Peak Oil (was "petroleum geologist explains US war policy")

[jæd]

Can't be that certain. Recession may bring the price down, and the market could swing the price around too. It wouldn't surprise me though.

Are any bookies taking bets?

The high price is also a lot more to do with speculation than an imminent Apocalypse...

 

[max_freakout]

the only thing that will bring the price of oil down, is if people stop using it


but that is never going to happen

 

[max_freakout]

Anyone betting against $200 a barrel before the end of the year?

i bet it will be over $1000,000 a barrel within 6 months

 

[teqniq]

the only thing that will bring the price of oil down, is if people stop using it


but that is never going to happen

It is a finite resource. A resource that is becoming more difficult and therefore more expensive to extract. So even if it's finished long after you and I are long dead and gone it's still going to run out. So I don't see the price of oil going down anytime soon.

 

[bigfish]

Mr Brown can try to blame this crisis on Opec, but the real fault lies with his own tax policy

The British Government has two policies on oil prices. The first is that the price we pay for oil is too high, and must be brought down. The second is that the price we pay for oil is too low, and must be increased.

The second policy rests its case on the Stern Review's assertion that the price consumers are charged for fossil fuels is "the biggest market failure in history" – because it doesn't take account of the "climate costs" they allegedly impose on future generations.

Gordon Brown gave the now-celebrated economist Nicholas Stern a personal standing ovation when he delivered his report on the economics of climate change; the fuel price escalator – abandoned at the time of the road hauliers' protests and blockades in 2000 – is set to resume. Even without that, taxes on petrol and diesel are dramatically higher in the UK than in any other European country – we lead the world in fuel duties. So you might think that Gordon Brown would be delighted that crude oil prices have soared recently – isn't the market doing what Lord Stern of Brentford and the Government ordered as environmentally essential: to make us use less of the stuff? Apparently not.

This week the Prime Minister told the Google Zeitgeist conference: "It is, as people recognise, a scandal that 40 per cent of the [world's] oil is controlled by Opec, that their decisions can restrict the supply of oil to the rest of the world, and that a time when oil is desperately needed, and supply needs to expand, that Opec can withhold supply from the market."

This is not the first time that Mr Brown has attacked Opec in such terms. He did so – not coincidentally – when there was a sharp upward turn in petrol prices in 2005: it was the then Chancellor Brown who told the Confederation of British Industry that it was all Opec's fault for not producing more oil.

This produced a withering retort from the then Opec president, Sheikh Ahmad Fahd al-Sabah. He pointed out that the British Exchequer was taxing fuel at a rate of 75 per cent and asked who would buy the extra millions of barrels a day of oil that Mr Brown was calling for: "If he would like to have it I would be happy to sell it to him."

What Sheikh Ahmad observed then remains true today. There is not a shortage of crude oil – inventories are at normal levels, worldwide. Have you seen any queues at petrol stations? Do you know of any? Are there any queues at gas filling stations in the United States? Nope.

Far from operating as a restrictive cartel – whatever their aspirations – 12 of the 13 members of Opec are pumping out oil at maximum capacity. Saudi Arabia alone has the flexibility to produce more than their current output, but they are already producing well in excess of their official Opec quota.

Last week, in response to a personal plea from President George Bush, the Saudis agreed to increase their output by a further 300,000 barrels of oil a day. The announcement had no effect in halting the upward rush of the market price.

That is because most of the recent surge has been driven by oil "futures": the financial houses which dominate this market are convinced that oil production in the years ahead will not be able to meet demand – and so they believe that they will be able to sell "future" barrels of oil for more than they are now paying for them.

At the moment, however, there is enough oil in the market to meet immediate demand – and the Saudis argue that if there is a supply crunch coming in the years ahead, isn't that when they should be producing more, rather than now?

To the extent that there are already bottlenecks in the system, this is principally due to shortfalls in refining capacity. You can't put crude oil into a motor car – at least not if you want it to move. Yet for other environmental reasons – called "not in my back yard" – over the past 30 years there have been no new refineries built in the US or Europe. Is that another "scandal" that can be blamed on Opec?

On the same day that Mr Brown fulminated against Opec, the US House of Representatives overwhelmingly approved legislation enabling the Justice Department to sue Opec members under anti-trust laws for "limiting oil supplies". President Bush has said that he will veto any such bill. He probably remembers how in 1986 his father – then the Vice-President – pleaded with the Saudis to cut back their production when the oil price had collapsed below $10 a barrel. They did so – thus saving the oil-producing states of Texas, Louisiana and Oklahoma from economic meltdown.

