Why Peak Oil will never reach $500/barrel

[jpatter666]

http://www.chrismartenson.com/forum/...rude-oil/38937

Brilliant commentary by Erik Townsend (I think this is available to all but let me know if not so I can modify the posting) who has recently also become a member of iTulip and posted similarly great commentary there.

FWIW, Erik pointed me to the Chris Martenson site and I've found it to be equally populated to the iTulip community; very lively, social and well-informed community. I recommend and thanks Erik for the pointer.

PLEASE READ THE FOLLOWING:

Gaahhhhh!! Adding this because of some misinterpretations:

The author (xPat) is a FIRM believer in Peak (Cheap) Oil. In the article, you will see a reference at the top to "100 years of oil remaining". This *is* actually true -- BUT the vast majority of that is NOT recoverable with current technology -- this was mainly put in as a sop to those who think there is still lots of oil (and I admit, genius may strike and we get it all -- I wouldn't bet on it though). There is a post by xPat further in the conversation thread if you wish to know the details.

[hayekvindicated]

Re: Why Peak Oil will never reach $500/barrel

http://www.chrismartenson.com/forum/...rude-oil/38937

Brilliant commentary by Erik Townsend (I think this is available to all but let me know if not so I can modify the posting) who has recently also become a member of iTulip and posted similarly great commentary there.

FWIW, Erik pointed me to the Chris Martenson site and I've found it to be equally populated to the iTulip community; very lively, social and well-informed community. I recommend and thanks Erik for the pointer.

He should qualify that by saying $500 in 2010 dollars. If you get Dollar hyperinflation, $500 oil will arrive in no time.

[Ben]

Re: Why Peak Oil will never reach $500/barrel

Thanks for pointing me to that.

3 year futures are selling for about $90 now.
In 2008 they corrected to around $65
Given the quantity of stimulus since then, and hidden inflation, it seems unlikely long-dated futures would get all the way back down the 2008 bottom.
Suppose they could reach $70.
Then, at worst you are facing a temporary loss of 20% vs an eventual gain of over 60%
That seems like a reasonable bet, though perhaps not if you are using leverage.

Equity Hedges:

It's historically unprecendented to have a new equity bear market (decline of over 20%) within 3 years from the end of a bear market. The 2nd year after the end of a bear market has only seen a decline once out of 8 bear markets, and it was only of a couple of percent. I suggest this is down to the psychology of bear market rallies. We can see this today in how there seems to be momentum behind the rally and the nominal economic recovery. Then there's the stimulus and 0% interest rates.

This suggests to me that the most likely scenario is one where equity markets grind their way up for 2 more years, and then we have a 30% decline, the showdown in government bonds etc that we expect.

The worst that seems likely in the next year or so is a 10-20% correction brought on by one of the crises (sovereign debt, china real estate, attempted withdrawl of stimulus, inflation) followed by a rally as the stimulus keeps flowing. This could present a small buying opportunity as perhaps long dated futures could head back to $80.

In these scenarios, oil will keep grinding up as the economy undergoes a nominal recovery yet at the same time people use it as a store of value. Then we will either get a peak cheap oil price shock as the cause of the 30% showdown, or oil will undergo the correction you expect (just not so soon as you expect, and by then, maybe not so severe).

The peak cheap oil price shock might be delayed some time, if another crisis causes the 30% showdown event we expect before peak cheap oil does (as EJ suggests in his latest commentary). In that case, we will have another buying opportunity.

Alternatively you could argue that we are facing such a bad situation that for the first time ever we'll have a bear market within 2 years after the end of the last bear market. But this seems unlikely.

Grantham goes through these scenarios with similar conclusions in his last commentary.

It's difficult to make a clear conclusion, but basically, don't bet too heavily on a sharp short term collapse in the oil price or 20%+ decline in equity markets.

[jiimbergin]

Re: Why Peak Oil will never reach $500/barrel

He should qualify that by saying $500 in 2010 dollars. If you get Dollar hyperinflation, $500 oil will arrive in no time.

He did mention that in the article itself. Thanks jpatter666 for the link. It was a well written summary of our situation and he did promote EJ and itulip.

[jtabeb]

Re: Why Peak Oil will never reach $500/barrel

This article is stupid!

WTF "the world has 100 years of oil remaining"?

Oh yeah, at what daily consumption rate? Based on what daily flow depletion rate?

You don't specify these two "little" things and you come up with such stupid statements as "we will never run out of coal".

I am not sure how this can be a good article when he doesn't even specify his assumptions for his major premise.

I find it very funny that EJ just a couple of years ago was in the camp of "Why I don't believe in peak oil in one chart". Amazing how things change.

In fact I remember some lively debates on the subject with EJ in NOT camp.

