376. NITROGEN USE EFFICIENCY (NUE)
One of the most far-fetched peak oil scares is the idea that peak oil is going to cause mass starvation because fertilizer is dependent on oil. This isn't even remotely true, and if you're new to peak oil, this article has all the info/links you need for a more realistic understanding: PEAK OIL AND FERTILIZER: NO PROBLEM.
Generally, the peak oiler alarmist approach is to look at the fertilizer problem (and everything else about peak oil) strictly through the lens of supply, i.e.: We need natural gas to make fertilizer, and when gas starts running low, we're going to be in big trouble. Even that statement is wrong (because fertilizer can be made from coal, or hydropower, or nuclear), but it also ignores the potential for innovation on the demand side, which is where the real action is at the moment.
For example, Arcadia Biosciences has developed nitrogen-efficient crops which provide the same yields with 1/2 to 1/3 the fertilizer:
...farmers can reduce the overall amount of nitrogen required by employing new biotechnologies, such as the nitrogen use efficiency (NUE) improvements offered by Arcadia Biosciences. By engineering crops to overexpress a gene that allows roots to absorb more nitrogen, Arcadia scientists have shown that "it's possible for NUE crops to produce the same yield with half as much fertilizer," president and CEO, Eric Rey, says. "In canola, we saw a two-thirds reduction."The Chinese recently announced a nationwide release of genetically-engineered rice, and are working with Arcadia to develop nitrogen-efficient rice:
Seeds bearing the technology have already been licensed to agricultural giants Monsanto Company and Dupont's Pioneer Hi-Bred International in the case of canola and corn, respectively—and even grass seed from Scotts Miracle-Gro Company may one day employ it. Although field trials over the last four years have proved the genetic changes effectiveness, further testing and government approval means that such crops will not be grown before 2012.
"It's a big economic benefit for farmers if they use only half as much nitrogen as well a big beneficial impact on nitrogen runoff into waterways," says Rey, who hopes that this product will be adopted as quickly as herbicide-resistant crops, which only took five years from introduction in 1998 to become nearly 70 percent of the corn grown in the U.S., and is now nearly 90 percent. "A reasonable expectation is that there would be a dramatic reduction, maybe by 2018."Source
China says short world grain supplies have persuaded it to release biotech rice nationwide, ensuring the broadest-ever use of genetic engineering in a food crop. Chinese plant breeders say biotech crops are certain to produce higher yields, forestalling the need to finance costly rice imports for China’s billion-plus consumers.This is a hot area, and Monsanto is also in the game:
[...]
The Chinese have already developed genetically engineered rice strains with bred-in pest and disease resistance. They’re also experimenting with new nitrogen-efficient rice that needs only half as much fertilizer to get top yields. The new rice thus costs much less to grow, and emits far less greenhouse gas per ton of rice produced. They also say biotech rice “escapes” will not be a problem, since they’ve pre-programmed the rice to be hyper-sensitive to a particular herbicide.Source
Monsanto is developing corn that will yield better under normal nitrogen conditions, or to stabilize yield in low nitrogen environments. Last year, the company’s nitrogen trials demonstrated a 5 to 15 percent yield increase across limited nitrogen environments. Across three locations in Illinois and Iowa in 2006, Monsanto’s lead N utilization gene showed no yield drop-off as the N application levels decreased from 180 pounds per acre to 40 lbs./acre. Just recently, Monsanto and a company called Evogene announced a collaboration to improve nitrogen use efficiency in corn, soybeans, canola and cotton. SourceConclusion: The peak oil "fertilizer crisis" continues to recede into the distance like the silly fantasy it is.
by JD
posted by JD @ 4:06 AM
84 comments
84 Comments:
Supply and demand. The profit motive. A well-capitalized world economy, with tons of innovative people. Literally thousands of venture capital firms. Add on the Internet for ultra-rapid dispersal of information.
None of the above strikes a chord with sniveler-doomers. In their world, we never adapt, we never innovate, we never respond to price signals.
We will never drive EVs, build more nukes, we never heard of scooters.
"In their world, we never adapt, we never innovate, we never respond to price signals."
Correct. look at the relative performance of wal-mart. wal-mart is the peak oil place to go to escape high gas prices.
Wal-Mart on track to cut truck fuel use by 25%
http://www.msnbc.msn.com/id/19810648/
Site-specific management(aka precision farming) is another technology to watch. GPS and cheaper tests is starting to make it profitable to map out and tailor the fertilizer, seed and irrigation density across a field to achieve the best use of water and fertilizer and reduce eutrophication.
I know farmers who have used GPS technology for precision farming since the mid-'90s.
Being the agricultural type that I am, if soylent hadn't mentioned precision agriculture, I would. ;)
That said, I do think that practices like precision agriculture and leguminous cover crops would be more likely to be adopted by farmers than genetically modified crops, which have an undeserved stigma in the US and Europe. It is vital that we educate the public about the importance of biotech in tomorrow's world.
There is also work to develop "smart fertilizers", which can mean several things. An example is using polymer coatings for granules that dissolve over time and become available to plants at a uniform rate. This reduces total fertilizer need by reducing leaching and bacterial consumption.
It is well to consider that fertilizer research has stalled for decades. Borlaugh, a fellow you have discussed before, is agitating for renewed efforts.
I took a whack at the subject here.
I would be curious to see what "Bob Shaw" at TOD thinks of this. He's always preaching fertilizer doom and gloom garbage.
-Doomers Smell Like Hippies
If your interested in genetic engineering and microbiology topics, have a ganders at the September the 8th entry here:
http://newenergyandfuel.com
Using microrganisms to gasify uneconomic oil.
Couldn't we just use poop as fertilizer? You should see how green the grass is over the top of my lateral field.
Craig, my parents farm horses, cattle, and goats, and they DO use manure as fertilizer for their alfalfa/hay fields. It works quite well. They hay is then cut and used for the animals or sold at auction.
Oil dumping again today. If the commodity funds start suffering outflows, we could get a speculative spike, but this time to the low side. You want to hold your positions as the price sinks to $40? Hedge funds are levearged up, have to dump...increasing the downward dump.
Look out below. Remember, we thought $60 was high, and that was all of a year ago. And the world's appetite for oil has been decreasing, while output has been rising.
"Couldn't we just use poop as fertilizer?"
We do, but there isn't enough to go around. If that's all we had it would set us back to a Malthusian world where famine became a regular occurrence and human population dropped. Many predict this, even long for this. It's the crunchy rapture.
I have a feeling that we have a long way to go before petroleum bottoms out in price. I wouldn't be surprised to see it under $20 per barrel in the next few years. Why? I think that PO is not provable or disprovable or even debateable. It's not much of a science if you ask me.
ATL:
Congratulations. You are the only person ever to post a more bearish viewpoint on oil prices than myself.
But who knows. Oil hit $10 a barrel in 1998, almost 20 years after the last oil scare.
This time different? Maybe not.
The oil thug states do have nearly a vice grip on oil. Few free states pumping exports.
I think that is the only reason it will not go back to $10 or $20.
But the increasing substitution, conservation and alternative fuels are gong to whack oil hard.
Benny (or anyone for that matter), you seem like a guy who knows what he is talking about. I posed this question to JD in an email and he hasn't gotten back to me, which is fine, I know he has more important things to do than respond to my email seeing that is what pretty lengthy.
Anyways, I believe in alternatives and especially Plug-In EVs taking over in the coming years. The question I have is, do we have enough time to implement these measures? What if for instance, the Simmons and those people are right and 2 years from now, oil is 300 dollar a barrel and we are paying 8 dollars a gallon in gas? Will we be able to get these EVs and Alternatives up and running or will the cost be too much to take on. Or do you not see the price of a barrel every getting that high to begin with? I am on your side, I just like to think about every angle to the problem.
Frankie-
Thanks for the compliment.
The sudden price zoom scenario is a scary one. I give it just the smallest shred of possibility, and only that due to the control of the world's oil supplies by thug states. Geologically, there is plenty of oil.
But, we already saw the price crack at $147. It was not sustainable. And the outlook is for oil supplies to increase for two more years, even in the doomiest scenarios. Additionally, the doomers do not count biofuels, but biofuel output is rising rapidly. Biofuels could supply 3 percent of transportation fuel needs by 2015, and keep rising thereafter. Palm oil is the real deal now (deforestation is a serious concern -- because palm oil makes sense economically), and yields from new palm stock are double old stock.
