Oil Price thread

[imp]

Well Eclipse with your certainty w.r.t. peak oil you should buy Nymex 6 year oil futures for approx. $60USD/barrel. You can then sell them in 2011 for $120 (a very conservative estimate based on how scarce you perceive oil to be). Assuming that you invest $6000 90% margined (not considered an uncommon amount of leverage in futures markets) you would receive $120,000 when you sold your position in 2011. Many of the proponents of oil peaking in the near-term should become very wealthy.

There is no downside risk, of course, because of the certainty of the science and the many left-leaning experts that claim peak oil is imminent. Why does this remind me of "the bet" between Julian Simon and Paul Ehrlich that wound up being what some consider to be the greatest setback in the history of the environmentalist movement?

[eclipse]

imp,
it's not my certainty. I just read what big oil themselves are saying. That's enough.

You have not responded to the United States Department of Energy Hirsch report? Why?

CLUB OF ROME
Yes, I've heard about the bet... and I haven't read anything from Ehrlich, or relied on Ehrlich in any of my arguments. I have however drawn attention to the DOE's Hirsch report, which you have consistently ignored.

It's easy to tar all the proponents of the Club of Rome with the same brush. The fact that different people from different backgrounds approached the issues from different perspectives escapes most people bagging the Club of Rome.

However, we are right on track according to some of the scenarios of another Club of Rome report "Limits to Growth" (Meadows & Meadows). Matthew Simmons found their original argument compelling, and has verified that their projections were realistic based on various rates of economic growth JUST AS the IEA and EIA do in projecting economic growth and energy growth. Matthew Simmons is the head of the world's largest energy consulting firm, and has been an energy advisor to Dick Cheney.

RISK MANAGEMENT
Anyway, back to your argument. Because this scientific information is so confronting, your rationale is that we ignore it (because these scientists must be nutters) and continue business as usual! There's nothing to worry about, the marketplace will sort it out (even despite the Hirsch report saying it can't mitigate the effects on it's own.)

1/ The government already interfers in the free market, giving subsidies to the highways and oil dependent lifestyle. This is ridiculous given what SENIOR OPEC OFFICIALS, CHEVRON, EXXON and others are saying about the imminence of peak oil.

2/ What is the worst case scenario if we are wrong? We rebuild our lifestyles around more sustainable city plans, community living, conserve resources, and create healthier happier people in a less alienated city & village lifestyle... and conserve the oil for future use. We prolong the oil age, solve many environmental and social issues, and solve global warming, all in one hit.

3/ What is the worst case if we are right? The cheap oil disappears, the global economy melts down, people turn to coal liquefaction to prevent an actual city by city civilization meltdown and CO2 levels get even WORSE because it takes 4 to 6 parts of coal to get just 1 part of petroleum equivalent. Untold economic and environmental pain.

So imp, I WANT to be wrong. I WANT peak oil to be 20 or 50 years away. But it's just not what Chevron, Exxon and others are saying.

If you believe there really is plenty of oil, you need to read my page "Not Convinced" which I have copied and pasted for your convenience.

http://eclipsenow.org/Facts/NotConvinced.html

————————————————————————————

This is the tricky bit — there is still plenty of oil but not enough CHEAP oil to meet demand. The end of the oil age is not when it "runs out" — it is when oil becomes too expensive to use for the average citizen. The end of the oil age is when the cheap oil runs out. The following is a picture in very broad brushstrokes of the oil majors announcing the end of the oil age.

Chevron have said it! "The era of easy oil is over!" writes the CEO at www.willyoujoinus.com

OPEC have already said that light sweet crude is in decline. (Only the sour stuff is still increasing in production.) This backs up what Chevron has already stated, the era of easy oil is over. The age of sweet oil is turning sour.
http://www.vitaltrivia.co.uk/2005/08/26

Exxon Mobile have announced that the entire world outside of OPEC is about to peak in its production of all oil categories in the next 5 years. That is a huge announcement. It tells us that we will be dependent on OPEC for any increase in worldwide demand.
http://www.thebulletin.org/article.p...fn=mj05cavallo

A senior Saudi oil geologist has stated to the New York Times that he believes Saudi oil will peak at about 12.5 to 15 million barrels a day. After that point, there can be no more growth in sour supply no matter what the world demands!

