368. OPEN THREAD
To everyone: I've deleted this post because my reasoning was shoddy, and it didn't hold up to scrutiny. Please accept my apologies. I will do my best to ensure that Peak Oil Debunked keeps a higher standard in the future.
There were some good links in the comments which I will post here:
Juan: WITH ALL THE TALK ABOUT PEAK GLOBAL OIL SUPPLY, WHAT ABOUT PEAK OIL DEMAND?
Interesting video showing how supply and demand curves interact in peak oil:
Brother Cadfan:
Goldman Sachs obviously aren't liking the decrease in oil price over the last few days!
Link
Otherwise, feel free to use this as an open thread.
JD
posted by JD @ 5:43 AM
29 comments
29 Comments:
As usual, please use the Name/URL option (you don't have to register, just enter a screen-name) or sign your anonymous post at the bottom. The conversation is better without multiple anons.
Thank you,
JD
Oh, the post wasn't that bad.
And there was much value in the exercise. I do have this idea brewing; In the short-term, oil demand is inelastic, at market prices. That is, a rapid rise in prices doesn't dent demand much.
Therefore, if speculators can raise the price on the NYMEX, demand does not wither immediately. It looks like the market is validating the demand.
In the longer term, demand begins to stall. The manipulated price of oil starts to encourage too much production and decreases in demand -- and these trends are also inelastic. The guy with the scooter, or who rents an apartment closer to work does not suddenly return to old ways.
The oil bulls, thug states, and financial quislings all had a wonderful run in the last five years. They took great advantage of the short-term inelasticity, and constantly shoved the price up step by step. Congratulations Goldman Sachs, Iran, Venezuela, and quisling commodity and hedge fund operators et al.
Now, the bull-quislings are running into a wall: demand is falling. The medium-term market responses are happening. People carpooling, driving less, vacationing near home etc.
The big results are still ahead -- people moving closer to work, smaller cars, higher mpg trucks, better mass transit. The GM Volt is an OPEC/Goldman Sachs-killer.
Get ready for the Mother of all Oil Price Corrections, sometime out there, just a matter of when
good job JD. too few people these days will admit they're wrong. I think this shows how valuable you're peak oil analysis is.
Fair decision JD, far too many people adopt dogmatic positions, and simply repeat the same unthinking nonsense ad nauseum, e.g Benny Cole.
Economics is one of those systems which is composed of simple rules, but their interaction produces an infinitely complex result. The video gives a good illustration of how the dynamics work.
JD, you just scored huge points in my scoreboard.
It's always good when someone accepts their mistakes. Makes me trust your other rationales more.
I don't know if anyone is interested, but I combined a few figures posted on the site to create a spreadsheet model of potential demand destruction across all oil uses likely to be affected by a decline in available oil in the U.S.
I used the ASPO decline model to model global decline, which I gather is something of an intermediate scenario among the best depletion models out there (Laherrere, Staniford, etc.)
Given the likelihood that Asia and oil producing states will show less demand destruction in response to price signals than the U.S. for future oil (as is the case now) I assigned the United States a somewhat steeper decline rate. The model demonstrates that if Asian and exporting countries continue their explosive growth in oil demand, it will put an incredible squeeze on the U.S. and other OECD members. I also made the pessimistic assumption that that there would be little mitigation from biofuels, which is probably more true in the 2015 time frame than the 2030 time frame. The end result was assigning the U.S. a 50% cut target for 2030.
Although many different scenarios can be envisioned, the results generally suggest that a non-doom transition through 2030 is likely with reasonably extrapolated technology improvement and conservation. On the other hand, it also will likely involve significant contractions in market size in certain sectors such as trucking (to be partially replaced by rail), which are likely to cause significant economic disruption if not properly anticipated. It is also clear that major increases in personal transport efficiency must be achieved for any scenario to work. Finally, it is clear that food production and its transport are unlikely to be a major problem given their relatively low level of oil usage.
