Another $100 per barrel flirtation
Oil prices closed above US$100 per barrel for the first time in history today. While I keep getting hassled for talking about peak oil, the fact is that prices keep going up while production keeps flat. It’s been flat for almost three years now. No one can say that it has finally peaked, but this could indeed be the plateau that has long been forecast by the Peak Oil community. We shall see.
As for oil truly being US$100 per barrel, my trendline shows that $100 won’t be the average price until about September this year. Today is just another flirtation on the road to truly expensive petroleum.
Further to my previous posts - just when on earth are Treasury, the MED and the Reserve Bank going to pull their heads from the sand and give us an honest forecast?
February 20th, 2008 at 8:11 pm
Sure - the wells are drying up faster than its being found and the End is definitely Nigh! Have a look at
http://www.lifeaftertheoilcrash.net/
if you need any further confirmation.
What will be interesting is when the demand truly exceeds supply. The last oil crisies entailed a drop in production of only 5%, and with that the price went up enough to drive demand down by that small increment. We chose to drive a bit less, turn the heat down a bit and we scraped through.
During that time, of course, production costs didn’t change, all that happened was they supplied less and (since, as I recall the price increased by substantially more than 5%) they actually made more money.
But this time round it will be different. The shortfall will kick in, and it will never go away. It will only get worse. But at the auction will New Zealand bid versus say USA for a bunch of barrels; if we win we get what we bid for - but if we put in the low bid because we cant afford to pay more then will we simply come second and get nothing – not even a pineapple lump?
Will it be an all-or-nothing scenario for us? Is the government hauling the local reps of the Shell, BP et al in to the office and asking them how they will allocate the remaining resource? Are the bids put in by these companies, or by the government? What guarantees of share of the falling supply are in place? What proportion of our local oil well production is suitable for processing to motor spirit and industrial fuel oils at Marsden Point? To what extent are we self-sustaining in readily-usable liquid fuels, and for how long?
I noticed that the great new oil find off Taranaki a couple of months ago with big volumes of oil touted was described in the small print as having 50% being extracted in a period of three to five years with the remainder (obviously the hard-to-get-at part of the resource) over several decades. This conforms with the Peak Oil predictions where the easy oil is virtually gone, and as the harder bits are worked they run out sooner, and the oilmen have to move on to the next harder part of the field and that runs out sooner still.
While the reported connection between the use of fossil fuels and climate change is unfortunate to say the least, perhaps the biggest irony of all is that the untimely failure of the energy source we are most strongly and perhaps fatally addicted to will lead to a collapse of our transport, industry and food supplies right when we need a reliable and stable industrial and social base to cope with climate change and sea level rise. Not a good look!
February 20th, 2008 at 8:49 pm
If you believe the peak oil story, and your new peak coal story, then there can be no reason to continue trying to control everyone’s lives by dictating to them about their CO2 emissions. If you are right, the problem will solve itself as supplies of fossil fuels dwindle and prices inexorably rise.
It seems you can’t help indulging your weakness for those apocalyptic stories of doom and gloom that you relish so much - the ones where wicked humans are punished for ignoring the wisdom of wholewheat Gaia - even when your fables completely contradict each other.
February 20th, 2008 at 9:35 pm
Frankly Mouldwarp you couldn’t have said it better; Peak Oil + Peak Coal = Peak Food,
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/mo ney/2008/02/07/cnoil107.xml
and so we should stop messing about in boats trying to reverse-engineer thermodynamics by capturing carbon we have just released or making life impossible for the ordinary man by taking money from our pockets and putting it into a bottomless carbon trading pit.
We should instead use the remaining resources and time we have to building the most robust lifeboat we can for our nation. We need a truly transparent state of the nation review covering nationally sourced and produced energy and food supply. From that we need to develop local systems that will ensure the survival of our families at basic levels long before we fret about spectrum for digital TV or arbitrary controls on the mortgage market or trying to manipulate the gap in income between the rich and middle earners versus the gap between middle earners and the poorest citizens.
All these will be trivial when – as you say – the ‘problem’ starts to solve itself.
It won’t be my head that goes on a pike when the starving hoards crash the gates of the Beehive – it will be those in whom we have put our trust for the safety of the nation who will bear its wrath when it all goes bad. I don’t take any pleasure in the dark view of our immediate future – either as a nation or as a species. I pray that prudence will see us adopt a precautionary approach and focus vigorously on building a new and more sustainable future for us, rather than indulging the ‘establishment’ by trying to prevent the unpreventable.
Way out here in the antipodes we have the blessing of isolation, combined with the curse of being so small and so remote that other nations will not even see us going down – so focussed will they be on their own issues.
