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Ugh... Peak oil. It's real, but the people who ascribe to it are the same ones who stockpiled spam and bought a bomb shelter for Y2K, and are looking for an excuse to use them.

1). High gasoline prices make a transition easier. If gasoline goes up to $100/gallon, I can guarantee you the rich will be driving around in hydrogen powered cars in two years.

2). We have plenty of coal, and can go to CTL in five years with $5.00/gallon gas. My question, these days, is whether we're in a position to just skip CTL and head straight to hydrogen/wind & nuclear. About half of our energy infrastructure is in electricity anyways, and it's a lot less of a transition to double our electrical grid than some of the straw-man examples some of the doom-and-gloomers set up.


Don't worry; the market will take care of things as long as we keep the price of gasoline high. I'd be concerned if gas dropped back to $1.25/gallon or oil went back to $10/barrel, but if we can just have gas prices slowly ramp up from $2/gallon to $3/gallon to $4/gallon to maybe $5/gallon in advance of the peak, the worst-case scenario will be 10-15 years of a '70s-style supply constrained economy.

Careful with the over-generalizations. I subscribe to Peak Oil it because I'm a geologist, but I never have done and never do any of the tinfoil hat stuff you suggest.

Global production of crude oil will peak, plateau and eventually decline. It's inescapable. A lot of people refer to it as peak oil "theory". It's not a theory. It's how wellfields behave. The only theoretical part is trying to predict exactly when it will happen. The difference between the most pessimistic and most optimistic estimates is only about 30 years, so the "when" doesn't matter as much as people want to think.

What the repercussions may or may not be I don't claim to know and do not attempt predict.

I will say the following, however: Because the energy market is so distorted by virtually every government on the planet, and because the transportation market is also heavily distorted (which is the chief area of the economy where oil is consumed), I am hesitant to believe that the market will cure all, even if the price rises occur slowly.

Only time will reveal to us the truth of how this will all unfold, so I'll leave it at that.

That answer made the most sense.


Maybe, the geologists and paleontologists of the future will be digging up our fossilized remains up in a couple million years and burning us to get around.

We'll all get burned by the market.

Just came across this article through www.energybulletin.net

http://www.energypulse.net/centers/article...t.cfm?a_id=1124

It contains a good mixture of geology and economics, although it's pretty technical in places. Some key paragraphs

For what it is worth, the Petroleum Economist (October 2004) stated flatly that investment no longer keeps pace with high oil prices, which is a sure sign that in the executive suites of major oil companies, the general belief is that there are no longer investment opportunities capable of matching those of the past. Regardless of the upbeat bulletins and rumors emerging from those venerable premises, this should always be kept in mind, because even investment in OPEC countries (by local and/or foreign ‘players’) has slumped badly, and if this trend continues the production forecasts of the International Energy Agency (IEA) and US Department of Energy cannot possibly be fulfilled. One prominent consulting organization, PFC Energy, has stated that by 2020 at the latest, OPEC will not be able to make up the difference between non-OPEC supply and global demand. This is not a very welcome prophecy, and I am at a loss to explain why it is not more widely discussed.

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Some observers insist that enough oil can eventually be squeezed out of existing deposits to compensate for the inability to discover major new deposits. My immediate reaction here is that since between 75 and 80 percent of today’s oil output come from fields that were discovered more than a quarter of a century ago, and since almost all of these fields are in full decline, this is another case in which upbeat expectations should be carefully examined and justified before our political leaders and their experts use them to make pivotal decisions.

*********


Of late we have been hearing a great deal about oil from tar sands (in the Athabasca region of Canada), and the heavy oil of the Orinco region in Venezuela. As it happens, if a large expansion takes place in the output of these unconventional resources, then those observers who feel that the resources of the Middle East are overrated might be correct, because in those circumstances it is conceivable that the 9-10 Mb/d output of Saudi Arabia could be matched or overmatched.

As suggested by Crandall (2005) and Reynolds (2005), the total output of unconventional oil from these two regions will not reach anywhere near 9-10 Mb/d in the near or medium future, and by the time it does the global production of conventional oil might have turned down. Accordingly, we would still be faced with an oil price that is capable of devastating the international macroeconomy, as well as creating social/political chaos in the large importing countries. The CEO of one of the major oil companies has sworn what almost amounts to a sacred oath that his enterprise is prepared to assume the responsibility for developing the kind of technology needed to make unconventional oil economically attractive, but this sounds like the kind of pledge that is delivered late at night after the cognac has gone around the table a couple of times.

