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Peak Oil Price

Discuss research and forecasts regarding hydrocarbon depletion.

Re: Peak Oil Price

Unread postby shortonoil » Fri 06 Nov 2015, 10:24:42

"I thought peak was supposed to occur a decade ago. At least that is what the doomers predicted on TOD and on this board back then."

When the world burns its reserves faster than it finds new ones, the point arrives when there are no reserves to burn. What reserves there were are now 55% less than what they were a year ago. Whether anyone notices doesn't change the situation. We are in a lot worse position now than a decade ago; with a zero percent chance of it improving!
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Re: Peak Oil Price

Unread postby Pops » Fri 06 Nov 2015, 11:03:00

Cog wrote:I thought peak was supposed to occur a decade ago. At least that is what the doomers predicted on TOD and on this board back then.


I'd say to you that oil pretty well did peak, and right on schedule. Extraction of regular old drill a hole and watch the money pour out oil is lower today than in 2005 and lower than the 10 year average, at least according to TPTB.

Image
http://www.crudeoilpeak.info

Obviously people predict a lot of things on the old interwebs and a person needs to take predictions with a grain of salt, especially those predictions that line up with our own natural knee-jerk. A lot of predictions ignore everything that is not geology right up to the point of peak and decline and then are off to the races on everything else. Little witticisms like "geology trumps economics" and "nature bats last" were/are really common. Considering most of the folks making predictions in the early days of internet PO were geologists that should be no surprise.

The biggest mistake peak prognosticators made, and still make, is ignoring economics and/or believing themselves to be the only rational actor on the stage. Short just said: "...price becomes completely irrelevant!" I'm pretty sure that in the oil biz price is never irrelevant. Like any other biz it is the only relevant thing, as the whole point is not to make energy but to make price point. "The economy" is a human construct, built around humans making choices every minute of every day, to pretend that means nothing is where silly predictions come from.

Oil price rose on short spare capacity in the oughts because demand increased faster than supply. But the price didn't reach the levels the prophets predicted. Around 2005 Simmons bet that the average price for a barrel of oil would be $200 in 2010. The assumption being that demand is completely inelastic and there are no substitutions possible (even substituting with nothing) and conventional had peaked. Although conventional oil looks like it did peak the average price barely made half that $200/bbl in 2010.

Economics 101: as price rises demand falls. I'd think even in China the reality of economics can only be suspended for so long, although they are still spending those dollars hand over fist to buy the dream ...

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http://crudeoilpeak.info/asias-oil-cons ... ed-in-2010


So anyway, I think when a person is trying to evaluate predictions they should first try to understand the bias of the source, because we all have a bias. And since we all have biases it is even more important is to attempt to correct for our own. But mostly, understand that models at best are just simplistic representations, they can never capture all the possibilities. I've kinda come to the conclusion that the reliability of a prediction is inversely proportional to the prophet's conviction; the more absolute his belief the less I'm convinced.
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Re: Peak Oil Price

Unread postby Subjectivist » Fri 06 Nov 2015, 11:43:11

Cog wrote:
Subjectivist wrote:My prediction, once world supplies can no longer keep up with demand at a price the economy can support many governments will institute price controls and rationing.


Price controls and rationing would further crush whatever economy you are trying to protect making oil even less affordable.


I disagree, a price fixed at $100/bbl coupled with rationing for any shortfall in production would go a long way towards stabilizing production at a price point we know will support a mostly stable economy. Much higher price will crash the economy completely, but as we go forward $100/bbl won't produce oil to fill all the demand at that price point, so rationing to agriculture, police, medical, medical and national defence first will be crucial.
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Re: Peak Oil Price

Unread postby shortonoil » Fri 06 Nov 2015, 13:00:43

"I disagree, a price fixed at $100/bbl coupled with rationing for any shortfall in production would go a long way towards stabilizing production at a price point we know will support a mostly stable economy."