Anyway, I can try to figure out a way to pass along the .xls if anyone is interested in playing with the numbers to see what the effects of different depletion rates, breakthroughs in different sectors, etc. are. I think it might give us a better sense of the implications of technological advances in different oil-related fields over the next few years.
I have been reading your blog for a long time and enjoy it. The comments you allow are always very good too. There are many other good energy blogs out there too. There is also a lot of hype. Your's along with others stay close to the facts. The ones who mix politics in are hype, spin, bull. You used to talk more about electricity. You made me believe electricity powered by solar, wind and tides will save the world. From another blog I caught the Arabian phrase. "The stone age did not pass for the lack of stone."
When was the last time you heard of a big, bad Corporation capping the sun, or the winds, or the tides? J.C., Sr.
I liked the posted video. The discussions of peak oil routinely leave out the fact that vast energy inefficiency has accumulated in our lives due to the prolonged presence of cheap oil or energy supplies. I mean just look at the migration to the suburbs and the decline in city centers over the last 50 years along with the rapid rise in SUVs.
Oh yeah, but the jobs are in the city.... I'm not a doomsayer, I see so many ways to mitigate our consumption. You only have to ask yourself at what price do people give up or change what they "need" and reassess their lives. I just came across your blog, peak oil needs a lot of debunking. People forget basic economics. We'll never run out of oil. It'll remain a niche product somewhere I'm sure. You'll only see worldwide supply peak oil and depletion if you could hold oil prices artificially low.
I just started my webcomic to point out some of the vast inefficiencies in peoples lives. Two years ago, we cut our consumption 75% and recently cut it by another third. No chevy volt needed.
"Cramer attributed the first trend, the drop in oil and gas prices, to the fact that the U.S. has cut back on usage. The cost just got too high for consumers to handle. Plus, there’s no room left for oil in our storage facilities, even worldwide, he said. Cramer had been calling a $150 per barrel target price, and it appears the level was $148. Oil's been down ever since it reached that mark."
http://www.cnbc.com/id/25722926/
Looks like even Cramer now has this thing understood
I think oil is going down and i enjoy your bog very much. However, with regards to the name of your blog and your disclaimer, there is only one idiot and it's you. You call yourself "peak oil debunked" and then you say you believe in eventual peak oil. No wonder people think you reject any peak notion. So...these people are not idiots at all. You're the idiot, and you should change the name of your blog, because it's an excellent blog and it's too bad that is it tarnished by the name you chose for it.
Cheers
I don't think the name 'peak oil debunked' is all that bad.
*Oil depletion* is a very serious topic (although we must note that the record of those who try and forecast it is not really that great!). It is best left to geolists/geophys and economists, who know what they are talking about.
The term 'peak oil' on the other hand has been misappropriated by rather cultish individuals distinguished by their lack of qualifications on energy (Kunstler, Savinar, Heinberg) many of whom arrived at peak oil not through scientific rigour but rather because it replaces whatever doomer scenario they believed in previously and was invalidated by observation e.g. Y2K. I would argue that peak oil is a rather dangerous offshoot of environmental extremism, in fact. Rather than JD changing the name of his blog, I would like to see the Oildrum ditch the doomers and get back to its original purpose, ie oil depletion.
JD, Brother Cadfan,
What would you say about some of the 'doomers' on The Oil Drum like Prof. Goose, DaveMart, etc. who insist that they started out optimistic but have become more and more pessimistic just because of the actual developments?
jd walters
Thank you for your question.
