NobleSavage
Veteran Member
Why is that?
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Peak Oil
- Thread starter Derec
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Why is that?
That's why I put "vast" in quotation marks.
This also explains why we face limitations no matter what technologies we employ. The reason is peak oil.
Demand did not increase significantly. The point is that it continued even as oil prices tripled.
Peak oil refers to production rate, not reserves:
https://en.wikipedia.org/wiki/Peak_oil
That's why peak oil does not look at oil depletion, only the maximum rate of flow.
When increasing oil production cannot meet increasing demand, then prices go up. Similar happens when oil production reaches a plateau or drops while demand goes up.
To maintain production given higher marginal costs, the oil industry will have to be heavily regulated and subsidized as it faces lower profit margins, and eventually losses. That will involve extensive coordination between economies, especially if the oil will also be used to manufacture renewable energy components, etc.
More details are given in the IEA Outlook 2010 report.
Oil is needed to mine resources for electric cars as well as manufacture and even ship them. Oil is even needed to manufacture renewable energy components plus infrastructure needed to provide power to the vehicles.
And if use is widespread, a lot of oil plus various minerals and even fresh water will be needed.
Actually, not only fossil fuels but even fresh water are needed to manufacture electric cars, together with many other resources, from various minerals to cement needed for infrastructure to distribute electricity to vehicles. Even the heavy machinery used in mining to extract various minerals for such products and infrastructure to power them require diesel, not to mention large container ships to deliver them across extensive supply chains.
Isn't it the other way round? That is, low-end torque gives electric motors a disadvantage?
Finally, if the global economy operated primarily using small cars, to the point that even small cars can be used to mine resources for small cars as well as manufacture and ship them overseas, then this would be a non-issue.
Many of these examples involve mining, manufacturing, and shipping using oil not only for energy but even for petrochemicals.
The catch is that production and marginal costs also went up, leading to higher capex and resorting to U.S. shale oil. The reason is peak oil.
But U.S. shale oil production costs require higher prices, and in addition involve low energy returns. It's worse for oil sands. In fact, that's the reason why we did not resort to unconventional production until prices went up.
Production cost, marginal cost, and capex have gone up. The reason is peak oil.
Also, the global economy does not consist only of the U.S. and China but BRICS and many emerging markets.
Finally, not oil prices but even copper and other commodities face issues. Given that, we may be looking at deflation resulting from the unwinding of U.S. QE.
The data used comes from the IEA and other sources. The sources are given in the graph.
Also, energy efficiency in capitalist systems does not lead to less consumption but more. That's why oil consumption kept rising and dropped as vehicle miles traveled dropped as well:
http://ourfiniteworld.com/2013/01/31/why-is-us-oil-consumption-lower-better-gasoline-mileage/
The argument does not come from the newspaper but from a study linked in the second paragraph.
What you referred to is a documentary. What is referred to in the article is a study, not a documentary.
The argument does not refer to predictions but compares actual data with forecasts.
Actually, it didn't. Debt continued to rise and employment relied heavily on part-time jobs. Meanwhile, other economies continued to weaken, especially Greece, Iceland, and Spain. All that "recovery" was possible due to QE, which started to unwind last year. That's why the BDI remained weak throughout and weakened considerably recently, and why various commodities face similar problems as oil.
Given high marginal costs and rising capex, the only way that the global economy can afford higher oil prices is through more extensive bailouts.
A capitalist global economy requires continuous economic growth. That's why money supply together with energy and material resource use has been on an upward trend for decades. The continuous growth allows for employment for more people entering the job market each year plus a growing number of consumers worldwide who want cars, houses, appliances, etc. The profits earned from sales of more goods and services are re-invested to expand production and fuel consumption further.
NobleSavage
Veteran Member
I'll agree with economic growth, but not energy and material resources. We can have economic growth with less energy, stable population numbers, and recycling.
DBT
Contributor
Up to the point of market saturation, supple meets the needs, wants and income of a population, then economic growth stalls and eventually stabilizes into a 'steady state economy.'
https://video.search.yahoo.com/vide...a&sigb=131flt08g&hspart=mozilla&hsimp=yhs-001
And where did your last cell phone go?
