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Peak Oil is You


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Page added on March 28, 2013

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Peak Oil Is Dead

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Yesterday, Citi commodities analysts Seth Kleinman and Ed Morse declared that “the end was nigh” for oil demand.

They’re not alone.

Last month, the BNY Mellon‘s asset management subsidiary, the Boston Company, published a paper called “End of an Era: The Death of Peak Oil.” AOL Energy’s Peter Gardett pointed us to it.

In brief, peak oil theory argues that oil production will peak, then fall sending prices surging. Ultimately, supply is unable to meet demand and prices become unbearable, sending the global economy to the edge.

The team, led by Robin Wehbé, makes arguments similar to Kleinman and Morse’s: the rise of natural gas as an alternative fuel to oil, combined with increasing fuel efficiency, is causing crude demand to sink.

Wehbé and co. add that U.S. consumption has also become much more price elastic. They observe the following:

  • When oil prices rise to 3% of gross domestic product, consumption becomes more cautionary
  • A spike to 6.5% reduces consumption, exhibiting sharp price elasticity. (Currently this 6.5% level would translate into $165-a-barrel crude prices and $5-a-gallon gasoline prices.)

Team Wehbé decline to make a call on crude prices, and actually say they won’t even necessarily go down.

Rather, they argue, the aforementioned trends will put an end to supply-shortage-related price spikes:

“…the likelier scenario is a gradual increase in global demand with ample sources and time for supply growth. Thus, we bid farewell to the days of Peak Oil.

It was fun while it lasted.

Business Insider


18 Comments on "Peak Oil Is Dead"

  1. keith on Thu, 28th Mar 2013 1:26 pm 

    We’ve been in a 6 year recession/depression. Could that be the reason for lower oil demand. Also, 100 dollar barrel oil doesn’t help. scam artists. I have no respect for financial people.

  2. Arthur on Thu, 28th Mar 2013 1:44 pm 

    “the rise of natural gas as an alternative fuel to oil, combined with increasing fuel efficiency, is causing crude demand to sink.”

    Peak oil would have been discredited if actual global oil production would have substantially risen. The Great Thinkers at Citi Commodities observe that crude oil is being replaced by cheaper gas and take that miraculously as a proof that peak oil is dead. Meanwhile oil prices remain at near record high (ten times the level in 1999), even at reduced demand. That’s peak oil alright. The only real death zone can be found in the brains of Seth Kleinman and Ed Morse.

  3. J-Gav on Thu, 28th Mar 2013 1:54 pm 

    There’s a name for people who just can’t wrap their heads around the relationship between resources and biophysical limits on a finite planet: they’re called economists. Hazel Henderson, herself an economist, called the study of Economics as practiced today: “A form of brain damage.”

  4. Dragon Spawn on Thu, 28th Mar 2013 2:18 pm 

    I believe the famous Upton Sinclair quote aptly applies:

    ‘It is difficult to get a man to understand something, when his salary depends on his not understanding it.’

  5. rollin on Thu, 28th Mar 2013 2:53 pm 

    When the financial media keep beating a drum on somethng, it’s time to do the opposite. In this case it’s really time to prepare for less oil and higher prices.

  6. Kenz300 on Thu, 28th Mar 2013 2:58 pm 

    High oil prices are causing behavioral changes in even the most skeptical people. The era of cheap oil is over and people are starting to adjust.

    People are walking more, riding bicycles more and taking mass transit more in an effort so save money on their transportation costs.

    Car sharing and ride sharing is growing in popularity.

    Energy efficiency is rapidly improving. Gone are the 12 MPG gas guzzling SUV’s and pick up trucks. They are being replaced with 30 and 40 MPG vehicles, electric and hybrids and even CNG and LNG fueled vehicles.

    Fuel efficiency has now become an important part of the auto and truck buying decision.

    Price and scarcity change behavior.

  7. BillT on Thu, 28th Mar 2013 3:35 pm 

    There will be excess oil only after the collapse of the world economy when there is no money to buy it. Citi is one of those bankrupt ‘too big to fail’ banks and anyone who believes their bullshit deserves to be ripped off. ALL financial ‘experts’ are just snake oil salesmen preying on the stupid and gullible.