I'm actually only a few years older than yourself so the whole oil depletion problem I find highly relevant. However I can tell you that if any of my undergrad students produced (some) of the work presented as fact on the Oildrum to Hades they would be going. I have many relatives who work in the oil industry and there are problems; not necessarily like the ones the oildrum website focus on. Matt Simmons I think understands (part of) the true problem behind oil; underinvestment in infrastructure and an aging workforce. Many of the most promising areas for increased oil production are not areas of the world many oil workers wish to work in. The reason I am 'optimistic' is because I know from my science background that solutions exist. The sad thing is, it will involve nastiness like coal to liquids (we won't get into the nuclear debate here). This will damage the environment. Kenneth Deffeyes know this. You must understand also, having a PhD is the not the be all and end all and just because some 'peak oilers' may have one doesn't make them an instant expert on coal, uranium, indium, galium whatever. If Prof Goose is so concerned, then the correct course of action is to reveal yourself, write a paper with your hypothesis and your theory/experimental observations and publish in a peer reviewed jorunal!
Best wishes,
James
The video here is a good way to explain supply and demand. It does make one assumption though. That demand destruction will outpace depletion rates.
Many make the same argument in reverse.
I guess for the near term future this is the Q of the day. The long term future is more clear. Sooner or later, unless some new energy source hits the scene, decline will far outpace demand destruction.
As for now demand destruction is alive and well where I live.
I drove from Santa Monica CA USA to San Bernardino last Friday. I left SM at 4:30 pm. Last year (and for as many years back as I can remember)this was a 3 hour drive in stop and go traffic all the way. Friday it took 55 minutes and I went around 70 mph the whole way.
Shiner:
I commute from near Dodger Stadium to work on Robertson Blvd. When I started last September, it was a solid hour, and then only if things went well. Now it is 45 minutes.
I never used to see scooters, and now I would say I see several, maybe even 10, on the commute.
I plan to buy a scooter soon myself. It will pay for itself in a year. My other plan is a diesel that runs on WVO, but everybody has figured this out, and teh restaurant no longer give away their old grease.
Oil tanking hard today. I think we have seen the worst in oil prices for a generation.
Mr. Price Mechanism swings heavy lumber if you get it his strike zone, And we are there now, with a slowball right down the pipe.
Some people keep saying "Chindia." But China and the developing world's demand rose sharply when oil was cheap.
There are still problems with thug oil (we have lots of oil, only thugs control nearly all of it), but we have greater strength in our innovations and adaptability.
It appears the IPCC agrees with JD on teleconferencing:
http://www.treehugger.com/files/2008/07/ipcc-scientist-encourages-video-conferencing.php
Wow, 16 comments so far, and only one troll going on about the name.
From what I gather, the idea is to debunk the doom culture surrounding peak oil as well as some of the flawed theories treated as fact, not necessarily peak oil itsef.
Mo,
Since everyone who comes to this blog insists on talking about the title, I'm going to give and add my two cents. This blog is debunking the Peak Oil (capitalized) movement, not the eventual, geological moment of peak oil (lowercase letters) production. This is only the 78,934th time this has been addressed here.
Regarding experts becoming pessimists (and speculation/depletion rates/refinery margins);
Professor Robert Kaufman at Boston University's Centre for Energy Studies has given a lengthy talk on oil depletion, offshore drilling and speculation, generally aimed at "dubunking some of the persistant myths" that surround the current debate on the matter.
It's a longish talk--a teleconference actually, with journalists listening and submitting questions via e-mail. However,despite the length, he never rambles nor pontificates and it's quite worth the listen. Not much was news to me, however, I found his future projections on the current 'energy transition' disconcerting because of how vague projections for the near future are and that he anticipates that the transition to new energies could be smooth or really quite bleak. Listen for yourself...there is a good PDF slide show to go along at the site;
www.facsnet.org
Scroll down and just look for
"Pain at the Pump"
At least he is a published, peer-reviewed academic in the very field he lectures on, unlike some others.
Also, this is a very handy, succinct summary of the factor leading up to our current pricing of oil fuels. He tackles speculation, offshore drilling, depletion, and estimates for future finds and extraction.
Stuck in Shizuoka
I got so tired of all the doom-and-gloom that I googled "peak oil debunked," to try to find a different viewpoint.
Lo and behold, I did!
Great site. Great name. Keep up the good work.
"The video here is a good way to explain supply and demand. It does make one assumption though. That demand destruction will outpace depletion rates."
