[threadbear]

oil speculation = economic depression

You might want to read Kublikhan's posts on other threads. He does an excellent job of addressing this issue. Rampant speculation is one of the four horsemen that rides on the back of geologic scarcity. They are far from mutually exclusive. There's also a lack of political will, and good old cash register ringing complacency and collusion.

[mos6507]

Scalability. No current technology or combination of technologies besides cheap, plentiful crude oil can scale up to meet the needs of the US and the world. Isn't going to happen. Not a chance in Hades. Better accept it now and get on with life.

Renewables scaling up have to be matched equally by scaling down consumption to the lowest possible levels. Then we'll see what we're left with. Renewables without conservation are doomed to failure.

[yull]

In a sense it's not energy that's important it is concentrated energy. No renewable source provides concentrated energy, only diffuse energy, and that is all but useless for running a modern global civilisation.

And $135 is nothing. It's going to go up and up and up until demand is destroyed so much through economic hardship that only then it will come down. World oil exports have declined by about 2mbpd over the last 2-3 years, or about 6%. That is your reason for $135 oil...

[mgibbons19]

I love Toecutter.

I love Toecutter's sig line.


DSE, read TC, and learn a little something while you are here.

Yeah, he's a cool kid. I dig his stuff on here.

[The_Toecutter]

I'm not a kid. I'm a 23 year old man. I just don't look like it...

[RogueEconomist]

In the short term, the reason the price of Oil is escalating at a rapid pace right now isn't because there is a shortage. Pretty much the same amount is online today as 3 weeks agao when the price was $100 a barrel. Why is it going up so fast?

The reason is hedge funds and investment banks are deleveraging many of the risky securities they have been holding in the mortgage market and the CDS market. There is a lot of Capital that was getting a good return before those markets became too dangerous and now it needs some place else to go. So, on the floor of the NYSE, the traders are buying Oil Futures and bidding up the price. Similarly, they are buying up commodities futures as well, driving the cost of food out of the reach of many people in the poorest economies of the world, thus the food riots. We still have plenty of food to feed people, just its being bid up in price on the exchanges by people who hold the vast percentage of the world's wealth looking for a place to drop their money and make more money with it. Its called market speculation.

Issue being of course at a certain point people simply can't BUY the food at the prices its being bid up to, so they will either die or it will have to be given away, in which case somebody here is gonna lose money. Probably the taxpayer, who will be asked to compensate the rich speculator who bid up the price. Same deal with the Oil.

Rogue Economist

[The_Toecutter]

Speculators are indeed part of the picture, as much as the majority on this site seem to not wish to acknowledge, but it is far, far from the entire story.

We've had well over enough food to feed the world for the past few decades, but they've simply been unable to afford it. Today, it's merely gotten worse. The top 1% want to keep owning 40% of the wealth and accounting for 32% of humanity's resource consumption in a planet of finite resources, and to keep this going once the resources are short, they will let the middle class go out of existence and for the poor to simply die off. Instead of compensating the bankers, it's time to shoot the bankers. But take the speculators for oil out of the picture, and it would still be $110+/barrel right now(and probably $135+/barrel a few months from now anyway). Peak oil is reality. The specdulators are merely parasites cashing in on what they can, and playing some role in the price increase, but they are not the root cause of the problem, even if they are making it worse.


We are in desperate need of change, but I fear the window of opportunity has already passed us. Even if we would have started perhaps just 2 years ago, large inroads could have been made into lessening the magnitude of this crisis(it would still be there; to fully mitigate it, we needed 10+ years; 20 according to Hirsch); the clock is about to strike DOOM and nothing has been done. Oops.

[RogueEconomist]

I'm not arguing that Peak Oil isn't a reality, I'm just explaining the market conditions right now that are leading to a rapid escalation of the price. The bet is on increased demand from China and India, and even with a slowing of growth there you still have a fairly obvious situation that the supply can't keep up with the demand.

I would say though that if it was just oil depletion we had to worry about, we really wouldn't be facing apocalypse. Plenty of coal reserves, and over a 10-20 year period buiding enough coal fired and nuclear power plants and converting over GM plants to Plug In cars would suffice to keep most of our mobility intact. Most of the heavy load trasport done now by the trucking industry could be shifted back to the railroads. Logsitics would be different, but mostly it could be accomplished.

The problem is less with the depletion of oil as a resource than it is with the distribution of wealth and the way the capital is being directed at the moment. Fix that, and the Oil issue really isn't insolvable at all.

Rogue Economist

[tecumseh]

75-80% of buyers of oil are commercial buyers. Of the speculators, half are buyers and the other half sellers. The long term futures contracts for oil are rising quickly. I think the price is now $140/barrel all the way out to 2016. My guess is the commercial buyers may be aware of PO and are now securing future supplies at these higher prices rather than possibly go without. Once PO becomes accepted as truth, the true value of oil must go up. Acknowledgement of scarcity increases value. If oil was easy to get and thought to be plentiful, it would still be $10/barrel. People who blame Big Oil need to remember BO is investing billions to get oil out of very difficult places (like 6 miles beneath the surface of the ocean). If easy oil was out there, the BO lobbyists and Bush Co. would have their way with the easy stuff. $135 oil is cheap.

[RogueEconomist]

$135 is definitely a cheap price for Oil, especially considering the precipitous drop in the value of the dollar as the currency is further debased. However, in the absence of an economic crash of herculean proportions, over time substitute forms of energy will come to replace oil. The main problem being that right now the money simply isn't being directed toward building a defferent energy infrastructure and due to the enourmous national debt hanging over our heads, we don't have the economic wherewithal to start building it, at least not without a serious change in government policy.

