Peak Oil is You
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Page added on April 20, 2012
Peak oil goes mainstream (again)
Well, The Economist is talking about it in a non-sneery way.
Okay, perhaps that’s not fair — only in February the newspaper likened oil markets to a horror movie: with prices likely to stay high and tight capacity raising the risk of future price spikes.
Still, it’s interesting, in this time of triumphalism over shale gas and oil, to see such a pessimistic piece.
We’re not talking about head-for-the-hills type “peak oil”, however. From Friday’s Buttonwood column:
The concept of peak oil—the idea that global crude production may be at, or close to, its limit—is far from universally accepted. One leading asset manager talked recently of the world being “awash with energy” because of the exploitation of American shale gas. Nevertheless, oil is still the main fuel for cars and trucks. And crude output (as opposed to alternatives such as biofuels and liquids made from gas) has been flat since 2005.
That won’t be news to anyone who thinks about energy a lot, because it gets to the heart of the challenges facing the world today.
We’d sum it up as this:
– It’s the price, stupid: It’s not the amount of oil, it’s the price at which it can be produced under both technical and political constraints.
– The primacy of transport liquids: There may be plenty of coal and unconventional gas out there, but they can’t displace oil. Oil is oil. Heating oil can be substituted fairly easily, but other sources of energy are not so useful for transport, yet.
– The critical contribution of cheap energy to the modern industrialised world. You can argue the numbers on just how important it is, and there are plenty of fun debates to be had about resource economics/mercantilism/scarcity/EROI (energy return on energy invested); but… who is really willing to say that the abundant and relatively cheap oil was not an essential component in building any modern developed economy?
– There’s also this problem of carbon constraint – let’s not go there just now, but you get the idea.
It’s nothing new, this questioning of what permanently higher oil prices means for world economic growth. Gregor MacDonald, Chris Nelder and Gail Tverberg are just a few of those who’ve been dedicated to considering the economic effects of an energy-constrained world. James Hamilton has been attempting to bridge the gap between peak oilists and economist for years; his ‘How to talk to an economist about peak oil‘ post (from 2005!) is a must-read.
There has also been in recent years some interesting discussion about the concept of “peak demand” — the idea that the world, or parts of it, will pre-emptively shift away from oil dependence and its accompanying economic and political risks. A favoured quote on this is: “The stone age didn’t end because they ran out of stones.” (Saudi Arabia likes to trot that one out, not that you can read much into it.)
However, as the Buttonwood column notes, most practicioners in the field of economics are paying no attention:
This issue is not much considered by mainstream economists, who are too busy focusing on monetary policy, the impact of fiscal austerity or the need for labour-market reforms. But just as the industrial revolution was built on coal, the post-second-world-war economy was built on cheap oil. There will surely be a significant impact if it has gone for good.
The question of what that impact will be, and how it will be managed, is much more interesting than straw man arguments about when exactly the oil will “run out”.
6 Comments on "Peak oil goes mainstream (again)"
BillT on Fri, 20th Apr 2012 1:49 pm
As I said below…
“…Numerous factors affect oil prices, like supply and demand, geopolitical unrest, natural disasters, monetary policy, and speculation,…
… Globally, the cost of drilling a new oil well has gone parabolic:…
… Skrebowski sees rising costs outrunning the ability of economies to adapt to higher oil prices by 2014, producing an “economically determined peak” in oil production. After that point, prices will remain economically destructive, and render sustained economic growth impossible. At the same time, it will make new oil production harder to finance…
…That technology will mean that we won’t literally run out of oil in the coming decades as depletion takes its toll. But we should not imagine that it will bring us energy independence or bring back the good ol’ days of $2 gasoline. What it will bring, eventually, is oil for Asia as the U.S. and Europe are forced to park their cars for good…”
http://www.smartplanet.com/blog/energy-futurist/the-cost-of-new-oil-supply/468
Arthur on Fri, 20th Apr 2012 10:21 pm
My reaction:
http://deepresource.wordpress.com/2012/04/20/the-economist-feels-peaky/
SOS on Fri, 20th Apr 2012 10:39 pm
The price of oil/gas has been driven sky high by government interference at every level of the supply chain. It includes burdensome regulation, high taxes on production and end users.
It includes refusals to develop resources owned by the american public while borrowing more and creating more public debt than anyone in history.
It indludes worthless and billions in lost investment on bankrupt solar panel companies and other favored “alternative” energy groups that havent done a thing to make energy cheaper or more pleantiful. In facy each subsidy makes energy more expensive, especially if you are in the 50% group that actually pays any tax.
I could go on but this is an artificial nightmare that has been going on for 30 years or more. Peak oil is political, high prices are real and a result of government peak oil policies.
If you want lower prices support orderly developement of our citizen owned energy reserves.
If you believe the oil markets are global you must understand politics favored by the president are killing babies around the globe because people are paying way too much for energy.
Arthur on Fri, 20th Apr 2012 11:00 pm
SOS says: “The price of oil/gas has been driven sky high by government interference at every level of the supply chain. It includes burdensome regulation, high taxes on production and end users.”
It is irrelevant. The US government has no influence on the world market price of crude oil.
Take a cereful look at the long term development of the crude oil price:
http://tinyurl.com/86c7bzs
From 10$ to 147$. Then in 2008 there was an economic crash. Now we have a ‘recovery’ on FED-steroids to the tune of a few trillion $ out of thin air.
There is only one explanation for the graph: we are running out of oil. It is that simple!
BillT on Sat, 21st Apr 2012 12:46 am
Arthur, SOS is in deep denial or just scared S—less that peak oil is past and his lifestyle will be contracting for the rest of his years. The Us has not had any real influence on the price of oil since the 70s when we stopped exporting and started to import the stuff. But the corporate press and government propaganda want you to believe that it is just the ‘greedy speculators’ that are to blame, not the reality that the amount of oil is shrinking.
Kenz300 on Sat, 21st Apr 2012 1:20 am
Increasing demand for oil from China and India are the driving force in higher oil prices. China is now the worlds largest auto market. In the US we import more than 50% of the oil we use every day. This is bought on the world market at market prices.