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My personal conclusion: Again, only time will tell.

Sorry. Being someone who's feelings about everything from radical feminism to peak-oil doomers sometimes turn into over-generalizations, it's something I really need to work on watching out for. It was my hope that in saying I ascribed to peak oil, I was also allowing for it to be OK for others to ascribe to it, too.

I hang out on PeakOil.com a little too much for my own sanity and have to constantly fend off a bunch of chicken-littles. It's kinda scary that there are people out there trying to buy a machine gun because they're convinced that Peak Oil will mean resource wars- or because they're worried about looters when the government collapses.


Well, being a geologist, you'd probably know better than I would the fastest rate that worldwide oil production could decline at. My environmental science textbook suggested it might be around 10%. If changes in oil production are *gradual enough*, this won't be entirely unprecedented for the market.

However, I'll agree that maybe we shouldn't completely trust the market to cure all. Three years ago, if I had figured that peak oil would hit where I think it will today, I'd be out buying myself a tin foil hat. But today, with oil at $60/barrel, I see a lot of hope for a market-based solution. In a sense, peak oilers in 30 years might be able to thank Bush for accidentally saving civilization by being stupid enough to invade Iraq. The terror premium from energy prices has gotten everyone thinking about reducing oil consumption early.

When energy prices got high enough in the '70s, non-oil parts of the energy industry grew pretty quickly. Today, we're seeing wind plants going up like crazy. Hydrogen fuel cell companies that were going out of business two years ago are seeing lots of investment money pouring in. We're also seeing plans for new nuclear reactors getting drawn up (this moderate Democrat has no problem with that) and CTL plants go up (I'm hoping CTL gets done with plenty of care for the environment, but not completely opposed).

I think that if energy prices continue to go up next summer, and stay around $3.00/gallon or $3.50/gallon, we might even be able to have a market transition to a post-peak economy without a whole lot of environmental problems. If we jump from $2.50/gallon to $7/gallon overnight, any concern for the environment will get thrown out the window.

No apology necessary. After I posted this, it sunk in that you said you ascribe to peak oil and then I realized I hit the add reply button too soon.

By the way, looks like I should have said ascribe rather than subscribe. Oh well.



I recall reading 10% somewhere myself, but I don't think the rate of decline matters so much as the supply-demand relationship. Gasoline demand is somewhat inelastic, at least up to a point, (though I don't know where that point is). In the US, the vast majority of people have no choice but to drive to take care of the day to day demands of their lives. The vast majority of neighborhoods and communities in the US are not walkable and are not transit friendly. Nor can they be made walkable and transit friendly easily. This contributes to the whatever the level of inelasticity of demand for gasoline is in the US. This is an area where I think we'll see some trouble. But again, we have to wait and see.




I would be more inclined to trust the market if it wasn't so distorted or if the government involvement in the market were geared toward aiding a smooth transition to an oil constrained world instead of which lobbyists can can throw around enough money to get tax breaks and incentives.



You may be right on this point.



I wouldn't say everyone. There are a lot of people who are in denial and think that there's nothing wrong with the supply outlook and believe that oil prices will fall back to where they were a couple of years ago and we'll all be comfy in our SUV's again. I've met some of them.



This is where I'm out of my league. I couldn't begin to guess what price level will wreak havoc and what won't.

A former "Peak Oil" discussion presented the following which may be partly true. It was pointed out that darn near everything uses oil. As the price of oil goes up, inflation kicks in and the price of darn near everything goes up to accomodate the added cost of fuel or raw material.

So, it occurred to me that this would also drive the cost of the capital costs for alternative fuels up. I am thinking that the infrastructure for alternative fuels would be very expensive. If the price of the alternative energy plant becomes even more expensive, it is less likely to be built. There is always the possibility that the returns would not pay back the money invested. The risk may become too high.

Too ensure a decent return on the alternative energy plant, fuel prices may need to be much above $3.50 a gallon. Another way of looking at it is that demand must far outstrip supply before alternatives will come to fruition. It may have to be a situation that gas and diesel cannot be had at the pump. The pumps will be dry.

Based on what I've seen in the past few years on the political front, our aging population is not willing to take risks in new technological ventures. Things may need to get pretty bad before some innovations in our energy occur.

Am I overly pessimistic?

