380. A TRIP DOWN MEMORY LANE WITH MATT SIMMONS
We like to wax nostalgic from time to time here at POD, and I thought you might enjoy an amusing little nugget from July 14, 2008. It features our old buddy Matt Simmons making yet another astute call on the oil market:
To help you put this in context:
The commentator's remark toward the end of the video that "commodities are cyclical" triggered the usual subthread of ridicule over at The Soiled Rump, and of course that has long been a staple of PO rhetoric. The peak oilers believe that, aside from some negligible superimposed noise, PO will cause never-ending price escalation, and bring an end to cycles. For example, here is Robert Rapier rejecting a journalist's comment that oil is cyclical:
Journalist (in an article called "What Goes Up Must Come Down"): The length of the cycles may vary, but in the end, oil, too, is a cyclical business.This has been consistently rejected by the grizzled old veterans who run the oil business:
Robert Rapier: Encouraging signs that we are reducing our consumption, but I think the author misses the mark with that last statement. Oil has historically been a cyclical business. This will change when supply growth can no longer outstrip demand. This is going to be the case when oil production peaks, and all signs indicate to me that the erosion of excess capacity is driving the current surge in prices. Unless we have enormous demand destruction (and how is that going to occur other than through very high prices?), or there are a couple of Saudi Arabia’s hiding in the Arctic and soon to be discovered, I can’t easily see supply getting far ahead of demand. That is what would be required to continue the cycles - an oversupply situation.Source
"We're a cyclical business," David J. O'Reilly, chief executive of ChevronTexaco, the second-largest American oil company, said in a telephone interview, "and at the high end of the cycle it makes sense to get the company in good shape and strengthen our balance sheet.I think we're going have to step up to the plate and admit it here folks. Any company which greenlighted its projects according to peak oil theory (i.e. assuming high oil prices) is now getting seriously reamed. The grizzled old veterans were right. Oil is a cyclical business.
"History tells us that what goes up also goes down."Source
So why do the peak oilers keep getting this wrong? My answer is the same as always: Peak oil theory has a systemic bias which prevents its adherents from clearly understanding the demand side.
by JD
posted by JD @ 4:36 AM
153 comments
153 Comments:
As always, 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
And Matt is still calling for crazy high prices...
I find it hilarious that all the doom jockeys on TOD and PO.com are STILL trying to blame the current mess on P.O. Its the same old argument of doom bring "just around the corner". Its been there for quite a while now....
The headline on that video clip sums up my criticism of Matt Simmons. He is presented as an 'ultimate energy indsider'. What qualifies him for this title??
I remember one commentator on TOD who criticized matt simmons that day as hurting the PO cause was vilified for criticizing matt. matt looks pretty bad on a day with oil under 70 after hurricanes and gas shortages in the south.
Matt rarely gets caught with his pants down but I guess it's fair to say he did this time.
Doesn't mean prices will stay this low for long though. We'll see, said the zen master.
Savinar is really reaching...just last week he tried to fear monger by pulling out a story of missing heroin in Afghanistan. He then predicts "is that somebody is expecting massive wars and/or disease to break out on a global scale inside the next 6-18 months."
Of course, this has absolutely nothing to do with peak oil. But it's hard to preach fears about PO when oil has lost half its value.
He still needs to preach doom in order to keep those affiliate "Preparedness" stores in business.
http://www.lifeaftertheoilcrash.net/Archives2008/October16.html
Wow, it's been a long while since I bothered to look at Savinar's site, but is that page supposed to look like that? What a mess....
It's a textbook conspiracy theory, and not even a particularly sound one, logically speaking. Then again, I have a certain degree of respect for some peak oil "experts" (even Simmons, to some extent), but people like Savinar and Jim Kunstler have always struck me as doomsday prophets, first and foremost. Peak oil has just been the most convenient thing on which to hang their apocalyptic fantasies.
Oil dumping hard, hard, hard again today. The Brent Spot price into low $60s. Waaaay down from peak of $147.
Even more good news: After the 1979-80 price spike, global oil consumption fell by 11 percent, and did not recover for a full 10 years.
Right now, that looks familiar.
Even assuming the worst -- that there is a peak fossil crude production capacity around 2010 -- one very likely scenario is that we do not bump up against putative production capacity for a minimum 10 years. And that ignores any gains in biofuel output or large declines due to PHEVs and EVs.
My fellow POD dudes, we may not see demand for fossil crude reach 2008 levels again for 12 to 20 years, and then only if prices are moderate.
There is one fly in the ointment: Speculators control the price of crude on the NYMEX, and they have an army of quislings in finance, and on websites. Still, it will be tough to make the PO story stick for another generation.
Fro here, oil may go to $40, or maybe its long-term norm around $30.
Sean,
Thing is, if Kunstler only stuck with his criticism of suburbia, I'd be a HUGE fan. I effin' hate suburbia and all its so-called "trappings." I feel like his hatred of suburbia (largely reasonable) has somehow led him down his current path. It's bad because his other criticisms are so legit, and he's letting his peak oil hysteria get in the way of something that a lot of reasonable people would get behind otherwise.
To be fair to Robert Rapier, he DID allow for the possibility that the relentless drive upward in oil prices might be counterbalanced by huge demand destruction. His query is "how is that going to occur other than through very high prices?"
I think we're seeing now exactly how that works. The financial crisis has blossomed into a full-blown economic crisis dragging real production towards the edge of a really steep cliff, and that has caused the enormous demand destruction we're seeing now.
I'm not a PO fanatic by any means, but I would be more encouraged if the drop in oil price were due to an increase in supply, not demand destruction due to economic slowdown which could very well delay alt-energy projects as well as new exploration and drilling for fossil fuels.
By the way, check out that other commentator's reaction when Simmons says 'go back to living in villages again'. That pretty much sums it up.
Not to be a doomer but I suspect oil prices might be around $200 again by the end of next year.
Nothing to do with peak oil, however.
More to do with the massive amount of liquidity injection by the banks.
During an inflationary recession, a lot of us will be out of work anyways.
Ironically, this may just give the Chinese the time needed to grow production of PHEVs since we seem to be dragging our heels this side of the pacific.
I note that BYD said they will be producing a 100km range PHEV in november of this month. Great news because that will force the heel draggers to compete since China is such a friggen massive market and they're the only one's with any money anyways right now.
I concur with the other poster that a demand drop of this scale may give us 10 years of breathing room.
Hell, I'll take five.
Benny: I was skeptical at first, but I have to admit, your price predictions here at POD have been consistently accurate. Great job. It's an honor to have you here.
Heyzeus7: "To be fair to Robert Rapier,"
Just to be clear, let me say that I have nothing but respect for Robert Rapier. He's a friend, and one of the most sober,reliable writers on peak oil. He did however go astray on "oil is a cyclical business".
Also, a plug for Andrew's amusing new site:
The Anti-Doomer
Not to be a doomer but I suspect oil prices might be around $200 again by the end of next year.
Sorry, anon, but anonymous predictions are prohibited by the Peak Oil Debunked by-laws. I'll let you off with a warning this time. Next time you will be taken out back by POD thugs who will mercilessly whip your lower body with bamboo canes until all the skin peels off.
Thanks,
JD
One factor that will make it harder for crude to rise in price is that it is priced in dollars. And since mid-July the dollar relative to other currencies has risen almost 20 percent.
But given that the Fed and the Treasury seem to spend a trillion dollars a week in various bailouts, oil could be $2 million a barrel within 12 months due to hyperinflation. (Of course a cup of coffee will be $4 million.)
like a bloody chainletter, the PO theory comes back into vogue every couple of decades.
JD (or whoever), I hope someone saved a screenshot of LATOC after Lehman Bros. Savinar basically went all in and claimed that "We are at Impact," and then went into some pseudo self-congratulatory monologuing. The site seems to still be operating under the principle that "peak oil" hit, and we are reaping its whirlwind.
And then that heroin thing, which was just a bit too bizarre.
Anyways, it might be interesting to look into how the bailout bill 2.0 will help alt-energy, since that was a stipulation by the dems.
A couple of points here and I'll play the role of the nail standing up. Though I do think that Simmons seems far too sure of his data and faith in that data, and he should have made a much more nuanced prediction (allowing for the interplay of factors such as speculation, price effects and changes in consumption/driving habits), Simmons is actually of great overall value to mitigating PO.
One thing that Matt Simmons was saying around this time--though not on this clip--was that he forsaw a collapse in prices with a global depression. Boone Pickens made the same call. Yes, this is not exactly rocket science and anyone could have done the same, but to be fair to Simmons, his price predictions did contain that caveat.
To my original point, I see Simmons as playing a very valuable role in the MSM's treatment of PO and how the public perceives PO. Simmons is an influential figure with a circle of associates who make or affect public and private policy. Basically, I'd rather see him screaming about PO than Kunstler. Kunstler can easily be dismissed as a crank--especially after the Y2K non-event--whereas those in a position to do something about PO may listen to Simmons.
Also, in the same vein, Simmons plays a part in changing the political spectrum much as a fringe group like Greenpeace does. Though we may disagree with much of what Greenpeace does or purports to hold as gospel, they sway public opinion, so that the centre of the spectrum moves. The same can be said about any vocal, organized, and intelligent fringe group or social dissident, e.g, Chomsky.
So, Simmons has played the part of pied piper to PO, but at least he gets wide coverage in MSM and this creates public awareness. Somtimes, I wonder if his shrill calls are DELIBERATE overreactions so that the public and media will actually pay attention. As he did say, he had been talking about this for years but to little or no avail. For every Matthew Simmons or Boone Pickens, there seems to be an equal or greater number of Daniel Yergins or Rex Tillersons, with equally outlandish comments from the cornucopian camp. They are easy to like of course, as they have that Reagenesque "Morning in America" approach that the public loves, as it appeals to their ability to use cognitive dissonance to drownout the negative and embrace the positive. I think Simmons has given up trying appeal to reason and temperance but has taken a 2 X 4 upside the head approach.
Lastly, as for the question of actual demand destruction, I haven't seen anything yet to show that the global demand for crude is actually down from recent years---only that the IEA has revised its forecast for a decrease in the overall increase. From what I have read thus far, it would seem that the IEA is sayign that we will indeed have less demand BUT this shows only a smaller overall increase for 2009. The monster of depletion still eats away I'm afraid....but I'd love to see evidence to the contrary...
Still,
Stuck in Shizuoka...
Oh, and also, from recent newscasts on NPR radio, there have been experts citing the sudden increases in gasoline as the catalyst for the mortgage defaults. The house of cards was indeed built by bad banking, but it was the gas prices that served to tear it down. More on that later if anyone is interested
Oh, and also, from recent newscasts on NPR radio, there have been experts citing the sudden increases in gasoline as the catalyst for the mortgage defaults. The house of cards was indeed built by bad banking, but it was the gas prices that served to tear it down. More on that later if anyone is interested
Even if higher gasoline prices were the catalyst, there is still NO proof that the sudden jump in prices had ANYTHING to do with Peak Oil. In fact, it's becoming increasingly obvious that the run up in oil (and essentially all commodities), was nothing but a speculative bubble. So yeah, outrageous gas, oil, and commodities prices can wreck an economy, but none of that is because of Peak Oil.
DoctorJJ
Thanks for the mention, JD!
JD (or whoever), I hope someone saved a screenshot of LATOC after Lehman Bros. Savinar basically went all in and claimed that "We are at Impact," and then went into some pseudo self-congratulatory monologuing. The site seems to still be operating under the principle that "peak oil" hit, and we are reaping its whirlwind.
Justin, I think you might referring to Matt Savinar's September 15th post on LATOC claiming 'This is it' (http://www.lifeaftertheoilcrash.net/Archives2008/September15.html)
From his post: About six months ago I wrote on this page it was time to "brace for impact". Now I would say forget about bracing for impact, we are at impact right now. It may take a few weeks, even months, for the smoke to clear but I suspect that once it does, people will look back on mid-September as the day "it" happened.
You're oh so bold,Matt. Notice how he doesn't go into detail by what he means when the 'smoke clears'. Does it mean that everyone is starving and dying or simply that the stock market has bottomed out? There's a big difference. He doesn't say.
Also don't forget this plug towards buying shit from LATOC affiliate, at the bottom of the post:
Best of luck,
-Matt
P.S.
If you're thinking about stocking up on food or supplies, there is a bit of good news: LATOC affiliate Nitro-Pak is now back to shipping both dehydrated and freeze dried food orders within 48-to-72 hours.
OK, a few observations from me.
1. There is definite signs that demand has shifted left. The US cushion rose in the past few months from something like 3.3m barrels to 300m+ barrels. Since production hasn't been cut yet, I think that demonstrates that demand is indeed down.
2. Lots of people are saying that oil was the catalyst, but I still don't buy it. Oil is a convenient boogeyman, but there was a sudden run-up of ALL commodities, and oil was just part of that basket. I'm actually more inclined to believe that the mortgage-backed securities beginning to crack drove the banks to invest in commodities (hence the run up), and that led to a further meltdown of the same securities the banks were trying to hedge against.
Even if that is not the case, then why are we all running around screaming about oil instead of food? Thing is, oil demand is relatively inelastic, but let's be fair: food demand is far MORE inelastic in both the short- and long-run than oil demand.
3. Exaggerating, even to get into the MSM, is never good. Ever. People can see through it better than we seem to believe, and it just leads people to ignore the whole argument (even if some of it is legit.) Simmons' shrill calls for doomsday are only going to fall on deaf ears right now, and may make people completely ignore the long-term implications if he goes on long enough with the $500/$one bajillion dollar oil cries.
4. Anyone with half a brain could have predicted that the financial system would shit itself eventually. The signs were all there, and it was only a matter of when-- one just had to read Taleb to see why. I don't find Kuntsler or Simmons particularly noteworthy for "predicting" that which many far more qualified people were predicting long before they did. Riding the coattails of others doesn't mean you're impressive.
Ari,
Oh, certainly. I'm no more a fan of suburbia than Kunstler. If Kunstler simply talked about the problems of suburbia, I'd have no problem with him.
The problem is that he lets his disdain for suburbia influence (if not entirely dictate) his predictions regarding peak oil (or Y2K, or whatever other boogeyman he's latched onto). I'm not a fan of reality television, but that doesn't mean I think it's going to disappear. As you suggest, Kunstler "analysis" is so strongly colored by his personal biases that he's about as unreliable as he could be.
Sean,
Definitely. I think a lot of these guys let their disdain for one (or a number of) aspects of modern society color their predictions. As a statistician whose blog I read says, "People are too sure of their predictions and themselves." That's the problem with guys like Simmons and Kunstler and Savinar. They are far too sure of their prognostications, and can't realize when they're being "fooled by randomness," so to speak.
By the way, I just noticed I keep calling Kunstler "Kuntsler." Kind of funny, even if I don't do it on purpose. Or maybe it's subconscious? :-)
The house of cards was indeed built by bad banking, but it was the gas prices that served to tear it down.