LOL
Shiner, you simply can't have depletion rates going faster than demand destruction (theoretically)! If there is no supply, then price goes up so astronomically that in the end there is no demand. Supply constrains demand, so that demand never outpaces supply.
That's why oil got to 148 dollars, to destroy demand.
The only way that you will have more demand than supply is if price is regulated far from the market and its price signal doesn't tell demand that it should go down. The direct consequence of that is that you will get shortages. Of course, there is no thing as a perfect market, so one can expect some shortages now and then, in some stressful situation.
Did I hear oil at $147? How about $127. And surprise -- now Goldmand Sachs says oil will trade below $100 in a couple years...do I hear $80? $60? How 'bout when the commodity funds start suffering withdrawels? $40? $20?
Can we finally pin some of this down on speculation? Oil is down nearly 18% in less than two weeks. Coincidentally, it began its run down just as the banks began their amazing run up (BAC up over 70% in the same time frame), which also coincides with the SEC cracking down on naked short selling of financial stocks (something that was already illegal, by the way). Free market, my ass.
Blatant manipulation aside, my main fear is that we go right back to our old ways if oil goes back below $100/barrel.
Scooters are great and all in the summer, but the second fall and winter hit, the scooter owners are going to realize it isn't that great of a substitute for a car. Couple that with lower prices on oil and I see the masses hopping back in their SUV's and trucks.
Goldman Sachs really, really aren't happy........
http://www.bloomberg.com/apps/news?pid=20602099&sid=aH5u6XIW16m8&refer=energy
Best wishes
James
they JD thought you might be interested in this
http://www.nytimes.com/2008/07/23/opinion/23smith.html?ref=opinion
A latimes article that suggests using the international space station as an experimental solar collecter and beaming the energy to the surface of the earth.
Thanks shiner, that is interesting.
Oil down to $124...hmmm..makes you really wonder what the hell is going on. Speculation, probably so. Supply vs. Dmand, hardly...
It's funny, really because Goldman and others keep citing China and India for "runaway" growth, yet the numbers tell a different story esp. you put these numbers against our demand destruction in the U.S. alone. Well, perhaps their days of making money hand over fist while we average folk suffer are finally done....I hope so in a way, but then I don't, either...
I want us here in the States to get off of imported oil, and to conserve enough so much so that our own production can more than quench our thirst...for many years, while other things begin to become more common place...
-Justin
Stuck et al,
Are you all really suggesting that we should listen to people whose credentials are actually RELATED to the field, instead of amateurs and (probable) hacks?
Pfft. You all so crazy! Next thing you'll tell me to actually study economics from economists to see how economies react to energy crunches! You're all a bunch of lunatics, I tells ya!
Seriously, though, it's nice to see real experts weighing in on the subject. I hope we get more Kaufmans and fewer Savinars, because then we can finally get a clear picture of what the hell is going on.
Only then can we truly start making sense of the future, whatever it ends up being.
Regarding the suggestion of beaming energy via microwave from space to earth. There are some fundamental problems: The divergence (angle) of a beam, scales with the ratio of the transmitting antenna size to the wavelength.
tan (theta) =(approx) lambda/size
In this example:
http://en.wikipedia.org/wiki/Wireless_energy_transfer
the suggested size is 1 kilometer diameter space transmitter for a 10 kilometer diameter earth based receiving antenna.
The opinion author from NYTimes has a vested interest, as a recipient of tax money before (Nasa Employee), and most likely as a lobbyist or consultant today.
The best we can do today, is to concentrate sun light using micron thick metal foil as space based mirrors, and designate large geographic areas as earth based solar power enhancement areas, and put those in areas with limited bad weather. And I don't claim this will be cost effective.
Putting solar cells in space, and generating significant amounts of electric power, and beam it back to earth, is something we will be capable of about the same time we have finnished the space elevator, and the fusion power plant. Oh, wait a minute, why do we need a space based solar power station if we allready have a fusion plant?
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