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