That is ignoring the affordability factor that must be considered for the sale of any product. Big Macs selling for $100 are not going to have much of a market. Oil is not a magical substance that can be sold at any price one wants to choose; the economy can only afford a specific amount. In the case of petroleum the determination of its maximum price is a straight forward calculation:

http://www.thehillsgroup.org/depletion2_022.htm

It has already passed the $100 mark, and is declining. At least a third of the world's producers are now operating below their full life cycle production cost, and are continuing operations by accumulating growing amounts of debt, reducing operations, laying off staff, or selling assets. At $100 there is not going to be any oil sold for long because there will be no economy to purchase it! Further attempts at centrally controlled economies will only have more negative effects. Liquidity injects by central banks have already resulted in the financing of over production of a product that has no market. That has already produced long term, and probably irreversible damage to the industry.
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Re: Peak Oil Price

Unread postby Pops » Fri 06 Nov 2015, 13:29:05

What would be the point in coming up with some arbitrary price and then some arbitrary quota based on a limited amount of information (and a large amount of political bias) when ye olde market does it automatically using every bit of pertinent information?

A "stabilized" price that sends a signal things are stable... right up until you get cut off by rationing doesn't sound all that desirable.

A market prioritizes uses with the most utility automatically by sending a signal to the consumer each time someone drives to the pump — it works both macro and micro and in both directions; to the supplier as well as the consumer. And the best part is you don't just go to the polls and vote out the market like you do the policy — like we have done every cycle since Carter.

As I remember the embargoes it was the rationing that caused the trouble — because the arbitrary price cap itself caused at least as much rationing as the embargo.

With a functioning market I get to choose for myself what has utility and where to allocate my limited resources and when I need to adjust. Do I want food and services? If so I pay the increased cost they pass along for fuel and reduce my expenditures elsewhere. On the personal level, at $60/bbl I drive to the QikSac for a SixPac but at $120 I ration myself and only drive my wife to the maternity ward - but I still have the ability to choose what is important.
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Re: Peak Oil Price

Unread postby StarvingLion » Fri 06 Nov 2015, 20:57:48

If Peak Oil was happening/happened then they wouldn't be rolling out this renewables crap. It would be already too late.

Prices don't matter. The capitalism you pretend to see does not exist.

The excuse "The exact date does not matter" is pathetic. Of course it matters. In fact its everything.

"Hey hot babe, you're doomed. Peak Oil and all that...come to daddy"...lol

"You are a nutcase and a pervert"

See, it doesn't work. I tried that line many times.

Peak Space, Peak Fresh Water....are blowing away Peak Oil. Ron Patterson is literally going out of his mind because his Peak Oil predictions of 2005 and now 2015 are not happening.
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Re: Peak Oil Price

Unread postby shortonoil » Sat 07 Nov 2015, 10:27:28

"A market prioritizes uses with the most utility automatically by sending a signal to the consumer each time someone drives to the pump"

Depletion is as inevitable as the sun will rise tomorrow, and it doesn't give a hoot about someone's macro economic hypothesis. The Romans were very aware of it two thousand years ago; of course, they weren't armchair wizards with Keynesian supply/ demand curves to stare at. Its a good thing that we have progressed as far as we have. Otherwise, we would have to prepare for the decline of the petroleum industry, and the economic train wreck it is leaving in its path. As soon as the Venezuelans get toilet paper again let us know how the magic of the market is doing?

http://www.thehillsgroup.org/
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Re: Peak Oil Price

Unread postby Pops » Sat 07 Nov 2015, 12:24:42

shortonoil wrote:"A market prioritizes uses with the most utility automatically by sending a signal to the consumer each time someone drives to the pump"

Depletion is as inevitable as the sun will rise tomorrow, and it doesn't give a hoot about someone's macro economic hypothesis.


So depletion negates markets?

Maybe in your little scenario but out here in the world scarcity equals higher real price, always has and always will.

Markets don't care about depletion, only supply and demand. Whether or not higher price enables more supply isn't what I said. I said markets are more efficient at distributing scarce resources than governments.

Nominal prices, like in my 2020 WAG above, and your "model" are only good to play price guessing games. Nominal price like you use to "prove" your model means absolutely nothing, the real value of a dollar back in '62 is so different from with that of the one in my pocket right now as to be uncomparable.