I'm curious as to how exactly they proved that gas prices were the culprit. Do you have any details, SiS?
Ari: it just leads people to ignore the whole argument (even if some of it is legit.)
I think the video in the post is the classic example of this. Look at the faces of the commentators when Simmons starts going off the deep end. They're rolling their eyes and almost snickering. You can't get through to people and be persuasive if they think you're a nutcase. I think that's Matt's problem at this point, and I'm not entirely joking when I say he's having a nervous breakdown. He really is overwrought, and people can sense it.
One thing continues to interest me from this post, namely:
Virtually everyone assumes that the price of oil will skyrocket someday, and that the "cyclic business" will come to an end (like Robert Rapier said). That is certainly Matt Simmons view. But is that a good assumption? I'm seriously starting to wonder. It may be that the oil price is homeostatic and can't keep rising above a certain level because everytime it does so, the economy breaks down. In other words, the oil business truly is cyclic, and will always be so, and outrageously high prices are not a real worry because they can't be sustained.
Thoughts?
JD-
I may have been generally right this year, but making predictions is hard, especially about the future....if I may quote Casey Stengel. Thanks for the nod.
Also, please note, I almost always preface my predictions with words like "likely" or "possibly." Still, if we do have a global recession, demand could fall 10 percent, like the last time we had a recession following a crude oil price spike.
That would throw an unwanted 8.7 mbd onto the world oil markets, just as production rises 1-2 mbd (even doomers predict small increases in output for next couple years).
In a "best case" scenario (although "best" depends on whether you are a buyer or seller), we could see a full-on glut in two years.
Making things even "better," some refineries are coming online that can handle sour crude, of the type that has been piling up in tankers in the recent past for lack of a market.
In the next several years, progress will be made in PHEVs and biofuels.
If oil doesn't become a lot cheaper, we will see big changes in these two fields. Already, new hybrids of palm oil trees are exhibiting tremendous results. Look for yields per acre in palm oil to rise several fold. An amazing probability: Brazil, in 20 years, will produce far more palm oil than ethanol. Oil palm yields are rising dramatically, and new strains thrive in a wider range of climates.
In 10 years, Thailand will be oil independent, and Brazil a huge, huge oil exporter.
And PHEVs may come to market with 80-mile charge ranges.
But, just like the 1980s-90s, we may see an oil price collapse that destroys alternatives. Another reality is that speculators control the price on the NYMEX, and can move it any direction for months, maybe even years at a time, due to the inelastic (short-term) demand for oil.
Wild times, but oil could get a lot cheaper.
Thoughts?
You are absolutely right, and really it should be obvious. It's supply and demand 101, oil cannot rise in price without causing demand to reduce. It is only the shrill doomers who have given cause to doubt this simple effect.
Doomers often complain about the linearity of mainstream thinking but they were equally guilty of making the same mistake.
Doomers also try to accelerate PO into a process that takes months or years, but in reality it will play out over decades.
Anyway, I think it's clear that oil price has been driven largely by an economic bubble which is now deflating. The really interesting effects of PO will kick in when supply has declined say 20% from it's peak.
TOD have quietly dropped their polls on oil price, it's to make doom with falling prices. I may well have been the person criticizing Matt Simmons for going too far, and in the process damaging credibility. The other Matt, Matt Savinar, has always been pretty unhinged in my opinion.
A couple of quick points to Ari and JD;
JD--no, I can't give data on that, but if you go to NPR (www.npr.com) and go the hourly news broadcast icon at the top, your browser will open and display a number of other broadcasts available for listening. A feature on gas prices and mortgage defaults is there. I can't provide a link due to the browswer. However, I'll keep my eyes open throughout the week and will add links should they come up. It makes sense to me though--loans are given to those people who can't afford them and are high credit risks. They "walk on the financial tight rope" with low incomes, etc., and, overnight, gas prices soar. The hour commute costs over double from when they first bought the house. Then food prices go up. Banks raise interest rates to lower inflation. Etc. Anyway, as Ari said, there are a few comments on this out there--I just have to retrieve them for POD and post.
Ari; Yes, demand is down in America. Agreed--the figures out there do support that. Pump prices may be more reasonable but unemployment still lowers VMT, as does the threat of a looming recession/depression. But my comment was about the current IEA figures worldwide. So far, from what I've read, worldwide demand is still forecast to increase next year. Always open to seeing other info though--you know I'm on the fence between doom and optimism.
One last point about about Simmons (oh, and I must say--people are being VERY agreeable in their disagreement with my above posts--that is MUCH appreciated. I enjoy posting here and keeping things relatively polite serves POD very well I think) is about his comment on shortages/"run on the (gas) bank" .
From what I see above, Simmons point did have some justification. He basically said that gasoline stocks were far too low (and they were on the low side of average--the lowest since the 60s from my memory) and that there could be this so-called run on the bank and then it becomes a problem. Was there was justification in this in that the shortages in the South came that came with the two hurricanes came as a result of low stocks combined with little or no restrictions on fill-ups? From what I have read, there would have been MUCH more gasoline to go around if there had been rationing, but instead, people filled their tanks as much as possible and, in some cases, as often as possible. This lead to further shortages. I wonder how much credence Simmons is being given for his call on this? Also, how will the MSM spin this in his next interview?
Yes, Ari, I agree that exaggeration may not be good in that people will tune out next time. That's why I think Simmons should be far more nuanced and bring more science to the fore. But, does the MSM even bother with this anymore? Maybe I'm being cynical but...will the average JOE bother with details other than price?
I've tried to explain PO to people, even my own colleagues at various universities. Most have little or no interest and tune out very quickly. Eyes begin to quickly glaze when talk turns to science. I see Simmons as doing his bit to get beyond that and get PO into the publics head. He gets coverage in CNN and the Economist--once again though, I wish they would provide the science back up.
Stuck in Shizuoka.
More evidence that higher oil prices won't hinder the growth of renewables. actually it's credit and low oil prices that will hinder growth of renewable the most.
"The American Wind Energy Association says the U.S. added nearly 1,400 megawatts of new wind energy capacity during the second quarter of 2008, providing enough electricity to power more than 400,000 homes."
http://www.grandforksherald.com/ap/index.cfm?page=view&id=D93VOJCG0
We should also remember just like the car industry is adjusting to higher gas prices the food industry is doing so too.
Drought Resistance Is the Goal, but Methods Differ
http://www.nytimes.com/2008/10/23/business/23drought.html?_r=1&ref=business&oref=slogin
One of the major flaws with the peak oilers is that they don't account for human beings adapting in ways that cushion the impact of peak oil. they essentially think that if we can't drive our Escalade to and from the suburbs we are doomed. they never allow for alternate transportation(like scooters I know see everywhere) or some other adaptation that's not even invented yet.
I have nothing but respect for Robert Rapier. He's a friend, and one of the most sober,reliable writers on peak oil. He did however go astray on "oil is a cyclical business".
While I certainly appreciate the comments - and I have in fact sent quite a few depressed doomers here so they could get another viewpoint - I think what I said was exactly right.
Historically, the oil business has been cyclical because in good times, capacity expands and gets ahead of demand. The price falls. Investments dry up. Spare capacity shrinks, and prices head back up. Good times return. That is the cycle.
In the future, there will come a time when excess capacity can't be built out - because there simply isn't enough to keep expanding capacity ahead of growing demand. This could put an end to the cycles. (And I think I have been quite clear that I don't think we have yet reached the point of contracting supply).
But - and this is the point I made - capacity could still stay ahead of demand by destroying demand. That is what we are witnessing now. We haven't had a big capacity build out, but we have seen demand slip due to high prices. This caused prices to come back down. If you have a series of demand destroying events, then you could see the cyclicality continuing. But it won't be the same kind of cycles we have seen before.
As for the grizzled veterans, they have been mostly wrong on oil prices over the past 5 years. They are still doing project economics based on a $40 oil price.
Cheers, RR
Not many updates on his site now for sure...... Has his publications peaked?
Sorry to derail the conversation, but I gotta bring up that Savinar is going to be selling LATOC and is stepping down.
http://www.lifeaftertheoilcrash.net/Archives2008/October23.html
Money quote: Traffic to the site, revenue generated, and the amount of time necessary to track the news/developments all follow both oil price spikes and bad news in the financial world. So whether oil goes up in an inflationary spiral or down in a deflationary crash is largely irrelevant to what happens in terms of traffic and revenue.
Yep, he was in it for the money. Don't let the door hit your ass on the way out Matt.
"In the future, there will come a time when excess capacity can't be built out - because there simply isn't enough to keep expanding capacity ahead of growing demand."
You're wrong because you are focusing too much on supply and not enough on DEMAND. you assume that demand will grow. bad assumption. increased prices will reduce demand. we just say that.
you want to know what will cause the next oil bust? plug-ins and electric vehicles. most people could drastically reduce their oil consumption if there was an affordable plug-in like the Volt.
Here's a 5-minute read on current US/World demand/supply trends and future constraints with the latest info on OPEC cuts and IEA forecasts. Some of it is speculative, particularly regarding the current recession.
Worth the read and germane to the above discussion
http://321energy.com/editorials/cohen/cohen102208.html
SIS
apologies, the last part of the URL is of course,
html
ari,
"People are too sure of their predictions and themselves."
Hey, I read that blog too!
Robert,
Hi, enjoyed your comment, but I don't agree with your assessment when you say:
But - and this is the point I made - capacity could still stay ahead of demand by destroying demand. That is what we are witnessing now.
This is what has also happened in the eighties. There's not so much difference. There is a mantra inside your head still thinking that "oil demand will go up, oil demand will go up" as if it were an unbreakable law. It isn't. That's the reason why oil is cyclical. A see-saw. Now you can argue that because of peak oil, the price base line of it will slowly climb. So, if the base line of the 90s were 10-15$, now it will probably be in the 50-60$ range, who knows? (it will probably be OPEC who decides that) Perhaps we will see another bubble in the next ten years, and it will collapse again, perhaps to the 100$s level.
It won't matter much that time anyway. In ten years, PHEVs are completely mainstream and gasoline cars average consumption is way smaller than today, meaning that it won't hurt as much.
100$ will be cheap, for we will be able to do with oil much more than we are doing with it today.
And when oil collapses completely, due to technological energy shifts in two or three decades, oil will be left only to plastics and that kind of stuff. It will collapse again to the 20-50$ range, and 10-20 million barrels will be enough to satisfy everyone.
Yeah I'm dreaming a bit, but the core of what I'm saying is that oil will always be cyclical. Just like any other commodity.
You're wrong because you are focusing too much on supply and not enough on DEMAND. you assume that demand will grow. bad assumption. increased prices will reduce demand. we just say that.
To you (anonymous) and to Barba, who said something similar. I don't assume demand will grow. I assume that supply won't be able to stay ahead of demand for very long. That presumes if supply is growing, demand is growing (which is the trend we have seen for decades now). But when oil production peaks, demand can't grow very far before it runs into a wall. Then prices rise and demand is destroyed.
But I don't see such a situation being cyclical. I see an upward trend on prices that squeezes out demand. There may be times when price shoots up and demolishes demand - as we are seeing now - but I don't think this massive price run-up, followed by massive demand destruction, is going to be a pattern.
So to repeat - my position is not based on the idea that demand must rise. Demand can't rise if supply is falling - but to this point that has never been the reason the oil industry is cyclical. The reason for that is the demand keeps growing into available supply.
RR
OPEC announces they're going to cut oil production by 1.5 mbbl/d; futures market responds by plummeting $6/bbl.
I guess the threat of OPEC cutting oil production had kept the price up until the size of the cut was revealed to be less than expected.
As for the grizzled veterans, they have been mostly wrong on oil prices over the past 5 years. They are still doing project economics based on a $40 oil price.
Yes, but today the price of oil dropped to $61, even after OPEC announced a 1.5mbd cut. So knowing what we know now, doing product economics based on a $40 oil price was a wise move. They may have gotten some of the recent price action wrong, but they shrewdly anticipated the price move that really mattered to their survival: the price collapse. I found that pretty interesting considering how often I've heard those veterans maligned in the peak oil forums for believing that oil is cyclical, and that prices would come down.
It seems to me that in all past cases where oil rose to a very high price, it didn't temper demand in a continuous process -- allowing price to continue to rise. Rather, it caused the economy to break in a discontinuity which caused oil prices to plummet. It's almost as though prices over about $100 (in current 2008 $) are a limiting value.
That makes me wonder whether cycles like the current one are more probable than the continually increasing price theory favored by Simmons et al. Certainly Simmons' theory is based on dubious economic concepts like "demand overshooting supply by 17mbd" etc. And his forecast was clearly wrong in this case. The theory seems pretty weak on the face of it, IMO.
What's to stop oil prices spikes from breaking the economy and causing the price to dive every time they arise? There seems to be a disconnect between the two forecasts for the post-peak future: a) a broken economy, b) soaring oil prices. How do you get both of those at the same time?
So to repeat - my position is not based on the idea that demand must rise. Demand can't rise if supply is falling - but to this point that has never been the reason the oil industry is cyclical. The reason for that is the demand keeps growing into available supply.
Granted. My position is that when demand vs supply is so tight that speculation enters in mayhem mode (just as it as done this year), we witness a price escalation, a media frenzy and a lot of people changing a lot of habits, while creating a demand for utilities that use less oil, destroying demand. This happened just when supply was starting to cope with the rising demand, and so the obvious consequence is a small oil glut and a bubble pop.
Demand will have a hard time rebouncing up in a recession and while people are cutting costs, and the biggest admission of this is OPEC's recent admissal that it is cutting its output.
Notice how this will delay peak oil.
The reason why I argue that it is a see-saw is because we will experience the same thing over and over, except perhaps that in the future, bubbles will be caused by flattening demand, but lower supply options, thus tightening once again sup vs dem, skyrocketing prices for some months and popping another bubble.
The consequence of this sequence of bubbles and busts will be that oil will have less and less prominence on the world's energy budget. In my mind, these busts and bubbles will prolong even in a very post-peak oil world, where even when oil is at 10-20 mbd, there will be stuff like this happening.
All this assuming that the market still operates something similar to today.
RR,
You said In the future, there will come a time when excess capacity can't be built out - because there simply isn't enough to keep expanding capacity ahead of growing demand. This could put an end to the cycles. (And I think I have been quite clear that I don't think we have yet reached the point of contracting supply).
If capacity can't be built out to meet demand then the price will rise. Throw in a little speculation and the price will jump high enough to destroy demand and then the price will fall. That is still a cycle. I don't see a scenario where oil won't be cyclical. In fact, once we are definitely on the down slope I think it will be even MORE cyclical. Banks and investors will have an incentive to hoard and drive up prices, then flood the market with their supply, once the price is high. So maybe the mechanisms of the cycle will be different, but it will still be cyclical.
DoctorJJ
So knowing what we know now, doing product economics based on a $40 oil price was a wise move.
Not really. For the past 3.5 years, they have missed out on oil prices that were always over $50, and for almost a year were over $100. The only way they are right in the long run is for oil prices to collapse to sub-$40 oil and stay there. I predict there's no way that's going to happen.
