PowerSwitch

This piece from the Powerswitch Peak Oil Daily is the sort of piece which makes my blood boil. Are the people who write them stupid or do they think us stupid? Oil is bound to peak at some time as it is a limited resource and the time to the Peak varies only a small fraction of the total production time if more resources are bought on stream.

Even with the new finds of oil, excluding tar sands and shale oil, we are still using more oil than we are finding so we are bound to run out sometime soon. As far as tar sands and shale oil go the rate of production possible cannot keep up with the rate of production from a conventional field so that that source will find it hard to produce at the rate we are consuming. The net energy available is also so much smaller that this makes it even more difficult to substitute for declining conventional production.

He does mention that the high price of our current finds makes them vulnerable a drop in price of oil. He also makes the point that the world's economy can't stand the current high oil price as shown by the difficulties of banishing the recession. But to say that this has nothing to do with peak oil is a nonsense of that peak oil is a nonsense is just not true. The current peak of conventional oil supply has led to the high prices which make unconventional oil supplies viable.

These unconventional supplies have been enough to compensate for the decline in conventional supplies but not enough to drop the price so that the unconventional supplies become uneconomic again. As conventional oil supplies continue to drop in volume the unconventional supplies won't be able to keep up with demand and we will then see prices hitting levels which will completely collapse the world economy. Oil price will drop then to prices which make unconventional oil uneconomic. By then, though, the amount of oil that we can produce will be entirely academic as our energy consumption and our ability to pay for it will have plummeted to virtually nothing.

Another one confusing the conclusion that peak oil isn't relevant to the immediate present with a confusion that the theory is debunked. Nobody ever actually debunks the theory probably because it is ultimately the Second Law of Thermodynamics.

It's like saying that the Sun won't turn into a Red Giant because its lowered its rate of Hydrogen fusion and is also using Hydrogen from elsewhere. It's shocking they are making this mistake so frequently.

It seems to me that early "Peak Oil" theorists vastly underestimated how much we would be willing and able to pay for oil. It was never claimed that we would actually run out, but that the reserves would be more and more difficult and expensive to extract. That's still true, but our ability to pay $90 a barrel has stretched the curve a long way.

The question now is how long can we pay these prices ? Economic growth has already been choked off, pretty soon we could see demand destruction force the price back down, then the shale becomes uneconomic, and we're back onto the original bell curve, but with a few bumps thrown in as prices bounce above and below the shale oil break-even point.

I've seen oil described as addictive, it is, and like any addict we will sell everything we have to get another fix of it, but there will come a time when many of us have to go "cold turkey" because we have nothing left to sell. Demand destruction is a last resort for many people, a sign that things are grim, evidenced by reports that people have very low savings and are tightening belts. "Fuel Poverty" is in the headlines regularly, transport fares are taking big chunks of income, stockpiles are low. If all this isn't evidence of an energy crunch then I don't know what is.

kenneal - lagger wrote:This piece from the Powerswitch Peak Oil Daily is the sort of piece which makes my blood boil.

Yep.

Are the people who write them stupid or do they think us stupid?

Both.

It doesn't matter. Since 2008, the entire global economic picture has changed radically, and it has changed for good. This sort of story is just part of the attempt to re-create the economic conditions that existed pre-2008, and it won't/can't work. There is no way back, because there is no more cheap oil.

kenneal - lagger wrote: As conventional oil supplies continue to drop in volume the unconventional supplies won't be able to keep up with demand and we will then see prices hitting levels which will completely collapse the world economy.

But not the whole world at once. It will collapse bit by bit, with Cyprus being this morning's bit.

I suspect that people will pay much higher oil prices than at present.

Retail petrol at present is about £1-45 at litre, but over half of that is tax.
Although the motoring lobby moan about the price of petrol, many drivers still use it so wastfully that price does not seem to be a big concern in practice.
An increase in retail petrol prices to say £1-90 would increase the volume of the moaning, but probably not affect everyday life that much. The price of goods transported by road would increase, but not by that much as transport costs are a fairly small proportion of the total price.

