Monday, June 08, 2009

A Fit Of Peak

With oil trading around $70 -- up from the $30's just a few months ago -- I suppose we should watch for the reappearance of the "peak oil" pushers. They've been strangely quiet since late last year. It will be interesting to see how much traction they get this time around. Because of the bailouts, the Fed has been sharing the headlines with Susan Boyle and Kirstie Alley's waistline. Anyone who's been paying the slightest bit of attention gets it now. That wasn't the case in the months and years before the last spike to $150, when presciently bringing up topics like liquidity and open market operations at cocktail parties got you a hasty introduction to the 9/11 truther standing alone in the corner.

Assuming there's no geopolitical event that gives cover to monetary policy -- and undoubtedly some would welcome that right about now -- this time the cause of pain at the pump should be obvious. I don't expect that to deter the Fed, its defenders, and a keep-it-simple-stupid media from going back to the well on North Sea weather, fog at U.S. ports, Nigeria unrest, refinery problems in Texas, or pirates. We'll see if it works.

23 Comments:

Anonymous KAIMU said...

ALOHA!!

Perhaps we would be better served to study "PEAK DEBT" and its direct relation to "faith and credit"!!

6/08/2009 7:44 AM  
Anonymous Anonymous said...

James Kunstler flogs the peak oil horse weekly on his blog, regardless of oil prices.

6/08/2009 2:31 PM  
Anonymous primob said...

Maybe Hillary has switched to oil futures from cattle futures. Or Soros may be long, oil futures.

6/08/2009 4:17 PM  
Blogger Ivan said...

TCR,

It's why I have been reading since 2005:

"I don't expect that to deter the Fed, its defenders, and a keep-it-simple-stupid media from going back to the well on North Sea weather, fog at U.S. ports, Nigeria unrest, refinery problems in Texas, or pirates".

You would have made a terrific financial journalist; I guess you still have, albeit annonymously.

Agreed.

6/08/2009 9:40 PM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Be patient, we are in the beginning of the Peak Oil catastrophe. Stay tuned.

According to independent studies, global crude oil production peaked in 2008 and is now declining terminally.

Within a year or two, oil prices will skyrocket as supply falls below demand.

Independent studies indicate that global crude oil production is now declining from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

Alternatives will not even begin to fill the gap. There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."

With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, water supply, waste water treatment, and automated building systems.

Documented here:
http://www.peakoilassociates.com/POAnalysis.html
http://survivingpeakoil.blogspot.com/

6/09/2009 11:03 AM  
Anonymous charles lyell said...

The peak oil nuts keep going on about the subject because of fairly detailed studies by people like, geologist, that indiciate that world oil production has, well, peaked.

This is one of those things, though, where the consequences won't be visible until some time after the event.

6/09/2009 1:03 PM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Hi Charles,

The consequences of Peak Oil are visible: http://www.energybulletin.net/node/48275

and

http://survivingpeakoil.blogspot.com/

I am one of those "peak oil nuts."

6/09/2009 1:16 PM  
Anonymous Goldhorder said...

Wow...and you guys thought I was pessimistic! We are certainly going to be poorer going forward. I'm not inclined to believe we are going to run out of oil in the next 20 years myself...although when our dollar collapses we might as well be out of oil because we'll be too broke to buy any lol

6/09/2009 4:20 PM  
Anonymous Anonymous said...

It always amazes me that Peak Oil is treated as another conspiracy theory, or doomer hysteria. If you believe the world is finite, and oil is a non-renewable resource (both common sense conclusions, in my opinion) then oil will, by definition, peak at some point. If you take the time to read what most of the industry thinks, we're at or very near this peak. Even extreme optimists might give us ten years.

It has nothing to do with "running out" of oil. The Earth will probably never run out of oil. In a hundred years, people will be pumping oil, a few thousand barrels here, a few thousand there. It's a precious commodity, and our descendants will curse us for using it to haul our fat asses around in Escalades.

Argue the likely consequences of Peak Oil all you want, but please understand what it means. It's about hitting peak global extraction and heading down the slope of inexorable decline. Major news in itself, but it's not just going to stop flowing, and nobody who knows anything about Peak Oil theory has ever argued that.

Thank you for your time.

6/09/2009 9:48 PM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Dear Anonymous,

The age of oil is a speck in human history, 1859 to before 2059; less than 200 years. The latter date will be about or after total global collapse. Read some of the stuff on my blog, esp Peter Goodchild. My guesstimate for the last power blackout in the U.S. is between 2020 and 2030, but it could happen tomorrow. See the testimony of Paul H. Gilbert (National Research Council scientist testifying before Congress), cited in my report: http://www.peakoilassociates.com/POAnalysis.html

And read my comment above about the highways, which I guesstimate will fail before 2030.

