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Page added on September 25, 2012

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Visualizing Peak Oil: Hype, Hope, Boom, Or Bust

While oil prices have slid in their ubiquitous post-QE manner in the last few days, they remain notably elevated amid growing tensions in Iran and central bank largesse spillovers. These short-term fluctuations, however, pale in significance to long-run implications of peak-oil and whether it exists or not. From cost implications to technological innovation and demand destruction and supply constraints, the feedback loops of oil prices over time provide vicious and irtuous cycles for the global economy as we know too well. This brief clip provides all the color we could need on the matter of fossil fuel dilemmas and the diverging opinions of Astenbeck’s (ex-Phibro) Andy Hall and Goldman’s Michele Della Vigna provide the depth.

 

Andy Hall’s Conclusion: In summary, yes there are new oil resources to be developed but it will require high prices for it to happen and even then it is by no means certain that these resources can be developed fast enough to offset declining production from the existing supply base. More likely is that prices will need to rise periodically to curb demand growth emanating from the developing economies. In any event, we feel that longer dated oil prices which remain at a steep discount to spot prices remain a relatively safe investment with very significant upside and limited downside.

 

What impact high oil prices?

 

Goldman’s Michele Della Vigna: Since the start of this oil price cycle in 2000, peak oil theories have become increasingly popular, due to lack of credible new sources of crude oil. Over the past five years, however, the industry has opened up two new credible sources of future supply: the ultra-deepwater and the “oil shales”. We believe that these new sources of oil will be comparable in scale to the opening up of the North Sea and Mexico in the 1970s and will lead to a meaningful reduction in oil prices, alongside a change in the balance of power of the oil and gas industry. This is why we call it a revolution. However, the technical complexity of these developments and the tightness of the oil services supply chain are likely to delay the impact of these new projects by several years, sustaining a tight oil market.

 

The ‘new’ cost-curve…

zerohedge



8 Comments on "Visualizing Peak Oil: Hype, Hope, Boom, Or Bust"

  1. dsula on Tue, 25th Sep 2012 11:38 am 

    >>> In summary, yes there are new oil resources to be developed but it will require high prices

    What a change from a few years back, when doomers where certain there are no new resources available, no matter the price.

  2. rollin on Tue, 25th Sep 2012 2:16 pm 

    Why do all the experts say we cannot make a substitute for petroleum? With our industrial and chemical knowledge it shoud be just a matter of finding a cheap energy source to do the conversions from smaller molecules (CO2, H2O, etc.). Maybe we should consider using the sun, it doesn’t seem to be a limited resource.

  3. Arthur on Tue, 25th Sep 2012 3:43 pm 

    @rollin, converting CO2 and H20 into fuel? Now let me see what I can do for you, sir…

    http://deepresource.wordpress.com/2012/09/06/energy-101-algae-to-fuels/

  4. Kenz300 on Tue, 25th Sep 2012 4:44 pm 

    Bring on the electric, flex-fuel, hybrid, CNG, LNG and hydrogen fueled vehicles. It is time to end the oil monopoly on transportation fuels.

    We can now make biofuels from waste or trash. Every landfill can be converted to produce biofuels, energy and recycled raw materials for new products.

    The world is changing as the price of oil continues to rise.

    Alternative energy sources will continue to grow. Wind, solar, wave energy, geothermal and second generation biofuels will all become a bigger part of the total energy mix.

  5. peakgrowth on Tue, 25th Sep 2012 7:59 pm 

    Well said Richard H,

    Also, could have mentioned energy return on energy invested. (EROEI)… that really is the key issue.

    Our complex society requires a net energy source greater than the options on the table.

    Contraction is inevitable.

  6. MrEnergyCzar on Wed, 26th Sep 2012 2:08 am 

    He’s right. EROEI rules…. we move down the energy ladder to a lessor energy source and we won’t grow…

    MrEnergyCzar

  7. SOS on Wed, 26th Sep 2012 2:32 am 

    EROEI is exactly why solar and wind are doomed. The real alternatives, the conventional fuels, have by far the lowest EROEI when calculated correctly. They will continue in this pattern even as the huge infrastructure costs of new developments are absorbed by the market. Let me tell you why:

    If solar and wind had a competive EROEI they would already be the dominate sources of energy. They have been around producing electricty for at least a hundred years, probably longer. They arent dominate because they have a much, much higher EROEI and always will unless the laws of physics change.

  8. Kenz300 on Wed, 26th Sep 2012 2:02 pm 

    Even the US military is convinced that we need to transition to safe, clean alternative energy and away from fossil fuels.

    http://www.businessinsider.com/richard-zilmer-pushes-renewable-energy-2012-9?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

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