If need be the duty on road fuel could be cut, I would not support so doing at present, but would support a duty cut in the case of a large increase in crude prices.

A doubling of crude prices could be accomadated by a much less than doubling of retail petrol/diesel prices.

Aviation would be worse hit as fuel for aircraft is either untaxed or very lightly taxed, but much less flying is hardly TEOTWAWKI.
Overseas holidays to be become more expensive, then holiday in the UK !
Airfreighted food to become much more expensive, then eat more local foods, or non perishables imported by sea.

adam2 wrote:I suspect that SOME people will pay much higher oil prices than at present.

Fixed it for you!

Yes. Some people are willing and capable of buying oil at £500 a barrel. But that doesn't include most of us.

Aviation would be worse hit

Yes.

I do not drive, but if I had to live somwhere remote then I might well consider paying £5 a litre for petrol.
Used in efficient moped, petrol even at £5 would compare well with walking, bus fares, or the considerable trouble and expense of a horse.

If fuel duty was kept at the present rate per litre, then petrol could probably be sold for £5 even with crude oil at $500.

The flaw in that reasoning, Adam, is that at those prices the whole economy collapses (along with oil prices).

It's not a matter of what we are prepared to pay to drive our cars so much as how many people have a salary.

As per Ken's original post.

adam2 wrote:I do not drive, but if I had to live somwhere remote then I might well consider paying £5 a litre for petrol.
Used in efficient moped, petrol even at £5 would compare well with walking, bus fares, or the considerable trouble and expense of a horse.

If fuel duty was kept at the present rate per litre, then petrol could probably be sold for £5 even with crude oil at $500.

I agree with B on this one Adam. People would, if pushed, pay five quid a litre right now. But, that is because enough people are in work right now and are paying current prices for everything else.

If petrol were five quid a litre, then you can bet that bread would also be five quid a loaf. At which point, assuming you were still able to obtain a job, then five quid a litre, that at the moment does not seem like an impossible imposition, would be considerably more likely to be so in such an economic environment.

Remember, it was £1.30 a litre that was one of the main thing which pushed our economy over a debt cliff it was alrready right up against anyway and it is 1.40 a litre which is keeping it there. Given that, just imagine what £5 per litre would do to it.

I agree with Steve only I see the price of everything made from oil going up just for an extra special kick in the bollocks. Demand destruction will continue with prices becoming volatile until no more destruction is possible - In a simplified form I would see it like a half-life of an atom. 2008 was the first iteration where there was a lot of room for decay to bring down prices however each time there is less and less room until you are left with high oil prices which cannot go down to any real degree because nobody would be able to cut down any further without ceasing to use it entirely.

I think we will end up with an impoverished form of the LEDC model - A far bigger ratio of poor to rich where the world we know of today would cease to exist for the poor and the rich would be forced into enclaves of gated communities of higher prosperity which would slowly diminish over time.

Standuble wrote:I agree with Steve only I see the price of everything made from oil going up just for an extra special kick in the bollocks. Demand destruction will continue with prices becoming volatile until no more destruction is possible - In a simplified form I would see it like a half-life of an atom. 2008 was the first iteration where there was a lot of room for decay to bring down prices however each time there is less and less room until you are left with high oil prices which cannot go down to any real degree because nobody would be able to cut down any further without ceasing to use it entirely.

I think we will end up with an impoverished form of the LEDC model - A far bigger ratio of poor to rich where the world we know of today would cease to exist for the poor and the rich would be forced into enclaves of gated communities of higher prosperity which would slowly diminish over time.

That sounds about the size of it unless we do something to make something different happen. We can't stop the coming contraction, of course. But we can do something about how it is shared around. That's the only thing we are going to be able to control and that's going to be difficult enough because those at the top are not going to share it out voluntarily.