Monday's Open Thread
Posted by Heading Out on December 26, 2005 - 12:14pm
Topic: Miscellaneous
In this season of annual reviews, and predictions for next year, the floor is yours . . . .
Posted by Heading Out on December 26, 2005 - 12:14pm
Topic: Miscellaneous
My thoughts are fourfold. 1) in the long term oil will increase in price as we hit the peak. I agree with the Danes that it will be out in 2020. With shale oil and other sources and with the Big Oil companies pouring money into drilling rigs this next year, production should see an uptick. BUT, I do not think they can get any real return on their investments for a couple of few years just with everything involved (permits, site issues, set-up, shipping, etc.). So I would conclude that in 2006-08 production should not increase too much but than some new wells, etc. will come on line which will temporarily ease rising demand over that same period.
- Global warming, if the world's governments get serious about it, would impact my point #1, by discouraging the use of oil based energy. But there again it would take several years to see any real impact.
- There are wildcards out there. If Iran is bombed for three days by Israel or USA or both over the Nuke issue, figure the Persian Gulf will be shut down for sometime. No tankers leaving those waters for weeks would smash up the Far East, and Europe economies to a degree. Iran's new President is not helping this option go away, that is for sure. If a world wide recession results from this or some other economic/terror event, and there are a lot of potential triggers out there, oil prices would plummet.
- the other event this past year and going on worldwide is that the world's economies absorbed the higher priced oil much much better in 2005 than in the 1970's. It still hurts the poorest of every nation the most, but petro-dollars in the Middle East mean more fancy car sales, and more buying of the latest military equipment, which keeps economies moving ahead. Places like Nigeria, Canada, and Venezuela all get a big kick in their economies and that means more stuff is bought and sold.
P.S. I do a local radio show in Central California from time to time and have a "Rush is Wrong" segment. This week it is how wrong Rush is about the "expensive" (his words, not mine) Prius! He echoed the President of GMC (boy I am glad I do not own any stock in that turkey) who last year said that hybrids were a fad.Then, if possible, the world needs to increase production even more for the actual increase in demand.
Rick
amount of stuff sold = amount of stuff bought?
Is there more to it? Have I got the definitions wrong?
When an economist uses "supply" or "demand," they're usually talking about the whole curve--the whole range of quantities that would be supplied (or demanded) at the whole range of possible prices. Normally, those functions a graphed, and the two graph lines cross at a single point--the market clearing price--and give you the quantity supplied and the quantity demanded.
If there's a lack of a free market (such as, if there are price supports or import restrictions), you can get into a situation where you don't clear the market. For example, if there's a price ceiling making it illegal to sell gasoline for more than $2 a gallon, but the market clearing price would be $2.50, you'll see shortages. Contrariwise, if the market clearing price of corn was $4 a bushel, but price supports hold the price at $5 a bushel, you'll see surpluses.
All of which is a bit off the point the previous poster was making, which I read the same way you did: in a free market, the price will move as high as necessary to prevent there from being a "shortage" of some good. Of course, that's what most people call a shortage--when there's so little of a widely used good that the price moves so high that ordinary people can't afford to use as much as they're used to using.
Talking about $100 oil in 2010 needs to be in the context of which dollars you are measuring with. In particular as a lot of us expect inflation to accelerate.
Agric and I talk about it some, but mostly engineers post here, so they are not all that interested in economic issues.
Inflation is out of control all over the world right now, kinda of the "hush hush", in these economic "boom times". All that money must go somewhere and the housing bubble has hid most of it since 2001. When people start pulling their money out of housing, they must put it somewhere, if it goes into oil.....look out. A bad hurricane season could put the speculators at the edge of their seat. The price of oil has much more to do with inflation than anything else, as long as the supply stays somewhat stable.
Oilmen in particular are playing poker with all sorts of variables.And by nature they hold their cards covered to their chests!I have spent my last 33 years living in an oil field in North Texas and have to deal with them because I have oil under my HomeStead!
Have worked on triple deep hole rigs.
The old fields are still producing 75 yrs after discovery
New oil is still found in Texas
Shut in oil/gas is rarely discussed,but it is a fact that Texas is not producing near what it could if real crisis appears
But how big is the overall impact?
There is plenty of evidence that the domestic real estate market has peaked for now, properties for sale are at the highest level since 1986. Australia and UK seem to be ahead of the US on the property market cycle. Based on their experience the slow down should be mild and manageable, but one can never be sure...
2 It is often said that high oil prices might drive the world into a recession, and that the recession would than cause prices to crash. There were three recessions during the seventies, not least the one that followed the Iranian oil embargo. Oil prices climbed 9x during the period, and never declined yoy. Recessions sometimes stop prices from climbing further, but have not so far actually induced any decline at all.