Then, there is always the upside possibility that thug states do start improving their oilfields, and rejoining the civilized world. We are seeing that now in Libya. Iran and Iraq? We can hope, and those nations could add 5 mbd rather quickly to world supplies. (And yea, the US is not perfect, and under Bush we have made things worse, not better). Mexico and Venezuela? Production is way off, due to poor field maintenance and corruption.
I would say the worst case scenario is that oil can stay above $100 for a sustained period of time, and even that has the positive of encouraging EVs. Above $150? Demand falters, and it falls back down.
It will sap our ecoomy for years to adapt to the higher price regime. We should have spent the last eight years preapring, instead of screwing around in foreign adventures.
But, it is not the end of the world, or progress.
The final result will be cities in which most people drive EVs, and the air is cleaner. That will take time, as in decades, and I hope I live to see it.
Good luck Frankie, I hope the years ahead are prosperous for you. The explosive growth of alternative fuels and EVs could lead to a better world than we have ever known.
Thanks Benny for the quick response. The problem is, I see all these reports that these various Peak Oil sites are making and get very concerned. I worry that if oil makes such a drastic leap, we are going to be up a stream. I also am very optimistic at times because I see the role that EVs will play and hopefully America begins to diversify our public transportation section and move to electric.
I guess one other concern I have is when I saw the chart that JD had of where our oil actually goes. It goes to many things such as plastics as you obviously know. When we think of oil, all we think about is cars and trucks. But there is much more to that.
I agree though that we have reached Peak Demand in the United States. I think anyone who believes contrary to that is a friggin' moron. I mean, our cars will only become more fuel efficient. Our public transportation sector is becoming more electric. Our trucks will be running on more and more biodisel in the future. I don't care if we have 10 million new drivers in 5 years, because the advancements we are making will cancel all of that out.
I still worry, but this site has relieved much of worry because I know there are people out there who want to find a solution. Even many of the staunch POers out there know that electric is the answer.
Have any of you debunking fucktards been checking the news lately? Banks are failing left and right, the economy is in the tank, and good luck getting any sort of car loan at this point. Now just wait till things really blow up. Who the hell is going to be financing the big switch to evs then, Lehman Brothers and Bear Stearns?
Idiots.
Idaho Spud Farmer
Frankie-
I suspect some Peak Oil sites are financed -- indirectly or directly -- by oil speculators, or others with connections to the oil industry. PO sites are there to whip up fears -- The Oil Drum comes to mind.
Idaho Spud Farmer -- what are you worried abut? You will have enough to eat. Seriously, when things are bad, they look very bad, and when they are good, they look very good. Consider dot.com euphoria 1998, or house price mania 2006. Then you have the doomdays of 1979 (oil), or 1987 (stock market collapse) or early 1992 (bottom of real estate).
When everybody is crying and says it will get worse -- that is the time to buy. Although farmland has been doing great, no?
And you can make vodka from potatoes? Eat, drink and be merry.
I think Benny Cole has covered the point of banks going downhill. They are in serious trouble *because* they dumped too much money into commodities because billy-bob couldn't pay hisher mortgage. Chicken and egg situation. And I am in total agreement with Benny that there is an element of peak oil that is being funded by hedge funds etc. One of my friends is a peak oiler, a proper one, and has is afraid of this possibility himself. The Opec countries are on course for the a*se kicking of all time at their current trajectory. The Saudis are the only ones who truly understand. And the answer is coal to liquid and biomass technology. I, personally am very afraid that elements of the peak oil movement will end up inducing a climate catastrophe. If you want to make money, I would suggest either:
Look at newenergyandfuels.com
Or
Sasol - South African CTL firm
Any electronics/semiconductor company.
Cheers,
Heh Spud,
I have cash. I don't need no steenkin car loan.
If I decide to buy an electric SUV from phoenix or lionev then I could in theory make lots of cash in a local delivery business since my prices will not be rising the same as my competitors. I could grow pretty quickly I think but soon there will be competition and the economy will reconfigure around those with cash, electric vehicles, mass transit, scooters and rail.
Don't ya love capitalism?
The funniest thing about the OMGBANKSPEAKOIL segment of the doomer movement is how little they bother paying attention to other countries that have had fiscal crises.
Look at Japan and the Asian Tigers to see an even more serious fiscal crisis (a decade or so ago). Now while I don't claim that Japan is perfect, but how many Japanese starved because they couldn't get decent loans for some time?
Seriously people...
I was just thinking, Frankie, check out the Freddy Hutter website. He collates all the peak oil predictions on one of his pages. Might help put things in perspective.
Cheers,
Thanks for that website, it seems to have a lot of great information.
I have a few other questions though.
(JD, this is a great topic that you wrote about and I apologize for discussing topics that are unrelated to your post but I feel this is one of the few outlets for lively and up to date discussion about peak oil.)
I notice that a lot of articles and POers describe how one of the oil fields in Mexico had declined 33 percent in a year?? Is this information accurate? What is the reason for this, is that field just running out of oil or are there other geopolitical factors at play?
If it peaking and rapidly declining like these PO sites want us to believe, who is to say that the same cannot happen to that massive field in Saudi Arabia?
As far as the Freddy Hutter site goes, why does this individual keep getting banned from the PO sites? Is it because his charts and data are not backed up by fact or are the PO people so close minded that they are unwilling to look at both sides to the story?
Again, whoever responds, I want to thank you ahead of time for taking time out of your day to help me better understand the PO situation in the World today.
Frankie-
I got banned from The Oil Drum, for posting meek, polite challenges to TOD orthodoxy. It is not a "forum," it is likely a front for oil trading interests.
I have e-mailed the CFTC my concerns about TOD, and the cloaked nature of its financing and "editors."
No one at the site will answer an e-mail inquiring if the site or its editors receive funding, directly or indirectly, from oil interests or intermediaries.
On the Canterelli field, the Mexicans milked it, did not maintain it. The elite in Mexico is weak and corrupt. Our elite is becoming so.
I belive the Cantarell field does in fact have a rather high decline rate, largely due to the rank incompetence of the Mexican government which uses Pemex as a cash cow. Ku Maloob Zaap has been a bit of damp squib partially for this reason. The Mexicans do in fact have large potential deposits of oil. I was reading an academic article about the potential of the overlooked Yucatan area quite recently. Now the Saudis have never failed to make their deliveries, and although they do not release much official information oil traders would know pretty quick if there were any proper problems brewing. See Jim Jarrell's Another day in the desert for a technical discussion from a qualified oil man i.e. not Matt 'St' Simmons.
Fundamentally you have to remember that TOD is an advocacy website and they respond by banning the likes of Freddy Hutter because they offer non doomer fetish material. All he really does is collate various forecasts; he has recently added his own theory. He does actually communicate with ASPO and with Bakhtiari (before he died recently) which is probably more than most TOD pundits have.
Who is Freddy Hutter exactly? What does he do and what makes him someone who can believe is qualified to discuss the issues regarding peak oil?
I like the Hutter website because he collates all the data in one place, not distorted. I would venture the oildrum should be treated with some caution if one is after raw data, which as a scientist is what I want to see. He has a profile somewhere on his website and you can make your own judgement. He is certainly no worse qualified than amateur TOD pundits like Dr Staniford. He also seems to have an interest in politics and climate change if you are into that sort of thing. I think our very own JD has a few links to other websites you may be interested in a similar vein.
So nitrogen based fertilizer and GM crops solve the imminent famine issue, just as renewable energy and hydrogen cells 'solves' the energy crisis we are seeing RIGHT NOW. But the problem is, they dont. They could have - implemented twenty yrs ago maybe, but how are they going to save the several billion people living at or below the poverty line and utterly reliant on cheap energy - this new technology will have to be given to them and fully implemented in the next 5 -10 yrs for it to work. There just isnt enough time.
I work in upstream oil and gas exploration. There's plenty of conventional oil left, but its hard to get at and the easy oil is running out fast. We're seeing the effects of that every day in the news, and its only going to get worse. The oil majors are spending billions on unconventionals now - ten years ago I worked on nothing but conventional hydrocarbon exploration, now half the projects I'm involved with are unconventional - coal bed methane, basin center gas, deep sour gas, oil shales, tar sands - you name it. They are spending comparitively nothing on alternative energy research. You're thinking too much like a rich westerner.
jon,
I daresay it's actually YOU who thinks too much like a rich Westerner.