Cheers,

Cliff

6/10/2009 12:09 AM  
Anonymous Anonymous said...

Seems to me that with economic output dropping off a cliff, that the oil price doing the same isn't out of line with peak oil. Further, every time even a hint of recovery flickers, price of oil spikes in concert. So whether it's peak oil or some other reason we're pressing that demand curve, the effect will be the same.

I suppose when/if we do have a recovery, and oil spikes through the roof we'll see the same walk back from CR that we've seen on other matters...

Hey, how's that hyper inflation coming? Not saying it's not right around the corner, but if one did a content analysis of your blog, we could certainly detect that you were/are expecting some serious hyperinflation which still has yet to happen.

Much like peak oil predictors, I suppose.

6/10/2009 12:48 AM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Dear Anonymous,

The economic impacts of Peak Oil are happening already for the many who are unemployed and can't afford to buy/keep cars, homes, travel, and trips to the mall.

Inflation will grab hold when the price of oil skyrockets again this year and as the dollar collapses.

Cheers,

Cliff Wirth

6/10/2009 8:49 AM  
Anonymous nil said...

OK someone needs to play the cornucopean in this comment section...

If you believe the world is finite, and oil is a non-renewable resource then oil will, by definition, peak at some point...

Julian Simon showed that this reasoning is a fallacy. People don't care about oil, what they care about is energy: something to power the cars, warm or cool the houses, etc. And if you take a longer perspective, in the 300 years since the industrial revolution, real energy cost has gone down dramatically, energy use per person has skyrockected while human population has multiplied several times.

It is very possible that we are close to a time where oil is peaking. What Simon argued is that because of the pressure to find alternatives, people will find a solution to this problem: either discover unorthodox sources of oil, or an entirely new source of energy, and after that hurdle is cleared, energy will be, in fact, cheaper than before. We have been through times like this before (peak wood, peak coal), and, to their durable surprise, the prophets of doom turned out to be wrong.

6/10/2009 9:35 AM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Hi Nil,

We have lots of solar/wind energy, but alas, after more than 80 years of trying, we have no good way to concentrate the electric energy from the sun/wind for use in large tractors/combines, trucks, ships, airplanes, and most trains in use.

Lots of disperse energy around, but it takes energy to get energy to concentrate it.

This is explained here: http://www.peakoilassociates.com/POAnalysis.html

6/10/2009 9:52 AM  
Anonymous nil said...

Clifford,

I would object to after more than 80 years of trying, we have no good way to concentrate the electric energy. There was no serious investment in alternatives to oil. Why bother? Oil is just cheaper. If oil triples in price for a couple of years, that would be an incentive to get some serious change going. And more than wind and solar, I could see nuclear, geothermal, natural gas and liquid coal all stepping up to the plate.

6/10/2009 10:14 PM  
Blogger Clifford J. Wirth, Ph.D., Professor Emeritus, University of New Hampshire said...

Hi Nil,

Universities and scientists around the globe have been searching for 80 years on the question of discovering a way to store much electric energy like diesel or gasoline. But you can't discover what is not possible.

6/10/2009 11:31 PM  
Anonymous e. nonee moose said...

I don't expect that to deter the Fed, its defenders, and a keep-it-simple-stupid media from going back to the well on North Sea weather, fog at U.S. ports, Nigeria unrest, refinery problems in Texas, or pirates.

NPR had a guest on today that very clearly pointed out that the reason oil is going up is not because of demand but because investors are very unsure of the dollar.

6/15/2009 12:10 PM  
Blogger michaeld said...

Very good article.

In my opinion, it is all a matter of market timing. It does not matter if it is gold, oil, or Microsoft, if you have access to good market timing signals, they will help you get in and out at a profit.

No guarantees in this business, but if they are right most of the time, you can still make $s.

There are may web sites providing them out there (search Google). Just find one that works and use it! Check out http://invetrics.com as an example.

Its Dow Jones timing signals are up 43% as of 6/23/09 while the Dow is up just 29% off its March lows.

Following a market timing system works!

6/24/2009 1:53 PM  
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SINGAPORE (AP) — Oil prices rose above $71 a barrel Tuesday in Asia as a jump in global stock markets boosted investor confidence. Benchmark crude for November delivery was up 60 cents at $71.01 by late afternoon Singapore time in electronic.

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