"When I asked whether the kingdom could produce 20 million barrels a day -- about twice what it is producing today from fields that may be past their prime -- Husseini paused for a second or two. It wasn't clear if he was taking a moment to figure out the answer or if he needed a moment to decide if he should utter it. He finally replied with a single word: No."

Once Saudi Arabia have peaked, then that's it — the world has peaked. There will be no more economic growth of the oil dependent variety. Indeed, current industrys such as airlines will start to go broke. The New York times quote is from the comprehensive article below.
http://www.nytimes.com/2005/08/21/magazine/21OIL.html

The Hirsch report (let me mention it once again) to the American Department of Energy has reported that the peak is near and he has emailed me that the consequences will be "dire, worldwide, and long lasting." (Download 96 page 500mb word file HERE.)

The effective end of the oil age is when we can no longer rely on the ever increasing production of cheap oil. For your average suburbanite, farmer and food distributor, the oil age ends when it costs $500 to fill the car!

[eclipse]

Also see this... "Markets cannot create oil: U.S. needs a real national energy policy".

http://www.registerguard.com/news/20...ection=opinion

The approaching peak of world oil production, combined with the United States' sensitivity to price and supply shocks, points to the inadequacy of a market-based energy policy. Once an oil field is past its peak, increased production can't be obtained at any price. By waiting for the market, through higher prices, to impose limits on consumption, encourage efficiency and promote the development of alternative energy sources, the United States resigns itself to the inevitability of economic pain, places itself at the mercy of foreign suppliers and cedes ground to less energy-intensive competitors.
The United States' near-exclusive reliance on the free market to solve the world's energy problems threatens to leave the country unprotected against severe blows to its economy, security and way of life. Americans did not rely on the free market to put astronauts on the moon, or to create a system of universal education. A similarly ambitious effort is needed now to get the nation ready for a future that will require more efficient use of energy and a diversified portfolio of supplies. It's necessary to anticipate the market rather than merely having faith in it, because waiting for the market to do the job means waiting too long.

[DJ_Mittens]

Originally Posted by tracy

Oil at record prices again today. Boring.

Does anybody really care anymore about the price of oil? Certainly Wall Street doesn't, as it rightly puts its faith in Say's Law: supply creates demand. Cut the price of oil, and more will be used; increase the price, less demand. A law as old as the hills.

Recommended reading for Peak Oil fanatics: "The Doomsday Myth: 10000 years of economic crisis" (Hoover Inst Press, Stanford).

Yawn.

Supply doesn't create demand. First year economics. Check out a supply/demand curve. It's a reflection of the quantity of a product supplied/demanded by the market at a given price. If you artifically adjust price, then there's a market imbalance between what customers demand and what the market is willing to provide. It can create artifical "shortages", or "surpluses" and mess with the curves, but it doesn't create something from nothing.

Supply does not create demand. Demand is always there, whether there's a supply or not. Oil is a bad example for you, as it has a really inelastic demand, meaning that in general the same amount of oil will be demanded by the market irrespective of the price, except at the extreme ends of the curve. I'm going to fill up my car today, whether it's $10 or $50. Same with most people. That's why it's inelastic, and that's why your theory is sorely flawed.

No, people do care about the price of oil. Wall Street is freaking out over it. This is the technology bubble all over again, and it'll be much worse when it bursts.

Oil prices fell on Friday on confirmation that foreign oil reserves will be made available to the US in the wake of Hurricane Katrina.

The Paris-based International Energy Agency (IEA) said its member countries would release two million barrels a day to help ease the crisis.

All 26 IEA member countries backed the measures which will take effect for an initial period of 30 days.

US light crude fell $1.90 to $67.57 a barrel on Friday.

Full story

[eclipse]

2 million barrels a day! cool.