So for the past 3.5 years, the grizzled veterans have been wrong. The less grizzled, but veteran nonetheless - me - has been correct, and remain correct unless we see a prolonged sub-$40 collapse.
RR
Throw in a little speculation and the price will jump high enough to destroy demand and then the price will fall. That is still a cycle.
You are missing the piece where supply is falling. That's the difference, and the reason I don't think we will see post-peak cycles. As demand is destroyed, supply is falling. What I predict is steady long-term upward pressure on prices.
RR
You are missing the piece where supply is falling. That's the difference, and the reason I don't think we will see post-peak cycles. As demand is destroyed, supply is falling. What I predict is steady long-term upward pressure on prices.
So the price tripling and then subsequently losing 60% of it's value in a little over a year is NOT a cycle? Because if it is, that can certainly happen again, even in the face of falling supply. Sure there may be upward pressure on the price, longterm, based on the fundamentals, but if the price can fluctuate as much as it did in the last 18 months and NOT be based on fundamentals, (which is now clearly what happened), then post peak, it could also certainly have temporary super-spikes in price that would temporarily crunch demand more than the supply would decrease in that same timespan.
DoctorJJ
'So knowing what we know now, doing product economics based on a $40 oil price was a wise move."
Nope. don't think that because of where the oil price is this month. it could be $100 this time next year. don't get too crazy over once price point.
"What I predict is steady long-term upward pressure on prices."
You sound like realtors who said home prices will only go up. you sound like the other of "Dow 36,000" written in 2000.
I guess what you mean to say is oil prices only go up? buy now or be priced out forever?
So the price tripling and then subsequently losing 60% of it's value in a little over a year is NOT a cycle?
No, not at all. Prices got way ahead of themselves. Speculators pushed prices in the short term far beyond what was reasonable. So they corrected. Now if they repeat that behavior a couple of times, you can start to argue that this was a cycle.
RR
You sound like realtors who said home prices will only go up.
Except for the part where I said I expect oil prices to go down when they got ahead of themselves. You confuse short term with long term. My point is that 3-5 years out, oil prices are headed up. That doesn't mean I think they will head straight up, just that I think the trend continues to be up. I have been right about that trend for 6 years now, but I don't ever speculate about what oil prices will do in the short term.
I guess what you mean to say is oil prices only go up?
Don't assume what I "mean" to say. If you do, you end up beating down a straw man. Just read what I wrote, and pay close attention to "long-term." When I say that, I am thinking of 5 years out, and yes I think oil prices will be higher than they are today.
RR
The "Peak Oil" idiots were the same idiots who were saying "real estate prices never go down" a few years ago.
Amazing how just an average person with common sense can understand markets better than these so-called "experts".
Here's a tip: anything that shoots up 300% almost overnight like oil did, is a bubble and it WILL pop. Simple as that. No "expertise" needed. No fundamentals can explain a wild price swing like that.
No, not at all. Prices got way ahead of themselves. Speculators pushed prices in the short term far beyond what was reasonable. So they corrected. Now if they repeat that behavior a couple of times, you can start to argue that this was a cycle.
Well if you don't think a run up from $50 in 2006, to over $147 in mid 2008, back to $64 now isn't a cycle then I can certainly understand why you think the price of oil won't be cyclic in the future. Because according to your definition, it never has been. I mean, seriously, what the F' is a cycle then??? This latest bubble was the mother of all cycles. Look here to see the massive scale of this latest cycle.
http://inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm
Again, if this latest run up and back down wasn't a cycle, then nothing ever was and nothing ever will be.
DoctorJJ
arguing with robert rapier about oil....wow....just...wow.
the wonders of the internet...everyone can be an expert
maybe you can get ahold of Warren Buffet and argue with him about making money in the market.
SD completely nailed it.
I love the video because of the reactions of the group, especially the young guy. They are all like "are you insane" and, of course, the guy is.
Oil price collapse will not destroy alternatives like PHEVs this time around.
The reason is that China cannot grow without increasing it's transportation volume.
Historically the only way to do that was by growing oil consumption.
Since oil consumption is constrained going forward by peak oil the Chinese must either sit on their hands and accept they cannot grow or they must find some alternative.
Since it is ONLY oil that is limited and inputs to electricity can be had from massive new dams, wind, wave, coal, nuke and solar it is obvious that the Chinese will resort to both fully electric transportation and PHEVs.
From another perspective:
90 million barrels per day of ICE global transportation is equivalent to 270 million barrels per day of global transportation by PHEVs.
China will drive the adoption of electric transportation.
I mean, seriously, what the F' is a cycle then??? This latest bubble was the mother of all cycles.
We are talking apples and oranges here. I am talking about business cycles and you are talking about bubbles - which pop just as the stock market corrects when it gets ahead of itself (and you probably don't consider that a cycle). The reasons for business cycles are well understood, and I have explained them above. I have explained why I think peak oil will put an end to the business cycles in the oil industry.
There is such a thing as a bubble cycle - which is what you are talking about. But that is not regularly cyclical within industries as are business cycles. You see bubble cycles moving around from one industry to another: Biotech, technology, commodities. These "cycles" aren't regular and predictable as are business cycles. I don't personally consider them cycles. If you want to argue that we may see more oil bubbles in the future, I won't say that we won't. It's just that I don't consider business cycles the same as a bubble, and that seems to be the source of our difference of opinion. Business cycles repeat. Bubbles, not necessarily.
RR
Not really. For the past 3.5 years, they have missed out on oil prices that were always over $50, and for almost a year were over $100.
I'm not sure how they missed out on high oil prices. Chevron alone made $50 billion+ in net profit over that time period.
You're not really giving a reason why it was unwise to do project economics assuming an oil price of $40. What would have been the wise approach, in your opinion? Investing in expensive projects requiring $100 oil to be profitable, just in time for oil prices to collapse??? That's not wise.
The only way they are right in the long run is for oil prices to collapse to sub-$40 oil and stay there. I predict there's no way that's going to happen.
This doesn't make much sense either. They are right if oil stays above $40, and they can maintain profitability. They are *wrong* if oil drops below $40, because then their budgeting will fail, and their costs will exceed their revenues.
So for the past 3.5 years, the grizzled veterans have been wrong.
In terms of forecasting the oil price, you're correct. They've been wrong for 3.5 years. However, they have been right in spades for the last few months, by an amount which currently cancels out about 3 of those 3.5 years. The price of Brent today is roughly right back where it was 3 years ago (Oct. 25, 2005=$58.72, Oct. 25, 2008=$61.08).
In terms of budgeting and predicting what would eventually happen, the grizzled veterans were 100% correct the whole time. They said it would eventually fall, and it did. Massively. So massively that huge cuts in OPEC production are not effectively checking the fall.
Your position has morphed considerably over time. In the original article cited in my post you write: "all signs indicate to me that the erosion of excess capacity is driving the current surge in prices".
But here in the comments you write: "Prices got way ahead of themselves. Speculators pushed prices in the short term far beyond what was reasonable."
I know that, during the heat of the actual events, you kept an open mind on the issue of speculation, and you deserve a lot of credit for that. But now you're talking like I was in July. And I got completely shredded and ridiculed for it! Remember Speculation -- My A$$? I was a very lonely voice in those days. So I think I deserve a little credit for being right too. ;-)
maybe you can get ahold of Warren Buffet and argue with him about making money in the market.
Or get Alan Greenspan and argue with him about optimizing the financial system! LOL
We don't have any sacred cows here, aghast. In fact, that is one of the best points about this site.
As noted above, I have the highest regard for Robert, and it's an honor to have him drop by. I hope that everyone here will treat him with courtesy. That doesn't mean they should agree with him.
We're arguing here about an issue which primarily involves economics, not oil, and Robert is not an economist.
"That's the difference, and the reason I don't think we will see post-peak cycles. As demand is destroyed, supply is falling. What I predict is steady long-term upward pressure on prices."
Let's not mince our words or play semantic games. I understand the difference between a normal business cycle and a price bubble (although, there are people who would argue that bubbles have replaced normal business cycles, but that's another point). That being said, it sure seems like the above statement was implying that there would no longer be any price swings, bubbles, whatever you want to call it. Only prices going up, up, up.
I think to assume that there won't be either bubbles OR cycles in the future is naive.
Let's back up for a minute. What causes business cycles? Your words:
Historically, the oil business has been cyclical because in good times, capacity expands and gets ahead of demand. The price falls. Investments dry up. Spare capacity shrinks, and prices head back up. Good times return. That is the cycle.
So we all agree that at some point in the future, supply will not be able to continue to expand. However, the underlying forces will still be present. Historically, as noted above, higher prices meant more investment in increasing supply and simultaneously destruction of demand. Therefore, you had supply that was relatively greater than demand and hence a decrease in prices/investments/etc and the cycle started over again. In the future, we will still have higher prices that will mean more investment in increasing supply (granted, it may only be able to plateau supply or slow down the decreasing supply temporarily based on PO theory), but, based on the higher prices, you will still get simultaneous destruction of demand, just like we've always seen. This will lead to a relatively greater supply than demand and hence a decrease in prices. Again, how is that different than it's always been???
Even in the face of falling supply, demand can (and likely will be) destroyed much more rapidly and significantly. I mean, just look at what happened in the USA over the last year. And that was at prices of "only" $140 per barrel and prices didn't even stay there very long. The demand destruction was/is just getting started.
If your argument is that, long term, you have a relative mismatch of supply vs. demand that can't be fixed by increasing supply, then that is a false pretense, too. Take land for example. The number of people on Earth (demand) has been steadly increasing, yet there is ZERO increase in supply, therefore a relative supply vs demand mismatch, yet the price of land has and likely always will be cyclical.
DoctorJJ
this is an interesting blog. It seems to me many commenters are overly focused on oil markets and demand. I beleive there are many solutions and surprises coming on the supply side from other industry technolocies. Besides wind which T Boone talks about so much a couple of companies and concepts worth watching are nanosolar and hyperion energy.
Nanosolar uses a printing process to make solar panels. Hyperion Energy is making s small (40 MW I believe) nuclear power plant that can be mass-produced.
Investing in expensive projects requiring $100 oil to be profitable, just in time for oil prices to collapse??? That's not wise.
History will have to tell us what was wise. As someone indicated above, you are looking at a small slice of time and making conclusions. I am looking at a slice as well, but one that is about 10 times longer than the slice you are looking at. Ten years from now, the wise (or lucky) were the ones who based their project economics on whatever the average oil price was. My bet is that this is over $40.
This doesn't make much sense either. They are right if oil stays above $40, and they can maintain profitability.
Wrong. Since oil has already spent a good deal of time over $40 over the past 3 years, it is going to have to spend substantial time under $40 to justify project economics based on $40 oil (three years ago). If oil falls to $40, then the average is going to be over $40. Thus, those who did their economics based on $40 left money on the table.
They said it would eventually fall, and it did.
Again, you are making conclusions based on a very small slice of time. But you are also over-generalizing. They didn't bet that there would be a massive fall. They bet that oil prices would average $40. We have a long way to go before $40 project economics are shown to be accurate. Right now, they are still wrong, just less wrong.
But now you're talking like I was in July. And I got completely shredded and ridiculed for it!
Remember, I am the guy who bet $1000 that oil wouldn't crack $100 in 2007. I started talking about speculation last fall when oil prices raced north of $80. I said that this wasn't warranted on the basis of fundamentals, and wasn't sustainable. I also got shredded and ridiculed for that. I can go back and pull up some old TOD threads in which I said "speculation" and people pounced.
Now, that doesn't change my long-term view at all: Higher oil prices. But when oil goes on a $70, unprecedented increase in a short period of time, of course corrections are expected. If someone wants to believe that my position was that oil was going to draw a straight line all the way to $300, that's pretty laughable. I have said many times I expect the rise to be very jagged, because demand destruction will occur as prices rise. My argument for why $140 oil wasn't sustainable in the short term is that the economy has to have time to adjust to that, and we hadn't seen that adjustment take place.
RR
That being said, it sure seems like the above statement was implying that there would no longer be any price swings, bubbles, whatever you want to call it. Only prices going up, up, up.
All I can tell you is that I have written a great number of times that 1). I think long-term direction is higher; 2). Short term, anything is possible. When oil raced past $100, I said lots of times that I didn't expect that price to be sustainable in the short term.
Take a look at the comments I made a year ago as oil closed in on $90:
Robert Talks Speculation
The fundamentals haven't so drastically shifted in the past couple of months to justify this sort of run-up. I could much easier explain why gasoline should be $4 based on the fundamentals. But $90 oil? Not yet.
The data I posted yesterday show that speculators are piling in.
RR
"So we all agree that at some point in the future, supply will not be able to continue to expand."
I think that's an accepted assumption by most peak oilers and it's true.
But looking at it from a different angle will raise your eyebrows.
Ask this question:
Although supply will (at some undetermined point in the future) not be able to continue to expand, can we increase the utility of the oil beyond it's production?
I think the answer to that is YES.
90 million barrels of internal combution transport per day are equivalent to 270 million barrels of PHEV transport per day since the electrical input part is not constrained by oil production.
That probably means that we could see over $400 per barrel the next time around WITHOUT the economy collapsing.
Under Obama we can expect inflationary monetary policies combined with a deflationary regulatory regime. Prices will go up but the value of money will depreciate more quickly than we have been accustomed to.
There will be less discretionary income, less discretionary investing, speculating, and investing. The US government will be the big winner as it takes over more and more functions for the portions of the private sector which will collapse.
Foreign investment will increasingly run away from the US, if Obama wins. Powerful simultaneous and conflicting inflationary and deflationary governmental incentives and policies will make long term investing very complex and difficult.
Precious metals begin to take on greater value, as do other solid tangible items easily converted to wealth.
ari said:
[i]"2. Lots of people are saying that oil was the catalyst, but I still don't buy it. Oil is a convenient boogeyman, but there was a sudden run-up of ALL commodities, and oil was just part of that basket. I'm actually more inclined to believe that the mortgage-backed securities beginning to crack drove the banks to invest in commodities (hence the run up), and that led to a further meltdown of the same securities the banks were trying to hedge against."[/i]
I have often thought the same thing. Earlier in the year, the ONLY thing going up was commodities, so everybody piled on board because there was no where else to make money, and there seemed to be a surficial logic behind the phenomenon (growth in Chindia, etc). But like all manias it was destined to come crashing down.
We're arguing here about an issue which primarily involves economics, not oil, and Robert is not an economist.
Incidentally, the group I worked in at the Billings Refinery was the Optimization, Production, and Economics Group. We dealt with these sorts of economic issues - both economics for constantly optimizing the refinery and longer term project economics - every single day. The sorts of issues we dealt with are often the issues I write about: Inventories, pricing, price forecasts, crude quality.
Cheers, RR
"My point is that 3-5 years out, oil prices are headed up."
yeah robert, that is pretty long-term...
