So if oil drops back to $50-60

andyh · Post by **andyh** » 10 Sep 2006, 05:08

Be prepared to cop some flak from your friends and family and all those you have introduced to PO. Some are going to turn around and tell you that you have been a mug and a Jeremiah for banging on and on about it. I can think of 2 people in particular who are going to be dancing all over me.......

Question is: is oil likely to fall back that far?

You have to say the odds on that are increasing. I think Tess has mentioned there is new output coming on stream in 2007/8, and since the hurricanes have done very little and the US driving season has come to an end prices may tumble further.That allied to a potential slow down/recession in the US due to the housing bust and you have a scenario where prices may fall much further from here.

How quickly things seem to change - at least in the short/medium term.

ianryder · Post by **ianryder** » 10 Sep 2006, 08:03

I think the only thing is to fall back on the expected price volatility in the run up to PO. As supplies become tighter the price fluctuates, killing demand then encouraging demand.

If there was an abundance of supply we'd never have had this high price in the first place.

I must admit I've been more and more feeling of late that maybe things will somehow limp on and SA will just keep pumping more and more. I think for all of us we've got to remember that nothing's ever as clear as it seems - there are always surprises along the way so all you can do is make a judgement based on a best guess of what's to come.

I read Chris' presentation the other day (http://www.powerswitch.org.uk/portal/in ... 4&Itemid=2) and you can't come to any other conclusion that we're entering peak. Yet I also know that as impressive as all the figures are something might happen beyond current knowledge.

So I'm telling people about it but not getting too far up my own backside in thinking I'm right. If people then want to go and look for themselves and make their own best guess then good for them.[/url]

PhilSage · Post by **PhilSage** » 10 Sep 2006, 10:54

The thing to remember, is that a fall in prices will stimulate demand. Positive-feedback loops such as this always lead to instability (seen as market volatility in this case).

Looking back to a year ago, I seem to remember the dollar crude price falling back to the high fifties for a while, after topping 70 in the wake of Katrina. It is no surprise to see prices back to the high sixties after climbing within a whisker of $80 this summer. The next political or natrual crisis could easily push the price to new highs.

hatchelt · Post by **hatchelt** » 10 Sep 2006, 11:11

andyh wrote:Be prepared to cop some flak from your friends and family and all those you have introduced to PO.

I just tell them that the downward slope is like a saw blade. It goes up and it can go down, but there's only one way it's heading.

bigjim · Post by **bigjim** » 10 Sep 2006, 12:23

No matter what the price of oil is, it doesn't alter the fact that it's a finite resource and as such will run out sooner or later. So it's well worth it trying to become less dependent on it ASAP.

Post by **mikepepler** » 10 Sep 2006, 16:57

PhilSage wrote:The thing to remember, is that a fall in prices will stimulate demand. Positive-feedback loops such as this always lead to instability (seen as market volatility in this case).

Spot on. I think this is why any fall in prices will be temporary. There are millions of people in developing countries, and poorer people in developed ones, who are currently limiting their energy use as they simply can't afford it. If the price falls a bit, they will come back into the market, providing a solid floor for prices.

Of course, we could enter a recession, then I'd be wrong about all that...

RevdTess · Post by **RevdTess** » 10 Sep 2006, 21:21

Always remember that there's a bunch of new oil supplies coming onstream in 2007-2008. It's when we get to the 2009-2010 period and China's still growing at 10% per year that things get interesting (in the Chinese sense).

snow hope · Post by **snow hope** » 11 Sep 2006, 00:26

Tess, can you detail the new supply expected?

RevdTess · Post by **RevdTess** » 11 Sep 2006, 01:24

Skrebowski's megaprojects paper is a good basis for analysis. I can't supply any more than is publically available. At the office we simply aggregate as many different sources of information that we can find, be they public stuff, reuters or bloomberg reports, or specialised reports from energy analyst companies like PIRA et al.

Post by **clv101** » 11 Sep 2006, 10:25

A peak oil sceptic bounced over to me in the office last week talking about how oil was now down to only $67 and petrol was even under 90p in places...

