[Graeme]

US Association For The Study Of Peak Oil (US-ASPO) Conference Thoughts: Listen To These Folks

Chris Skrebowski, Energy Institute, London - Skrewbowski is the best analyst I know of in terms of empirically looking at oil supply going forward. Follow his work. Determining the actual liquid fuels peak is much harder after 2008 as demand has changed. OECD demand has shrunk will developing demand is still growing. OPEC has extra supply but its hard to tell how much. The EIA show 2012 as the peak not counting "unidentified projects". Skrewbowski thinks late 2014 is the peak (THAT's JUST 4 YEARS AWAY!!!). Skrebowski goes with 4.7% depletion of all existing production based on 3/4s of EIA's 6.7% depletion for post-peak fields. Skrewboski is expecting no production growth for 2012 with a little growth in 2013 and 2014. EIA is predicting demand growth of 1.2 Mbpd/year with no double-dip recession. Only half of oil demand is now the OECD. The peak will be around 93.8 million bpd. Current spare capacity is around 4 mbpd with the Saudis, Kuwait and UEA having 2/3s of spare capacity. Takeway: The Saudis control the price of oil. They have been targeting successfully a price band of between $70 and $80/barrell for years and should be able to continue to control the price of oil for another 2 years. Iran, Ecuador and Venezuela oil production is in a sustained decline. Iraq is a real wild-card. Apart from political/security concerns they could produce a lot of oil and shift the peak a couple of years. Takeway: Watch Iraqi oil production closely. The real (inflation adjusted) price of oil is higher now than in 96 of the last 100 years. $100/barrel price is needed to bring on new Arctic, Deep-Water, oil-sands, etc. The U.S. economy goes into recession whenever its oil expense exceeds 4% of GDP. Takeway: Find a way to graph and watch this.

worldofwallstreet

[dissident]

The Saudis control the price of oil. They have been targeting successfully a price band of between $70 and $80/barrell for years

That is merely a claim. In 2004 they were targeting $30-40. What has changed is that they are no longer able to dial their production up as much as they want like in the 1980s and 1990s. Where is there any evidence for the spare Saudi capacity? Demand from China, India and other parts of the world is what is keeping the prices high in the worst recession since the Great Depression and not some mythical Saudi power over the market.

[Plantagenet]

Chris Skrebowski, Energy Institute, London - ...The U.S. economy goes into recession whenever its oil expense exceeds 4% of GDP.

The US economy is going to have be restructured and reprioritized. A somewhat bigger share---say 8-10%---- is going to have to go for energy, leaving a somewhat smaller piece for the rest of the economy.

Its either that, or the US economy will be in permanent recession.

[Plantagenet]

The US economy is going to have be restructured and reprioritized. A somewhat bigger share---say 8-10%---- is going to have to go for energy, leaving a somewhat smaller piece for the rest of the economy.

Its either that, or the US economy will be in permanent recession.

Oil that costly leaves no room for debt service and a retail-based economy.

Don't be silly.

There is plenty of room in the economy to divert 8% of it oil and energy. Look at the US healthcare system----it uses about 18% of the US GDP, while the rest of the world gets better healthcare for about 7-9% of their GDP.

If we could get rid of Obamacare and get our healthcare system down to 9% of GDP, we'd liberate another 9% of our GDP to use for things like the inevitable higher energy costs and rebuilding our infrastructure.

[Pops]

Come on you guys, derailing every thread with the same old hackneyed partisan politics is getting tiresome, try staying on topic, at least in the PO threads.

---
Thanks Graeme, I was wondering if anyone would post anything about the ASPO conference, a couple thoughts on peak oil for a change...

Iraq has been saying they'll ramp up to 12Mbbl/d any day now, I think that's a big factor...

But then Russia has been pumping more that KSA for a while, if they peak and start into decline, then KSA will really be in control again.

US (all of OECD?) demand still has a ways to fall IMO. There are lots of air pockets in the economy, not the least of which being all the make-believe RE assets on the books. Some rosy sounding reason like voluntary peak demand aside.