Robert,
My view is straightforward: When the price of oil surges too high, it causes the economy to break (recess), and the price of oil rapidly drops. This has happened on a number of occasions in the past (1979, 2008 etc.) so the empirical evidence for the phenomenon is solid. You don't seem to have any solid argument/position against it occurring again and again in the future. In fact, you seem to explicitly allow for such events by saying "in the short term, anything can happen". Let's call this repetitive behavior of price soars -> price crashes "oscillation". As I said, you don't seem to disagree with "oscillation", although you strongly disagree with calling it "cyclic" for semantic reasons I don't find compelling. IMO, saying it will be "very jagged" is just another way to say it will be cyclic (i.e. what goes up must come down).
So, your "anti-cyclic" position would seem to be characterized as:
a) Despite wide oscillations, higher and higher prices will be continuously sustained, or
b) The peaks and troughs of the oscillation will continually rise
Thus, at some point, you necessarily predict we will see oil at, say, $500 or $1000 (in real terms, 2008 US$) per barrel. I'm curious about what you think will be different to prevent such prices from crashing the economy. Certainly, every time prices have been even 1/5th or 1/10th that high in the past, there has been a recession which brought prices back down. $500 or $1000 oil seems to imply an underlying economic strength (i.e. a general ability to pay that much) which doesn't seem possible considering the effects of high oil prices in the past. How does your theory address that issue? I'm also not sure why you think demand for oil will continue to be strong when the price reaches such high levels.
You don't seem to have any solid argument/position against it occurring again and again in the future.
Of course it isn't my position that it won't ever happen again. It is just that this isn't the same as a business cycle. Since I state up front that I expect corrections, I am explicitly stating that these sorts of pullbacks will happen. What I am arguing against is a continuation of the business cycle in which oil just bounces up when capacity is tight, then everyone overbuilds, and price comes back down. Peak Oil will put an end to that. It won't - nor have I ever implied that it will - put an end to corrections, such as we have just seen when prices got ahead of themselves.
As I said, you don't seem to disagree with "oscillation", although you strongly disagree with calling it "cyclic" for semantic reasons I don't find compelling.
It's not semantic. A correction isn't the same as a business cycle. We don't call stock market corrections cycles. I don't call oil market corrections that were a result of excessive speculation cycles. Your position in the essay is that I am wrong because of the current correction. But my position has always been that corrections will happen (hence, the 'jagged' price rise).
I'm curious about what you think will be different to prevent such prices from crashing the economy.
If it happens very quickly, it will crash the economy. But I predict we will see recoveries to higher and higher price levels. And why do I think the economy will tolerate that? Easy. Europe already does. This summer in the Netherlands gasoline was selling for $420/bbl. Of course a lot of that is taxes, but the economy kept chugging along, and people kept driving. But Europe is a lot more fuel efficient than we are in the U.S. As we get more efficient, we will be better able to cope with those kinds of oil prices.
RR
Robert,
I appreciate your corrections, I understand better what you are saying now with respect to market oscillations, and I both agree and disagree with you. I'll explain better.
For instance, I disagree with you when you say that:
What I am arguing against is a continuation of the business cycle in which oil just bounces up when capacity is tight, then everyone overbuilds, and price comes back down.
And yet, this is precisely what has happened in this year. Market tightened in 2006/2007, many pessimists claimed that the world production couldn't cope with demand growth, hedge funds entered the market (because it was different "this time") and the price of oil soared. 2008 production numbers soared as well, just when the market went caput. Proof of that is what OPEC is doing right now and the market response to it (down with the price of oil?!). If OPEC did cut 1.5mbd last year, the price of oil would have gone to heights I can't even imagine.
I do agree with you on this:
If it happens very quickly, it will crash the economy. But I predict we will see recoveries to higher and higher price levels. And why do I think the economy will tolerate that? Easy. Europe already does.
Exactly. This is why the climb to 100$ oil wasn't as problematic in 2008 as it was in the late 70s. Increase in efficiencies and the slow substitution of oil as an energetic solution will render future rises of oil prices increasingly unimportant to the overall bugdet of companies and individuals. I also do agree with you that the price of a finite commodity as oil is is conceptually destined to gradually rise as it is being depleted. There will be market cycles, but they will happen on top of a slow gradual rise of oil price.
What I don't agree with you as well, is in the factoid, or unproven theory that after peak oil it all will be very different. I don't buy that. The problems we will see will have a lot more to do with a particular problem with the demand side of the issue, with developing nations trying to get themselves up to the first (if the world is to consume the same as the US then we would have to produce 500 mbd) than it has to do with supply issues.
I think that the behaviour of the market will be somewhat similar. But the future tightenings of the oil market won't be caused by surging demand, but by weakening supply. It's the relationship between these two variables that create these cycles, call them "business cycles" or "market cycles".
As a last comment, I'd also stress out that if you call "Business cycle" as something to do with a lot of suppliers being "burnt" by the oil market crash, then I agree with you, this won't happen this time around, because the suppliers are smarter this time, and they will prevent that from happening, by a very precise (and coordinated) swinging of production (recall OPEC's call on Sweden).
And yet, this is precisely what has happened in this year.
But of course I don't believe oil has peaked yet. That's why this characterization of my position is essentially a straw man. I said that when oil peaks and supply starts to fall, we will see an end to the business cycle for oil. People point to the current situation of falling prices and say "See, you were wrong." That's ludicrous. Oil supply is still expanding. We won't know if I am wrong until it actually starts contracting.
Further, as shown in links above, I was suggesting last fall that this situation with oil racing skyward was not sustainable and that a correction was expected. Now people want to act like that correction - a correction that I was calling for - somehow falsifies my position. But this correction is completely irrelevant to my hypothesis on falling supply and the business cycles. What we have seen is a correction that was caused by several factors, one of which is the fact that supply is still expanding as demand is going stagnant.
RR
People point to the current situation of falling prices and say "See, you were wrong." That's ludicrous. Oil supply is still expanding. We won't know if I am wrong until it actually starts contracting.
Yes, I concede that point. Like the brits say, "wait and see". Still, if oil gets to a new low of production numbers due to falling demand, then we *could* have reached peak oil, not geologically driven, but demand-driven. It could be possible to reach a new low (say, 80 mbd of demand), and when a new peak arrives (say 85 mbd), we would see that we would already have passed peak oil in 2008.
It wouldn't change the kind of dynamics we are seeing today. Mostly, if anything, the reasoning that this time "is different" would only create another bubbling myth like we saw this year, with many pessimists claiming that "this is it, we're heading north forever", without realising that the idea of theirs was changing the very dynamics of the market (Heisenberg).
There is no reason whatsoever to assume that these kind of "cycles", however different in style they will appear from each other, don't perpetuate even after peak oil.
Now people want to act like that correction - a correction that I was calling for - somehow falsifies my position.
I'm not. I used to read TOD more often last year and I watched that debate of yours. I agreed with your stance's and JD's. There was a clear hysteria around peak oil skyrocketing oil price that should be read as a red herring to any intelligent person. You were among the few who tried to put ice on the hysteria (I also remember the luck you had in your bet of the 1st of january 2008, only to lose the money in a private adventure of yours).
In all seriousness, your posts were probably the reason why I didn't dump TOD sooner than I did (I loved the confrontation between your calm realistic assessment of things against their doom and gloom "weresofuckedup" stance).
It's just that I don't agree with your assessment that the oil market system will change that much.
But, again, like the brits say, wait and see :).
Greets and thanks for the chat.
Just because oil costs less than $147 doesn't make it cheap, and it doesn't signal the end of the cycle. Prices would need to go much lower. We've had a speculative bubble alright, but with oil above $50, it's still on a long term uptrend starting 2000. The oil companies know this. That's why they've been getting into the tar sands.
Yet again the conclusion from this thread is that no one really knows what the hell is going to happen, nor can they even agree on what actually just happened.
This giant vacuum of defintive information is nevertheless filled with arguments over who was right and wrong, and who will be right in the future.
The view of mainstream economics is that the market system should reach a "natural" equilibrium, and instability is due to adverse external influences, e.g. the government. However, the mathematics of chaos tell us that systems can generate instability purely by themselves, without outside influence. This feature of economics is usually brushed under the carpet.
It's also a feature that the easily understandable parts of a system lead to equilibrium type predictions, but the chaotic parts are hard to understand. Therefore you often see statements such as "the trend will be up because of declining supply", but in fact the more likely truth is "the trend will be up or down because of events we couldn't even guess were going to be a factor".
Meanwhile, Ken Deffeyes suspects that the credit crunch may have been deliberately engineered by enemies of the USA.
Enemies of the USA? You mean the millions and millions of them? That's a lot of suspects.
High Oil Prices Crash the Economy.
We all say that and it sounds right.
But is it?
I think that there is plenty evidence this time around that the housing bubble bursting was the sound of the crashing economy and previously it was the housing bubble inflating that created rising DEMAND.
When DEMAND collapsed, price followed.
This whole thing is demand driven not supply driven.
I think that if we get PHEVs en masse and a booming economy we could see $400 a barrel and the economy could handle it without breaking a sweat. When the next bubble bursts, however, collapse is certain
Meanwhile, Ken Deffeyes suspects that the credit crunch may have been deliberately engineered by enemies of the USA.
OK, now I know he's just getting kooky. The sad truth is that the people who "engineered" the credit crunch are probably the most ardent supporters of it-- namely, the wealthy and successful upper-middle class.
latest "preview" of the upcoming IEA report for 2009, in the financial times,
http://www.ft.com/cms/s/0/e5e78778-a53f-11dd-b4f5-000077b07658.html
The decline rates do not look pretty, although there are some caveats to this
However, even with massive investment, it looks like there are declines over 6 %. Let's hope that optimistic assessment of third generation biofuels and a massive push for BEV/EV/PHEVE, and mass transit continue.
With the IEA report there is another article on the FT website which gives I believe a more balanced view
http://www.ft.com/cms/s/0/360cefa6-a52a-11dd-b4f5-000077b07658,dwp_uuid=f2b40164-cfea-11dc-9309-0000779fd2ac.html
Including this superb paragraph which will really rile the OilDrum
"The draft report has found that the planet is far from running out of oil, as some so-called “peak oil” theorists argued. But it also finds that output from the world’s oil fields, some of them discovered more than 30 years ago, is declining much faster than previously thought. That means the oil industry will need to invest more than expected. "
This appears to the be the keyword, investment.
Shizuoka,
The IEA disowned that leaked report here. I would also encourage folks to be very careful not to confuse the different types of depletion.
Interesting link JD--and point taken. Of course, we'll have to see where this recession will take us--how far, and how long--to really make any accurate assessment of demand/price destruction.
Even though some scaling up of biofuels and automotive technology may lessen (the severity of which will again be very hard to predict), the scientific advances will continue. Battery technology simply won't go away, nor will work on biofuels.
On that note, I am very curious about what RR will have to say about the upticks in gas production in N.A., and the recent big leaps in GTL technology.
Thanks JD...
you're all missing the point.
is oil price cyclical? yes, very
will it continue to be cyclical? yes, same as any other commodity.
will the average price continue to climb over the next ten years and on? absolutely.
kyle_1,
Who's missing what now?
I don't think anyone is arguing that, [i]ceteris paribus[/i], the price of oil won't rise.
I think the question is how long the base set of assumptions hold.
Also, whether cyclicality remains. That's another interesting question, and one that was really being debated. Will the base price rise? Almost assuredly, [i]ceteris paribus[/i]. But it's those last two words you really have to watch out for...
will the average price continue to climb over the next ten years and on? absolutely.
That depends on alternatives to oil. If there are truly no alternatives to oil, including not wasting so damn much of it, then the price will rise as long as the economy can afford it.
However, as it becomes increasingly clear that the future of oil is limited, more and more people will be switching to alternatives. For consumers, it's mainly a question of mindset. For businesses, it's simply cost, that's why some are moving to EV's. For investors, better returns will be had investing in alt-energy companies instead of oil companies with declining reserves.
Well, there we have it folks. With the leaked IEA data, it looks like we will be sliding off the plateau into the terminal decline. There is not enough new oil coming online to offset a 6% decline, let alone 9%. It's been fun.
Cheers!
anon,
A name or some sort of signature is nice for keeping track of who's posting, but anyway... you should read this:
http://www.iea.org/journalists/arch_pop.asp?MED_ARCH_ID=477
The IEA data appears to be quite limited in its scope and it appears the oil market has already accounted for it now if not months ago. Anon, your simplistic response is probably woefully incorrect
Ari, I have read that press release already. It made me even more doomish since they did not deny the numbers. In fact they imply they are based on earlier drafts. I guess we'll find out for sure on the 12th.
cheers!
OptimisticDoomer
OptimisticDoomer,
It pays to not jump to conclusions. Remain agnostic until you actually have the facts in front of you. The IEA isn't in the business of "denying" numbers, but providing balanced reports. They have no business denying the numbers when the FT article was probably not even based on anything up-to-date or accurate.
I don't think Matt is crazy at all. Oil prices are so low because there has been a major contraction in the world economy which has lowered demand and put a glut of oil on the market. One of the reasons, granted one of many serious reasons, for the contracted economy is the price of oil over the last year. It has hit every single sector in the economy from food, to manufacturing to the service industry to retail. Even at 150 a barrel it is cheap, it's just not as cheap as WE (the Americans) are used to.
I have seen many references to dips in oil production/use in the past that did not cause much problems, but invariably they are drops in demand. For example, during the 70's and early 80's there was a lot of pressure to make cars more efficient, many new homes were built with electric heat or gas heat and suddenly there was a huge drop in oil consumption, but the demand was met due to the many conservation efforts. In other words, the drop in production was a result of a drop in demand. A significant drop in production without a significant drop in demand would raise prices quickly and sharply and likely lead to short term shortages and then a repeat of what is happening now in the financial markets (only without being made worse by a credit/housing bubble bursting) and a subsequent drop in demand. I am not a doomer, but I certainly think that things are going to be worse then people around here seem to think.
Matt Simmons has stated over and over and over again, that we won't really KNOW where we stand until we can get a good look at the oil inventories of the OPEC nations. There is absolutely no reason for oil supplies to be a state secret. Every OPEC member nation stated huge reserve increases after OPEC started the quota system and none of them have lowered their reserve numbers since, despite pumping millions of barrels a day for decades since. We absolutely cannot be pumping oil at 4 times the rate we are finding it for very long and we need to know what the reserves we have right now to plan accordingly. Peak oil doesn't have to be the nightmare it may turn out to be, but we have got to know when we are going to peak and if we have indeed already peaked. Now we have a worldwide recession which is really going to hide the peak for at least 2 years (if it has happened already) and just as the world economy starts to get back on it's feet BAM! and energy shortage and price shock to send us back in to a recession. And if you think the tar sands in Canada are going to see us through, you are sadly mistaken. It's expensive, it's energy intensive and environmentally catastrophic. And furthermore, they probably won't be able to put out the production of a middle east light sweet crude field. So lets force these people to allow 3rd party verification of their fields. They can run them as they see fit, but we have got to know what reserves they have and what capacity they have. Without that data we are running blind towards a cliff. Matt Simmons may have been wrong about the price of oil, but I don't think he would have been had the economy not tanked. I don't see how anyone car argue with what he says, except the part about thinking we should pay more for oil, I can see how someone wouldn't like that statement:)
One of the reasons, granted one of many serious reasons, for the contracted economy is the price of oil over the last year.