I'd venture to guess that many of the poorest, if not most of them, use so little oil that it probably doesn't matter much to them. Most Africans weren't blessed by the Green Revolution, and much of the poorest Asian agriculture is still done the old-fashioned way (back breaking labor.)
Go live in Asia for a year-- even rich Japan. Go watch how most rice gets planted. That's right! Miserable, bent-over, hard, backbreaking labor. Go live in a farming town in Japan or Korea. Meet the old ladies and old men who plant and grow rice. Look at how all of them are permanently hunched over from the decades of rice growing.
Now, consider that the Japanese farmers got the advances of modern agriculture in their favor. How many in Vietnam, China, Cambodia, Laos, etc. can say the same? How many of those people are simply growing food the way they did before oil became a big deal?
In my experience, most of them.
But that's the problem. Like I keep pointing out with the Asian financial crisis, most peakniks don't know a damn thing about life outside of their Western enclaves-- nor do they care. They like to imagine a world where the average sub-Saharan African has a little combine and uses fertilizer to grow his or her crops. They like a world where rice is grown without the need for backbreaking labor.
That's the world they think they live in. It's not.
There just isnt enough time.
Enough time for what? This is what bugs me the MOST about the peak oil crowd. It's a bunch of soothsaying tied to vague, relatively hard-to-argue statements.
"There isn't enough time."
"It can't be done."
"The challenges are too severe."
Etc.
Start giving specifics. Start showing that the Africans and Asians care.
Start by living abroad and actually seeing how the rest of the world lives, instead of claiming things and acting like they're true because of a challenge on one end of the equation.
but how are they going to save the several billion people living at or below the poverty line and utterly reliant on cheap energy - this new technology will have to be given to them and fully implemented in the next 5 -10 yrs for it to work. There just isnt enough time.
This is also an interesting and vague statement.
It almost sounds like Ehrlich redux, funnily enough. THERE ISN'T ENOUGH TIME. THE POOR MUST DIE. PREPARE FOR MALTHUSIAN DOOM.
(Never mind that Malthus never predicted the population crashes that people think he did.)
Jon, didn't you read the article? China's already rolling it out. Last I checked, China has about 1 billion of those "below the poverty line" people you're gnashing your teeth over.
One other thing, though: define "poverty line." Are we worrying about $1/day poverty? $2/day poverty? American poverty? African poverty? Poverty is a relative state, and you can't use the term as flippantly as you do and expect your argument to have any traction.
Poverty line?
Call me elitist, but in the USA most of the people living below the poverty line are either lazy, stupid or both. As pointed out by others already, in foreign countries, those people who are "below the poverty line" don't want or need oil anyway. Oil could have dried up yesterday and they wouldn't even know.
DoctorJJ
Its strange you should say that, I lived in Thailand for two years. I'm very familiar with South East Asia. And yes, many of them still use water buffalo to drag ploughs around their paddy fields, but that doesnt isolate them from a world that is in the early stages of a global energy crisis! They arent living in the stone age - they have cars and generators and mobile phones, they export their produce, but compared to the western world, they are still poor and their countries are poor - they're much much more susceptible to a global economic downturn that we are. Its a little naieve to say that advances in biotechnology or alternative energy supplies will make one jot of difference to these countries in the short term. By short term I mean the next ten to fifteen years. By 'thinking like a rich westerner' I mean making an assumption that a world undergoing a paradigm shift from limitless, cheap energy to a world where energy is expensive will not have a devastating affect on the poorer nations of this planet.
Or would you like to refute that? Taking into account the the shift in focus the majors have undergone towards expensive unconventionals (I dont want to labour the point, but oil exploration is my livelihood and has been for many years), or the fact that a barrel of oil has quadrupled in just a few years, and the economic upheavels we are seeing right now. Is your head so deeply buried in the sand that you are writing all this off to oil price speculation?
I'm not a doomsayer - I dont believe that we are going to return to the dark ages or be plunged into global conflict, but I do believe that we will, as a direct result of peak oil, suffer a severe a protracted global depression - a lot of westerners will be made poor, and a lot of people in the developing nations will die. If you think that over the next decade or two your job will remain secure, or that your pension will be guaranteed, or your house retain its value, then think again.
Agreed about the phrase 'poverty line' - it was used it a little flippantly. I meant the poor of the world in general. Although the fact that two of the three replies are so keen to argue semantics whilst ignoring the theme of the post is interesting.
Almost every post on this website has something annoyingly naieve in it. I just chose this one at random. The end-of-the-worlders are, in my opinion, a bunch of loons, but then you lot are equally misguided to think that we can make ANY significant difference to the effects a peak in world oil supply will have on our lives over the next ten years.
Jon,
Its strange you should say that, I lived in Thailand for two years. I'm very familiar with South East Asia. And yes, many of them still use water buffalo to drag ploughs around their paddy fields, but that doesnt isolate them from a world that is in the early stages of a global energy crisis! They arent living in the stone age - they have cars and generators and mobile phones
But that's the point. Most farmers and agricultural workers DON'T have generators or cars or mobile phones. Go to India and survey the countryside. Go to China and leave the cities. See how many people actually have these amenities.
Sub-Saharan Africa is no different.
I don't necessarily disagree that this site waxes a bit overly optimistic at times. However, I do think that JD does a service by showing the other side of the coin that most sites interested in oil don't bother showing. The majority of oil interested sites are all about DOOOOOM and DEAAAATH and MAAAALTHUUUS. Most of them don't even get Malthus right anyway (Malthus predicted steady-state, not crashes.)
What I'm saying is that those living at $2 or $1/day poverty levels probably won't even sneeze at the loss of "cheap" oil. To them, $100/barrel oil is already well beyond the threshold of what they can afford.
Now, I agree that we're potentially in for a tough few decades, and I don't think JD has ever necessarily ruled that out.
Agreed about the phrase 'poverty line' - it was used it a little flippantly. I meant the poor of the world in general. Although the fact that two of the three replies are so keen to argue semantics whilst ignoring the theme of the post is interesting.
That's the point: semantics matters a LOT in this case. You can't go into an argument and throw the phrase "poverty" out without taking care to define it. If you make an economic argument, you need to be consistent with your terminology. Saying "the poor" is actually too broad to be meaningful in an economic context because "poor" is a broad term. For a Westerner who's "poor", $140/barrel oil means less driving and maybe a few more heavy sweaters in the winter. For an African who's "poor", $140/barrel oil means pretty much nothing (life sucked before and after.) For the Chinese guy who's in the middle (perhaps the farmer with a combine), $140/barrel oil means making painful choices.
Poor is relative, and you have to take care to define your terms. I didn't mean to make you think I'm only interested in semantics-- I thought my point about the average sub-Saharan African not noticing showed otherwise-- but I do disagree with you.
Why is the crisis the coming 10 years? Why not the 10 years after that? Why is it a crisis?
I mean, I get that we're being pushed to unconventionals. That's no good. I've argued that we make a big and fast move to nukes, wind, and solar yesterday. However, I don't believe that cost, in and of itself, is a "crisis." That's the thing. Demand is defined by the cost of a good. Even at just shy of $4/gallon, I no longer drive. I bicycle. Behavior can and will change on the demand side to meet price shifts.
That's JD's core argument, and what I think you've missed.
And what may actually save a billion Chinese is the fact that they have a government that will simply roll out the changes for them whether they like it or not. Or they'll have to keep shelling out $1b/month in subsidies. Even the Chinese don't have that much cash in their coffers, and I can offer sources for that if anyone wants.
You're right - 'Poor' does need defining in a discussion such as this. Personally, I feel that if the worst a global energy shortage and a protracted economic crisis can do to me is put me on the dole and in negative equity for a few years, then I'm rich. If it means my kids die of starvation, then I'm poor.
"Most farmers and agricultural workers DON'T have generators or cars or mobile phones. Go to India and survey the countryside. Go to China and leave the cities. See how many people actually have these amenities."