NobleSavage
Veteran Member
NobleSavage
Veteran Member
My last cell phone is sitting on a shelf waiting for me to give it away. I do understand where you are going though. The important thing is that my new phone does more for less. It uses less electricity and is made of less matter. The only real limit in the universe is entropy. For every reason you can give that we are headed for imminent disaster, I can come up with one for why we are not.
DBT
Contributor
Everything is limited, Income is limited for most people, consumption is limited: you can only live in one house at a time, you can only eat so much, have a finite number of cars, TV's, etc, etc. Own too many houses and the cost of maintenance exceeds value, if everyone owns many houses, they cannot be rented. The market is saturated....that's why many economists recognize the principle that population grown is the main driver of economic growth. And why nations which have stabilizing population growth are trying to stimulate birth rates through economic incentives or rely on immigration. But living on a finite planet, this is not sustainable in the long term. Given perpetual growth, at some point demand exceeds the environments ability to supply the demand.
So you are backing away from the $35 prediction?
Funny that many non-investor people are already heavily betting on price of oil staying this low or going lower since the demand for SUVs and light trucks is increasing. Suckers, the lot of them!
Not really. The price of oil is not a random walk, it's based on a physical commodity with its own complicated mechanisms. Including the negative feedback mechanism I explained before.
My bet has a snowball's chance in a freezer. Also:
The insult aside, you seem to have an overinflated sense of your own mind's caliber. Especially since you completely ignore the fundamentals and solely focus on technical analysis.
Market price is a pretty good thing to look at.
Consider the price action since we made our little bet. Oil went down four dollars or so to 44, then it went back up 8 dollars to around 53 (+4 on the original price), down 5 dollars back to 48 or so, back up 4 and now is back down 4. In other words it has gone up about 4 and gone down about 4 since we started. Isn't that exactly what I said? The chances of it going to x+y are about the same as it going to x-y - in this case y = 4.
The price will continue to move up and down and probe the minor highs and lows. If it probes 44 again and breaks that, your thesis is in peril. There is no law that says oil must stay above 40, 35, or whatever. There is a law that it cannot go below zero.
Your bet is saying something like you can flip a coin and it will come up heads three times in a row, I simply took the other side.
I also have told you exactly what has to happen for your bet to have a chance. Oil has to consolidate above $50 or so this month and hopefully make a move above $60 relatively soon. You would have approximately an even chance of winning if it reaches about $67.
Derec
Contributor
What you said is that oil would drop to $35. That did not happen. Not even close.
The market has been hovering around mid to high 40 and low 50s for a couple of months now. That suggests to me that a price floor has been reached. It is not going to go below mid-40s unless something truly crazy happens in the oil markets.
Not law per se but very unlikely in my estimation.
Except that we are not playing with fair coins and (unlike with coin flips) the incremental price movements are not IID.
Of course that has to happen. For a quantity to reach a certain level it must first reach some intermediate level. That's pretty trivial.
The question is, will it drop to $35 first. I still say no.
Derec
Contributor
These problems have to do with things other than oil price. The oil price spike ($147/bbl) in July 2008 triggered the worldwide financial crisis but did not cause it.
High debt levels public and private, high levels of entitlement spending, housing bubble etc. were all real causes. As you say, other commodities other than oil are similarly affected. If oil was the primary cause you'd expect it to behave differently than other commodities.
All that said, we did manage to weather the last crisis without collapse, contrary to prophecies of Peak Oilers. Again, go and read some of the writings on peak oil from a decade ago about 2015. Or go read the FRDB threads from a decade ago. There was a lot of pessimism about what life in 2015 would look like.
Or decreasing the oil intensity of the economy.
Derec
Contributor
Modern industry is complicated sure. And if we were in danger of running out of these resources anytime soon you'd have a point. But we aren't. We do not need to eliminate all fossil fuel use within a decade or two. But electric cars (as well as plug in hybrids) will do a great deal to reduce oil use for transportation.
You are mistaken.
The Achilles heel of the electric car is storage. Batteries still have much lower energy density than gasoline or diesel. However, battery technology has made large strides forward in the last 20-30 years (early GM EV1 still had lead-acid batteries!) and more research is ongoing. At the same time, hydrogen is developed as an alternative energy storage medium for electric cars (a reverse electrolysis reaction generates electricity).