I'm sorry, but like a previous poster in another thread, you too are not even wrong. When debt is piled upon debt, and the entire economy is at the far end of a lever over a yawning abyss, things like the price of oil or wheat or iron (or any of other other commodities that spiked) are rendered entirely insignificant.
The null hypothesis, supported by every last piece of evidence I've come across, says that today's economic disaster is a result of extremely poor financial engineering. In essence, you have it completely backwards: the commodity bubble was a consequent, not an antecedent.
Hey anon, before you go ahead and troll all the comment thread, at least give us a *name* to answer to, bokay?
Else, it's a fair though typical doomerish reply. When I have time, I'll respond.
Anonymous;
More and more news about increasing efficency and higher yields in biofuel production. With increasing attention to this on the part of governments, research and industry, I remain hopeful
http://www.syngenta.com/en/media/mediareleases/en_081029_2.html
Also remember that, even in the face of depletion, advances in GTL, biofuels and EV technology will continue.
We may deride Matt Simmons for his predictions but he has said A LOT of salient points; "There is another Saudi Arabia right here in America--in the form of conservation". I believe he is spot on in that one. Americans haven't even really begun to conserve.
Anyway, the link above is worth the look. Obama wants to (apparently anyway) remove the tarriff on Brazilian ethanol. This would allow for greater blends and competition among biofuel producers. At the same time, whilst EV are getting better AND scaling into production, flex fuel vehicles are dead easy to produce OR even do after-market, much like the growth recently seen in LPG gas (CNG) vehicles.
The IEA report of course focuses on depletion and the need for massive investment, but doesn't account for the factors above.
"There is another Saudi Arabia right here in America--in the form of conservation". I believe he is spot on in that one.
Couldn't agree more. Unfortunately, that's about as far as he ever takes that line of thought. Which is why I far prefer the rhetoric of Amory Lovins (despite his many flaws). At least Amory spends huge amounts of time talking about technologies and approaches to conservation.
anon1,
Drops in demand are always responses to increases in price. Like this time and like the 1970s oil shock. The thing that people seem to miss is the PRICE SIGNAL. People only use oil because other alternatives (using transit where available, BEV/PHEVs/HEVs, bicycling, carpooling) come with associated costs (time, convenience, smell, higher fixed costs) and are not sought until the price of using an oil-powered automobile is too high.
Thing is, a sustained $100+ barrel of oil cost regime could cause people to flock, en masse, to things like the Volt, which will kill demand in the auto sector (currently a huge fraction of oil demand.)
The question isn't whether demand will be reduced (it will), but what the substitution costs are.
jd and stuck,
Definitely. But I think all of this betrays a fundamental problem with the "peak oil debate:" the idea that people don't respond to prices of oil-based goods like any other good. It's a shockingly bad assumption that demand will rise independent of price.
"There is another Saudi Arabia right here in America--in the form of conservation".
~50% of all oil goes to moving passenger cars around.
Something like 80% of that is just getting people to and from work.
A PHEV would reduce this component of the load on oil to zero.
Arithmetic: 0.5*0.8 = 0.4 ==> 0.4*20e6 bbl/day = 8 million barrels per day, for the USA.
Which is in fact just about the current output of the KSA.
Argument: most cars are on the road for about 10-15 years. This amounts to a ~5%/a replacement rate for the fleet. When they are available, and assuming people buy the PHEV when they need a new car, this would come down to a ~3%/a reduction in demand for oil, for about 15 years.
But I think this is conservative. Consider two facts:
1) the SUV market this year didn't simply evaporate: it sublimated. From solid to gas. And in an economic instant.
2) the current crop of gas-electric hybrids can not be made fast enough to satisfy consumer demand.
Based on these, I think a more reasonable guess is that as PHEV/hybrid production catches up to demand, uptake of these vehicles will accelerate.
A few more things about this.
No further assumptions about actual consumer behaviour have been made. As JD and others note, this is unrealistic, since driving less is already part of our observed reality.
Other oil consumers -- primarily trucking and aviation -- are relentlessly looking for efficiencies too. Now the net effect of their efficiency improvements will be smaller in the larger picture. But their consumption is small enough that it is not ridiculous to imagine the fuel these sectors consume be completely synthetic at some point.
As for other oil users, and a general dose of reality, I suggest Olah (et al), "The Methanol Economy".
"Now we have a worldwide recession which is really going to hide the peak for at least 2 years (if it has happened already) and just as the world economy starts to get back on it's feet BAM! and energy shortage and price shock to send us back in to a recession."
If you mean us as in the U.S. possibly, but that'll be stupidity (of which we have plenty).
The FACTS:
Most commutes in the U.S. are under 30 miles per day.
The FACTS:
PHEVs could be sold for (let's say conservatively)$60,000
The FACTS:
Fully have the auto-owning public could afford a $60,000 vehicle at a stretch
The FACTS:
USDE did a study (and others have verified this) showing we could provide 80 million 30 mile commutes from electricity provided from off-peak from the grid AS IT STANDS.
The Assumptions:
Oil production likely cannot be pushed beyond 90 million barrels per day.
Supposition based on facts: The Chinese are not going to stick their heads in the sand and say "oh dear peak oil means we're all dead". In fact they have a transportation plan specifically designed around PHEVs and full EVs. They will because they MUST. Thus it is quite feasible that although, yes, we may be in recession, gradually more and more and more PHEVs will be built.
So no 28 days later zombie doomer scenario I'm afraid.
More like a burst of recessions and soft recoveries followed by an eventual HARD recovery based on renewable energy.
But knock yourself out buying them MREs and ammo for your basement.
I will buy popcorn instead and save my pennies for a nice like th!nk city if I can't get me a GM volt or a Plug-in Prius or a BYD Plug in....
The Chinese are rapidly approaching peak water & peak arable land. They will soon have much larger problems to deal with than peak oil. That is what keeps me more in the doom crowd. I don't want to be there. I hate doom, despise it, but when you look at everything we are stacked up against it becomes obvious something has got to give. We live in interesting times.
OptimisticDoomer
optimisticdoomer,
The Chinese also have 1.73 births per woman, which is well below the replacement rate. Their population is likely to plateau, if not outright decline, in the coming decades.
Never mind that their "peak water" and "peak arable land" and "peak air" and "peak peaks" and "peak pokemon" and "peak peak-a-boo" problems are largely due to DEMAND factors and not SUPPLY factors. Water usage in China is, at best, poorly managed.
At best.
Interesting thought of the day:
By 2030, there will be pretty much zero population growth, and then from there on out it's flat to declining.
But people keep getting older. So by 2050, China will have around 20% of its population over 74. Imagine, Japan and the EU... except with hundreds of millions.
It's scarier to me than any of the resource scares we see on the net, and it's rarely discussed by doomers who prefer the "Earth go boomboom" quick and dirty method of societal collapse."
Hi Ari -
Can you cash out what you are thinking here a bit more? I'm very curious, partly because I am reading Sach's Common Wealth, and so far it has been all about sustaining a large population of 9 billion - and nothing about the effect of subsequent declining population.
Akrotiri21,
It's not the declining population that bothers me, per se, but the demographics of the future population: namely, lots of old people.
What will Japan, Germany, the UK, and even eventually China and the US do when they have more retirees than workers? Now, keep in mind that I'm making a probabilistic argument here-- and therefore I should maintain a degree of uncertainty-- but I think it's an interesting, and potentially frightening scenario.
http://en.wikipedia.org/wiki/Image:World_net_birth_rate_2007.png
http://en.wikipedia.org/wiki/Image:Fertility_rate_world_map.PNG
Now, while it's true that populations are growing (mostly just in Africa and Latin America), it is mostly just population momentum that keeps the population growing. By 2050, assuming current trends continue, most of the world will be in sub-replacement fertility scenarios. We're talking nearly 9b people with upwards of 1/4 to even 1/3 of them being "retirement age."
That's an interesting scenario.
It's interesting to note, by the way, that I was taught to fear the terrible 10 billion mark, which we were to have reached by 2010. That seems unlikely now.
It is an interesting scenario--we may see more and more migrant workers in such places. Some factions in the Japanese government have been calling for a 1000% increase in the number of foreign "workers" here in Japan. Already, some thousand Indonesian care workers have been brought in to work at nursing homes.
Of course, in a country like Japan, where a recent UN study on deemed that racism was widespread, "institionalized" and "profound" , such an increase in the number of gaijin would worry the locals and cause ultra-conservative backlashes, such moves may never take place.
Other countries with low-birth rates that welcome immigration (such as Canada) may well succeed, in that the immigrants have legal rights and constitutional protection, and are largely urbanized. Urban centres in Canada are growing with immigrants from developing nations, and scaling up cycling and mass transit relatively quickly. Victoria's bus system ramped up another 7% just this year.
Thanks Ari and Stuck in S -- one of the reasons I keep coming back to this site is that y'all respond thoughtfully to questions and comments.
So what you are describing is the kind of population bulge that Chris Martenson discusses in his Crash Course lectures (an interesting watch, if you haven't already): namely, with decreasing population over time you get an inverse pyramid: lots of elderly having to be supported by a thinner base of productive workers.
I see the problem, but if we want population to go down to a more sustainable level without the aid of a catastrophe, it seems to me we have to face it directly. Stuck's observation may be how it goes, and his underscoring race as a problem seems right to me. I have had several conversations in recent years where folks in the US point to reproductive rates (whether of minorities like Mexicans vs. whites or Republicans versus Democrats or the Religious right vs. liberals) and suggest that they (or "their way of life") will win in the end as a result of higher reproductive rates (an observation always made with angst). I don't share any of those preoccupations, but do recognize in the concern a source of resistance, particularly to voluntary reduction.
Thanks again for expanding on your comments.
Separately, this report was published on the 29th - interesting read. Awful lot of convergence around the 2011-13 timeframe. Beyond the Usual Suspects, Hutter has revised his scenario to 2011 (down from 2029!) and it looks a lot like what Opinion B in this reports suggests (by Shell, using what seems to me a similar method):
http://peakoil.solarcentury.com/wp-content/uploads/2008/10/oil-report-final.pdf
akrotiri12,
To be honest, I'm not so much concerned with population per se, as much as I am with how that population manages its resources and effects on the environment. I admit freely to not being an ecologist, but I've read a good amount of literature from all different angles that suggests that the problem isn't so much that we've passed some specific threshold (if we did, I'd be inclined to believe population would have been "culled" already.) I'm inclined to believe that we may hit (or will soon hit) a Malthusian steady state soon enough, but I doubt we'll be inclined to see a giant flaming crash to pre-industrial populations any time soon.
But like I've said on this blog at least a half dozen times, most people don't know what Malthus actually said, they don't care what he actually said, and they just want to believe he said what they believe.
I don't see the price coming much below $50 a barrel.
But most oil exploration & development, even the ultra-deepwater, ultra-deep drilling investment was calculated at $35 a barrel, at least at Petrobras, the Brazilian oil company most haeavily invested in deepsea oil.
So these investments are not threatened at the present time.
Offshore oil is the cross stuck in front of the face of the vampire:
Peekers can't bear to look at it.
Outside of the Middle East, that's where the growth in oil production will come from. And it's a good thing, too, because the oil industry has barely scratched the surface of deepwater oil production.
Matt Simmons is a chearleader.
In Wall Street parlance that means no matter what may be happening on the "field" you keep cheering.
No "Peak" yesterday, no "Peak" today, no "Peak" tomorrow.
No "Peak" within the economic horizon -- 30 years.
Which means no economic decision today should be influenced by "Peak" oil concerns at all, period.
Doomer mentality is a sickness.
To bad, they can't be committed to a mental institution.
Optimistic Doomer: what if the Chinese shift to vertical farming, with aqua farming included? What if the Chinese implement more desalinization technologies? They have the money. What's to keep them from using their brain when they run out of arable land? Their government?
May I remind you that farming is done by peasant and that China is infamous for its peasant revolts. The last thing Beijing wants, spreading over the internet, is a peasant revolt.
My hunch, btw, is that this crisis represents disruptive change. Formerly wealth was based on land (ever rising prices of houses and so on), in the foreseeable future we will never run out of space. Food, fuel, work and stuff can be produced anywhere. Land is irrelevant.
I posted 2 back to back anonymous posts earlier in this thread and for the respect of those who care, I'll post with a name.
I agree with poster who stated that we have a whole new Saudi Arabia in America called conservation. Matt Simmons himself said that. He said The biggest new oil discovery that will ever be made is called conservation. It is definitely true that we in America waste a lot of oil, especially in the transportation area. The good news is that public transit use is on the rise for the first time in like 50 years (at least in Philadelphia) and car manufacturers are racing to bring in higher efficiency vehicles. I personally would like to see plug in hybrids. A plug in hybrid doesn't use any gas most days, while allowing the ability to take long trips and has the bonus of not dropping to 0mpg when at a stop. Speaking of which, updating our infrastructure would allow us to get better mileage with all our vehicles by reducing or eliminating traffic jams. Unfortunately, we ,might see the reinstatement of the 55 MPH federal standard as part of carbon emission targets as well as energy savings. It took over 20 years to get rid of it and some studies attribute a less than 1/2 of 1% fuel savings anyway. Keeping your car in good repair can save gas, sometimes substantially and people have begun doing that. Even simple things like keeping the tires inflated to the right pressure and eliminating heavy objects from your car that don't need to be there can save too, and changing driving habbits and again people are doing that.
But, there may be some bad news to all this conservation though. I've heard that when someone conserves energy and therefore saves money, the money saved (unless put in a mattress) will cause the energy use to grow by growing the economy. It sounds logical to me. It says that if you save money and spend it, you would be buying things you wouldn't have been able to buy otherwise and therefore causing somebody to spend energy manufacturing the goods you buy or service you buy. If you put it away for a rainy day or your kids college account, then it's used as capital to expand a business that will use more energy. I guess it's getting more use out of the same energy, but if the net energy use doesn't go down, then you're back where you started. If you don't save money in the process, then that is beneficial, but then why do it? Say, if the premium of a hybrid or other fuel efficient vehicle is high enough to offset the cost saved in fuel, why not just get the regular car that is probably bigger and more powerful anyway?
I think we really need to rethink the way we do things, especially in America. Growing our food locally will help immensely. Our food comes from all over, most of our beef comes from South America for crying out loud! We could save millions of barrels of oil in food transportation alone. We can also start producing clothing and other consumer goods relatively locally as well. It would bring much needed jobs back to America and would save the energy of sending raw materials to China and sending back finished goods.