I've never been to India or Africa. Ive been to China but never into the countryside - if you have, then I concede your point. If it is as you say it is, then I agree that a hike in energy prices and dwindling supplies will have little immediate effect. However, I have lived and worked in Laos and Thailand, and have spent long periods of time in many other SE Asian countries. I'd imagine they are very similar to many other '2nd world nations' - poor countries with (increasingly) large urban populations. Even if the rural component of these countries (which are now in the minority) are energy independent, they still sell their produce locally, which relies heavily on regional and international markets. They still buy medicine and basic foodstuffs and materials which need manufacturing and transporting. I'm not talking about the Maasai or Bedouin here, I mean the average Thai person, or Mongolian or Pakistani. Its a huge part of the worlds population.
Even if we do include the true rural, energy independent people which you are referring to, I cant agree "that those living at $2 or $1/day poverty levels probably won't even sneeze at the loss of "cheap" oil." . Those that are in a position to do so sell their coffee beans and maize and rice to us, and if they live at a subsistence level, they may receive aid and medicine from us. At the very least, a stable global economy will be less conducive to conflict within the poorer nations. If our world staggers, theirs collapses. So in a world of limited, expensive energy, we get poor, the poor begin to die and the poorest, who were already suffering in a world of limitless, cheap energy, die quicker.
Believe me, the doom and gloom peddlers are as annoying to me as they are to you. I put them in the same category as the people that believe the LHC will destroy the Earth with mini black holes. As Berners-Lee says, the internet propagates this kind of rubbish. However, having said that, I truly believe that peak oil is happenig right now, and that we cant look back at history for guidance or precedent, as we've never really been in this predicament before. We've known it was coming for 30 years and done nothing to prevent it because profit is sacred and must not be jeopardised. The GM crops in this thread are a good idea and should be applauded, but its coming too late! There's an inertia to change with a global population of this size - particularly with the lack of money available to the vast majority of the world's nations and their reluctance to take a less profitable path. My feeling is that it will take at least ten to fifteen years to implement the fundamental changes that you are talking about, and during that time, we, as a people, are going to be in trouble.
I see JD's point and agree with it to some extent - but this again is what I mean by 'Rich Western Think'. You may well switch to your bike with high gas prices, and this will alleviate the problem for a while, but what does the typical 'third-worlder' switch to when they can no longer afford their basic materials to survive?
We are experiencing the very first symptoms of peak oil, in fact, its so marginal that websites such as this can still convincingly debate its existence, and yet a barrel of oil still topped $147. I repeat $147. Doesnt that scare you at all?
Jon,
You raise some good points, and I will just respond to them one by one for clarity's sake (I like clarity, something that most doomers don't bother with...)
You're right - 'Poor' does need defining in a discussion such as this. Personally, I feel that if the worst a global energy shortage and a protracted economic crisis can do to me is put me on the dole and in negative equity for a few years, then I'm rich. If it means my kids die of starvation, then I'm poor.
This is a good point, and something that gets ignored too often. Truth is, most Western nations (if not all of them) are pretty much in the former group. Teeth gnashing is pretty much a waste if you're living in the big rich West.
Uganda? Laos? Maybe not so much. You might be right. But I tend to believe that the poorest and the richest will be the least hit. I'll explain why in a bit.
I've never been to India or Africa. Ive been to China but never into the countryside - if you have, then I concede your point. If it is as you say it is, then I agree that a hike in energy prices and dwindling supplies will have little immediate effect. However, I have lived and worked in Laos and Thailand, and have spent long periods of time in many other SE Asian countries. I'd imagine they are very similar to many other '2nd world nations' - poor countries with (increasingly) large urban populations. Even if the rural component of these countries (which are now in the minority) are energy independent, they still sell their produce locally, which relies heavily on regional and international markets. They still buy medicine and basic foodstuffs and materials which need manufacturing and transporting. I'm not talking about the Maasai or Bedouin here, I mean the average Thai person, or Mongolian or Pakistani.
Dwindling supplies only matters in relation to the price. I suggest you read a bit more of James Hamilton over at econbrowser to get a good idea of what demand means in relation to price in this case. It's definitely not the silly "outstripping supply" argument that many make (including Hirsch.) Rather, price is the chief cause of demand shifts (whether or not supply is actually reduced, that is.) As price goes up, demand naturally goes down.
We saw this this summer as demand plummeted in response to $147/barrel oil, in fact. It would never happen, cried TOD! NEVER! Demand is unaffected by price! Demand for oil = GDP. Blah blah blah.
Bad economics is bad, as they might say on some internet sites.
Even if we do include the true rural, energy independent people which you are referring to, I cant agree "that those living at $2 or $1/day poverty levels probably won't even sneeze at the loss of "cheap" oil." . Those that are in a position to do so sell their coffee beans and maize and rice to us, and if they live at a subsistence level, they may receive aid and medicine from us. At the very least, a stable global economy will be less conducive to conflict within the poorer nations. If our world staggers, theirs collapses. So in a world of limited, expensive energy, we get poor, the poor begin to die and the poorest, who were already suffering in a world of limitless, cheap energy, die quicker.
The problem with this argument is that it doesn't factor in the idea of "substitutes." Despite what doomtards peddle, there ARE substitutes for oil, but they are capital intensive (relatively speaking.) However, they are also getting cheaper by the day. PVs are reaching a price level nobody could have predicted 10 years ago, and I can imagine a world where a lot of those oil-fired generators get replaced by small-scale PVs. Oil-fired combines can be replaced by oxen/water buffalo. Not the end of the world, per se.
Hell, every fossil fuel power plant in the US could be replaced by a nuke tomorrow if need be. And no, I don't believe in uranium doom, since the lowly Advanced CANDU can use the uranium waste that other plants crap out, as well as thorium.
So, why do I think it's the middle "2nd-world" countries that will be hurt the most?
Simple.
What happens to spending in rich countries as inelastic goods' prices rise? Well, they stop spending on elastic goods. Where do a lot of those elastic goods come from? 2nd world countries.
The poorest won't notice (as they're pretty much poor and don't buy oil anyway-- 2.7 billion are priced out of any oil at present as it is) and the richest will just change spending habits.
At least until energy use is rejiggered for the next century. Will it possibly be painful? Sure, why not? I don't believe any large scale event has to be painless. But will many die? I don't think so. For one, oil can be substituted easily in food production. I think what will probably hurt the most, though, is the potential for aspiring middle-class populations being dropped back down to "not quite poverty but close" levels. That's what could suck.
I see JD's point and agree with it to some extent - but this again is what I mean by 'Rich Western Think'. You may well switch to your bike with high gas prices, and this will alleviate the problem for a while, but what does the typical 'third-worlder' switch to when they can no longer afford their basic materials to survive?
I think my point is that there are a lot of options, and that a lot of the supply side worries are focusing on oil as the ONLY option when substitutes exist. I can imagine, for example, China rolling out a huge PV program if worse came to worst. And they have the capital to do so. That's 1 billion of the world's poor, too.
We are experiencing the very first symptoms of peak oil, in fact, its so marginal that websites such as this can still convincingly debate its existence, and yet a barrel of oil still topped $147. I repeat $147. Doesnt that scare you at all?
No, because it topped $147 for reasons not completely related to supply. Also, the price hike demonstrated, once and for all, that despite demand inelasticity, oil demand can be curbed in the short and medium-run for sure, and almost certainly in the long-run.
Actually, the fact that demand dropped so quickly made me realize just how much oil demand is not necessary and how quickly people can change habits and usage. That's a good thing.
jon: Believe me, the doom and gloom peddlers are as annoying to me as they are to you.
Hi jon, welcome to POD.
Don't fool yourself about not being a doomer. You are making a case for massive die-off in the next 10 years, which is pretty much slapping the end of the dial of doomerism.
You seem to think that we need to get NUE (the technology described in this post) up and running tomorrow to solve the fertilizer problem, but that's not the case. The problem is already being solved. For example, China already produces 60% of its fertilizer from coal. Massive fertilizer plants are currently being built throughout the 2nd world in Algeria, Indonesia, Tanzania etc. There is no indication whatsoever that we are in danger of having a shortage of fertilizer in the next 10 years. The plants are either running or being constructed right now, so why is it "too late"? Please present the relevant stats and evidence on the fertilizer industry which shows that we need some radical new technology to come online now to prevent a die-off. All the evidence I've seen shows that world fertilizer production is steadily increasing without any problems whatsoever. As you know, there are still huge reserves of natural gas and coal feedstock. Why would there be any problem in the next 10 years?
