Why Peak Oil will never reach $500/barrel

[gnk]

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

Folks, if you've been following the Peak Oil discussion for any length of time you'd note that EJ did not invent the concept of Peak Cheap Oil. I'm a fan of his macro-econ/finance analysis, but as JTabeb notes, he was rather late to the peak oil party. I don't count that against him -- who among us hasn't been late to the big picture on resource depletion? But neither do I think every article discussing the concept or even the term requires a citation to iTulip. (Not sure the term itself is all that original; thinking back to a National Geographic article from a few years back using similar terminology to discuss the same phenomenon: http://ngm.nationalgeographic.com/ngm/0406/feature5/

Most beilevers in the peak oil theory always understood it to mean that oil extraction would get progressively more difficult and expensive. EROEI also plays a role.

Yet there is a misconception amongst those that have not taken the time to study the issue, to assume a "peak oilist" believes the oil will magically disappear one day. Far from it. It's more nuanced than that.

The term "Peak cheap oil" is indeed a better description that helps counter the erroneous view that peak oil means it will disappear instantly. Thus, regardless of the term and its origination - the process of cheaper oil running out and each subsequent class of oil extracted gets more expensive to extract and refine - is nothing new.

[jtabeb]

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

I said that we can survive this (as in not face mass extinction). I didn't say that we would be able to keep the empire ;)

[jtabeb]

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

No argument. (Because I agree with you)

[jtabeb]

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

Agree but this isn't Martenson's article. It's a good article with a bad promo line (e.g. "100 years of oil left in the ground"). Leave that out, and Yeah, I think it's a very worthwhile read.

Martenson's crash course is fantastic, because it really does lay out the fundamental issues we face as we move closer and then past maximum geologic resource extraction. Very much worth the time (And I even put up a link to in in an Itulip post about a year or two ago).

If you want to know what the "Big Picture" is and don't know yet, it'll get you 80% of the way to a comprehensive understanding. (And do it in a couple of hours, tops)

I HIGHLY recommend the entire crash course.

[Rajiv]

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

A link to the discussion on The Crash Course

[jtabeb]

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

Oops, I guess I'm not the only one!

Thanks for the link Rajiv!

My link got stuffed in Rant and Rave initially (until strenuous objections got it restored).

[aaron]

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

I have not watched it yet, but he has an even shorter course on the site now --> 45 minutes.
http://www.chrismartenson.com/page/c...ar-anniversary

[mliu_01]

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

This article is stupid!

Exactly, I found his stuff is totally biased and have not bases.
If he write the article in 1940, he might say the oil will never reach 20 bucks. Are you kidding me? How will US got out of the trillions dollar of debt without amazingly inflation? There is simply no way. This kind of article is completly nonesense.

The global economy simply cannot afford such prices, and the rules will be changed before they are reached

The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources

ET simply made a few assumptions.
1. Only american uses oil, plus a few europeans. Third world country won't count. like china, india, brazil.
2. USD will never ever crash.
3. There will be no higher inflation not to mention hyper inflation.
4. Govt can produce the oil just like Fed print the money. And Govt will decide who gets the 5 buck a gallon gas and who don't. Life is great, isn't it?

[jpatter666]

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

Exactly, I found his stuff is totally biased and have not bases.
If he write the article in 1940, he might say the oil will never reach 20 bucks. Are you kidding me? How will US got out of the trillions dollar of debt without amazingly inflation? There is simply no way. This kind of article is completly nonesense.



ET simply made a few assumptions.
1. Only american uses oil, plus a few europeans. Third world country won't count. like china, india, brazil.
2. USD will never ever crash.
3. There will be no higher inflation not to mention hyper inflation.
4. Govt can produce the oil just like Fed print the money. And Govt will decide who gets the 5 buck a gallon gas and who don't. Life is great, isn't it?

mliu, I suggest you re-read and rethink; most of your comments are invalid and I'm not sure how you ever got those opinions from that posting.