Another area we could really cut down our energy needs, and this is something that Matt Simmons repeats over and over is work transportation. There are so many office workers that could do their jobs from home with no problem. With voip you could even keep your 3 or 4 digit extension, with vpn you could have access to the local area network and with video conferencing you could have virtual meetings (there is also teleconferencing). Not only would the people who work from home save energy by not driving to work, but the people who do drive to work would get better gas mileage because of the lowered traffic congestion.
There are many solutions to the problem and it is solvable and I don't think America will fall apart the way the doomers do, but there is probably going to be a lot of pain. It will take at least to 20 years to get the suv's off the road (and they are still being made and sold) and I think you are going to see oil go up again when the economy recovers and oil demand recovers. What is most worrisome is temporary shortages of gas and diesel. It happened in the south east US in late sep and early oct. and it could happen again. One thing that Matt Simmons points out over and over is our just in time delivery system of gasoline and diesel fuel. Add this together with AAA statistics that say the average motorist drives around with 1/4 tank and you have a formula for a run on the gas stations in the event of any kind of emergency or perceived emergency. There is also the possibility of an oil shortage in the winter and the consequences that could have in our northern states. Imagine if Israel attacks the Iran nuclear sites and Iran does what it says it's going to do which is to lob missiles at Saudi Arabia and Israel and attempt to shut the strait down, and imagine that happening in the fall and then having a cold winter. A big oil shortage like that would necessitate diverting oil to make sure that everyone had heating oil. A situation like that could get really ugly. While that situation has nothing to do with peak oil, it does illustrate how much we are at risk.
Peak oil could be a non event, IF we are able to phase in a new supply of sustainable energy. So far, the only serious attempts at it has been corn based ethanol which is totally useless. As long as we are pursuing policies like corn ethanol, nothing is going to change except India and China are going to want more and more of a more and more scarce commodity.
It would be ironic if this recession, possible depression, caused 'peak oil'. Certainly the culprit was out of control credit, which manifested in the run up of oil prices. Peak oil didn't cause this crash, silly lending terms did.
If we go into a significant recession, oil production will drop simply because purchases will drop. It's not like there is significant storage available for it.
This is very important because one of the extremist Doomer views is that we can't survive peak oil unlike previous economic or energy shocks because "all those recoveries were powered by oil still being available." Well, there's still plenty of oil available for a long time even if we never produce as much as we did ever again.
Old people are useless because they've been cast as such. Life long learning is not promoted and there's a strong prejudice against employing old people for anything.
I don't see why most 70 or 80 year olds would be physically unable to acquire(or retain) the skills necessary to write music, write code, drive a combine harvester, test water quality for the EPA, check insurance claims or any of a million other mentally and physically light work regimes at least a few days out of the week.
Unless you're already living in a poor country it does not appear to be difficult to absorb the loss of productivity. If you consider that the GDP/capita varies by about a factor 10 across countries which have a Human Development Index above 0.8 a loss of up to 1/3 of GDP/capita does not appear to have a significant impact on human health or happiness in the longer term provided income disparity does not increase. (the loss of productivity will be less than 1/3 if 1/3 of the population retires because rising costs of labour will increase the opportunity to economize on labour with labour saving devices).
Chris,
It's interesting that you mention PHEVs, because I think it was Benny "Peak Demand" Cole who was the most vociferous about them as a very useful "bridge between oil-based and fully electric transportation. Transit use will certainly increase, but I don't think the automobile is going to die. It's just going to be reincarnated as something better.
One thing I think you need to keep in mind about your "net energy" argument is that energy, in and of itself, is not that terribly hard to generate. Coal, nuclear, hydro, wind, solar, tidal, etc. can all pick up the slack. The problem isn't energy use, per se, but "easily transported energy" use.
Also, we do import a lot of beef... but we export a lot as well. Something tells me that the import-export equation has to do with the TYPE of cow, and is based on local tastes more than anything.
The temporary shortages do definitely have the potential for causing pain. I think the big problem is that the oil reserve doesn't include a "refinery reserve," and many of the refineries are in places that are constantly at risk due to storms. Remember that "sustainable" energy is a loaded term. I think nuclear is sustainable, but I'm sure most greens would beg to differ.
Also, it's not that oil is more scarce per se (production has increased each year), but that we were in a boom growth period, so RELATIVE scarcity was a problem. I mean, if you had told telecom companies in 1978 that they would be able to change their transmission lines from copper to cheap and abundant silicon, what would they have said then?
I'll just end this comment with an interesting quote from Michael Crichton that I think sums up the doomers quite well. He is generally about environmental doomsdayers, but the point still stands today as we find out that 2008 broke the 2007 record for oil production:
Well, it's interesting. You may have noticed that something has been left off the doomsday list, lately. Although the preachers of environmentalism have been yelling about population for fifty years, over the last decade world population seems to be taking an unexpected turn. Fertility rates are falling almost everywhere. As a result, over the course of my lifetime the thoughtful predictions for total world population have gone from a high of 20 billion, to 15 billion, to 11 billion (which was the UN estimate around 1990) to now 9 billion, and soon, perhaps less. There are some who think that world population will peak in 2050 and then start to decline. There are some who predict we will have fewer people in 2100 than we do today. Is this a reason to rejoice, to say halleluiah? Certainly not. Without a pause, we now hear about the coming crisis of world economy from a shrinking population. We hear about the impending crisis of an aging population. Nobody anywhere will say that the core fears expressed for most of my life have turned out not to be true. As we have moved into the future, these doomsday visions vanished, like a mirage in the desert. They were never there---though they still appear, in the future. As mirages do.
Okay, so, the preachers made a mistake. They got one prediction wrong; they're human. So what. Unfortunately, it's not just one prediction. It's a whole slew of them. We are running out of oil. We are running out of all natural resources. Paul Ehrlich: 60 million Americans will die of starvation in the 1980s. Forty thousand species become extinct every year. Half of all species on the planet will be extinct by 2000. And on and on and on.
With so many past failures, you might think that environmental predictions would become more cautious. But not if it's a religion. Remember, the nut on the sidewalk carrying the placard that predicts the end of the world doesn't quit when the world doesn't end on the day he expects. He just changes his placard, sets a new doomsday date, and goes back to walking the streets. One of the defining features of religion is that your beliefs are not troubled by facts, because they have nothing to do with facts.
RIK - Isn't vertical farming more water intensive than traditional? If they are able to do that, good for them.
Please do not confuse my grave concern for our future with wanting some doomsday scenario. That couldn't be further from the truth. However, I only need to look around my own neighborhoods where they are bulldozing down corn fields to build walmarts & banks to know this can not continue forever.
I believe our population, as a whole, has passed the planets carrying capacity. Many of mother natures natural ways of keeping the human population in check have been done away with with cheap oil, but more so modern medicine, imo. I just hope the return to a lower population is a slow & gradual descent and not an abrupt & catastrophic one.
optimisticdoomer,
No, vertical farming is far LESS water intensive, largely because you stop evaporative water loss.
And who says that it will continue forever? And furthermore, I think an important question is "what percent of fertile American farm land remains?" Are we actually threatening our ability to meet the dietary needs of people when we actually spend more grains on livestock than anything else?
Here's the problem with the "carrying capacity" argument: we don't actually know.
Repeat after me: we don't know.
Furthermore, "cheap oil" did not bring about the growth in population in Africa because, get this: THE GREEN REVOLUTION NEVER MADE IT THERE.
How can the continued population growth in Africa be a result of industrial modern agriculture, a la Borlaugh, when Borlaugh's methods never were adopted?
Did oil help give people a better standard of living in much of the world? Yes. Is it the only or even most causative variable in a panoply of reasons for why we all live mostly awesome lives today? Not really. Of course, most of the "sustainability" people would rather that we all go back to being chased by big cats and eating "off the land," or some such rubbish.
Ari, you are right, we do not know. It is just what my gut tells me & my personal opinion. It is good to hear that vertical farming uses less water. I will have to google it later.
We do(the US) export a lot of grains to Africa, I do not believe that would have happened without cheap oil.
Again, I do not want doom. I have 2 young children, why would I want that for them? I am just trying to be a realist about things and inform myself on both sides of the issue.
Robert R,
1. Unless you believe the oil business cycle determines the larger avg rate of profit cycle inherent to capitalism, the industry will remain cyclical. Only within the subjectivisms of neoclassical econ do we find a belief that price change of circulating constant capital can ever be determinant, which has most often had to do with unconsciously attempting to shift 'blame' to 'exogenous' factors rather than grasping the system as a whole.
2. Worth recalling that many of today's 'grizzled old veterans' have been part of the industry's nearly 20 yr redirecting towards share holder returns or, in the case of NOCs, fiscal policies -- both of which may well have effected temporal horizons.
3. Change in price formation regimes until these became centred in the futures markets.
optimistic doomer,
Outside of the mechanical portion of the green revolution, oil is only used for food production because it's RELATIVELY cheap. The core of the green revolution is not just the use of fertilizers (which can be obtained from a number of sources), but irrigation and the use of specific crops. The oil-obsessed people never seem to acknowledge that part of the whole deal.
The whole "no oil = no green revolution" argument is somewhat interesting on its face, but does not hold up well to scrutiny. For one, everything done in today's agriculture can be substituted (using anything from alternative fuels to electrified machinery.)
Oil is used because of its convenience. Not because it's the only thing that can be used.
Like I said in a previous post, most rice growing done today, even in modern countries like Japan, is still the product of back-breaking human labor. Outside of the irrigation and crop varieties, what's so oil intensive there?
Ari-
Did I see "Benny "Peak Demand" Cole referenced in your post? G-d Bless You.
And you are right: We can generate electricity from a multitude of sources, all that you mentioned -- fossil fuels, solar, wind, Hydro, nukes, but also one you missed, geothermal. Geothermal could make up 10 percent of US power in 20 years. It is growing rapidly, and has a much smaller footprint than wind or solar installations.
Switch our car and truck fleet to 80-mile range PHEVs and who needs fossil oil?
There is a good case to be made that global crude demand will sink rapidly in next three years due to recession, and then keep sinking slowly due to new technologies. The Thug States will have to sell oil for $60 a barrel or less, or watch their markets disappear.
Thanks for notcing my posts Ari. I enjoy reading your as well.
Benny,
Good call on geothermal. Personally, I think that companies like BP, that are intent on diversifying their stakes in energy, will be poised to succeed in this coming era. Then again, I also don't think that Exxon or any of the other exploratory/production companies will be going anywhere fast, so I guess you could call me downright bullish about the future.
The only "sticky issues" I see for an electrified economy is air and sea travel, where batteries/energy storage/synthetic fuels don't quite work well yet. Granted, I don't think it matters a whole lot in the medium-term (which is what matters to us mortals), because there are certainly potential options that we simply haven't developed. It just poses the greatest challenges in my mind.
Ari-
Of total oil consumption, ships and airplanes are rather small. Fossil fuels will not run out soon, and if we switch to PHEVs, there will be plenty for deceades to come. Even so, palm oil output per hectare is rising rapidly due to improved hybrids. Jatropha may work.
A permanent sustainable model is PHEVs-biofuels.
What is really heartening is that a successful energy future does not require a "science fiction" answer. We already know we can make diesel from palm oil or other veg oils, and we know how to build PHEVs, and we have been building nuke plants for decades.
So why the doomsterism?
Benny,
Good question. I don't know. I think the Crichton quote I posted above sheds some light. If you have time, I highly recommend you read his whole speech on environmentalism. It's quite interesting:
http://www.michaelcrichton.net/speech-environmentalismaseligion.html
He makes an interesting case for how environmentalism as we view it today shares a common narrative with Western religious themes: the Eden, man's spoiling of the Eden, and the only way to restoring the Eden is to listen to the Gospel as told by ______. Really interesting way of looking at it, if you ask me.
Ari,
The problem with Crichton is that his arguments concerning environmentalism are effectively straw men. He may well have a point that a lot of modern environmentalists are dogmatic in their approach. If he stopped there, I'd likely agree. However, he goes on to imply that this somehow means that there's a lack of reliable scientific consensus regarding key environmental issues (like AGW).
It's a classic logical fallacy: because there are some crackpots that claim to believe something, everyone who believes that thing is a crackpot. It's the same sort of thing we see every now and then when trolls pop up on JD's blog: because JD doesn't adhere to the doomer/TEOTWAWKI party line, he's a crazy cornucopian who doesn't believe that oil will ever run out.
It's a tricky distinction to make. I'm certainly not a doomer, either when it comes to peak oil or environmental devastation. And I think Crichton has a point regarding the millennial tendencies of certain vocal contingents of the environmentalist (and peak oil) crowd. But I think there's a lot of legitimate, responsible scientific work being done on these fronts, and not all of it is particularly encouraging. I think Crichton has a tendency to try to discredit legitimate work by associating it with the ramblings of nutcase doomsayers. And I think that's every bit as reprehensible as the nonsense spouted by people like Simmons, Savinar, Kunstler, and Hanson.
Sean,
I'd advise you to be more careful regarding Chricton's position on AGW. He's been very sensible on the matter, and he's not making any straw man's case on GW.
Here's a video with a different speech but where he touches similar positions, linking it with other scares, like Paul Erlich's pop bomb, y2k, etc.
He's not straw manning, and you can see that in his interview with Charlie Rose in here, where he clearly aligns himself to be in the position of Bjorn Lomborg who is also a very sensible man regarding the GW debate. He simply refuses the high rethorical and emotional rollercoaster and takes the numbers as they are and makes a case out of it. There is a lot of work being done in GW that is very good, but the whole endeavour is frustrating and there is a lot of prejudice, politics and very bad management in the IPCC science. And there's a lot to be said about that.
His case is sound, while many GW activist's are clearly not. But just because he states that this is not the end of the world, you don't like him, that's ok.
To equate him to idiots like Savinar though, it's frustrating. Chricton is more honest and intelligent than 10 Savinars.
Sean,
I'm going to have to disagree with you there. Crichton's stance is actually a bit more nuanced and interesting than you give him credit for. For one, he states, very clearly, that he believes that humans affect the climate, that CO2 will cause warming, and that further study is warranted.
What he's against, and I think this is more than reasonable, is the idea of "consensus," the attacking and silencing of anyone who dares to voice contrary opinions, and the very unscientific behavior of many involved in the scientific community and the AGW studies.
I have been called the moral equivalent of a Holocaust denier because I stated that I believe that there are legitimate scientific and statistical concerns with the models. Let me repeat this: I got called the moral equivalent of a Holocaust denier. Because I don't put my absolute faith in models.
This is the same reason I very quickly found the peak oil hysteria to be quite silly: the effects are all the products of models. We don't actually know what happens when the oil production slows, because we've never been there. The funniest part about it is that the one instance of oil production being reduced (oil embargoes) suggests that it sucks, but life carries on in the short-, medium-, and long-run.
I think Crichton's problem with the way things are going-- and this is mine as well-- is that science has been hijacked by "model fever." Instead of people going out and actually doing observational, falsifiable science, they're instead throwing data at a computer and are developing models. The "Export Land Model" is no different, of course.