Jon-
Oil is dumping, dumping dumping.
The price was simply not sustainable at $147, let alone $200.
People adapt, use less.
As we speak, EVs coming closer to market.
We saw Peak Demand well before we saw Peak Oil.
You can strike oil off the list of things o worry about. We may see $40 a barrel again, maybe $20. Maybe $10.
Now, U.S. leadership.......there is a problem.
I find this sort of article immature and missing the point. It seems to be an ego defence mechanism to try to deal with the enormous fear of a major resource running out. There are ways of slowing down fossil fuel usage as you rightfully suggest -- but it is only delaying the inevitable for a few years or decades longer. A finite resource is a finite resource, and our large, expanding and greedy consuming population is almost totally dependent on oil, coal and natural gas for energy needs. It will be necessary to transition to entirely alternative modes of energy generation in the end, or start to synthesise hydrocarbons to produce, say, plastics and fuel through devices such as GM algae. Nuclear is pretty dirty and really not a very good option -- and a finite resource in itself also. Peak uranium will occur a few decades after peak oil. We need to adapt now, or Malthus will have been proven to be right after all.
I happily admit I am no expert in fertilizers and the science/economics of the fertilizer industry - I have no statistics for you, but there are a couple of points I'd like to make to JD. Firstly, the article was concerned with GM crops requiring less nitrogen - what exactly does your point about "Massive fertilizer plants are currently being built throughout the 2nd world in Algeria, Indonesia, Tanzania etc" try to make? All three countries are hydrocarbon rich and, until recently (i.e until we began to run out), net exporters. Algeria has a lot of conventional gas. Its supporting the country's entire economy. Ironically, I'm associated with the 7th Algerian bid round at this very moment, and in my opinion, they have nothing left to offer. Its all tight gas, difficult to extract and expensive to produce (sound familiar?). I dont know this for a fact, but as the fertilizer plant is partly owned by Sonatrach, and that the Sonatrach/OCI press release states "This new venture is in keeping with our strategy to expand into natural gas-derivative industries that capitalize on the region's competitive advantages." - I think we can assume that the fertilizer plants in the countries you mentioned are being built because of their hydrocarbon reserves. A drop in supply will simply exacerbate the problem, not solve it. I agree that world fertilizer production is steadily increasing without any problems whatsoever", but its increasing on the back of ever dwindling supplies of hydrocarbons.
I'm not denying that we have a lot of natural gas to feed these plants. We have a lot of conventional oil too. The point is we are not finding any more of it! Not in significant volumes anyway (barring the freak Brazilian deepwater discover recently). And yes, the world has plenty of coal. But its dirty, inefficient, unprofitable as an energy source (in comparison with oil/gas) and difficult to process into anything like a useful energy source. Why would a global economy, driven by profit maximization, choose such a poor energy source as coal? Surely that suggests to you that the far more profitable and efficient hydrocarbon energy resource is now in short supply?
Also, I won't insult you by bringing typical gas field decline curves into the discussion - I'm sure you've heard it many times already.
I honestly dont get this website. I havent read all the articles, but I would imagine that its central theme is that we arent experiencing peak oil, the political and economic upheavels we are seeing right now are a product of underhand and clandestine actions of 'thug governments' and oil majors, and that the people attempting to warn the world of the imminent energy crisis are conspiracy wielding doomsayers. And yet to deny the facts we are seeing right now, that the peak oil theory predicted 30 years ago: the steep price hikes and whipsaws we are experiencing in not only oil, but everything dependent on an abundant supply of cheap energy, the hegemonic machinations of the powerful oil-addicted nations , the switch to expensive unconventional hydrocarbons, the absolutely undeniable shift towards the Victorian era energy source of coal (what next, wood? Where's the progress there?) - to deny these things are a result of (as Sean put it) a major resource running out, which is by far the simplest explanation, and claim they either don't exist or are a product of some sort of oil-state/oil major collusion, is in my opinion conspiracy-mongering of the worst degree. I'm only surprised I haven't seen the word 'Illuminati' yet on this site. Apply Occam's razer on the two scenarios outlined above and see what you are left with.
Ari - I read your post, and I would like to respond, but I dont want to kill the thread with an overly long post. I'll pick your points up in a later post.
Benny - its not dumping, its whipsawing. Its entirely in line with peak oil theory and the associated economic turmoil. The only way that the price of a barrel of oil will return to pre-peak figures is by a huge drop in demand, and that will only happen when we eventually implement a sustainable replacement.
The period of implementation and the effects that it will have on society is the entire issue at hand.
Jon,
Like many noobs to this blog you seem to be too focused on the title. Nobody disputes peak oil here. What we dispute is the INEVITABILITY of die off which seems to be a tenet of faith on other sites. While some of the suggestions are theoretical only, it's my assessment that a good 80% are not only practical but LIKELY and F fact, as JD has pointed out, investors aren't waiting for your approval nor an EROI analysis for TOD before investing. So you work in upstream? that's great. I work in downstream and I car tell you right now that the major *I* work at states quite categorically that not only is the future electric but it seeks actively ideas from it's employees on how to benefit.
BTW ire been in Oslo, Norway for a few weeks. I see all-electric mass transit powered by hydro along with electric highway capable neighborhood vehicles. This town is the home of th!nk automobiles.
You personally may not see things happening fast enough and neither do I when I'm back in the States but that's not to say *nothing* is happening. So we will have a painful recession. Bring it byatch. I can afford to lose twenty pounds from any overfed gut.
Ive never seen any oil major conspiracy theory propounded by JD, although other commentators have put forward the perfectly plausible hypothesis that peak oil theory is being abused by some oil majors to justify their environmental destruction vis tar sands and liquid coal etc. Ive been following peak oil theory since before the recent run up in prices; my understanding was that the underpinning theory was oil price would head into the stratosphere and stay there. More advanced supply/demand arguments were only recently added, convieniently to fit the run up in prices. The recent wild price swings correlate too closely with the (mis)fortunes of hedge funds to be ignored.
Would this be Norway - the country with the largest oil reserves in the North sea? Of course they can afford to invest in renewables - they are swimming in oil. Its much of the rest of the world that we should be concerned about.
How on earth can you say "What we dispute is the INEVITABILITY of die off" when we have already witnessed it - an Opinion Research Business survey estimates over 1,000,000 violent deaths in Iraq as a result of the last 5 years worth of conflict.
Go ahead, claim that the Iraqi conflict is not a direct result of the dwindling supply of a finite global hydrocarbon resource - it will mean that I wont have to waste my team reading any more of your posts.
the major *I* work at states quite categorically that not only is the future electric but it seeks actively ideas from it's employees on how to benefit.
How quaint. I'm sure it is electric. What does that statement prove? A couple of years ago, I worked at a European major. They made quite a fuss over investing half a billion dollars on green energy - biofuel research I think it was. That same year we spudded an exploration well - one well - that topped the $300,000,000 mark in costs by the time we reached the target.
Brother Cadfan
I've been following it for a long time too. Price swings were predicted and are to be expected when supply becomes unstable and demand responds to price.
I agree that speculation can amplify the swings. the hedge fund point is a valid one, but I dont think they are the root cause of the swings, the root cause is the shortage of oil.
The price of oil is still very very high. There will always be temporary corrections, but until the world can provide a cheap and ubiquitous alternative, quickly implemented, what do you suggest might force the price down to pre-peak levels as predicted by Benny?
"I agree that speculation can amplify the swings. the hedge fund point is a valid one, but I dont think they are the root cause of the swings, the root cause is the shortage of oil."
What shortage of oil? What countries/people/industries are needing oil and can't get it? The global demand for crude oil had been increasing steadily, until the recent run up in prices, but supply had met it every step of the way. Other major projects are scheduled to come on line and even with projected declines in the operating fields, peak production hasn't happened and won't for a few years. Now with the recent demand destruction, we aren't even close to demand outstripping supply. So I say again, what shortage of oil?
DoctorJJ
I concur with DoctorJJ. Whither the shortage? Where shortages have occured they are not 'real' lack of crude but refiners not willing to make a loss on high oil prices in eg China.