1 War,with Israel trying to takeing out Irans nuke capacity.
2 Peak oil becomes a mainstream topic.
The crystal ball gets a bit cloudy at that point.The political consequence of the various scandles,and unhappiness
of the public with the administrations wiretapping will affect how the public reacts to price shocks from war in the
middle east
The two wild cards I see are china and russia...who both got a dog in this fight...
all bets off at that point....
Dec 31 2006 - Year-end Henry Hub Nat'l gas Spot Price (WRTG) - $9
Dec 31 2006 - Year-end USA avg Contract Price (EIA) - $45
2006 - Annual Avg Supply (IEA) - 85.5-mbd
Expect the unexpected. I wont bother with oil price forecast -too many variables - if we have upheaval or terrorist attacks in middle east - triple digits almost overnight - if we have worldwide stock mkt sell off - then $30bbl due to demand destruction - so $30-$120 sounds reasonable - anyone 'betting' on a detailed prediction doesnt understand markets or chaos theory - the trend is your friend with market prices.
Another prediction: in North America, Peak Oil will ultimately be secondary in importance to the natural gas cliff. I have no idea how in 5 years time we will get close to the amount of gas we are pumping now. Numbers of rigs and wells have doubled in last 5 years source yet our production is down source. Canadas new wells have tripled in last 5 years and their reserves are down 12%. source. How can we change the heating structure of everyone in the northern states (5.1 quads out of national total of 7.1 from heating are from NG)quickly? TOD showed a graph earlier that our new wells have decline rates of 30-40% annually! TOD link here
NatGas is different than oil - we cant just invade a country with excess firepower and ascertain a steady flow of energy to our shores. LNG ports need time, political and public approval, and even then are fraught with difficulty. My prediction is that nat gas in north america will our gordian knot here. Who, among 6.6 billion is Alexander?
(Some traders must have read my prediction...;)
Interestingly, last weeks price drop was only in the near contracts - mid 2008 and beyond made new highs.
One possibility is to go back to heating with coal. Not the old, dirty stoves, but with syngas taken from the gasifier trains of IGCC plants. This could be piped to the point of use (commercial or industrial customers, probably too dangerous for domestic use) and used either in furnaces or in small gas-turbine cogenerators.
The last two lines do not match with each other. You can have an insight on World Oil Demand here.
IEA predicts an overall demand growth of 1.5 MDB for 2006. At least in 2006 1Q and 4Q Demand will be over your projected production. How can that lower prices?
Moreover, from this we can easily expect demand to go beyond 88 MDB in 2007 1Q. How can such demand be matched with production?
P.S.: Freddy although you might get the feeling of being bashed all the time, I mean no hostility against you, I just divert from your opinion.
Welcome to the Meltdown Millenium !!!
Story at:http://www.adn.com/front/story/7312139p-7223885c.html
Note that when you check this story out that it is saying this will all happen by 2100 - just a few years off geologically but long last all of us NOW.
The melting of the permafrost in Alaska has been news in places like the NYTimes for almost a decade now, certainly the past five years. I think you have too much faith in human nature responding to this and not what guides many who run our nation - economic reality. As it was once said, "America's business is business" and that means many decisions, often wrong in the long run, will be made strictly on economics. Thus I would argue $40 -$45 - $60 or even $100 a barrel will be what people will be worried about and not Alaska melting, at least not quite yet.
Anyway, you still have the conservative right, which has much of the power in this nation, arguing that "yes it is warming but has nothing to do with 7 billion people doing what people do." It will take more to prove this point to them and it may mean we will have to wait for them to lose power or die off.
Probably two things that hurt us the most is 1) fear of a new Ice Age predicted in the 1970's and 2) The same fear expressed back then that we were about to run out of copper, zinc, other minerals in 10- 20 years time. The fact that we were WRONG on these two items hurts our credibility today. I get that thrown in my face all the time and have to agree we screwed up on those predictions.
With the minerals we were just off by a few decades though ocean mining is coming in the future.
Saw that hopeful sign about maybe it won't happen until next century.
Then again, many a traditionally cold places on Christmas 2005 were enjoying summer weather:
from http://wwwa.accuweather.com/adcbin/public/community_blog.asp
It's Christmas,
Got Snow?
A friend called from Tahoe here in California. Normally they ski the week away. But heard it just rained and rained. My, what a 1 degree change of temeperature can mean (0 deg C versus 1 deg C). Rain in December translates into drought in August because the Sierra Mountains don't pack the moisture away as snow.
2005 Was the Second Warmest Year on Record
There is clearly enough data from the past decade to indicate that a warming event is occurring and I would certainly argue it is due in large part to human activity.