We need to get on to a War footing – but this time the enemy lies within us all. We can choose to win or loose this fight. We can choose to act, or to let the tide of world events rise around us and drown us. But choose we must. Act we must. And soon.
February 20th, 2008 at 10:00 pm
Many of the costs of oil recently have been related to one-time refining issues and not just the levels of supply, fyi. So while I’m still with you that peak oil is a risk, if we project from current figures, we’re likely to get the future price increases wrong.
February 21st, 2008 at 1:54 am
The government’s lack of commitment to preparing for peak oil is best illustrated by the Christchurch Bus Exchange.
In 1999 a private developer offered to incorporate a bus exchange into a central city retail development. The city council agreed to the proposal and Transfund promptly commited $5million to make it happen. In 2004 it became obvious that the bus exchange was reaching its traffic capacity years earlier than expected. The government promised to increase Canterbury’s land transport funding by $50 million a year, so funding wouldn’t be a problem. The government reneged on it’s promise so here we are four years later with the bus exchange unable to cope with the public response to high petrol prices and second exchange not expected to be constructed before 2012.
http://www.stuff.co.nz/stuff/thepress/4407285a6530.html
This government can sure talk the talk but it aint walkin’ the walk.
February 21st, 2008 at 2:02 am
For those unfamiliar with a bus exchange (as opposed to a bus station or terminus) here’s an urban design breifing on the bus exchange from the Auckland regional council.
http://greensite.arc.govt.nz/arc/library/o78431_2.pdf
February 21st, 2008 at 11:33 am
wouldn’t those “one-time” refining issues be more like permanent refining issues? or should we be investing in additional refining capacity for a dwindling resource?
for those who think the oil peak is good news for global warming, remember it isn’t proposing a date after which all oil use will entirely cease! it will decline gradually. the problem of global warming is still with us - especially as some are saying action is urgently needed, if not already too late.
besides, incentivizing carbon emission reduction also helps incentivize the search for alternative energy. a free-for-all approach merely puts off the necessary action
February 21st, 2008 at 3:31 pm
Refining issues shouldn’t affect crude oil prices unless they are driven by rising or falling demand.
It’s ironic and slightly forgetful that frog says “this could indeed be the plateau that has long been forecast by the Peak Oil community” when in fact this is the view of organisations like CERA and IEA who they usually refer to plateaus. Peakies usually refer to a rapid fall from a peak as you regularly see in Colin Campbell’s work
http://www.aspo-ireland.org/contentFiles/newsletterPDFs/newsletter85_2 00801.pdf
February 21st, 2008 at 5:18 pm
Yup, the refinery issue was only a minor part of the issue. See:
http://www.guardian.co.uk/business/2008/feb/20/oil.useconomy
So a broken pump can cause the odd ripple, but it takes a statement by the chairman of OPEC to really put the frighteners into the market.
They’re not building more refinery capacity because there is no likelihood of any increase in production. OPEC will not increase production because it cant - the easy oil is running out.
Venezuela has not increased production over the last five years or so because its easy oil is cut as well, and its nerves about Enron et al are more about grabbing a bigger share of a diminishing resource than about socialism vs capitalism. That’s why Chavez is very anxious about possible military interference from USA because he is walking the fine line between clinging to his country’s major source of income vs posing a strategic threat to a power that has already anexed by military conquest much of OPEC’s production in Arabia.
Its not a pretty picture is it?!?!
February 22nd, 2008 at 3:20 pm
If you don’t think any refineries are being built go take a look at China. Of course there are no major ones going up in mature markets as they can meet demand through reengineering existing sites.
February 22nd, 2008 at 8:52 pm
actually, lots of new refineries need to be built just to stand still. That’s because we’re running out of high-grade crude and having to use more low-grade crude, and many of the old refineries can’t cope with it.
February 25th, 2008 at 12:15 am
Adapting new cars to run on CNG might not be a bad idea IMHO.
Unfortunately that option is only available in the North Island.
Trevor.
February 25th, 2008 at 5:31 pm
# Trevor29 Says:
February 25th, 2008 at 12:15 am
> Adapting new cars to run on CNG might not be a bad idea IMHO.
Unfortunately the Muldoon government built power stations which used up lots of the gas, so there’s not much left.
If we had used the gas directly for cooking and water heating, the amount of electricity use it displaced would have been about three times as much as the amount of electricity the power station gave us. This way it could have lasted 3 times as long, or we could have had plenty left over for CNG to power transport.
February 26th, 2008 at 12:06 am
Is CNG covered by the biofuels sales obligation? Or is that restricted to liquid fuels?
Trevor.