Honestly, I don't think Crichton has tried to "discredit" any work. He's tried to falsify it.
And that's how it should be.
When did science stop leaving itself in the open to be criticized? Is that not one of the first things we should WANT of our scientific works? It's far more reprehensible in my mind that people are saying that we shouldn't be questioning, because that isn't science.
Go to Treehugger.com or Grist.org and criticize a post on scientific or economic grounds. See how long it takes for the stream of ecocrusaders to come in and tell you that you're just a "denialist" or, even worse, a "skeptic." A skeptic! It's now pejorative to be skeptical! I once questioned a post on Treehugger about hurricane intensity (I mentioned that recent work by Emanuel and Landsea suggested a less-than-solid link) and got told to read "The Guide to Climate Change Skeptics." It amounted to little more than claims that anyone who dared to disagree with Mann or Hansen were little more than Big Oil lackeys.
Funny that Big Oil is the bad guy for Peak Oil and AGW. Anyway...
So I retorted with, "I'm offering you the most recent science. Why do I deserve to be treated like someone who needs "re-education?""
Etc. etc. I can give you all sorts of experiences like this, whereby my offering published, quality scientific work resulted to little more than getting ostracized, name-called, and harassed for not agreeing with the imaginary "consensus."
Crichton is right, by the way: "Consensus is not science, and science is not consensus." It was consensus using models that gave us nuclear winter and Limits to Growth. It was also consensus that kept us from understanding continental drift until the middle of the previous century. Consensus is not a good thing. I think the one thing I took away from my science classes in undergrad was to NEVER be comfortable with consensus. Scientists are always playing the role of gadfly, and that's how science should work. And that's why I think Crichton, despite some lumps, is generally correct.
It's also why I spend so much time trying to get people who come here and moan about the future or go on Treehugger/Grist/etc. and moan about the future to look past the doomsday crap and look at the science. All this talk about AGW or peak oil and we haven't even begun to really work on something far more serious: fishery depletion.
Now there's a problem I'd like to see studied, and instead we have smart people letting computers think for them. Ugh.
Ari,
The point isn't that Crichton isn't intelligent, or even that's he's being deliberately dishonest (I don't personally know the man, so I couldn't say). And he's undoubtedly right that there's "a lot of prejudice, politics and very bad management" in AGW science. But having read his writings on the matter, and listened to him speak, my problem is that he either explicitly or implicitly frames anyone who concludes that AGW is a significant issue as either prejudiced, politicized, or guilty of bad management. He comes perilously close to doing the same thing he accuses the other side of doing, namely, discrediting them for what they believe, not for why they believe it.
Taken in isolation, his thoughts are compelling. In practice, however, there's a strong whiff of hypocrisy around the whole thing. Crichton's playing sleight-of-hand with his argument: he has a valid argument to make regarding extremist elements in the AGW debate, and I agree with him that these elements have a higher profile in the discussion than they should. But I think he paints with too broad a brush, and I think there's a lot more reliable, responsible science out there than he would have his audience believe.
In that respect, I stand by the comparison to Savinar. In the end, both work to cloud the discussion and to discredit their detractors unjustly. To be absolutely fair to Crichton, however, the comparison only goes so far. I think Crichton, at worst, is guilty of distortion, not fabrication, and, unlike Savinar, I have no reason to doubt to his good faith in the matter.
For what it's worth, I don't think climate change is any more the end of the world than peak oil, and I've no idea where you got that idea. I think climate change is a bigger threat than peak oil, but I don't think either is likely to cause TEOTWAWKI. My attitude towards AGW is much the same as JD's attitude towards peak oil: it will force us, as a society, to change certain of our habits, but I think we're more than capable of doing that without losing our collective heads and going all Mad Max.
Erm, oops. My last response should have been addressed to Barba Rija, not Ari. Mea culpa.
The point isn't that Crichton isn't intelligent, or even that's he's being deliberately dishonest (I don't personally know the man, so I couldn't say). And he's undoubtedly right that there's "a lot of prejudice, politics and very bad management" in AGW science. But having read his writings on the matter, and listened to him speak, my problem is that he either explicitly or implicitly frames anyone who concludes that AGW is a significant issue as either prejudiced, politicized, or guilty of bad management. He comes perilously close to doing the same thing he accuses the other side of doing, namely, discrediting them for what they believe, not for why they believe it.
I don't think he necessarily says that anywhere. I think what he's saying is that climate science has strayed too far from the science and has gotten too cozy with the policy. This, I think, is more than correct. My take on Crichton is that he's an "old school" thinker about science. He believes science is science, and that it should strive for falsifiability, strict adherence to scientific methodologies, and objectivity to the utmost.
That is where I agree with him. And that is what I think he says that is the most important to listen to.
Taken in isolation, his thoughts are compelling. In practice, however, there's a strong whiff of hypocrisy around the whole thing. Crichton's playing sleight-of-hand with his argument: he has a valid argument to make regarding extremist elements in the AGW debate, and I agree with him that these elements have a higher profile in the discussion than they should. But I think he paints with too broad a brush, and I think there's a lot more reliable, responsible science out there than he would have his audience believe.
Yes, and the fact of the matter is that that reliable, "responsible" (what does that actually mean, by the way?) science CONSTANTLY CHANGES. Look at how quickly and readily Emanuel (and many others) changed conclusions recently about Atlantic hurricane intensity. That's the point. We are trying to make policy based on science that will change a fair bit in the short-, medium-, and likely long-run. Not a single scientific body I know of predicted that 2008's autumn and winter would be so severe. So what? Science is as much about the unknowns as the knowns, and I think that's what Crichton stresses-- and what most will ignore.
In that respect, I stand by the comparison to Savinar. In the end, both work to cloud the discussion and to discredit their detractors unjustly. To be absolutely fair to Crichton, however, the comparison only goes so far. I think Crichton, at worst, is guilty of distortion, not fabrication, and, unlike Savinar, I have no reason to doubt to his good faith in the matter.
I disagree. Crichton is arguing not necessarily against individuals, but against a mindset. Yes, he tries to falsify some arguments made by scientists. But so what? Why is this bad?
When did it become BAD to falsify science?
That's my point: WE SHOULD BE ENCOURAGING THIS KIND OF BEHAVIOR. McIntyre, McKittrick, Lucia at the Blackboard, Landsea, Lomborg, Pielke Sr., Loehle, Von Storch, etc. etc. These people, these so-called "problems." The gadflies. They are GOOD. They are challenging assumptions and making people question conclusions. THIS IS SCIENCE. That's my point, and that's why I think Crichton, in general, is good. That's why I think it's so problematic when a guy comes out and says, "my conclusion, based on the data, is that AGW is real but not catastrophic" yields little more than, "DAMN HIM! HE MUST BE SILENCED!" from the peanut gallery at Real Climate or NASA.
We've become too comfortable with the frocked scientist. We should learn to distrust the human and trust the method once again.
For what it's worth, I don't think climate change is any more the end of the world than peak oil, and I've no idea where you got that idea. I think climate change is a bigger threat than peak oil, but I don't think either is likely to cause TEOTWAWKI. My attitude towards AGW is much the same as JD's attitude towards peak oil: it will force us, as a society, to change certain of our habits, but I think we're more than capable of doing that without
I never said you did. Like I said before, I just was addressing the various ranges of opinions I've personally encountered, and why I think the so-called "skeptics" are such a good thing.
But then again, I methodologically align myself with the old school thinking in science of testing, validation, testing, validation, testing, validation...over and over... as a good thing. It overjoyed me to find out what McIntyre does BECAUSE it's a direct challenge and validation of Mann et al. I think McIntyre should get a spot on the next IPCC AR, personally.
Sean,
My apologies to you, then. I directly responded thinking it was aimed at me.
Still, I suppose it was a chance to further engage in discussion with you, so it was fun nonetheless.
Ari (for real, this time :-) ),
That's a fair point, and you (and Crichton) are absolutely correct. The thing that I'm sensitive to, however, is the idea that criticism means something specific, scientifically. Automatic gainsaying the work of someone you dislike isn't scientifically useful criticism. As you suggest, it's the difference between discrediting work and falsifying it.
By the same token, there's a difference between legitimate scientific consensus and enforced groupthink. If the data points strongly enough to a particular conclusion, there's nothing inherently wrong with consensus. Groupthink, and sacred cows, of course, are far less desirable, and I think my major complaint with Crichton, in light of what you and Barba have said, is that he doesn't distinguish between the two as clearly as I'd like. I would never dare to criticize someone for raising questions regarding AGW "consensus," but I think the those questions need to be subject to the same (harsh but fair) skepticism to which the consensus itself should be subject.
Then again, I'm (at best) an interested layperson, and I haven't done nearly as much research or analysis as either you or Crichton. I think it would be best for me to humbly back down at this stage before I dig myself into an even deeper hole ^_^
That said, thank you for the excellent discussion. It's given me a lot to think about.
That's a fair point, and you (and Crichton) are absolutely correct. The thing that I'm sensitive to, however, is the idea that criticism means something specific, scientifically. Automatic gainsaying the work of someone you dislike isn't scientifically useful criticism. As you suggest, it's the difference between discrediting work and falsifying it.
By the same token, there's a difference between legitimate scientific consensus and enforced groupthink. If the data points strongly enough to a particular conclusion, there's nothing inherently wrong with consensus. Groupthink, and sacred cows, of course, are far less desirable, and I think my major complaint with Crichton, in light of what you and Barba have said, is that he doesn't distinguish between the two as clearly as I'd like. I would never dare to criticize someone for raising questions regarding AGW "consensus," but I think the those questions need to be subject to the same (harsh but fair) skepticism to which the consensus itself should be subject.
There's nothing inherently wrong with consensus. There's something wrong with enforcing it. My problem is that we've gone beyond what there is a consensus about-- temperatures went up during the 20th century, CO2 is a known radiative forcing, increasing CO2 will almost certainly increase temperature, increased temperature will have some effects-- has instead become, "our model says this. Our model is fact. Do not question the model. Questioning the model will leave us with no choice but to call you names." OK, so not that simple, but pretty close.
I think Crichton says something interesting when he states: "Finally, I would remind you to notice where the claim of consensus is invoked. Consensus is invoked only in situations where the science is not solid enough. Nobody says the consensus of scientists agrees that E=mc2. Nobody says the consensus is that the sun is 93 million miles away. It would never occur to anyone to speak that way. " Now, he's not completely right here, but he's darned close.
Then again, I'm (at best) an interested layperson, and I haven't done nearly as much research or analysis as either you or Crichton. I think it would be best for me to humbly back down at this stage before I dig myself into an even deeper hole ^_^
That said, thank you for the excellent discussion. It's given me a lot to think about.
To be honest, I only got interested in the whole deal after a class in grad school on environmental policy. After being told that Crichton and McIntyre were the devil, I started digging deeper... and deeper...
Sean, I've read both your responses to me and Ari, and I must say that I also agree with your call to nuance. Chricton usually comes off as too harsh a critic against the AGW community in his speeches.
But he's doing those in speeches where he wants the audience to think for itself, to question things over, so he gets a little provocative. It's a style. In his interviews, he's more cautious and nuanced, because he's telling what he believes, not what an invisible audience should be told about.
Now what despairs me is not your critic against Chricton, which in my view can be quite fair. What despairs me is that most people simply fall prey to this groupthink where AGW critics are "loonies" on first sight, what Ari speaks about Holocaust denying, etc. (one should remember that this Holocaust thing was spread not by grass-roots, but by a high profile activist - and scientist) What I mean is that people are quite correct in their criticism against critics, but fail to do the same treatment when it comes to the very AGW team, when they claim they can model 100 years of climate, it's insane.
I mean, we can't even predict next winter, and there are people that pretend we can predict next century? OK, I'll buy that, but please, with a big grain of salt! And I won't buy everything, I want strong evidence that your models work.
And you know what? They aren't working. But here's the key: you cannot falsify these models until a certain time has passed, for 10 years can show "weather noise" rather than real climate trend, so we have to wait 30-40 years so we really know. But we are told that we should act now, so we are to act before the theory is proven correct. Quite slick, ain't it? Thing is, it's dangerous. I really believe we are going to uncharted waters by trusting these models too much to even decide trillions on dollars upon them.
Remember, there was another big thing that used complex forecast models on chaotic behaviors extensively to base decisions upon. I'm talking of course, of the financial sector. Just look how it turned out.
JD:
You are not blogging enmough. We need fresh meat.
barbra,
What's even worse is that when people like McIntyre and Lucia Liljegren try to falsify, they get name called and attacked.
Thanks for taking the time to respond Ari. You have an answer for everything, and I don't mean that in a bad way, quite the opposite.
I do have a question for any non-doomers that care to answer. Suppose the leaked IEA report info is correct and we are looking at a 9% decline rate, probably more around 12%+ when you take ELM in to account. What do you see happening in that scenario? We do not have any liquid fuels that could scale up in time to combat such a steep decline. I'm just interested in hearing some views other than the doomfest from theoildrum & LATOC.
To plan on 100% doom is naive, but to plan on no doom at all is also naive, imo.
OptimisticDoomer
Wow, a polite and intelligent discussion on the internets, I had nearly given up hope ;)
I'm not really impressed with Crichton's views on climate science, nor anything else - he is just an author after all - he at least does have a good point that contrary views are vital to scientific progress. However, these contrary views must be based on sound science, not merely naysaying.
I have no particular reason to doubt the science behind AGW, nor the climate models (within limits), but the IPCC projections are based on models of fossil fuel use which are highly improbable. Even James Hansen does not think they are likely.
Raise this question at realclimate and it gets brushed under the carpet. Unfortunately, climate science has become political, and that makes for bad science. I think in the long run "scaremongering" by AGW adherents will greatly damage the reputation of science, which is already viewed with suspicion in some quarters. If the dire predictions of climate change do not transpire (yes you James Lovelock!), the public will be even less inclined to take on trust what scientists have to say.
JD blogged on geoengineering a while back, I just read a piece on BBC http://news.bbc.co.uk/1/hi/sci/tech/7701006.stm about it. The idea seems to be gaining traction.
OptimisticDoomer:
Maybe this will help with your question. The below was posted by Freddy Hunter on his treandlines website last week.
Within each petroleum province, roughly a third of fields and wells are relatively recent and annually ramping up their production rate. Another third are in plateau. And there are the mature and near-retired wells and fields where aggressive depletion is causing their yearly production to decline. The IEA calculates that mature Regular Conventional Crude fields average 9.1% annual decline, while mature deep sea fields decline 15% avg per year. These subsets, oft identified by the lunatic fringe, are a mere 30% of total production.
optimisticdoomer,
First off, I think "doom" is a strong word that has been watered down in these circles to simply mean "problems." When I think of doom, I think of fiery hellspawn rising from the deepest pits of the netherworld to devour our souls. I don't think of "economic hardship." But that's a decidedly semantic issue.