As it happens we are on course for a record year of oil extraction. We'd be even higher were it not for the shut ins in Nigeria. I'm glad you agree that at least some of the rise is down to investment bankers. Many in the oil industry, as I;m sure you are only to aware, toil 12 hour shifts so the crude can be shifted from one spreadsheet to another by an over ambitious twenty-something in a nice office sitting behind his Idiots Lantern thinking he (or less commonly, she) is a master of the universe.....
Even Goldman Sachs today admitted that if oil prices shoot back up it will be due to 'sepculators' re entering the market.
"I've been following it for a long time too. Price swings were predicted and are to be expected when supply becomes unstable and demand responds to price."---Jon
Where's the "unstable" supply? And how do we know these price swings are what happens when "peak oil" hits? Can you provide an example for me in history in which this is EXACTLY what happened when peak oil occurred? Don't get me wrong, I probably know much less about the peak oil situation than everyone here. What I do know is oil is dumping.
Every article I read on peak oil, I see this one clown who copies and pastes the same thing about supply in an irreversible decline and demand rising which in turns leads to a 33 percent decrease by 2015.
But how do we know that demand is going to continue??? And where is the facts that supply is declining?? The only way in which peak oil will be disastrous is if the big oil field in Saudi Arabia begins a rapid decline. I don't know enough about it to determine whether or not it will. I do know one thing, Simmons probably doesn't know much about it either.
Don't get me wrong, I think peak oil will occur in the next 10 years, but it seems like the Doomers out loveeee to manipulate the facts in their favor.
Frankie,
I suspect the clown you mean is one Clifford Wirth. He turns up on any energy/oil related website. Actually, he posted here not that long ago.
If you had a million pounds in your bank - the first year you withdrew 1000 pounds, the next year 1200, the year after that 1500 etc. After some time you discovered that there was only 30 or 40 thousand pounds left, would you still say 'shortage, what shortage?'
Slightly blinkered dont you think?
Everything is traded on expected future prices. The expected future price of oil is high because of expected future shortage (itself being based on hard facts)- resulting in high prices today.
"Other major projects are scheduled to come on line and even with projected declines in the operating fields, peak production hasn't happened and won't for a few years"
So, are we debating the existence of peak oil (which judging by a previous post in this thread, I assumed we agreed upon it's existence), or the severity of the 'die off'?
"Like many noobs to this blog you seem to be too focused on the title. Nobody disputes peak oil here. What we dispute is the INEVITABILITY of die off "
But I know I have a million pounds in bank. Do we know how much oil is left? How much money I have in the bank is a just a tad bit more cut and dry than how much oil is left on the planet, lol.
Hoo boy. I saw Malthus again. Time to make something clear.
Malthus never predicted population overshoot. Here's Malthus from the mouth of a statistician:
"What [Malthus] argued was that humans, and indeed any species, reproduced to the limit imposed upon them by the availability of food. If the food supply increased, the population would increase. Both would also fall together."
In other words, steady state.
"In the Malthusian steady state, the birth rate (β) and the death rate (δ) are equal, i.e. β = δ, so that population growth is zero at the subsistence wage. The subsistence wage, w*, is just sufficient to sustain the steady state labor-land ratio, l*."
Secondly, peak uranium? Sigh. This is another one of those half-truths put out there by the peakologists who can't stand the idea of substitution to something else (WE JUST HAVE TO DIE, DAMMIT! WE HAVE TO!)
Dr. Buzz0 over at DepletedCranium does a good job of covering the basics on the so-called "peak uranium" scare.
http://depletedcranium.com/?p=561
Basically, what scare? If uranium is really truly running out, then so what? Thorium is plentiful and works in CANDU reactors.
Oh dear. Looks like we don't have to die just yet. Pity. I was so hoping for a die-off Malthus never predicted.
jon: I agree that "world fertilizer production is steadily increasing without any problems whatsoever", but its increasing on the back of ever dwindling supplies of hydrocarbons.
Then you are agreeing that your original point -- that's it's too late; we're in big fertilizer trouble, and headed for a die-off in the next 10-15 years -- was unfounded. It is true that hydrocarbon supplies are declining as we use them, but you can only maintain the fear quotient in that statement by ignoring the quantitative realities. The remaining amount of NG, coal, and non-convential hydrocarbons is absolutely huge, and will surely be enough to meet our fertilizer/agriculture needs over the next 10-15 years (or even the next 100 years). Ergo your original point about NUE being "too late" is complete nonsense.
On top of all this, fertilizer production is not dependent at all on hydrocarbons, and in fact fertilizer was originally produced from hydroelectricity. It can also be produced with nuclear power, solar, geothermal, wind etc.
We have massive remaining supplies of conventional fertilizer feedstock, new (actually old) sources like hydropower to turn to when conventional starts seriously running low, and methods for reducing demand like NUE. Sorry, but I don't see the crisis, my friend.
jon: I havent read all the articles, but I would imagine that its central theme is
You lazy asshole. I'm not going to respond to your "imaginings" about my central theme. My central theme is that peak oil is a fact and will happen in the near future. However, it will be a manageable problem because: a) huge volumes of oil are wasted on optional/silly practices like single-person commuting in horrendously fuel-inefficient vehicles, and b) there are huge, new sources of energy to transition to like nuclear and concentrating solar.
jon, your main problem, IMO, is that you are too close to the oil industry, and thus overestimate the importance of oil. Most oil consumption is nothing but lifestyle, and if you look at it carefully, you'll see I'm right. Do people really *need* to drive a car to work? Wouldn't a small electric scooter do the same job a lot more efficiently? For that matter, do people really need to go to work at all in this era of telecommuting and telepresence? Those are the sort of questions this blog addresses. The central theme of my debunking is that we don't actually need oil -- we just think we do due to oil/car company brainwashing.
Every article I read on peak oil, I see this one clown who copies and pastes the same thing about supply in an irreversible decline and demand rising which in turns leads to a 33 percent decrease by 2015.
Excellent point Frankie. That has been the peak oiler mantra for quite some time, although they are now in revisionist mode, trying to get the egg off their faces. According to Matt Simmons, the essence of the peak oil problem is that insatiable demand will continue to soar, outstripping supply, causing insanely high prices. Jerome a Paris over at TOD was counting down to $200 oil, until the price plummeted, LOL. The core problem with peak oil thinking is that it is obsessively focused on supply, and ignores the demand side. Peak oilers think oil is like oxygen, when it is actually more like cigarettes.
jon,
A better example would be an annuity/perpetuity because you can extract from a bank account at any rate you want. On the other hand, the annuity is a fixed amount that you extract at a fairly fixed rate (depending on your temporal needs.)
However, you're forgetting that resource reserves are not fixed like an annuity/perpetuity may be. In fact, resource reserves grow over time. This kind of makes valuing this "annuity" more difficult.
Let's assume you start with $1m in your annuity. You extract it at increasingly high rates, but at the same time, it grows. But there's something else that's funny about this annuity: your use of the fund is affected by your use of other funds you have. Those funds are also growing.
Is this simple? No. But then again, not much IS simple about resource usage. It's only the doomtards that try to oversimplify the situation.
I guess what irritates with this individual (Wirth) is his repetitiveness. At least the people on most of the peak oil sites refute arguments. He has never taken the time to break down an article and point out the "flaws." He just posts that supply is rapidly diminishing and demand is rapidly increasing.
I'm not denying peak oil. I'm just denying that in the next 10-15 years, it will have as big of an impact on people as the doomers would like us to believe.
If you had a million pounds in your bank - the first year you withdrew 1000 pounds, the next year 1200, the year after that 1500 etc. After some time you discovered that there was only 30 or 40 thousand pounds left, would you still say 'shortage, what shortage?'
Slightly blinkered dont you think?
Nothing is more blinkered that arguing with fake figures. We talk about the real numbers here, with sources, not fairy tale figures fabricated to make a false point.
jd et al.,
I'd kind of be interested in a course on peakology. Imagine economics without any real demand theory! There's only one rule for demand for anything: "it increases ZOMG !!!1!1!one"
Then you just slap an exponential curve on anything, misuse Malthus for everything, and you can model anything.
Peakology: the study of how people misuse a litany of legitimate fields to bolster their a priori conclusions.