Just because a lot of electric cars we have today are "small cars" doesn't mean that that's the only use of electric motors. I already linked to a bulldozer that uses an electric motor. So yes, a future with all-electric mining equipment is certainly possible if needed.
Petrochemicals are a small percentage of total worldwide use of oil and gas and thus are viable even if oil/gas production drops a great deal, as long as oil/gas use for energy is reduced over time. Thus petrochemicals are really a red herring.
Well limited amounts of easy to extract oil relative to demand means we need to increasingly go after more difficult oil as the time goes on.
That is not limited to US shale or Canadian oil sands but even in Saudi Arabia where ageing fields require increasingly complex and costly extraction methods.
Right. Low hanging fruit gets picked first.
And how is that playing into the peak oil thesis?
It's the interpretation of the data which can be very problematic.
Isn't this going against your thesis? We can lower oil consumption while still growing the economy.
Again, it's the alarmist interpretation of any results that I have a real problem with.
"We are nearing collapse" is not a prediction?
Derec
Contributor
You sound like a broken record.
World oil production was 72 MMbbl/day in 2006. In 2013 it was 75 MMbbl/day. Doesn't sound as if we peaked exactly.
And yes, oil is a finite resource and increasingly difficult to get out of the ground and into a usable form. Which is why I fully support development of alternatives to oil going forward.
Your point being?
You are just repeating yourself rather than responding to what I wrote.
Which is related to oil depletion. At least in Hubbard's model it is.
Both supply and demand are a function of price. If prices rise supply will increase while demand will decrease. Note that these happen over time - some effects are shorter other longer. It takes short time to open wellhead chokes but much longer time to drill new wells and even longer to develop a brand new field. It takes a short time to reduce miles driven for non-essential purposes but longer to switch to a more fuel efficient car and even longer for a city to expand public transit.
Or it just needs higher prices.
What percentage of total oil savings is that?
Much less than would be used otherwise.
Derec
Contributor
While accurate (as far as I can see) about what it takes to produce oil sands, that infographic is quite misleading about conventional oil. It implies all you need is a pumpjack and a borehole. In reality even in a relatively low cost oil country like KSA it takes quite a bit of effort to get the conventional oil out of the ground. Vertical wells are passe - miles long horizontal wells with multiple lateral bores each with an automatic shutoff valve (to take a lateral offline when too much water begins to encroach) are preferred. Large quantities of water must be transported, purified, treated and eventually injected to maintain reservoir pressure. Often fracking is employed on tight rocks to improve flow rates. When oil reaches surface (often with help of submersible electric pumps) it must be processed to remove gas, water and hydrogen sulfide.
Derec
Contributor
It's a major weakness of the model that predicts catastrophic consequences due to oil peaking. Higher prices are a result of oil getting more scarce, yes, whether or not it technically peaked yet or not.
No, they are not based on that premise. In fact, increased production costs are an integral part. Increasing price unlocks more supply precisely because then higher production cost oil can be economically produced and thus enters the market.
Well there are two aspects to it. The results of oil peaking is very much a part of it and what people talk about when they discuss "peak oil". Perhaps we should distinguish between lower case "peak oil" which is the mere fact of a finite commodity like oil peaking and upper case "Peak Oil" which is the model of catastrophic consequences of the actual peak oil.
Derec
Contributor
That's what I said, sort of. Hubbard's original peak prediction was 1995 but he adjusted it by ten years, to 2005. Today, in 2015 we are already 10 years past even this adjusted peak date. 2005 + 10 = 2015. And given the steepness of his curve (as can be seen in your video) we should already be down about a third compared to peak production. Yet, we are not. Even when only looking at conventional oil we are on a sort of extended plateau, which is definitely not part of Hubbard's model.
Nothing is ever fixed.
Petrochemicals are just a small fraction of oil and gas use. As far as mining, most equipment runs on diesel because that is still the most cost effective solution. It is not a technological necessity though. And we did not need QE because of oil.
The only way to have economic growth without using more energy and material resources is to increase money supply, but because money is eventually used to pay for goods and services, then more energy and materials are needed. And if goods and services are sold for a profit, then even more money is created. That's why money supply as well as energy and material resource use has been on an upward trend globally for decades.
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A steady state economy can only take place if all factors are static, including population, energy returns, etc., and that no other problems (from natural disasters to wars) take place. Unfortunately, this does not happen in the real world.