This underlined the paradox at the heart of the West's attitude to Opec: it is rightly suspicious of the operations of a cartel, but at the same time wants the price stability that Opec itself claims as its principal objective.

In this context, the dispute between Gordon Brown and Opec is not about production at all: it is a squabble over who collects the rent. The Prime Minister wants the British consumer to pay a very high price for petrol and diesel, but for the British Government (as tax-collector and distributor of benefits) to be the principal beneficiary rather than the countries which actually produce the black stuff.

This racket worked well when crude oil prices were at historically low levels. It enabled Chancellor Brown – even with the fuel price revolt in 2000 – to siphon off vast revenues in indirect taxes without facing insuperable public dissatisfaction.

The other truth which Gordon Brown evades is that Britain is also a significant oil producer: the soaring price of crude is producing a windfall from taxes on companies operating in the North Sea. If current prices hold, they will generate extra above-Budget Petroleum Revenue taxes this year sufficient on their own to fund the £2.7bn cost of the desperate Crewe by-election hand-out announced last week by Chancellor Darling.

Although this is not the purpose of Gordon Brown's oil taxation policies, if he does want to help to destroy Opec, he is going about it the right way. The more expensive it becomes to buy gasoline, the more people will find ways of not using so much of it. Much of the current hysteria seems based on the idea that demand for oil can not be reduced. Of course it can, and will: last year the supposedly incorrigible US reduced its oil consumption by 5 per cent.

It could just be that the speculators who have driven up the price of crude oil futures to such a giddy height might discover that they have dramatically misread the market: if the sub-prime crisis has taught us anything, it should be that a speculative bubble has the capacity to burst –indeed, that is what bubbles do.

Meanwhile, however much the Prime Minister is worried about the public's rage at high fuel prices, he really shouldn't try to persuade us that it's entirely the fault of grasping Arabs.

The level of fuel duty and VAT is clearly stated on every gas station forecourt in the land – and we all know who is responsible for that.

http://www.independent.co.uk/opinio...ault-lies-with-his-own-tax-policy-832806.html

 

[Meltingpot]

I think the weakness of the dollar is also a factor, and the fact that it's still the world's reserve currency (though there are signs that this is changing in favour of the euro).

 

[elbows]

Well with the IEA finally dropping their supply optimism, and Gordon Brown's article in the Guardian today, I think we can finally say that the era of mainstream acceptance of peak oil is upon us:

http://www.guardian.co.uk/commentisfree/2008/may/28/gordonbrown.oil

"The global economy is facing the third great oil shock of recent decades. "

"The cause of rising prices is clear: growing demand and too little supply to meet it both now and - perhaps of even greater significance - in the future. "

"So our goal that Britain becomes a low-carbon economy is now an economic priority as well as an environmental imperative"

"We have made a start, but over the coming weeks, as this new economic challenge moves to being the first item on every country's agenda, getting the world to act together will be the top priority at the EU and G8 summits and beyond."

 

[Crispy]

Now all that has to happen is the correct response!

examining how we can maximise the recovery of oil from the North Sea oilfields

We already did, and now it's dropping. soz.

£150m programme financed by the utility companies

How about a £10b programme to build a massive amount of renewable power stations?

 

[Darios]

Jesus wept.

Why now and not 10 years ago?

 

[Crispy]

Jesus wept.

Why now and not 10 years ago?

Short termism, fossil-fuel lobbying
Also if you want to be cynical, going renewable means people can start becoming independant from the gird, which has dangerous political implications for those in power.

 

[elbows]

Yeah Gordon mentioned trying to increase North Sea output, but as total output has almost halved in less than 10 years, the best they can really hope for is to slow the rate of descent.

I tend to assume that those in power have been aware of peak oil and its implications since at least the 1970's when America peaked, some steps were taken in the 70's and 80's but the minimum they could get away with, due to the way that oil is the life support system for the current crazy way of running the planet. That agenda had a holiday in the late 80's and the 90's, one last profit party made possible by North Sea oil, end of Cold War etc. Then it returned this century, under the guise of climate change. Some steps have been taken in the last 5 years, albeit grossly inadequate.

At the very least we can now enjoy a slightly more realistic debate about these issues in the press & politics, but I still struggle to see how strong enough action will be taken. A recession or depression seems like the most likely way our system may slam on the brakes, although that is taking longer than expected considering how long the price of oil has been high now.