What about if China is just blowing smoke regarding their internal consumer demand - they are a command economy don't forget. If all of a sudden they decide building ghost towns isn't a way to run a country and their demand drops like a rock, what happens then?

And what if demand growth stays below trend for a few years with no new investment in unconventional oil, while at the same time we just keep on depleting at the same rate, aren't we're sure to wind up in another "crunch" like '08?

Oh, yea, then there is ELM (first day of the SPO conference) and my personal hobby horse, Bi-Lateral Stockpiling.

[dissident]

What about if China is just blowing smoke regarding their internal consumer demand - they are a command economy don't forget. If all of a sudden they decide building ghost towns isn't a way to run a country and their demand drops like a rock, what happens then?

If this was happening it would be blasted by every western media outlet day in and day out. With 1.4 billion people it does not take much to produce consumer demand that starts to rival that of the west. There are over 200 million people in China with the purchasing power of Americans. This explains why globalism has worked for the corporations. They could care less if the standard of living falls by 50% in the US if there are a couple or more US equivalent consumer markets spawning elsewhere.

BTW, China has not been a command economy for over a decade. There is no central planning committee but an actual capitalist market. The Chinese government is authoritarian so it can push through large projects like the Three Gorges Dam but then the US had such big projects in the past too (e.g. Hoover Dam). Anyone paying attention would notice the rapid increase in private car use in China (and India) and the vast highway construction work. China is a big source of oil demand and is only second to the US right now. There is no slack in the global oil supply system for a couple more US-level oil consumers. Saudi spare capacity is a myth. Talk about 12 million barrels of oil per day of Iraqi oil production is certifiably insane.

[ian807]

The US economy is going to have be restructured and reprioritized. A somewhat bigger share---say 8-10%---- is going to have to go for energy, leaving a somewhat smaller piece for the rest of the economy.

Its either that, or the US economy will be in permanent recession.

These aren't mutually exclusive. Actually, I'd argue for causality. Of course, our ideas of "recession" are relatively recent and somewhat comical to much of the world. What we call "recession" is what most countries would call "Tuesday" and others (e.g. Bangladesh, Honduras, Haiti) would call "heaven on Earth."

[Pops]

BTW, China has not been a command economy for over a decade.

You're right, I got a little carried away, China is authoritarian and privatization has been working good for them while the world (including China) was refinancing it's house and buying stuff, speaking of which, China's real estate is bubblicious as well..

Lost in the euphoric frenzy of China's real estate market is the glum macroeconomic backdrop. China's overall economy depends heavily on exports; from January to July 2009, China's exports dropped by 22 percent -- a major hit to the nation's income stream.

Despite the surge in domestic construction and infrastructure projects resulting from the stimulus spending, China's exports are still declining. And too much money has flowed into new and unneeded factories which are now idling at low capacity.

The present housing boom also has some serious macroeconomic headwinds. A typical 1,000-square-foot apartment in Beijing now costs about 80 times the average annual income of the city's residents, wildly out of line with the historic levels of three or four times annual income.

See full article from DailyFinance: http://srph.it/avzOhz

I'm not arguing China's demand will fall, you'll notice I said "what if...", you on the other hand are saying you are positive it won't - OK.

http://www.theatlantic.com/business/arc ... ble/62679/

[ian807]

There is plenty of room in the economy to divert 8% of it oil and energy. Look at the US healthcare system----it uses about 18% of the US GDP, while the rest of the world gets better healthcare for about 7-9% of their GDP.

If we could get rid of Obamacare and get our healthcare system down to 9% of GDP, we'd liberate another 9% of our GDP to use for things like the inevitable higher energy costs and rebuilding our infrastructure.

There's more mileage in reducing our military budget. The graphs below speak for themselves.
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png
http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

We get a double advantage by reducing the military budget. The military is a major consumer of fossil fuels. Hospitals - not so much.