  8. SOS on Thu, 28th Mar 2013 3:40 pm 

    The sun is finite but wont burn out for a few billion years. Oil may be finite provided evidence showing the earth continually replenishing the resource is not accurate. Nobody knows how much oil there is, but it is becoming increasinly clear, ven though propaganda to the contrary is embedded in our very education system, that without strong political intervention our society has all the energy recources it needs in the form of gas and oil.

    Remeber environmental movememnts and leftist politicians have shut down exploration on the most prolific resources we have. This has pushed production off shore resulting in the mid east situation we now have. Also, another unintended consequence was the advancement of drilling technologies unlocking the vast shale reserves found world-wide. In the end enviro-radicals have provided us with the receipt to energy independence! YEA!!!!

  9. Plantagenet on Thu, 28th Mar 2013 3:51 pm 

    The claim that the US has been in a six year long recession is wrong. The recession ended in 2009, and we’ve had four years of weak recovery since then.

  10. GregT on Thu, 28th Mar 2013 5:46 pm 

    Yup, and that 4 years of week recovery, only required 9 trillion dollars of liquidity to be injected into the system.

  11. econ101 on Thu, 28th Mar 2013 6:51 pm 

    No growth because the policies that allowed the 9 trillion to be wasted were wrong headed. For example, expanding the welfare base cost 1 trillion last year, didnt help matters and isnt getting cheaper.

    9 trillion may have done a lot more good if billions hadnt been wasted on solar power plants now bankrupt.

    fortunately for the energy business in Texas, Pennsylvania, Wyoming and North Dakota the country has a pulse.

    One problem we have now is the ever increasing cost of solar, wind and ehenol which are mandated by law to be in the mix. As we approach independence with our conventional sources and private industry overcomes the infrastructure obstacles put in place by government we will see our energy situation improve greatly and me be able to continue the huge subsidies to fringe energy sources.

  12. econ101 on Thu, 28th Mar 2013 6:53 pm 

    9 trillion may have done a lot more good if billions hadnt been wasted on solar power plants now bankrupt and trillions in mortgages given away.

    Fortunately for the energy business in Texas, Pennsylvania, Wyoming and North Dakota the country has a pulse.

    One problem we have now is the ever increasing cost of solar, wind and ethanol which are mandated by law to be in the mix. As we approach independence with our conventional sources and private industry overcomes the infrastructure obstacles put in place by government we will see our energy situation improve greatly and may be able to continue the huge subsidies to fringe energy?

  13. Ed on Thu, 28th Mar 2013 7:54 pm 

    Econ101, you’re obviously a very intelligent person. Have you thought of running for president?

  14. DC on Thu, 28th Mar 2013 8:58 pm 

    But econ\sos has zero problem with subsidies to toxic energy, ROFL! Well at least hes consistent…

  15. BillT on Fri, 29th Mar 2013 1:01 am 

    Ah econ, if there is so much oil, why have the biggest oil companies DOUBLED their costs for exploration in the last five years? Many billion MORE to find less. Odd that it also coincides with the drop in production.

    And don’t bring up the ‘regulation’ lies. Big Petro runs Washington along with all of the other big corporations who feed at the taxpayer trough. Big Petro has seen the wall they are rushing towards and it scares them shitless.

    They KNOW that they are reaching their limits and when it becomes fully known, their stockholders will bail before the fall. Therefore, they will lie their ass off to keep the investing fools from finding out.

  16. GregT on Fri, 29th Mar 2013 5:58 am 

    BillT,

    Are you still writing a book?

  17. Kenz300 on Fri, 29th Mar 2013 12:25 pm 

    Fossil fuels are the energy sources of the past.

    The world is now in transition to safer, cleaner and cheaper alternative energy sources like wind, solar, wave energy and geothermal.

    The fossil fuel companies and the nuclear industry will keep fighting the change to alternative energy sources in order to protect their investments and PROFITS. At some point they will realize that they are fighting a losing battle as alternative energy sources continue to fall in price while fossil fuels become more expensive .

    Renewable-Energy Growth to Outpace Oil, Gas Through 2030

    http://www.bloomberg.com/news/2012-01-18/renewables-to-grow-more-than-8-a-year-through-2030-bp-says.html

  18. BillT on Sat, 30th Mar 2013 3:00 am 

    GregT, yes, it is in an editing phase at the moment. I am hoping it will be published this year. My agent is pushing for that to happen.

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