Monbiot's Guardian article from yesterday was also a tad amusing:

http://www.guardian.co.uk/commentisfree/2008/may/27/carbonemissions.energy

Talk about hedging his bets... Please Saudi Arabia, save the world by not pumping more oil, but oh by the way we are suspicious that you cant pump more even if you wanted to.

 

[santa klaus]

Short termism, fossil-fuel lobbying
Also if you want to be cynical, going renewable means people can start becoming independant from the gird, which has dangerous political implications for those in power.

You raise a very good point. In ancient times, the source of political power came from control over the irrigation grid.

You get one thing wrong, though: renewable energy doesn´t make you independent from the grid, but fossil energy does. That´s why failed states are full of diesel generators!

In Germany, wind power has reached the point where further expansion makes little sense without a strong European power grid, because otherwise you´ll still need fossil power stations to back up during windless days.

The idea is to connect wind parks all over Europe with a mighty grid - there is always some wind somewhere. Excess energy could be used to pump water into Norway´s reservoirs. These alone could deliver enough energy for the entire continent for weeks.

The EU has already grasped the significance of the grid problem.

See here:
http://www.iht.com/articles/2008/02/28/business/power.php

Or here:
http://news.bbc.co.uk/2/hi/europe/6117880.stm

Or here:
http://www.finanznachrichten.de/nachrichten-2008-05/artikel-10918240.asp

 

[santa klaus]

That agenda had a holiday in the late 80's and the 90's

Are you joking? Halliburton has managed to get their puppet elected into White House (and put their former chairman, Dick Ceney, next to him as watchdog).

Most of the world´s oil reserves are exploited by state-owned companies. That´s too bad for corporations when output declines. Their solution was to take over a few states.

 

[jæd]

Well with the IEA finally dropping their supply optimism, and Gordon Brown's article in the Guardian today, I think we can finally say that the era of mainstream acceptance of peak oil is upon us:

http://www.guardian.co.uk/commentisfree/2008/may/28/gordonbrown.oil

Amazing : the first appearence of the word tax comes in the 5th comment to that piece, and nowhere in Gordon's bit...

 

[elbows]

Are you joking? Halliburton has managed to get their puppet elected into White House (and put their former chairman, Dick Ceney, next to him as watchdog).

Most of the world´s oil reserves are exploited by state-owned companies. That´s too bad for corporations when output declines. Their solution was to take over a few states.

Sorry for confusion - I meant the agenda to slightly reduce reliance on oil etc, slightly improve efficiency, and make sure everyone knew that energy should notbe taken foregranted, had a holiday in that era, compared to the 70s and early 80s. The politics, profit & control of oil never rests.

 

[santa klaus]

Sorry for confusion - I meant the agenda to slightly reduce reliance on oil etc, slightly improve efficiency, and make sure everyone knew that energy should notbe taken foregranted, had a holiday in that era, compared to the 70s and early 80s. The politics, profit & control of oil never rests.

Exactly! The strategy of politics has been to secure a bigger share of the rest for yourself and let the rest of the world bite the dust.

 

[elbows]

Oh well, the BBC are now detailing what North Sea 'increases' are being talked about - about 70,000 barrels a day, which is an insignificant amount that will not even noticably reduce decline?

http://news.bbc.co.uk/1/hi/uk_politics/7422802.stm

I probably spoke too soon regarding a proper mainstream debate of these issues, in the UK it looks like we are going to have a long and largely pointless battle over short term fuel tax rates.

 

[elbows]

Ah I havent found much decent coverage of exactly what happened with Brown & the North Sea oil producers today, but Bloomberg appears to have come to the rescue on that front:

http://www.bloomberg.com/apps/news?pid=20601102&sid=aNHHoowEyYJM&refer=uk

Tax cuts for some producers there, hmm I havent heard that mentioned much elsewhere!

Meanwhile Indonesia bows to the inevitable and pulls out of OPEC, as it hasnt been an oil exporter for a while no, due to depletion in its fields and failure of bigfish to save them show them that they were just misguided, not suffering their own oil peak at all honest guvnor:

http://uk.reuters.com/article/domesticNews/idUKJAK6470820080528

Also this is not very long after they cut the subsidies on the price their people pay for oil, triggering outbreaks of violence that are predicted to re-occur there and elsewhere so long as the price of oil remains high.

 

[jæd]

I probably spoke too soon regarding a proper mainstream debate of these issues, in the UK it looks like we are going to have a long and largely pointless battle over short term fuel tax rates.

Probably because they're a more immediate priority...

 

[Crispy]

Probably because they're a more immediate priority...

Like noah choosing what colour umbrella to get out.

 

[jæd]

Like noah choosing what colour umbrella to get out.