[jpatter666]

Re: Why Peak Oil will never reach $500/barrel

This article is stupid!

WTF "the world has 100 years of oil remaining"?

Oh yeah, at what daily consumption rate? Based on what daily flow depletion rate?

You don't specify these two "little" things and you come up with such stupid statements as "we will never run out of coal".

I am not sure how this can be a good article when he doesn't even specify his assumptions for his major premise.

I find it very funny that EJ just a couple of years ago was in the camp of "Why I don't believe in peak oil in one chart". Amazing how things change.

In fact I remember some lively debates on the subject with EJ in NOT camp.

Jtabeb -- step back and breathe. If you've got points to make, make them and state facts, we're all open to that. Insulting the writer gets us nowhere and honestly I expected far better from you.

[aaron]

Re: Why Peak Oil will never reach $500/barrel

jtabeb, but how do you really feel?

Actually, if you do not mind, I was really hoping you could comment on this thread:
http://www.itulip.com/forums/showthr...ns+wall+street

[ggirod]

Re: Why Peak Oil will never reach $500/barrel

The guy is right, but probably for the wrong reasons. IMHO (I care not to conduct unnecessary research on that which is terribly obvious) the bottom line is the behavior of the proletariat. If gasoline rises to $10 - $15 (2010 prices) per gallon, then carpooling and other coping mechanisms will be invoked and the in-elasticity of gasoline consumption will be disproved for once and for all. Four people in a vehicle cuts consumption to 25% and that is difficult for optimistic pricing models to cope with.

Gradual price increases that lead people to think of the frog being slowly boiled will instead just give time for people to adjust. Shock increases will only increase the adjustment speed. Even with my almost 40 mpg Saturn, I would always think of recruiting riders somewhere over $5-$7.50 per gallon.

So, yes, $500 oil is unlikely, but so are 50 mile daily commutes sans mass transit and other wastes of fuel. It is funny how people stay in denial of their own foibles.

[jtabeb]

Re: Why Peak Oil will never reach $500/barrel

I'm not insulting him. (Hence "This article is stupid") I'm just getting a little sick and tired of these great unqualified assumptions everyone makes without reference to, you know, reality.

Okay "Breathing, Breathing, Breathing", my point IS, if you look at Martenson's work on mine ore grades (and, for that matter, the size declines in oil and gas field discoveries over time) and you can come to a very solid and realistic appraisal of the situation we find ourselves in. A good working title would be "Cheap Peak [insert name of geologically extracted resource here]".

Everything from declining coal ore grades to declining gold ore grades to the shrinking sizes of oil and gas field discoveries show a remarkable trend downward. Second, the extraction of these geologic resources is dependent on Non-"Peak Cheap Oil".

So you have the energy scarcity problem directly interacting with the resource extraction problem. (obviously not now due to our wonderful global financial crisis, global oil demand in the face of the biggest world-wide decline in economic activity since the great depression has luckily or unluckily, masked the effects, which were highly visible in the halcyon days before the crisis).

The Difference this time, (and is IT IS different than anything humankind has ever faced before) is that we have never before faced a situation where we did not have an existing consumable natural resource to turn to. Yes we went from wood to coal to whale oil to fossil oil, but there it is. What comes after fossil fuel and why is it different than EVERYTHING else that we have transitioned to in the past? The answer is THERE ISN'T ANYTHING! We are going to HAVE TO MAKE IT, and we are going to have to DO IT, before the remaining fossil fuels become uneconomic for running a world economy. We need to preserve the resource base that we HAVE so that we can utilize it to build our next energy infrastructure, and must get it done before those resources become unavailable due to the effects of peak cheap oil.

(And yes I know about Uranium, the problem is it is great at producing electricity, not so good at being a liquid transportation fuel). The problem we have is not electrical, it is finding a solution to the liquid transportation fuel problem. And if you think vehicle electrification is the answer (other than for trains, which would be a correct application), you have got some research to do on the amount of materials it would require for full scale implementation (Hint, see resource extraction on Martenson's site). And, it doesn't work for airplanes.

We have a "Planes, Trains, and Automobiles" (And Ships too) problem. We need a "Planes, Trains, and Automobiles" solution to the liquid transportation fuel problem. Nothing else will do.

[jtabeb]

Re: Why Peak Oil will never reach $500/barrel

Your last name isn't Freed, is it?

Anyway, what exactly did you want me to comment on?

Real or manufactured? Don't know.

Insightful and telling, even if fiction? Definitely.

True? In a truth-stranger-than-fiction way, Yes.

The point that everyone misses IS, why were these things allowed to happen? Was wall street operating under some official or unofficial sanction? What changed, why throw these guys under the bus now?
What comes AFTER?

If you are asking these types of questions, I think you will not only be able to know what is going on, but also why and how to profit from it.