Frankie - yes, the Doomers do exactly as you say. They did the same thing with the Y2K bug and the whole WMD thing. - I'm not some radical doomsayer. I'm finding it hard to understand that the people posting on this website can't see the obvious - in a world of cheap and abundant energy, we were rich, the poor were dieing and those in the middle were highly susceptible to economic turmoil. In a world of limited, expensive energy, how is this situation going to change? Surely you must see that it will impact everyone. The rich West will be hit financially (loss of earnings/pensions/investments), the '2nd worlders' will be in mortal danger, and despite Ari's feelings on the matter, I cant see how the really poor of this world, who were already struggling, will fair any better when the global economy takes a nosedive.
it really isnt dumping. 18 months ago it was just over $50, having dropped from about $80 a few months earlier. Its still over $90 now. If there really was no problem with supply and expected supply/demand, and it acted as an unlimited and cheap commodity, it should be around the $30/barrel mark (at a rough guess). It's whipsawing as a consequence of the instability in supply I described in the last post.
"how do we know these price swings are what happens when "peak oil" hits? Can you provide an example for me in history in which this is EXACTLY what happened when peak oil occurred? "
Its never occurred before. Not globally. The transition from wood to coal and from coal to oil/gas happened for ecominic reasons - each step-change resulted in a cheaper and more efficinet energy supply. There was still plenty of wood and coal left when the change was made (consequently, the impact on the global economy was negligible). This is the first time a major resource has begun to run out at a planetary level and there is no precedent.
I would add that the folks at TOD have also been puzzled by Wirth's numbers -- apparently taken from Simmons, but may be a misquote.
Separately, interesting further development on THAI that can be read over at Next Big Future.
In a world of limited, expensive energy, how is this situation going to change?
Why does energy have to be limited, though? Unless you're assuming that oil and hydrocarbons are it, there are plenty of sources of energy that can be tapped into. The limitations right now are largely political, particularly with nuclear.
it really isnt dumping. 18 months ago it was just over $50, having dropped from about $80 a few months earlier. Its still over $90 now. If there really was no problem with supply and expected supply/demand, and it acted as an unlimited and cheap commodity, it should be around the $30/barrel mark (at a rough guess). It's whipsawing as a consequence of the instability in supply I described in the last post.
Jon, this is where I suggest you look at market histories. Commodities are almost always affected by market crashes. Investors (particularly institutional investors) look for save havens in times of instability. Every market crash leads to a commodities boom.
Even assuming that scarcity is part of the problem, this isn't a "just variable x or just variable z" situation. It can be BOTH. I'm not necessarily going to deny that scarcity plays a role, but how much of a role? When you regress independent variables on a dependent variable, you're just as interested in the individual coefficients on the independent variables as you are interested in the overall power of the model (though model power is of course important.) What you're doing, essentially, is a "on the napkin" regression with none of the numbers, but instead of trying to understand how both variables (and others we are likely ignoring) have affected the price of oil, you're saying pretty much zilch.
If I were interested in teasing out the root of oil's price, I would probably do an ANOVA regression using most, or all, of these variables in some form:
y1: cost of extraction
y2: speculation premium
y3: supply disruptions (as inflection points)-- Russo-Georgian War, Nigeria, hurricanes, etc.
y4: demand premium
y5: dollar value
y6: US elections (I'm serious)
y7: cost of alternatives relative to oil
alpha: model noise
Then, of course, you have to control for seasonality in demand and supply, as well as the effects of a number of issues with noise.
I admit, freely, that this model is probably well beyond my ability to do properly, and any results I would get would probably be far too simple.
Its never occurred before. Not globally. The transition from wood to coal and from coal to oil/gas happened for ecominic reasons - each step-change resulted in a cheaper and more efficinet energy supply. There was still plenty of wood and coal left when the change was made (consequently, the impact on the global economy was negligible). This is the first time a major resource has begun to run out at a planetary level and there is no precedent.
Bollocks. Pure bollocks. The move to agriculture alone was one where the energy supply became more "expensive" relative to its predecessor. But so what? Price is relative, and what matters is not how much it costs per se, but how much it costs relative to demand.
If oil doubles in price by 2015 but demand is also reduced in half by then, then it doesn't matter. It's not how much it costs, per se, but how much of GDP you spend on it that matters.
Stop oversimplifying the economics, and include the DEMAND SIDE.
Guys,
check this one out:
http://en.wikipedia.org/wiki/Doomer#Common_themes
That article reads like it was written by a high school blogger.
And I'm not exaggerating. It really reads like a high school blogger.
This is a fascinating article by a guy who says stated reserves are extremely conservative...
http://www.theregister.co.uk/2008/09/17/richard_pike_rcs_interview/
I have a friend in the office who believes that peak oil is a conspiracy. He's always sending me links like that. Invariably they are written by morons.
http://www2.eluniversal.com.mx/pls/impreso/noticia.html?id_nota=10206&tabla=miami
http://www.oilandgasinsight.com/file/44956/uae-sour-gas-reserves-overestimated-says-total.html
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBzZ.NHGe6e4&refer=worldwide
http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=419264&in_page_id=3
Its very very easy to bolster your viewpoint with webpage links isn't it?
I'm simply telling you about the differences I've noticed in the industry during the last decade.
The problem with blogs like this is that its too easy to make a statement to argue your point or oppose another's view, then have that statement completely ignored if the other person finds it difficult to dispute. It doesn't happen in normal, verbal discussion.
JD, I've taken on board your point that I am too close to the industry. Your main problem, IMO, is that you have taken on some sort of bizarre, evangelistic role, a crusade for your cause. You've long since ceased to listen to facts.
Hubbert predicted this decades ago and its happening now. We have failed to prepare and now must suffer the consequences. Nobody knows what those consequences will be, including the people posting on this site. The doomsayers predict global catastrophe, you people think it will be a breeze, a minor belt-tightening inconvenience, I think it will have a major impact on the quality of life for people occupying every social strata, as I've said many time now.
Surely we must be due another pointless economic formula at this stage in the thread. Anyone?
Jon,
Surely we must be due another pointless economic formula at this stage in the thread. Anyone?
Statements like this suggest to me that you're not interested in the actual economics of the situation, which makes me wonder what you are interested in. You accuse JD of evangelism. Fine.
But if you aren't interested in the actual economics, then how are you avoiding the trap you're claiming another is falling into?
"The problem with blogs like this is that its too easy to make a statement to argue your point or oppose another's view, then have that statement completely ignored if the other person finds it difficult to dispute. It doesn't happen in normal, verbal discussion."---Jon
Jon, I am not disputing that I new to this topic and do not know as much as I would like. But, would you please point out anything you said that JD, Benny, Ari or anyone else on this site completely IGNORED. It seems to me that they dispute pretty much, if not everything you say. I'm not saying that you are necessarily wrong and they are right but they seem to have valid responses to every argument you make.
Your main problem, IMO, is that you have taken on some sort of bizarre, evangelistic role, a crusade for your cause. You've long since ceased to listen to facts.
This blog is about nothing but facts, as you would know if you had read any of it. Virtually everything I say is backed up with extensive sources. You're the one making unsupported statements and fabricating figures.
Your problem, jon, is that you are a defeatist and have no positive contribution to make to the problem. You seem to think you're not a doomer, but you are one in spades. The hallmark of a doomer is that they never talk about solutions, and piss on every solution, saying it won't work. The only topic they want to talk about is how screwed we are.
This blog is for 21st century people who believe we can move beyond the peak oil problem -- people who want to talk about solutions and things that will work. There are probably a few hundred blogs/sites devoted to the sort of defeatism and doomer swill that people like you are peddling. Surely you can understand the value of having at least one person take the opposite side, and talk in a calm, positive tone about solutions.
Big surprise, I have another question, haha.
Everyone knows that the price for a barrel of oil has risen extremely fast in the past few years and even faster more recently.
The question is, what is the explanation for these skyrocketing oil prices (i.e. 147 in July) if we haven't hit peak oil? I understand that speculators, the depreciation of the dollar and many other factors have played an intricate part.