I think Alaska (and most every place else, though we do not fully understand some of the corrections Mother Nature may make for us) will get that much hotter much sooner.
But knowing something and seeing govts. doing adequate stuff about it are two different things.
Here in California we can not get homes to be oriented for passive solar and building more and more suburbs out there and with longer and longer distances to drive is still happening and we are supposed to be leaders at this. What about Alabama or some other red states (like Texas)?
As an aside about Tahoe, if snow melt is poor and stays that way for several more years on average, how will and what will California do if people continue to flow into the state at 6 million every decade? Desal plants? Shut down more and more agriculture (which will probably happen anyway with the population pressure?)
Right now, about 500 trillion grams of methane is released into the air every year. This release results in an increase in the greenhouse effect comparable to the one from carbon dioxide. It is estimated that over 30,000,000 trillion grams of methane are locked up as frozen hydrates in the Arctic. If just 0.01% of that hydrate is thawed yearly, methane release would be 3,500 Tg/year, seven times what it is now. Methane would then probably be more signficant than carbon dioxide for climate change.
You raise a concern voiced before that is very valid. I understand that the methane hydrates in Siberia are even more extensive and that Japan is starting to try off shore mining of it.
It has been well argued that it may be part of the reason for heat spikes in the distant past that humans can not possibly have any claim to.
Infrastructure rebuilding? What are you referring to? Looks to me like we're stuck with what we have now in the near term (no new LNG, refineries). If we get back to where we were, prices were still high before the hurricanes and have been rising 20%/year since 1999. "Content purchases" from the Gulf? -- I assume you mean the Persian Gulf? The Gulf of Mexico?
Wise up a bit. Don't believe what you read. Be skeptical. Follow the data like Stuart and the rest of us do. Peak oil is a theory that will be borne out by the data going forward, not some toady agency's self-serving prophecies.
But why do you (and some other TOD contributors) have such a need to cling to optimistic scenarios when there is ample evidence that the situation is at best ambiguous, if not downright threatening? This is the question you (and some others) need to ask yourselves.
Is there no room for any opinion other than yours?
The recent exchanges between Stuart and Freddy have been among the most educational that I have read on this (or any other) site. A theory can not be kept alive without exposure to opposing points.
While I tend to agree with Stuart a bit more than Freddy, their fact and analysis-based discussion moves us all closer to the truth.
Commentors on this site has a huge tolerance for people eager for the immediate end of the capitalist/industrial society as we know it, but little for JD or Freddy who dare to challenge the gospel.
The peak oil movement needs more challenging analysis and less conspiracy theories. This is the only way to dispel the (currently fairly accurate) assertion that peak oil is in part a doomday cult.
How did you read that into my remarks? I said The IEA is not independent--I think you know that. I would call O&GJ an independent source. A call to "be skeptical" is a call to openmindedness, not a closed opinion. I said "will be borne out by the data". That's a call to wait & see what the 2006 numbers bring, again not a closed opinion.
I said the situation is at best ambiguous, if not downright threatening. This means that multiple outcomes are possible. Again, I did not say the case is closed. But I was also trying to make a more important point. When Yergin, IEA, ExxonMobil & the rest cling to their rosy scenarios, they are telling the people what they want to hear. Usually, they back these remarks up with talk about huge reserves numbers--trillions of bbls out there waiting for the taking. These numbers sound impressive but don't increase incremental yields from declining megafields or put new small fields into production because the economics don't justify their development. What's going to happen to Russian production this year? Mexico has tipped--how bad is that? Is the Burgan Complex going to see large decline rates? Will West Africa meet projected numbers?
My personal view of TOD is that this is a place where questioning mainstream authority is the right thing to do. Stuart's post using the IEA numbers still showed a flattening out of production in 2005. Meanwhile, US demand last month was the highest ever. Here's what Stuart actually said earlier There's nothing controversial in this. We've been discussing this all year. If the IEA can just come along and say "everything's fine", what are we supposed to do, just believe them?
And, i "cling to optimistic scenarios" 'cuz they have been the "most" right since 1991 in global short/medium and long term prediction. It is easy to cherry pick their data and say they got this or that country wrong but in what matters most, the global supply, they are always right within their perameters and caveats. There was no levelling in non-opec supply capability in 2005 that some are gloating about. It was a stat based on the GOM impact. Take that out and all was fine. And we saw how quick gasoline exports were diverted to the usa (with IEA guidance).
As i challenged last week, when y'all have someone that u want me to add to my Scenarios that is representative of the EOTWAWKI cause, i will add their data to the graph and we'll watch how they do over the next ten years...
In my mind Colin and Rembrandt fulfill your quest. We know Colin's record. It's graphed at my site. And Rembrandt Koppelaar is not predicting the dire picture that is painted by some here.