The skyrocketing cost of oil isn't just going to drive us off using it, its also going to drive everybody else off it also. The Chinese have no more real ability to pay those prices (and higher ones) than we do. Its the interim period between the Oil based Energy of today versus alternative sources we will use in the future that is the risk period, because of the economic disruption inevitable during the transition period. How bad that economic disruption is going to be is a matter of conjecture at the moment, in my worst case scenarios I can see a full blown depression that would make the Great Depression of the 1930s seem like a Boom, followed by a full scale Thermonuclear war for the possession of resources that would mostly likely end Human Existence.

However, its not an absolutely inevitable outcome. There could also be a less intense but more extended period of Global Poverty with a significant portion of the population wiped out thru Hunger and Starvation rather than than War. What resources there are would devolve to the survivors of this period, and then a period of rebuilding would follow creating a new energy infrastructure based on other sources, most likely a combination of coal, nuclear, solar, hydro and wind power, with Portable Power in the form of Hydrogen Fuel Cells and synthesized hydrocarbons from plant matter.

Oil has provided a cheap source of energy in the first century following the Industrial Revolution, it definitely is a finite resource that is running out but its hardly irreplaceable as an energy source. The fundamental energy source we have is for all intents and purposes inexaustible, the Sun. Its probably good for another 4 Billion years. It rains down plenty of energy onto the planet every day to provide us enough heat to drive all our machines, its just a matter of collection and transformation of the energy itno portable power. In the best case scenario, we won't really ever have to give up the type of mobility the automobile and the airplane have afforded us over the last 50 years, they just will be powered differently and have different configurations. In the near term, automobiles will be lighter and made from composite materials and powered by lithium-ion batteries, charged off the grid mainly powered by coal fired electric plants. Longer term, you will see hydrogen fuel cells come to market. Jet Fuel powered airplanes can be replaced by Rail-Gun Fired Gliders, Ballistic on the way up, gliding on the way down like the Space Shuttle does. Its all possible, IF the economic system can survive that is, and that is far from certain.

The problem to focus on here is not so much that oil has peaked in production or that its running out, but in how we will move toward replacing it in the future. there are numerous scenarios to this, none will come without pain, some scenarios have more pain than others. In about all scenarios though, there needs to be a significant die off in the human population of the planet, either thru war or starvation. Way too many people on the planet right now for the Spaceship Earth to support.

Rogue Economist

[BigTex]

trinitro and RogueEconomist, welcome to the site.

There is plenty of time to argue all of these topics out.

Don't exhaust yourselves on your first or second day.

We will all be here tomorrow, next week, next month, and probably until the internet stops working.

Just study the issues and arguments a little more and refine your own understanding.

This site is slightly different than many sites in that some people who may come across as obnoxious actually care very deeply about what they are saying and are not arguing just for the sake of arguing.

Enjoy.

[RogueEconomist]

Thanks for the welcome, and I'll put a lid on it

For me though, this isn't exhausting at all, I write reams every day. This particular topic dovetails with my passion for economics, so I just write my spin on it. I'll sit back and read some more though.

Rogue Economist

[DantesPeak]

trinitro and RogueEconomist, welcome.

Some very good points made, along with some good explanations.

However at the root level, the runaway price of oil is due to PO. How this is manifested, such as with hedge fund speculation, declining dollar, etc., are only side effects.

We live in a physical world and all the financial games that the Fed, Wall Street, and the Treasury play won't stop the price of oil from escalating relative to everything else.

I didn't say an oil price decline was impossible, but if it declines, I expect the price of other things (think homes) to decline faster.

We can discuss this more later.

[Judgie]

Trinitro

Your sense of entitlement, which you have only your fathers to thank for, blinds you.

Do the reading and the research, there has been literally millions of man-hours invested in producing the knowledge bank that we have in these forums.

RESEARCH THE CONCEPT OF EROEI

And lose the attitude, it'll do you no good. If not, you'll simply be Homer Simpson in a casket, bub, while those who have listened and learned will still be alive to make-do.

I sincerely, without any sarcasm, hope you do the above, and enjoy your time here.

Also considering visiting www.theoildrum.com, and reading some of the papers available. It's run by a set of academics, well-versed in their various disciplines and industries, and who UNDERSTAND AND KNOW WHAT THEY"RE TALKING ABOUT.

Oh and don't shoot your mouth off. It's offensive and tends to turn people right off conversation and into combat mode. Just a hint... hope it helps.....

Cheers
Mike

[yull]

A reason for the rapid increase in prices lately could be down to the fact that world oil production fell 700,000 barrels in March and April. Things being tight already, this would seem enough to send prices rocketing.

[btu2012]

Probably not and most of the terrorist operations of the middle east are funded by oil.

Whoa, man. What makes you think that someone else won't buy that oil ?

I have to agree with the others that you need to spend some time learning about the issue. Otherwise you'll sound ridiculous around here. Really.

Study the link below for starters:

http://dieoff.org/

[Keith_McClary]

75-80% of buyers of oil are commercial buyers. Of the speculators, half are buyers and the other half sellers. The long term futures contracts for oil are rising quickly. I think the price is now $140/barrel all the way out to 2016. My guess is the commercial buyers may be aware of PO and are now securing future supplies at these higher prices rather than possibly go without.

Trouble is, you can't "secure" future supplies by making futures contracts. It's quite possible that the amount of oil contracted for future delivery exceeds the available production at the time. You can sue people for failing to deliver the contracted oil, but that won't get you any more oil. (people making contracts to provide oil in the future aren't required to store the oil in tanks).