More to do with wanting to have a haulage network, people outside large cities able to do things themselves. etc... (And no, we can't just jump on the rail network)

For all that U75 seems to think its an independent, free-thinking board, people here do seem very keen to suck up Spin given out by the Govt...

 

[elbows]

Sure the immediate cost of fuel is a priority to those struggling to afford it, and the way fuel is taxed in this country should give us a buffer that the government could use to temporarily insulate us against oil price rises.

The reason I say that debate is pointless is because going forwards, people are going to be priced off the roads, poorest first, almost regardless of whatever else happens. If the government buy them a little time by cutting tax's, the issue will still return in the not-too-distant future, so companies & people are going to have to adapt eventually.

 

[Crispy]

Well exactly. I don't disagree with lowering the fuel tax for essential services. But the point is that it's a short term measure. At the going rate of increase in the price of oil, we'll be right back where we are within less than a decade, maybe even 5 years.

 

[santa klaus]

companies & people are going to have to adapt eventually.

Exactly - they won´t do that if they think the governments will always bail them out with tax breaks.

 

[zceb90]

Ah I havent found much decent coverage of exactly what happened with Brown & the North Sea oil producers today, but Bloomberg appears to have come to the rescue on that front:

http://www.bloomberg.com/apps/news?pid=20601102&sid=aNHHoowEyYJM&refer=uk

Tax cuts for some producers there, hmm I havent heard that mentioned much elsewhere!

Near the end of the Bloomberg article was the following ref to production increases:

Petrofac today won permission to develop two new North Sea fields that will add 50,000 barrels a day to U.K. oil output.

From BBC TV news coverage last night I understood that there was also going to be another 20k bbls/d increase making a total increase in UK N Sea production of 70k bbls/day within a year or two. According to Oil and Gas Index - May 2007 (pdf file) UK NS oil output fell by 224k bbls/day between March 2006 and March 2007 representing a 14% decline. Even assuming a more modest decline rate of 10% (and now applied to a lower base production level of around 1.4m bbls/day) the 'new' production announced by Gov't yesterday merely offsets around 6 months' decline in mature N Sea oilfields. On that basis the new fields can only slow the decline to some extent - they cannot reverse it.

On a global scale, as widely reported yesterday, 70k bbls/day against demand of just under 87m bbls/day will do virtually nothing for the oil price.

 

[zceb90]

Some excellent analysis on the Oildrum, Europe, yesterday: Why Oil Costs Over $120 per barrel.

 

[elbows]

Nice article that, cheers. I especially liked the graph that showed how important the former soviet union countries oil output has been in keeping up with demand in recent years.

I do wonder if a fall in Russian oil exports this year has been one of the primary reasons the price has been going giddy, and why we seem to be in an era of newfound peak-oil acceptance in the media and political classes.

I guess some of these Russian issues have been talked about already on this thread but here's an article I stumbled upon which is chock full of figures and also seems to show that Prime Minister Putin was doing a similar act to Gordon in terms of announcing measures to encourage more oil production...

http://www.axcessnews.com/index.php/articles/show/id/16085

 

[elbows]

Although on the otherhand this Russian Billionaire suggests that Putins actions could raise production up to 12 million barrels per day. Maybe he is right although theres no indication of when this could happen by, and he may just be getting overexcited by the tax breaks that were announced.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqtQRcVtmj2k

Anybody prepared to speculate as to how low the price of oil could fall back to if more data emerges that people are starting to cut back on its use?

Also will we actually see directly visible oil shortages when demand starts to exceed supply, or will the pricing mechanisms obscure this? I know that in practice it doesnt really matter whether you cant get the oil because it doesnt exist or because you cant aford it, but it will change the nature of what the masses start getting angry and protesting about, and who they blame?

 

[Crispy]

high oil prices wil fuck with the poorest countries first. We should be alright

 

[santa klaus]

Q:

Anybody prepared to speculate as to how low the price of oil could fall back to if more data emerges that people are starting to cut back on its use?

A:

high oil prices wil fuck with the poorest countries first. We should be alright

Exactly. I guess in the short run, there will not happen very much in the wealthy countries. Sure, old cars will be replaced a bit sooner, solar panels may be intalled on the roofs to heat the water with renewable energy instead of oil or gas, buildings may be insulated sooner and/or better.

Less people will move to the suburbs because commuting gets more and more expensive. Besides, downtown flats need less energy for heating.

Anyway, I guess it´ll take years and years of high energy prices before enough people change their habits.

Until then, the poor will be priced out of the market.