Robert Peston - Hooray for cheap oil

Tarrel · Post by **Tarrel** » 02 Dec 2014, 09:50

so peak oil could be on it's way back.

I don't think Peak Oil ever really went away. Those who state with some satisfaction that tight oil extraction has somehow "beaten" peak oil have inadvertently been dancing to peak oil's music IMO.

People like Richard Heinberg and John Michael Greer have been predicting this "tumbling down a staircase" style of collapse in which we have a period of high oil price, allowing unconventional production, leading to tough economic conditions, leading to demand-destruction, leading to a price-collapse, leading to shortages as some sources become non-viable, leading to a spike in prices.

Meanwhile the World continues to consume the oil, meaning that next time demand is high, a greater percentage of demand will need to be met from unconventional sources, requiring an even higher price. All this against a background of increasingly unsustainable debt.

The final arbiter is EROEI. As this continues to fall, we will have to adapt to a lower energy economy, either by transition or collapse. I don't see too much of the transition going on at the moment.

I wonder if anyone has actually asked the question; all this debt that the shale industry has accrued - how are they going to pay it back now that we have entered a regime of lower prices?

emordnilap · Post by **emordnilap** » 03 Dec 2014, 11:43

kenneal - lagger wrote:The environment is doing pretty well at the moment, all things considered. The low oil price is likely to bankrupt most of the tar sands oilcos so that mucky stuff will be drastically reduced in output. Fracked oil is also pretty marginal.

So:

The frackers go out of business, leaving their trail of destruction behind.

The wells fall into disrepair, leaking methane and all the rest of the toxic shíte.

Global warming continues.

There's a shortage of fossil fuels, so the price goes back up.

So the frackers start again.

The price goes down again as demand dies.

Rinse and repeat.

An interesting variation is when the frackers successfully lobby government to subsidise them with taxpayers' money.

Tarrel · Post by **Tarrel** » 03 Dec 2014, 12:03

An interesting variation is when the frackers successfully lobby government to subsidise them with taxpayers' money.

..Or when even conventional oil producers do so. The North Sea lot are already asking George Osborne for tax breaks. We'll see what happens in half an hour, in the Autumn Statement.

emordnilap · Post by **emordnilap** » 03 Dec 2014, 12:13

Tarrel wrote:
An interesting variation is when the frackers successfully lobby government to subsidise them with taxpayers' money.
..Or when even conventional oil producers do so. The North Sea lot are already asking George Osborne for tax breaks. We'll see what happens in half an hour, in the Autumn Statement.

Oh. I thought they were already subsidised by their tax breaks and other government supports.

Plus the various insidious subsidies such as no tax on aircraft fuel.

PS_RalphW · Post by **PS_RalphW** » 03 Dec 2014, 12:50

I think North Sea drillers are subsidised in the same way as electric cars. The 'subsidy' of £5000 for a new Nissan Leaf is very close to the 20% VAT tax on its purchase price.

More expensive electric cars are a net tax gain to the treasury.

emordnilap · Post by **emordnilap** » 03 Dec 2014, 14:07

Osborne's climate change action

£2.3 billion for flood defences
£15 billion for road upgrades
Tidal lagoon energy project included in national infrastructure plan
Tax cut on North Sea oil and gas profits
Sovereign wealth fund for shale gas proceeds in the north of England

Post by **kenneal - lagger** » 03 Dec 2014, 14:11

emordnilap wrote:Sovereign wealth fund for shale gas proceeds in the north of England

That's not going to be very big at the moment is it!

raspberry-blower · Post by **raspberry-blower** » 03 Dec 2014, 21:27

emordnilap wrote: Sovereign debt fund for shale gas proceeds in the north of England

There - fixed it for you.

Any talk of any profits from UK shale gas exploration is delusional

biffvernon · Post by **biffvernon** » 03 Dec 2014, 22:02

PS_RalphW · Post by **PS_RalphW** » 04 Dec 2014, 06:26

Thinking about the cut in stamp duty that is being hailed as making housing cheaper for house buyers, this will do no such thing. Houses sell for precisely the amount the buyer can afford. House sellers will immediately increase asking prices by the amount of the cut, as supply and demand have not changed one iota. This will increase profits for house builders and people selling large houses, ie the rich. A brilliant tax cut for the rich disguised as a tax cut for the poor, and trumpeted by a crudulous, indeed stupid media.

Tarrel · Post by **Tarrel** » 04 Dec 2014, 07:18

PS_RalphW wrote:Thinking about the cut in stamp duty that is being hailed as making housing cheaper for house buyers, this will do no such thing. Houses sell for precisely the amount the buyer can afford. House sellers will immediately increase asking prices by the amount of the cut, as supply and demand have not changed one iota. This will increase profits for house builders and people selling large houses, ie the rich. A brilliant tax cut for the rich disguised as a tax cut for the poor, and trumpeted by a crudulous, indeed stupid media.

Also, I imagine the old system would have had the effect of suppressing some prices below the 250k threshold. Those wanting to make their properties more saleable could have leveraged the stamp duty step-change. This artificial brake is no longer there, allowing those prices that may have been crowding below the 250k "lid" free-reign to rise above this level.

3rdRock · Post by **3rdRock** » 04 Dec 2014, 07:54

Yesterday, the dreaded Daily Mail presented the following chart:

In today's paper, they've revised it to hide the fact that a house valued at £250,000 (the average house price - allegedly) will see no change in the stamp duty. £2500.00 yesterday. £2500.00 today.

Still, the changes keep the wheels on an increasingly unstable wagon for another few months I suppose.

The Conservatives - a party for the people. Remember, we're all in it together.

Tarrel · Post by **Tarrel** » 04 Dec 2014, 08:47

The Conservatives - a party for the people. Remember, we're all in it together

He actually said that at the end of the Statement yesterday!

Post by **clv101** » 04 Dec 2014, 22:05

As we know house prices are set by the amount of money the buyer as to spend.

With the stamp duty falling, the buyer now has a couple grand more to spend on the house. House prices rise by a couple grand, sellers pocket the extra, the public purse loses out.

...wealth transfer from the public to house owners. Same old Tories.

Little John · Post by **Little John** » 04 Dec 2014, 22:26

clv101 wrote:As we know house prices are set by the amount of money the buyer has to spend.

With the stamp duty falling, the buyer now has a couple grand more to spend on the house. House prices rise by a couple grand, sellers pocket the extra, the public purse loses out.

...wealth transfer from the public to house owners. Same old Tories.

Precisely so