Wouldn't we expect to see oil back down to 50-60 dollars a barrel or even cheaper if supply isn't out pacing demand? If supply keeps up with demand, then the price should remain relatively constant? I doubt we see oil that ever drops to anything below 50-60 again. Why is it that when hurricanes hit, prices jump so much. In 1992 if a hurricane hit, you didn't see prices raise like they do now, or did you? (I'm on the younger side) What is the explanation for this? Why are prices of oil rising so much if demand essentially equals supply? Why aren't we seeing 4 dollar gas if supply is keeping up?
frankie,
I have a question for you then. Why during the peak of the epic rise of oil this spring and summer, why were OPEC members having a hard time finding buyers for all their oil if demand is outstripping supply?
http://tradingadvisor.wordpress.com/2008/05/16/oil-demand-iran-storing-about-25m-barrels-of-crude-in-tankers-official/
As for oil going up when hurricanes come through, it doesn't always do that. It didn't with Gustav or Ike. It's been dropping steadily despite those storms. It all depends on the mood of the market and how they want to spin it. If a hurricane comes through during a bull market, the price goes up, because the hurricane obviously disrupts Gulf production and shipments. If that same storm comes through during a bear market, the price goes down because the refineries shut down so demand for oil will be down since less will be used by the refineries. It's almost comical how the reasoning changes depending on what the market's mood is at the time.
DoctorJJ
Frankie,
As DoctorJJ pointed out, the increase in what you call gasoline, or pump prices (is that the American term?) this time didn't correlate with oil prices which in fact crashed somewhat in the face of Gustav.
See here and scroll down to Storm Spike http://energyoutlook.blogspot.com/
The price of oil can stay high even if the market is well supplied because of traders putting in what they delightfully call 'the geopolitical risk premium'. They also get narked if they think that there isn't enough slack in the market. If oil traders really believed we were at peak oil we would see oil futures ie oil for delivery in 2012 or whenever should be heading skywards. It isn't.
I actually hope that the price of gasoline remains around 4-5 dollars a gallon for the next few years at least. This is the only way in which Americans, who a largely ignorant, will wake up to the fact that we need a new energy policy which doesn't include a reliance on foreign oil.
I guess I am still confused about how 100 dollar oil is largely because of geopolitical factors? After 9/11, when geopolitical tensions were high, oil did not skyrocket. Why is it now, that we need 8 dollars increased in the price of a barrel and the next day, 6 dollar decreases? This is unprecedented. Are geopolitical tensions really that much higher today than they were a year after 9/11?
Disclaimer: I am not a doomer, just a worrier who is trying to learn the real facts about this situation.
I'll also throw in my two cents here.
Part of the price of oil today is the premium we're paying for the higher financial cost of extraction. As we have to tap into more difficult and more expensive sources, those costs are passed on to the end user.
It's perfectly possible for all sorts of demand to be met but for prices to increase if supply-side costs increase.
My grammar was pretty poor.
Why is it now, that we see 8 dollars jumps in the price of a barrel and the next day, 6 dollar drops?
That seems pretty volatile to me.
Frankie,
Actually, the fluctuations aren't necessarily unprecedented ON THE MARGIN.
Remember that it's not how much the price fluctuates that matters per se, but how much it fluctuates percentage wise. An $8 fluctuation today isn't nearly as much as a $1 fluctuation 30 years ago. Think on the margin.
I guess I forgot to think about it in that way. But a 5 dollar jump today may ultimately raise the price of gas by 30 cents, where as in the past, 1 dollar jump in the price of a barrel may have raised gas by only a few cents. That is a little bit extreme, I know but it brings me back to my original point.
Is 100 dollar oil right now due to geopolitical factors alone and why is oil even at 100 dollars now where as in the past, geopolitical factors essentially had very little to do with price fluctuations from my understanding. After we invaded Iraq, I do not remember huge jumps in the price of a barrel. But, if we decided to invade Iran today, oil might jump to very high levels. Am I correct?
Frankie,
Now I have to tease you:
You need to think on the margin, again, and in terms of REAL cost vs. NOMINAL cost.
In other words: Yes, it's true that a gallon of gas is, today, around $4. It also used to "only" cost 20 cents in some bygone year (let's say 1950s).
Today, the average American makes $35K a year. In the 1950s, the average salary was $3K. In "today dollars," the average person was making the equivalent today of $14K. Gas also cost the equivalent of about $1.40 in $2005 dollars.
So, in other words, you made $14K and spent $1.40/gallon in the 1950s in $2005 dollars. Today, you make $35K and spend just under $4/gallon.
On the other hand, your car is more likely to be more fuel efficient, but you're also more likely to live farther. You also probably have two of the hulking beasts in your family to deal with, versus one. But then again, you also are likely to have two incomes.
Complicated, eh?
Frankie,
I believe in fact oil prices did spike on 9/11. As they did when the Iranians arrested them Royal Navy sailors. The price swings are amplified by speculators quickly entering and exiting the market to make a quick buck. Also as Ari pointed out inflationary pressures and higher extraction cost for some sources tend to amplify things. Now much of the volatility over the last few days is to do with wild swings in currency markets and people dumping their money into oil, gold nat gas, silver etc etc.
Some of you might be interested in this. Personally it confirms what i have long suspected through common sense reading of feeds like Bloomberg.
http://www.earthtimes.org/articles/show/232651,jp-morgan-questioned-on-view-of-oil-prices-report.html
I see your point there.
But, why then is 4 dollar gas causing all the problems is it in our society? Families struggling, the airline industry, automobile manufacturers and virtually every other sector which is cutting jobs in order to afford rising fuel costs?
frankie,
Part of it is spending habits. Americans are much less frugal today than they were in the 1950s, and I suspect that a greater number of Americans live "hand to mouth" than 1950s Americans did.
For businesses, it largely has to do with how they structured their expenses. Airlines don't turn over their fleets overnight if they can turn a profit with the current one and expect to turn a profit with the current one for some time to come. The technologies to fly planes with less fuel were there, but why spend the money on that when you can get a higher return on something else?
Airlines CAN become profitable again, but as anyone who's studied economics will tell you: competitive markets have little profit, and companies with little profit are less likely to invest in capital.
That's one example. As Southwest kicks ass, expect them to turn over their fleet. Others will follow.
Part of the reason for the wild swings has to do with the massive amount of money that is now in these markets.
From this article, http://www.spiegel.de/international/world/0,1518,559550,00.html
Speaking about financial investors,
"In late 2003, they invested only $13 billion (€8.4 billion) in the food commodities business. By March 2008, that number had jumped to $260 billion (€168 billion), an increase of 1,900 percent.
Last year, new investments in the commodities markets amounted to roughly $100 million (€65 million) a day. At the beginning of this year, what had been a steady flow turned into a torrent, with more than $1 billion (€650 million) flooding the market every day. Hedge funds, banks, pension funds, investment funds -- in other words, groups that represent millions of small investors -- are all involved. At first they invested their money in the dot-com market, then in real estate, and now agriculture and the energy markets are the hot new investment opportunity."
This wild increase in the overall amount of money in these markets has significantly contributed to the price increases as well as the price swings. If you have that many more people with that much money reacting to market news, (especially when you consider that many of these managers are really experts in these markets, and are prone to overreact), any news can account for huge price swings.
DoctorJJ
*cough*
http://www.newfarm.org/columns/research_paul/2006/0606/nitrocorn.shtml
Not only nitrogen but winter cover and soil organic matter, which wipes away the Soil vs Fuel argument against using cellulosic co-products of corn, wheat etc (4 us tons or so for the average corn acre).
Can't get tired of repeating the same thing over and over to the americans in this blog: you are paying nothing compared to the europeans for the fuel we use, so stop bitching.
I live in Portugal, EU, and I'm paying 1.5 euro per liter. That means between 8 and 9 dollars a gallon.
It's bad? Hell yeah. It's harming the economy? YES. Is it alike the doomer scenario where people are starving because they can't afford to go to the mall to buy food (or some other shit?)? NO.
People simply consume less and change lifestyles. Choose jobs closer to home, choose houses closer to jobs. Scooters, bikes, mass transit. So that's the real doom nightmare scenario you should be worried about.
barbra,
You guys also have more fuel efficient autos, to be fair. A doubling in the price of fuel means less if you get twice the distance per liter.
That's where Americans can make the biggest gains right now, at any rate. Moving to Volts and Priuses and Civic Hybrids will save suburbia. Which makes me sad, to be honest. I hate suburbia. :-P
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