Yet as we all know, world demand went up from 79 million barrels a day to 84 million barrels a day in about one year. (2003 to 2004.)

Demand is increasing because the "elasticity" of the oil market is so low. We just have to have the stuff. Looking at the big picture again, as Matthew Simmons says "Once we've peaked, you no longer grow!"

Another comment on Katrina.

Remember before 911 there was this strange little spin off series from the X-files called “The Lone Gunmen?” These geeky crime fighters foiled a terrorist plan to fly a remote controlled jet into the New York World Trade Centre.

I recorded this “Lone Gunmen” episode and watched it AFTER I had already watched 911. The Lone Gunmen flew an airline up towards buildings that no longer existed. It was surreal.

It seems this is about to happen again!

Peak oilers have raved about a documentary called “Oil Storm.” It’s a scenario in which America’s economy collapses after a hypothetical (September 2005) hurricane destroys the gulf rigs and refineries, limiting oil supply and ravaging the fabric of American society. Oil storm screens Sunday week on 7, here in Sydney Australia.

“Oil Storm” previews here.
http://www.fxnetworks.com/shows/orig...torm/main.html

All too alarmist? “No way”, says the pentagon! They ran a oil think tank called “Oil shockwave”. I have read summaries that concluded only a 4% decline in oil supply to the USA would shatter their economy…. but I have to admit to you all that I have not actually read this myself from the “oil shockwave” reports. If anyone finds it, please tell me where… I have too many reports on my desktop as it is. They also have video and audio files to use.

“Oil Shockwave” at http://www.secureenergy.org/shockwave_overview.php

Now, you can see where this is all heading. If the USA government has bungled Katrina, what about the REAL oil storm that’s coming?

The Hirsch report concluded that it takes 20 years to wean off oil, and peak oil is nearly here. Katrina is merely a dry run for the chaos to come. It will be interesting to see how closely OIL STORM predicted the reality we have already been confronted with. Their hypothetical storm flies in over a district that no longer exists in reality. More interesting will be their longer term scenarios, and how true they pan out in the "real life" of daily documentary.

We are only on the “bumpy plateau” of Hubbert’s peak. The permanent decline has not begun yet (although OPEC just admitted sweet crude is in decline worldwide… our sweet oil is turning sour, which is already driving prices up.) What will happen when we enter the permanent arc of decline is anyone’s guess.

[arno]

Oil prices have surged ahead of a key decision by Opec oil producing nations on whether to increase output.

Prices rose $4.39, or 7%, to $67.39 a barrel on Monday, the largest single-day rise since December 2001.

Full story

[eclipse]

The thing most commentary fails to mention is output of WHAT? OPEC says "we could increase output by a million barrels a day and no-one will buy it" and you know what? I believe them... there's no where to process it because it's SOUR!

The age of sweet oil is turning sour. OPEC have already admitted that.

http://eclipsenow.org/Facts/NotConvinced.html

It would just be nice to hear the media and governments admit what the REAL story was... at least the New York Times has come some of the way in the right direction.

http://www.nytimes.com/2005/08/21/ma...0540f7&ei=5070

[Richard]

Peak oilers have raved about a documentary called “Oil Storm.” It’s a scenario in which America’s economy collapses after a hypothetical (September 2005) hurricane destroys the gulf rigs and refineries, limiting oil supply and ravaging the fabric of American society. Oil storm screens Sunday week on 7, here in Sydney Australia

If that were a true scenario then why didn't hurricane Katrina destroy the US economy? As far as I can tell it has had some, but not that much, effect on the price of oil. And it looks like this effect will only be temporary.

[george]

Quite right Robster. I'd also like to draw attention to something posted by Centrillium today:

I've heard convincing cases from two experts on this subject - according to them, oil depletion is not an imminent problem, and there is plenty left for the first half of this century. The situation with natural gas (which can be reformed for transportation use by a gas-to-liquid process which is apparently quite economical) is certainly no worse than that for oil. The reality is, we will not want to burn all the oil and gas (let alone coal) available because of the dangers of climate change.