I'm disappointed by this thread -- I thought we had a more erudite readership than this. I've only seen a few serious postings relating to the actual issue which pertains to investing in oil and the potential political issues involved. The CM site spun the conversation to the main page within a day and is having a decent discussion.

[flintlock]

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.

What you just said above is more brilliant than anything in that article. It's not a horrible article, but most of it just just speculation. Price controls on imports? How do you do that? " You don't want to pay $250 barrel for our oil, no problem, China says it will take all we can deliver". I don't see it.

I agree, I don't think we'll see real $500 bbl oil , but then again I don't think my house will appreciate that much either. It's hardly going out on a limb to predict a commodity won't go up 6x in value. I realize the article was in response to some who do say that will happen, but I just fail to see the brilliance noted in some of the comments section.

Government interference and Military adventures are no doubt huge factors concerning the future of oil, but these days that goes without saying. The article brings up some good points, so sorry if I seem like I'm trashing it, I'm not. It almost reads like two different articles though. On one hand he defends why Peak Cheap Oil will cause oil prices to rise, on the other he tells us why they won't go to $500. Maybe it was just the certainty of his tone.

I will add that I agree with the poster who mentioned that the article reads as if the author thinks the US can dictate consumption and prices of oil to the world. The world is changing fast.

[jtabeb]

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

That's the problem. We think more critically than the CM site here. I say that in jest, but there is a good dose of truth to it.

None of us (I think) are disputing the importance of bringing this subject up for public debate as early and often as we can. And that article did a very good job of laying out the base case.

THE PROBLEM as I see it (And those that seem to share similar views) is that the author ARBITRARILY and COMPLETELY dismisses ANY possibility of crude EVER exceeding $500. (That is bet that I would take AND lay gold and silver on).

Point is, let's look at the OBVIOUS things he misses.

High Inflation
Hyper Inflation
Loss of world reserve currency for the USD
Mid east war involving ANYONE and Iran, OR ANYONE and Israel.
Civil Unrest due to world economies in depression (I Like to call a Spade, a Spade) AND no realistic chance of exiting recession under the CURRENT world monetary/economic system.
Did I mention Hyperinflation? Oh Yeah, okay how about collapse of the USD? (You know, like oil goes for 500 Yuan or $5000 USD a barrel). No mention of this.


And PLEASE don't tell me this stuff is impossible or WILL NEVER happen. (I think we have ALL seen enough impossible or "will never happen" stuff ACTUALLY HAPPEN over the last 18 months to disprove the infallibility of "expertology", don't you?)

The point is, people don't go off the deep end at Itulip like they do say over at ZERO HEDGE. But they are DAMN GOOD at applying critical thinking skills and Picking Apart ANY logical inconsistencies in a theory or premise. Yes, I absolutely mean that, ASK COW if you don't believe me (Right COW?). Cow has filled in my blanks on more than one occasion and shown me that what I said does not match what I "meant" to say.

That's all we are doing here.

There is a MAJOR, HUGE GAPING hole in one part of this article (100 years of oil in the ground), and THAT's all (I think) we are all trying to show.

And Please understand that the REASON that we are all getting so worked up about this GAPING FLAW, is that it is gives a COMPLETELY UNWARRANTED and FALSE sense of security in understanding the "Peak-Cheap-Oil" phenomenon. That is, it leaves the reader BELIEVING that we have PLENTY of TIME to COPE. When that sad reality is that we ARE ALREADY LATE to act. Not TOO LATE, mind you. But we HAVE WASTED much valuable time and there is PRECIOUS Little time left to squander. (Wasting more time like we are doing now in an effort to try and fix THE UNFIXABLE economic system we currently possess certainly does NOT help).

Not an attack JP666, I just want you to clearly understand where some of us are coming from, and I will try to do a much better job of outlining that at the GET-GO, vs. just "shooting from the hip".

I apologize for the initial quip, But NOT for pointing out GAPING holes where they exist.

Fair enough?

"Breath, Breath, Breath" Phew. Glad I remembered! ;)

[jiimbergin]

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

That's the problem. We think more critically than the CM site here. I say that in jest, but there is a good dose of truth to it.