Oil has intrinsic value and the percentage of income we spend on it will almost certainly rise as supplies are constrained and we struggle to replace it with something else, get more efficient or just do without.
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Re: Peak Oil Price

Unread postby Pops » Sat 07 Nov 2015, 17:42:54

pstarr wrote:
Pops wrote:Oil has intrinsic value and the percentage of income we spend on it will almost certainly rise as supplies are constrained and we struggle to replace it with something else, get more efficient or just do without.

Wrong Pops. The percentage of income we spend on oil will almost certainly not rise beyond the point that said oil purchases cut into expenditures for food, warmth, housing, and security. People without transport fuel will certainly migrate on foot before they starve and freeze.

did I say it would?

I think you should spend a little more time reading what is posted before hitting reply.

we won't choose to starve or freeze rather than walk and of course didn't say we would, that was just something you made up to argue with, not sure why

fuel for heat and transport will have greater priority than pizza, cable, halloween costumes, lates and Candy Crush. those and other nonessentials will be foregone to pay for fuel — so, the fuel percentage will rise — until we change
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Re: Peak Oil Price

Unread postby Pops » Sat 07 Nov 2015, 22:26:14

So yes oil markets collapse when folks can no longer afford to buy oil

Come on Pete, you sound like 2005.
The oil industry didn't collapse in '07 when depletion/low capacity forced the price above affordability
The reason?
markets

To review:
Oil is not homogenous but is fungible. It comes in a range of costs and qualities and is priced on the marginal (and most expensive to produce) barrel.
Consumers are more resilient than we thought back when, they can actually survive on less oil than they use when the price is $15/bbl. They are able to use marginally less oil without foregoing it entirely and "collapsing the market". They did it beginning in '07 or so in the US right up until the price fell below $80 or something this year.

So extrapolate that out to the end of oil...

depletion causes the market to increase price until folks can no longer afford (for example) $100/bbl for 100mbd. They will buy what they can afford and use it to greater effect. But just like the US from '07 - '14 they will not quit buying it altogether.

Lower demand reduces price and sends a signal to suppliers so they supply less, like '09 and now. There is lots of oil available at less than the cost of the marginal barrel so they shut in those more expensive marginal barrels and reduce supply to match demand.

After a few iterations supply might be 70mbd @ $70/bbl or something


Continuing depletion affects cost and eventually the market balances the price of that 70mbd at maybe $140/bbl.
The market again forces consumers to increase utility and reduce use. Again there is no need to reduce to nothing, just to what they can afford. They adjust their uses and achieve greater utility.

supply declines as demand adjusts, but eventually depletion causes the market to increase price again, so again demand falls, again supply declines...

repeat until the cost of oil power increases to exceed muscle power (or whatever comes along next) and even then there will probably still be an oil market for uses other than power.

Notice that at no point did the oil market collapse.


Definitely not as sexy as "oil market collapses in overnight armageddon" but since there is no reason for "collapse" except wishful thinking I'm thinking no collapse is more likely.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
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Re: Peak Oil Price

Unread postby godq3 » Sun 08 Nov 2015, 10:52:15

StarvingLion wrote:If Peak Oil was happening/happened then they wouldn't be rolling out this renewables crap. It would be already too late.

Prices don't matter. The capitalism you pretend to see does not exist.

Peak Space, Peak Fresh Water....are blowing away Peak Oil. Ron Patterson is literally going out of his mind because his Peak Oil predictions of 2005 and now 2015 are not happening.

Price of oil is half what is needed to increase world oil extraction rate, and you say that peak oil is not happening? Coal extraction rate is already falling, and the price is still too low to prevent further downfall. Same will be with oil in 1-2 years.
It's true that we had low fossil fuels prices in the past, but they were never lower than price needed for extraction rates to increase. This is the first time in 200 years that such situation occurs.
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Re: Peak Oil Price

Unread postby StarvingLion » Wed 11 Nov 2015, 23:25:51

godq3 wrote:
StarvingLion wrote:If Peak Oil was happening/happened then they wouldn't be rolling out this renewables crap. It would be already too late.

Prices don't matter. The capitalism you pretend to see does not exist.

