Review of where we are...

[Lord Beria3]

I first became aware of Peak Oil in 2003 and it is now 12 years on from that date.

Oil prices are up a lot, we have had a massive financial crisis since then - partly triggered by a spike in oil prices in 2008 - but my question is where are we going now?

At what point will PO really start to impact our lives? e.g. real shortages of energy, power or sky-high prices? Is it still a a few decades away and business-as-usual, albeit in a crumbling manner, will carry on until then?

What do you think?

[vtsnowedin]

I think we are already experiencing the negative effects of expensive oil and it will steadily get worse. The failure of the recovery after all that stimulus spending is the most ominous sign. And of course there is the debt racked up by that stimulus spending that will come due and at higher interest rates which will bankrupt the USA as well as other countries that are in the same boat.

[BritDownUnder]

I agree it will be a steady gradual thing. Bar a war a shock is unlikely. The U.S. Has shale for maybe the next 5-10 years. Europe has a reasonable electric transport system. The frog is in the pot and the temperature is rising slowly. The oil producers and companies know this.

[UndercoverElephant]

When is it going to affect our lives? In a couple of hours I am going on an anti-austerity march through Hastings. There's your effect.

The theme of the next few years, including how it is going to affect our lives, is increasing political instability all over the place, including Europe. Islamic extremism, wars over resources, civil wars, land grabs, ocean grabs (south china sea, arctic, probably antarctic)...but this is all a bit remote from us, right?

Well, not really, because it is all feeding into a steadily deteriorating national and international economic-political situation, and it comes back to ordinary people in places like the UK as a steadily deteriorating standard of living. Look at the life prospects of people entering their teenage years right now. Unless they have rich parents, they're f*****d. They're even more f*****d than the 20-somethings who are currently looking at the employment and housing markets and wondering what sort of miracle it is going to take for them to get a decent job and the priviledge of taking on a f*****g enormous mortgage that they'll spend the next 20 years struggling to pay off.

It's not just in the UK. A similar story is playing out all over the world except in China, which is a special case because it is a society of one-child families where, instead of the family assets being split between siblings, the assets of two members of the previous generation are combined for each member of this one.

So I think we should be thinking in terms of "Peak Living Standards", and I'm confident that in the UK the only way is down. The only thing that could change the story is some sort of eco-socialist revolution, involving the bankers, the corporate leaders, the big land/property owners and the rest of the kleptocracy going to the gallows. But even this would just share the pain around more fairly, and delay the inevitable for a bit longer.

[Little John]

I agree with all of this UE. However, I would go slightly further and argue that the only way that we are going to get any population to go along with the real austerity, that is required for at least the next several decades and probably stretching into the next century, is if they can be convinced that all of that austerity is truly shared out equally within a given jurisdiction. In the absence of that, it will all descend into fascism/barbarism and we will lose what there is left worth saving. We will lose everything.

[Lord Beria3]

The theme of the next few years, including how it is going to affect our lives, is increasing political instability all over the place, including Europe. Islamic extremism, wars over resources, civil wars, land grabs, ocean grabs (south china sea, arctic, probably antarctic)...but this is all a bit remote from us, right?

My question is would these things be happening even if there is vast amounts of cheap oil available in the world - e.g. PO is something only to worry about in 50 years down the line?

So, what, precisely is PO - the decline in cheap conventional oil reserves going to impact on our life?

[Little John]

It's already impacting on many people's lives. The crash of 07/08 was, fundamentally, about a lack of capacity of the world to service debt at 160 dollars per barrel. We will, no doubt, get some kind of small and temporary "recovery". But, as soon as the oil price hits the ceiling again, our economies will tank again. I know plenty of people on zero-hour contracts. I even have a mate with terminal cancer who is being forced to go out to work in the last few weeks/months of his f***ing life because of the austerity cuts to benefits. My lads, following their degree, will no doubt be forced to do at least a year's unpaid "voluntary internship" before" even getting a sniff at a proper job. There is also the beginning of the mass migration of half the planet's population from those areas where the collapse is now well underway to the areas where the collapse is less advanced. In turn, causing major social, political and economic upheavals in the host countries. All of which is not even to mention the human catastrophe that is unfolding across certain parts of the Middle East and Northern Africa.

It's already affecting people's lives. What planet do you live on?