None of us (I think) are disputing the importance of bringing this subject up for public debate as early and often as we can. And that article did a very good job of laying out the base case.

THE PROBLEM as I see it (And those that seem to share similar views) is that the author ARBITRARILY and COMPLETELY dismisses ANY possibility of crude EVER exceeding $500. (That is bet that I would take AND lay gold and silver on).

Point is, let's look at the OBVIOUS things he misses.

High Inflation
Hyper Inflation
Loss of world reserve currency for the USD
Mid east war involving ANYONE and Iran, OR ANYONE and Israel.
Civil Unrest due to world economies in depression (I Like to call a Spade, a Spade) AND no realistic chance of exiting recession under the CURRENT world monetary/economic system.
Did I mention Hyperinflation? Oh Yeah, okay how about collapse of the USD? (You know, like oil goes for 500 Yuan or $5000 USD a barrel). No mention of this.


And PLEASE don't tell me this stuff is impossible or WILL NEVER happen. (I think we have ALL seen enough impossible or "will never happen" stuff ACTUALLY HAPPEN over the last 18 months to disprove the infallibility of "expertology", don't you?)

The point is, people don't go off the deep end at Itulip like they do say over at ZERO HEDGE. But they are DAMN GOOD at applying critical thinking skills and Picking Apart ANY logical inconsistencies in a theory or premise. Yes, I absolutely mean that, ASK COW if you don't believe me (Right COW?). Cow has filled in my blanks on more than one occasion and shown me that what I said does not match what I "meant" to say.

That's all we are doing here.

There is a MAJOR, HUGE GAPING hole in one part of this article (100 years of oil in the ground), and THAT's all (I think) we are all trying to show.

And Please understand that the REASON that we are all getting so worked up about this GAPING FLAW, is that it is gives a COMPLETELY UNWARRANTED and FALSE sense of security in understanding the "Peak-Cheap-Oil" phenomenon. That is, it leaves the reader BELIEVING that we have PLENTY of TIME to COPE. When that sad reality is that we ARE ALREADY LATE to act. Not TOO LATE, mind you. But we HAVE WASTED much valuable time and there is PRECIOUS Little time left to squander. (Wasting more time like we are doing now in an effort to try and fix THE UNFIXABLE economic system we currently possess certainly does NOT help).

Not an attack JP666, I just want you to clearly understand where some of us are coming from, and I will try to do a much better job of outlining that at the GET-GO, vs. just "shooting from the hip".

I apologize for the initial quip, But NOT for pointing out GAPING holes where they exist.

Fair enough?

"Breath, Breath, Breath" Phew. Glad I remembered! ;)

From the article:

so perhaps $500/bbl is possible in nominal terms. But in 2010 dollars, I don’t think the economy could ever support prices anywhere near that high

[jtabeb]

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

Understatement of the year. And Again, just want to make sure people understand the nuances of the subject matter. Fair?

[ThePythonicCow]

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

Yes, I absolutely mean that, ASK COW if you don't believe me (Right COW?).

Moi? (that's Moo with a French accent ;))

[jpatter666]

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

From the article:

so perhaps $500/bbl is possible in nominal terms. But in 2010 dollars, I don’t think the economy could ever support prices anywhere near that high

Exactly. And that's why when I see some of these comments I'm thinking -- did we read the same article?

And jtabeb, I hear where you are coming from, and I agree we've got some great, deep thinking members here (and I do count you amongst them) but I'm seeing way more kibitzing and way less construction than on the CM site (I'm a member there as well).

A few points:
1 ) I don't think he's at ALL saying we have a bunch of time -- look at the early chart showing the massive gap between expected production and demand. The comments on how even the military admits there will be issues in the very near future.
2 ) Regarding the US forcing down oil prices and China saying "we'll take it all". Do you really think China can afford energy at those levels either? That the US/China/Europe/Japan would let a bunch of third-rate military powers bankrupt them?

I think the politics of this, as xPat claims, are *deeply* intertwined and to me, that's a core issue worth thinking about.