My response was that last year - a week after the most destructive storm in the oil industry?s history oil was under $65. So why, given that there are no storms, the Middle East is calmer than it's been for weeks etc are prices now higher than they were last year?

See the graph Mike posted earlier:

If oil is over $60 at the end of the year the relentless rise will have continued.

SarahSimcock · Post by **SarahSimcock** » 11 Sep 2006, 15:48

I love that graph, in a "it scares the hell out me" kind of way

mobbsey · Post by **mobbsey** » 11 Sep 2006, 20:19

With oil we're talking geological scalres of formation, and with oil extraction we're talking research, exploration and production cycles of ten to twenty years... so why get worried over a few weeks of falling prices?

Nice graph above, but what's more interesting are the yearly graphs from the Beeb [http://newsvote.bbc.co.uk/1/shared/fds/ ... _month.stm]. If you watch these over a preiod of time, they just don't seem to change. The trend stays apparrently the same, all that changes are the labels on the price scale.

If you go the the US Energy Information Agency's site they've got historic price data going back a few years [http://www.eia.doe.gov/emeu/international/oilprice.html]. Here's a plot of the data for the last nine years for Nymex futures daily data [http://www.eia.doe.gov/emeu/international/Crude2.xls]:

Not quite the classic climate change "hockey stick", but it's getting there. you can see the 1999 low point, followed by a steady progressive rise.

OK, now lets concentrate on just late 2002 to the present and stick in the trend (regression) line to show the average rise:

What we see is a steady $12/year rise over the past four years. However, within this four year period, the swings in the price have at times been as great as $10 to $12.

OK, oil prices fall to $60... so what! It's not the daily price that matters. It's not the weekly price, or the price after the next Cat.5 hurricane tears through Texas. What matters is the statistical message the data provides, and currently that message is "FUTURES TRADERS THINK OIL IS GETTING MORE DIFFICULT TO SUPPLY".

Be patient. Don't be in too much of a hurry to get to doomsday... you might get what you wished for all at once!

snow hope · Post by **snow hope** » 11 Sep 2006, 21:28

Despite my doomer views, I don't want doomsday at all! I hope they find 2 new elephants tomorrow and we have all the oil we want for the next 100 years! I would love to see oil back to $20/barrel. Plentiful oil would be the best for mankind and you and I.

I just want to get my next big tankful of home heating oil with prices below $60 / barrel to do me through the coming winter.

I think we would still have massive problems with population growth, but it might get us to the next energy level (fusion), which at the moment I think we will fail to get to. And if we fail to get there before oil declines, I think homo sapiens will go backwards - our chance is just about gone....

So come on Exxon, BP, Shell, Total find us a real biggy and lets see the price drop right back.....

I wish, but I don't expect it.

grinu · Post by **grinu** » 11 Sep 2006, 22:38

Don't find another biggy! That would set things back even further and just succeed in setting the world up for a bigger fall in the long-run. If we find another couple of elephant fields that are cheap to get out we risk expanding the world's population even further, along with the associated increases in pollution, carbon emissions, water shortages, societal tensions etc. etc.

Post by **clv101** » 11 Sep 2006, 23:00

snow hope wrote:Despite my doomer views, I don't want doomsday at all! I hope they find 2 new elephants tomorrow and we have all the oil we want for the next 100 years! I would love to see oil back to $20/barrel. Plentiful oil would be the best for mankind and you and I. I just want to get my next big tankful of home heating oil with prices below $60 / barrel to do me through the coming winter.

I think I'd prefer to deal with peak oil rather than another century of business as usual. Do you think our ecosystem can take another century of exponential growth of industrialised society (if by some miracle it was wasn't constringed by primary resource shortage)? A wise man (you know who you are) once said something like the best thing about peak oil is that it distracts me from climate change - that's really scary.

I expect the human project will be in better shape in 2100 with a 2010 peak rather than a 2100 peak.

PowerSwitch

So if oil drops back to $50-60

So if oil drops back to $50-60

Re: So if oil drops back to $50-60