[UndercoverElephant]

My question is would these things be happening even if there is vast amounts of cheap oil available in the world

I don't think so, no. If there was an unlimited supply of oil at $15 a barrel then there would be a higher standard of living in many parts of the world that are currently going down the toilet.

Just look at what happens in those parts of the Middle East that have plenty of oil, as an extreme example. They are not progressive societes in any way, shape or form. They are politically (and religiously) backwards, and seriously corrupt. But the people have food, water, sanitation, access to medical care, access to western consumer goods, and on the whole, peace and security. The people are not trying to flee, or start a civil war. The growing instability we are seeing in many parts of the world is directly linked to growing economic insecurity. There are an increasing number of places where the people see no hope at all for the future unless they can get out of whereever they are, and a decreasing number of places for them to try to get to.

[UndercoverElephant]

I might add that it is (obviously) not just about peak oil. Peak oil is just the big, fat cherry on top of a cake composed of widespread and serious overpopulation, declining availability of natural resources of all sorts (fresh water, forestry, fisheries, soil, etc...) and the increasing impact of pollution of all sorts, especially greenhouse gases.

[vtsnowedin]

I might add that it is (obviously) not just about peak oil. Peak oil is just the big, fat cherry on top of a cake composed of widespread and serious overpopulation, declining availability of natural resources of all sorts (fresh water, forestry, fisheries, soil, etc...) and the increasing impact of pollution of all sorts, especially greenhouse gases.

I will second that. It is peak population that creates the demand for more oil then we can continue to pump out of the ground. The trifecta of population, resource depletion,and climate change (human caused or not) will create a very difficult future for those of us left alive.

[Catweazle]

Why is oil currently so cheap ?

I've been wondering about it for a while now. I suspected that OPEC were trying to bankrupt investors in unconventional oil, with a view to increasing the price again once the competition was dead. But this wouldn't make sense if the market was able and willing to pay a higher price anyway - OPEC could simply carry on selling oil and pocketing the big margins they make.

So, it occurred to me that perhaps OPEC believed that either the economy could not stand higher prices long term - and OPEC want to avoid a collapse - or OPEC believe that oil use will be regulated downwards to slow down climate change.

Another possibility is that OPEC want to stifle alternative energy research.

Any ideas what's actually happening ?

[biffvernon]

It is in the short term interest of every oil producer to produce as much as they can as fast as they can so long as production costs are less than the selling price.

Most folk only consider the short term, but if they did consider the longer term they might see climate related production constraint and competition from falling prices of renewables. These factors just provide more incentive to get the stuff sold as fast as possible while there is still a market.

The days when a united OPEC dominated the global market to the extent that they could make more money by deliberately constraining supply to increase price are long gone.

[UndercoverElephant]

Why is oil currently so cheap ?

I've been wondering about it for a while now. I suspected that OPEC were trying to bankrupt investors in unconventional oil, with a view to increasing the price again once the competition was dead.

My guess is not that they are trying to bankrupt UO, but that they want to make investors in future UO projects think twice about whether it is a safe investment. They are sending out the message: "We can still pump enough oil to make sure you don't see a return on your UO investment, so why don't you invest in something safer instead?"

[vtsnowedin]

Why is oil currently so cheap ?

I've been wondering about it for a while now. I suspected that OPEC were trying to bankrupt investors in unconventional oil, with a view to increasing the price again once the competition was dead. But this wouldn't make sense if the market was able and willing to pay a higher price anyway - OPEC could simply carry on selling oil and pocketing the big margins they make.

So, it occurred to me that perhaps OPEC believed that either the economy could not stand higher prices long term - and OPEC want to avoid a collapse - or OPEC believe that oil use will be regulated downwards to slow down climate change.

Another possibility is that OPEC want to stifle alternative energy research.

Any ideas what's actually happening ?

A very good set of questions. I'm still looking for good hard answers to them.

[biffvernon]

I'm still looking for good hard answers to them.

It is in the short term interest of every oil producer to produce as much as they can as fast as they can so long as production costs are less than the selling price.

And that means their net cost after the effective subsidy of inward investment from people who think their sector of the market will become profitable in the future. QE and the new caution around sub-prime mortgage lending will have helped here. It means unconventional production has continued at real production costs that exceed selling price.