Secondly, I don't have an answer for everything, to be honest. I cannot tell you what will happen because I don't know. I think the prognosticators who tell us what the world will look like in 2050 are as silly as the people who told us we'd all drive flying jet cars in the year 2000. We cannot say with any certainty. We can, however, look at past events to get an idea for what happens.
In the 1970s, the developed world was hit with the oil embargo. The US and all of the OECD lost nearly 1/5 of its oil supply in a matter of weeks. Responses were varied. The US instituted rationing. Some European countries banned driving on certain days of the week. Countries like Japan saw it as a sign that they had to decouple the grid from oil-based electricity.
Ultimately, best I can tell, very few people died as a result of a near-1/5 reduction in oil supply. It sucked, yes, but life went on.
Remember, also, that ELM is a MODEL. It's a model in the same way that the projections made by the i-banks and AIG were models. Be careful around models, because when they are largely untested (and ELM has NEVER really been tested), they are nothing more than exercises in imagination. ELM should be taken with a grain of salt.
However, let's talk about the IEA report and the decline rate. Remember that decline rates don't mean that ALL OF THE OIL IN THE WORLD IS DECLINING, but rather than CURRENT PROJECTS ARE DECLINING. Big difference. Nonetheless, let me offer my (very limited) view on what it means. I'll use a very very simple analogy. Let's say you have 100 units of something and it declines at 10% a year (10 units.) That means that, without doing anything, you'd lose 10 units every year. But you are doing something: you're going out and finding more units to replace those lost units. In the past, it was easy and you could add even MORE units! Today, we don't know. We do know it will involve a lot of investment that simply didn't happen due to the low price of oil for the past decade or so, but anyway...
Let's say you only replace 9 out of 10 of those lost units. That means that you do have 1 less unit than you had before, but it doesn't mean that the depletion means that you lose TEN units of usable units, but rather ONE.
The problem, of course, is knowing what will happen. We don't know. I suggest, however, that with history as our guide that the most likely scenario is a rationing situation with a massive shift toward EVs and other "non-oil" techs. I doubt we'll see the Armageddon as so many seem to wish for. But like I said, who bloody knows?
bc,
Wow, a polite and intelligent discussion on the internets, I had nearly given up hope ;)
It happens. It's just rarer than an honest politician.
I'm not really impressed with Crichton's views on climate science, nor anything else - he is just an author after all - he at least does have a good point that contrary views are vital to scientific progress. However, these contrary views must be based on sound science, not merely naysaying.
Here's where I'll break with you. It's not what he says about the science per se that I agree with, but with the methodological issues.
Also, "just an author" strikes me as a bit of an unfair statement. Freeman Dyson is "just a BA" according to some, yet I would clearly say that the man knows his physics. I say we go beyond the titles (and ad hom) and dissect the words. In that respect, Crichton has said nothing more than what needed to be said: unfrock the frocked scientists, and stop demonizing those with legitimate scientific concerns and arguments. Make science about falsfiability and sound methods once again. Institute stricter testing on these models (double blind works), and let the work speak for itself. Don't trust people just because they have fancy titles.
I have no particular reason to doubt the science behind AGW, nor the climate models (within limits), but the IPCC projections are based on models of fossil fuel use which are highly improbable. Even James Hansen does not think they are likely.
See, this is also where I differ. I took enough stats to know to ALWAYS be skeptical of models until they are tested. I have no problem with AGW (though I take the stance that CO2 is an over-hyped forcing), but I have a problem with people telling me that the models ARE THE FUTURE. They are not. They are extrapolations, and one should always remain skeptical until they have demonstrated predictive skill. Thus far they have not. Therefore they are the fanciful prognostications of people who should know better-- until proven otherwise.
Raise this question at realclimate and it gets brushed under the carpet. Unfortunately, climate science has become political, and that makes for bad science. I think in the long run "scaremongering" by AGW adherents will greatly damage the reputation of science, which is already viewed with suspicion in some quarters. If the dire predictions of climate change do not transpire (yes you James Lovelock!), the public will be even less inclined to take on trust what scientists have to say.
Raising questions at RC is the moral equivalent of denying the Holocaust, didn't you know?
Also, James Lovelock is a perfect analogy of a prophet in Western religion, don't you agree? "REPENT, SINNERS! THE GAIA GODDESS IS ANGRY WITH YOUR HEATHEN WAYS, AND UNLESS YOU HEED ME AND THE TEACHINGS OF THE GREAT EHRLICH, YOU SHALL ALL DIE!"
Oh, wait, I think he already told us we're all effed already. Whatever. In that case, why bother caring? ;-)
JD blogged on geoengineering a while back, I just read a piece on BBC about it. The idea seems to be gaining traction.
Definitely. I've been reading a newsgroup where many of the leading scientists in geoengineering post. I didn't want to disturb the group, so I haven't posted a high-profile link, but it should be fine down here in the comments:
geoengineering group
Lots of articles there if you want to follow the play-by-play.
I'm not a climate scientist, but here's my take on it...
If we can't even say, with certainty, how the system will respond to CO2 put into the atmosphere, should we really be looking to engineer changes directly otherwise?
I dunno... I just worry that geoengineering attempts may make things worse than they need to be.
If we can't even say, with certainty, how the system will respond to CO2 put into the atmosphere, should we really be looking to engineer changes directly otherwise?
My thoughts exactly. I'm completely dumbfounded at the naiveness of these "inventors".
JD:
You are not blogging enmough. We need fresh meat.
Sorry Benny (and everyone). I've got a new post almost ready. Please hang there for another day or two.
JD
And there's this:
"Solar Power Gamechanger"
Solar Power Game-changer: 'Near Perfect' Absorption Of Sunlight, From All Angles
ScienceDaily (Nov. 4, 2008) — Researchers at Rensselaer Polytechnic Institute have discovered and demonstrated a new method for overcoming two major hurdles facing solar energy. By developing a new antireflective coating that boosts the amount of sunlight captured by solar panels and allows those panels to absorb the entire solar spectrum from nearly any angle, the research team has moved academia and industry closer to realizing high-efficiency, cost-effective solar power.
If we can't even say, with certainty, how the system will respond to CO2 put into the atmosphere, should we really be looking to engineer changes directly otherwise?
I dunno... I just worry that geoengineering attempts may make things worse than they need to be.
If the Global Climate Models are good for prediction they are good for control. In the long run and ice age is coming. Geoengineering for Climate control is necessary for preservations of mankind with or without global warming. Many "environmentalists" who scoff at creationists have a belief that is basically religious and every bit as absurd as creationism. That is the belief that there exists a natural balance and any disturbances to that balance by mankind are inherently sinful and wrong.
stop demonizing those with legitimate scientific concerns and arguments.
This is one of the strawmen that antis like Crichton raise. In fact there are no legitimate scientists who are being demonized. Climate scientists who have doubts about AGW work within the community, and their concerns are studied and addresses. They are even on the IPCC panel
The people who are rightly demonized are self-taught amateurs and scientists from different fields who have decided to become experts in climate science. They repeatedly bring up old studies and ideas that have been debunked and abandoned.
A good example is the "sunspot" theory. It has been carefully examined and has very little effect, and anyway there is no proven causal mechanism. But some people like to dress as the major influence on climate.
They are not legitimate scientific concerns, it is just wilful ignorance.
The funny thing is that when science comes up with stuff that is useful or has no impact on lifestyle people have absolutely no interest about the science; most people don't even know how planes fly. But when science comes up with anything that may negatively affect lifestyle, suddenly all these people turn into self-claimed experts on the science, and further have a set of convincing reasons why the scientists are wrong about their own science.
Sorry, but I just don't buy that.
Humans have been geoengineering the planet for 8,000 years, so the cat is already out of the bag. It may not be a good idea, but people will do it anyway.
Apropos to recent discussion, I was shocked to see in the news that Michael Crichton has just passed away. It struck me as kind of spooky, I guess.
On the subject of geoengineering, I'm inclined to agree that it's premature to make anything approaching solid plans. But by the same token, I think it's silly to not investigate the possibilities.
Ari and Sean, ironic you both were discussing Crichton, he just passed away today (http://www.cnn.com/2008/SHOWBIZ/books/11/05/obit.crichton/index.html). Regardless of his views, he died way too young. I loved his novels. May he RIP.
"Nobody says the consensus of scientists agrees that E=mc2. Nobody says the consensus is that the sun is 93 million miles away."
And it's patently obvious why that's the case. There's little potential harm in disbelieving either of those and there's no widespread movement with a strong interest in spreading the belief that either of these are untrue by whatever means necessary; unlike say AGW, evolution or the virus theory of AIDS(there are still a few nutbars who insist HIV is harmless).
It gets invoked when the usual pack of lies, strawmen and proud flaunting of ignorance is trotted out by the denier movement. Legitimate criticism exists and is important but it never gets advanced by these people; they're just there to forestall action by never admitting defeat and just keeping the FUD machine running at full speed.
"It would never occur to anyone to speak that way."
That's wrong too, as outlined above. If there was a widespread movement which had some kind of serious implications and was impervious to reason it would be invoked almost imediately in policy circles(perhaps something like trying to deny that nuclear weapons or nuclear reactors are even possible and allow Russia to place their "imaginary ICBMs" in Cuba if they feel like wasting their time?).
bc,
I agree that many of the "prickly types" do work in the community, but look at how they get treated. Even Roger Pielke, Sr., who is clearly not some raving lunatic sunspotter, gets called all sorts of unflattering things by the "Real Climate types" when he dares to raise questions about specific claims. One of the so-called "ecoblogs" suggested that he lost his marbles once because he questioned a claim. This is what bothers me.
The same kind of ire has been aimed at people who have gone and published in peer reviewed journals if they have done any work that goes against the "Real Climate consensus." That's my concern. It's not that I think that the sunspotters deserve free reign. I don't. I just think that the people who publish good, scientific work that might shed light on how perhaps something is not what we thought it was (hurricane intensity, for example) get called names.
That's what bothers me. Of course it swings both ways, but the fact of the matter is that the ball is still very much in the "Real Climate" court.
The people who are rightly demonized are self-taught amateurs and scientists from different fields who have decided to become experts in climate science. They repeatedly bring up old studies and ideas that have been debunked and abandoned.
No, it's not "rightful demonization." There is no such thing as "rightful demonization" in science. That's just dogma. Dogma has no place in science and never will.
Also, "self-taught amateurs" have, and always will have, a place in science. Let's not forget that Mendel was an "amateur," as is Robert Evans, as were Edison (who founded the journal Science, BTW), Faraday, and today we have Forrest Mims, who has published in Nature and other journals-- he is an "amateur."
Does that mean I think we should give the sadly shrinking number of amateurs equal time? No. But it does mean that we shouldn't simply ignore or castigate them simply because they lack a PhD.
Also, it's interesting to me that you talk about people from different fields not having a place in the science when climate science is necessarily a multidisciplinary field. One thing that has bothered me a great deal is the reluctance by guys like Mann to invite more statisticians over to review the models. If I were Mann, I would have invited every statistician I could find to review my methodology! Hell, that's what I did in grad school before I submitted any of my econometrics papers!
Short of maybe English literature, I think every field has a role to play in climate science. Remember that many great scientific discoveries have been made by people "outside" of their chosen fields. Part of the problem of climate science today, in my view, is that they are too cloistered, too secretive. Some seem to resent having outside fields criticize their work. That is not science.
Science doesn't improve by consensus and protectionism. It improves by criticism and sometimes vicious assaults on works.
The funny thing is that when science comes up with stuff that is useful or has no impact on lifestyle people have absolutely no interest about the science; most people don't even know how planes fly. But when science comes up with anything that may negatively affect lifestyle, suddenly all these people turn into self-claimed experts on the science, and further have a set of convincing reasons why the scientists are wrong about their own science.
See, here's my take...
I don't care what climatologists have to say about climate. I really don't. I also don't care what biologists have to say about biology. Or physicists about physics.
I care what the data has to say. To that end, I'm as willing to listen to a statistician talk about the data as I am a climatologist. Or anyone else who can demonstrate mathematical ability, for that matter. This love of degrees and titles and positions at universities really bugs me. It reminds me of someone who said to me that we shouldn't care what Dyson has to say about physics because, get this, he doesn't have a PhD.
No, I don't buy it. Maybe I'm too old fashioned and believe in a science that's dead and gone, but to me science is a messy, collaborative, amateur-friendly, open-minded affair that doesn't exclude based on titles. I guess we are indeed entering an era of ad hominem science.
And it's patently obvious why that's the case. There's little potential harm in disbelieving either of those and there's no widespread movement with a strong interest in spreading the belief that either of these are untrue by whatever means necessary; unlike say AGW, evolution or the virus theory of AIDS(there are still a few nutbars who insist HIV is harmless).
So we should base scientific results on what may or may not harm us? Our theory and results should be biased in favor of what we think MAY be, instead of what is?
Science is supposed to be dispassionate and objective. What you are referring to is not science, but something far different.
It gets invoked when the usual pack of lies, strawmen and proud flaunting of ignorance is trotted out by the denier movement. Legitimate criticism exists and is important but it never gets advanced by these people; they're just there to forestall action by never admitting defeat and just keeping the FUD machine running at full speed.
Let me reiterate: I'm concerned with the attacks on the legit scientists. The people who are publishing and are still being harassed because what they're finding is different from the "consensus." Whatever that means. Not the shills.
"It would never occur to anyone to speak that way."
That's wrong too, as outlined above. If there was a widespread movement which had some kind of serious implications and was impervious to reason it would be invoked almost imediately in policy circles(perhaps something like trying to deny that nuclear weapons or nuclear reactors are even possible and allow Russia to place their "imaginary ICBMs" in Cuba if they feel like wasting their time?).
What?
I really don't get what you're saying here. Please reiterate.
I don't think the sharp drop in oil prices since the recent economic collapse is reflective of a drop in demand. Rather, it looks to me like a popped bubble in oil futures. Prices were going up enough, and credit was easy enough, that speculation got going, driving the price in an upward spiral. That doesn't mean the price was entirely speculation, but some of it was. Now, when the credit crisis started, it became impossible to unload those futures - which are in essence agreements to buy oil in the future, at the price on the futures agreement. Cash-starved speculators are now ditching their futures at a significant loss, or not paying for them as they come due. The shock has led to an artificially depressed market.
This is just speculation on my part. I was trying to make sense of why oil prices were dropping during the collapse. Normally, during a stock collapse, capital flees to commodities, so oil should have gone up. But it seems like sound reasoning to me. If true, it means prices will go right back up as soon as the market stabilizes - maybe not to the mid-2008 peak for a while, but we won't be seeing $1.75 gas for much longer.
The upshot is that those criticizing Simmons are every bit as wrong as he was, every bit as guilty of shoddy thinking. And outside the special environment of the credit collapse, his argument continues to make sense - blaming a drop in consumption does not.
Heh, it's interesting watching the video when the young guy says "June highs equal July lows"... nope...
nothing is that predictable...
Seriously... until the luxury part of oil usage is gone, to me it's quite absurd to forecast collapses of civilization. Economics is far too complex to predict such a thing.
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