Peak Space, Peak Fresh Water....are blowing away Peak Oil. Ron Patterson is literally going out of his mind because his Peak Oil predictions of 2005 and now 2015 are not happening.

Price of oil is half what is needed to increase world oil extraction rate, and you say that peak oil is not happening? Coal extraction rate is already falling, and the price is still too low to prevent further downfall. Same will be with oil in 1-2 years.
It's true that we had low fossil fuels prices in the past, but they were never lower than price needed for extraction rates to increase. This is the first time in 200 years that such situation occurs.


The price of oil tells us nothing about Peak Oil. How do you know what price is needed to increase world oil extraction rate? The system is opaque. You know nothing about it. Neither do I. The "experts" have never been right. So look out your window and observe. I observe much more fossil fuel driven activity than ever before. I do not observe any obvious signs of this racket discontinuing in the next year. Therefore, Peak Oil of 2005 was wrong. Peak Oil of 2015 is wrong. Now they say sometime in 2016-2020. LOL. I bet its closer to 2085.

All I want from this place or anywhere else is: WHEN IS PEAK OIL?
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Re: Peak Oil Price

Unread postby ROCKMAN » Thu 12 Nov 2015, 09:50:41

Yeah...the POK is back. I missed him.

"Coal extraction rate is already falling, and the price is still too low to prevent further downfall" FYI since 2012 the global production of coal has essentially been flat. And that has been the result of those lower coal prices. But all the Big Boys, like the EIA, that track such dynamics, are predicting an increase in coal consumption even in the short term. Coal consumption has decreased in the US. But coal exports from the US has increased to levels not seen in over 20 years with most of that increase coming from US govt lands in the west.

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Re: Peak Oil Price

Unread postby GoghGoner » Thu 12 Nov 2015, 13:55:26

I think by watching the oil price relative to other commodities you can tell if there is an supply issue. I think b/w 2011-2014 you could see oil prices a little higher than one would expect but right now the price is showing no signs of supply tightness.
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Re: Peak Oil Price

Unread postby ROCKMAN » Thu 12 Nov 2015, 15:08:19

Goner - "I think b/w 2011-2014 you could see oil prices a little higher than one would expect but right now the price is showing no signs of supply tightness." of course we don't: it takes years for the impact of prices changes (up or down) to have an impact on energy supplies. And typically much slower on the decreasing side since new wells add much quicker the existing wells decline. But even that isn't the only controlling aspect of the dynamics: economic health of the global economy also has an impact on that relationship.

Ignore the ridiculous price spike of late '08: for a few years oil averaged around $65 -$75/bbl. And then it fell to almost $40/bbl during '09. But back to around $65/bbl in '10. Historically that was an extremely fast rebound for prices. I think that happened because there was an overreaction combined with an economy that was improving relatively fast. The price collapse of the mid 80's took about 20 years to rebound.

I thin it's going to take another couple of years to know if we're going to have a fast "2010 rebound" or a slow "1980's rebound". Or something in between.
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Re: Peak Oil Price

Unread postby AirlinePilot » Fri 13 Nov 2015, 12:34:59

I believe the clues are shaping up nicely which indicate a more rapid, but by no means "meteoric" rise back towards 80 or 90$/bbl crude prices over the next year or so. Considering the costs associated with all the "growth" oil types, I dont see how we can remain where we are price wise for any longer term.
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Re: Peak Oil Price

Unread postby dolanbaker » Fri 13 Nov 2015, 12:43:58

If this story is anything to go by, it may be slower than you think.
http://www.bbc.co.uk/news/business-34808487

A record glut of oil is set to continue into next year and maintain pressure on prices, the International Energy Agency said on Friday.

Stockpiles stand at a record three billion, the IEA said in its monthly report.

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Re: Peak Oil Price

Unread postby ROCKMAN » Fri 13 Nov 2015, 12:47:00

AP - From your lips to Dog's ear. I've got a 16 yo girl that wants to look at used crew cab p/u trucks the day after Thanksgiving. A truck she can use when she starts attending college in a couple of years. I can't count on scholarships or the lottery to cover all the costs. LOL
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