It's true that short-term gasoline demand is inelastic. Same with short-term electricity demand, short-term steel demand, or just about anything. And if oil production dipped from 85 mbpd to 70 mbpd in six months, we'd be in trouble.

But oil demand's elasticity reveals itself in the long run. High oil prices make people move closer to work, buy hybrids, and figure out how to use public transportation. Sure, doomers claim that the average auto lasts for 13 years (I'm still trying to figure out how any car survives for 13 years of driving- I'm pretty sure it's closer to 7-10), but the average family has two or three cars, and the car of choice will quickly become the car with the greatest fuel economy as gas prices go up.



Have you seen what's going on in Washington, lately? When Trent Lott is calling for hearings on high gas prices, something tells me the oil companies don't have as much lobbying power as many of us think.

If I understand this correctly, the doomsday scenario of peak oil rests upon the condition of a sudden and sustained oil price increase. Since oil is used in the manufacture of almost everything, such high prices for oil will impede infrastructure development for alternative energy sources. In the meantime, acute shortages of almost everything will result in economic chaos.

Rather than leave it to chance that a gradual increase in oil prices will stimulate the market for alternative energy, why not put alternative energy infrastructure in place now?

From federal tax money, we've built infrastructure like superhighways, airports, NASA, medical laboratories, and weapons production to provide for the "advancement of science, security and general welfare" of the nation. Is there some reason why we can't do the same for alternative energy infrastructure ---other than tax breaks for the wealthy and the mistake in Iraq?

Isn't it a matter of philosophy? The folks in power have a steadfast belief that the free market will provide even though history has often taught people otherwise.

Building alternative energy infrastructure sure does seem like a proactive approach to do something about the future of energy now. It's an example of what some people call proactive planning. It seems to work better than depending on greed and random chance.

I think spending some money on this alternative sure beats having a perpetual oil war on our hands.

Well, my question is whether we're willing to put up with nuclear energy and maybe even CTL, assuming it's held to some reasonable environmental standards in order to do it.

If we're willing to put up with CTL, or maybe even if we're just willing to put up with nuclear enough to make our interest in the safety of nuclear plants more pro-safety and less anti-nuke, I can see us getting through peak oil with just 15-20 years of a '70s style economy, and then a major boom and plenty of room to improve the environment afterwards.

If we see both NIMBYism on our side and anti-alternative energy sentiments on the side of Republicans for the next fifteen years, it's possible that Peak Oil could put us in a situation which could only be compared to the Great Depression for 20-50 years.


It is kinda funny that we just had a $100 Billion highway bill with $3.00/gallon gas prices. You'd think that at the very least, Republicans would want to spend it on drilling in ANWR or building more power plants.

But I was watching Jim Cramer last night, and discovered that the industry for PVs is really taking off- and that some manufacturers like Evergreen Solar would still be reeling in the dough without government subsidies. Indeed, demand for solar cells is the main reason that silica prices have been going through the roof.

The market is going to be offering solutions to high energy prices. Not all liberals will like all of them- Nuclear and Coal-to-Liquids, in particular- but if you think that solar cells are the future, now is the time to invest. This is the first time that these manufacturers are turning profits, they're experiencing 40% growth, and as Cramer puts it, "Solar is now more than just a Carter-era pipe dream." One easy way for us to take action to make sure we avoid wars and less environmentally friendly options is to invest in this stuff.

(Disclosure: I have money in an energy fund that probably has less than 2% of its holdings in solar cell manufacturers. I'm thinking about putting some money in, though.)

These hearings are just a dog and pony show to appease the public, IMHO. The oil companies have been subjected to them before, and they haven't ever revealed much.

They might be, but oil investors are nervous, frankly. And I mean, there's a reason that companies like Conoco Philips and BP are running ads right now. Maybe the executives are nervous, too.

Hehe, maybe another opportunity to pick up more Chevron dirt cheap if you're right about all of this.

They are probably more concerned about a resurrection of the windfall profits tax than anything.

Senate is discussing ANWAR drilling today--- call you representatives to oppose this in the budget bill which cannot be filibustered.

Absolutely. And even as an oil investor and a more moderate Democrat, I'm not opposed to a windfall tax that brings the oil companies' taxes from ~35% corporate tax to 45-50%. Boohoo. It'll reduce Chevron's P/E to a miserable 12. My investment will survive.

However, I'd rather see a gas tax. That way, we get to tax ALL OIL sold in the U.S- not just the stuff that gets produced here. Why not tax terrorists along with big bad oil?