(Hint, there is a reason the system broke down)

[jpatter666]

Re: Why Peak Oil will never reach $500/barrel

OK. Question #1 -- did you read the full article, or did you see the 100-year statement and stop. The article makes many of the same arguments you are.

I'm not exactly sure where the disagreement is honestly. Even the 100-year argument I don't have too much trouble with, because he says "it's in the ground". Nowhere did he say it was being produced, or could be easily produced, and the following charts actually pointed out a massive difference between supply and expected future demand.

I thought the salient point was that we are VERY likely to see price controls and massive worldwide government interference. Given one of the major discussion areas on iTulip right now is investing in energy (and oil) I thought this to be an excellently timed discussion.

I don't think anyone is arguing that we are not up against a potentially massive energy crunch.

[aaron]

Re: Why Peak Oil will never reach $500/barrel

I guess I wanted you to comment on it because I think your opinion is worthwhile. How about another hint? Are these guys getting thrown under a bus? (I do not see that... yet)

Last name is not Freed. I am still too discouraged these days to start another business.

[jtabeb]

Re: Why Peak Oil will never reach $500/barrel

I read till that line, stopped, then forced myself to finish.

My entire problem with the article is that when you say things like "there's 100 years of oil in the ground" people think that we have PLENTY of time to be able to react to this crisis. We don't, and we need not just solutions, but IMPLEMENTATION of solutions in the next 10 years. We have to make, FROM SCRATCH, a brand new liquid transportation fuel infrastructure for the entire world, in the next ten years (I figure that's how long we have before our ability to extract new geologic resources is severely impacted by peak cheap oil. Hu)

I think there is only one solution that is suitable (Planes, trains, automobiles, and ships) and at the same time scaleable to meet that kind of demand. Even then, I don't think we will be able to achieve daily production rates like we had in the 05-08 time frame. At best, I think if we did everything perfectly, we could maybe get to something closer to the late seventies/early eighties daily production rates (But most likely a daily production rate similar to what we saw pre 1960 is most realistic).

We've got 10 years, tops. A zinger like "100 years of oil in the ground" does not leave people with the correct appreciation of the immediacy that this threat poses. (SOMETHING they SHOULD HAVE after reading an article like this.)

Hubbert's peak IS ONE STEEP MO_FO!

PeakGraph.jpggraph_201_10_4_2006.jpgEnergyCurveHistory2.jpg

[jiimbergin]

Re: Why Peak Oil will never reach $500/barrel

I read till that line, stopped, then forced myself to finish.

My entire problem with the article is that when you say things like "there's 100 years of oil in the ground" people think that we have PLENTY of time to be able to react to this crisis. We don't, and we need not just solutions, but IMPLEMENTATION of solutions in the next 10 years. We have to make, FROM SCRATCH, a brand new liquid transportation fuel infrastructure for the entire world, in the next ten years (I figure that's how long we have before our ability to extract new geologic resources is severely impacted by peak cheap oil.)

I think there is only one solution that is suitable (Planes, trains, automobiles, and ships) and at the same time scaleable to meet that kind of demand. Even then, I don't think we will be able to achieve daily production rates like we had in the 05-08 time frame. At best, I think if we did everything perfectly, we could probably get to something closer to the late seventies/early eighties daily production rates.

We've got 10 years, tops. A zinger like "100 years of oil in the ground" does not leave people correct appreciation of the immediacy this threat that they should have after reading an article like this.

jtabeb, I guess I understand where you are coming from. If someone quit reading right after the 100 year comment he/she could get the wrong idea, but if they kept reading he basically agreed with you

[jtabeb]

Re: Why Peak Oil will never reach $500/barrel

Okay, "Why change their ways, UNLESS they were FORCED TO DO SO".

Does that make sense?

So what is "forcing" them to do so? This thread is all about that "forcing" function. Lot's of other things too, like the internet, global development, but all of these things do NOT make an empire impossible (They make it a lot more difficult, and a much bigger pain in the rear, but not impossible).

Peak Cheap Oil, DOES make it impossible.

I think our Leaders are making a moral choice (I am Serious, for once). They could have chosen to follow Bush's path where we (the US) burned every last hydrocarbon trying to preserve our empire, OR, give up that empire so that the worlds remaining fossil fuel resources can give us (ALL) a fighting chance on getting to where we need to be in 10 years with a sustainable man-made liquid transportation fuel infrastructure.

I just hope they gave it up soon enough.

B.T.W. If anyone is in a position to get started on a solution right now. P.M. me. There is a commercially viable solution out there, I'm just not in a position to make it happen right now. I've done the leg work for you, so if you have the resources to make this work, drop me a line and I'll hand it to you on a silver platter for FREE (because it is THAT important).