Peak Oil Again?

Is "social meltdown" imminent?

Crude oil prices hover between $90 and $100 per barrel and U.S. gasoline prices are again north of $3 per gallon. Since 2002, the price of a barrel of oil has risen more than four-fold. Are we running out of oil? A new report by the German think tank Energy Watch Group (EWG) says so. The EWG report argues that the world reached the peak of oil production last year and supplies will fall from about 81 million per day now to just 39 million by 2030. "The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life," declared EWG founder Joerg Schindler. This fast onset of oil supply shortfalls, warns the EWG report, could trigger the "meltdown of society."

At the heart of the EWG analysis is its drastic downward revision of estimated world oil reserves. The Oil & Gas Journal estimates that world oil reserves are 1.3 trillion barrels and BP offers an estimate of 1.2 trillion barrels. By including unconventional sources of oil, Cambridge Energy Research Associates (CERA) triples reserves to 3.7 trillion. The EWG derives its figures by joining other peak oil proponents skeptical of Middle Eastern reserve claims. Like other oil peakists, they believe that Middle Eastern governments are lying about how much oil they have in the ground and, as a result, slash over 300 billion barrels from their total, calculating world reserves at only 854 billion barrels.

First, a bit of perspective. Daniel Yergin, chairman of CERA, noted that this is the fifth time the world is said to be running out of oil. "Each time—whether it was the 'gasoline famine' at the end of World War I or the 'permanent shortage' of the 1970s—technology and the opening of new frontier areas has banished the specter of decline," asserted Yergin. "There's no reason to think technology is finished this time."

Higher prices do generally mean that supplies are becoming relatively scarcer. So what is causing today's scarcity? Most people have forgotten that by the mid-1990s, the price of oil dropped to around $10 per barrel. Why? Because the world was awash in oil relative to demand. The oil crisis of the 1970s provoked so much field development that there was a 25 percent excess capacity. Low prices also meant that there was very little incentive to invest in projects to increase supply. For example, when oil prices collapsed in the 1980s, the number of exploratory drilling rigs in the United States fell from 4500 to under 1000.

At the beginning of the 21st century, economic growth in India and China surged after they finally managed to shrug off the shackles of socialist planning. Strong world economic growth soaked up the excess production capacity, which has now fallen to around 2.5 million barrels per day. Generally a cushion of 5 million barrels per day is necessary to keep prices low. Most of the excess capacity is in Saudi Arabia. The world currently consumes about 86 million barrels per day.

Fearing that the U.S. economy was about to slow down, the Organization of Petroleum Exporting Countries (OPEC) cut exports by 500,000 barrels per day in early 2007. Now afraid that higher oil prices will provoke a world economic recession and reduce the demand for their product, OPEC has opened the spigots by 500,000 barrels in November.

The rise of resource nationalism is also bedeviling oil supplies. Some 77 percent of world reserves are owned by governments—and they are trying to extract as much revenue as possible from them. The result, according to an October 31st report by the investment firm Goldman Sachs, is that greedy governments are killing incentives to bring new supplies to market.

"West Africa, Russia, the UK, Canada, and various Latin American countries have pursued very aggressive tax regimes on oil production profits, with Venezuela even shifting to the extreme of the nationalization of its assets," notes Goldman Sachs analsysts. "These policies substantially increase the costs of production and the price of oil required to incentivize investment. Over the past few weeks, Canada, Nigeria, and Kazakhstan have all suggested higher government royalties on production." For example, the Washington Post reported that above certain thresholds, Russian taxes siphon off $19.15 of a $20 a barrel price increase.

In addition, the International Energy Agency (IEA), the energy watchdog which was established by the developed countries during the 1970s oil crisis, finds that government oil companies are failing to invest enough to keep oil supplies flowing. Claude Mandil, head of the IEA warned last year that his agency's World Energy Outlook 2006 report "identifies under-investment in new energy supply as a real risk." In other words, the world could experience an even worse oil supply crunch because of the economic incompetence of governments in places like Venezuela, Iran, Mexico, and Nigeria.

Interestingly, despite a four-fold increase in the price of oil, world economic growth has been pretty robust. For example, the U.S. economy grew at 3.9 percent rate last quarter and inflation and unemployment remain low. Why? In September 2007 paper entitled, "Who's Afraid of a Big Bad Oil Shock," Yale University economist William Nordhaus speculates that the reaction of consumers and businesses to steep oil price increases is muted because they regard them as temporary. In addition, the cost of energy is less important to the budgets of businesses and consumers.

In 1980, when oil reached $101.70 per barrel in real terms, spending on gasoline was 4.5 percent of GDP, 7.2 percent of consumer expenditures, and 6.2 percent of personal disposable income, according to a March 2005 report by Goldman Sachs. If oil prices reach $105 per barrel, the report noted that gasoline spending would reach 3.6 percent of forecasted GDP, 5.3 percent of consumer expenditures, and 5.0 percent of personal disposable income. Prices would have to rise to $135 per barrel to equal 1970s levels. In addition, it takes only half as much energy to produce a dollar of GDP today than it did in 1980.

Instead of the "meldown of society," a likely and painful scenario is that greedy and incompetent government oil producers will continue to under-invest, causing a shortfall in supplies that will drive up prices and provoke a global economic slowdown. Expensive oil also encourages consumers and businesses to invest in energy efficiency that will combine with the slowdown to cut demand. Reduced demand will drive down oil prices as steeply as they rose. Some day peak oil production will be reached, but most oil reserve estimates suggest that there are good reasons to doubt that that day is now at hand.

Ronald Bailey is Reason's science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.

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  • ||

    There is no such thing as peak oil. There is an INFINITE amount of oil in the earth. This is because as it gets more expensive, more expensive oil becomes economical and this can go on forever. There is also no such thing as global warming because the increase in temperature in the last 100 years was less than one degree. There is no other source of energy we can use for any purpose other than fossil fuels.

  • Tim||

    Wow, there's an INFINITE amount of oil ! Who knew ?

  • Guy Montag||

    Ron's observation ties in well with my latest invention, well more like the idea for an invention.

    Happy Green Week!

  • ||

    Instead of the "meldown of society," a likely and painful scenario is that greedy and incompetent government oil producers will continue to under-invest, causing a shortfall in supplies that will drive up prices and provoke a global economic slowdown. Expensive oil also encourages consumers and businesses to invest in energy efficiency that will combine with the slowdown to cut demand. Reduced demand will drive down oil prices as steeply as they rose. "


    If I had to bet on the price of oil in five years, I would bet that it will be closer to $10 than it will be to $100.

  • ||

    One other factor in the rise of the "price of oil" is the fall of the dollar. How much of the $100 price of oil is the result of the cheap dollar. If the fed would get off of its ass and protect the value of the dollar better, the price of oil would fall.

  • thoreau||

    Fred-

    Be sure to purchase carbon offsets for the strawman that you burned.

  • Sandy||

    John,

    We have rather a lot of trade imbalance to correct before a resurrection of the dollar should take place. That's the market's way of saying "yeah, but we don't like your stuff that much, so pay us in something besides dollars for a while." But it's cheap to buy stuff from us in the dollars they don't want, so it will balance itself out before long.

  • ||

    Seems that OR - 1/2 * OR = infinity in the world of the 'reason magazine'. (OR= Oil Reserves, world wide). But then there are even much stranger things people believe in.... and putting the head into the sand like an ostrich makes the world around disappear. How good is that!

  • Tim||

    "But it's cheap to buy stuff from us in the dollars they don't want"

    What stuff ? We don't make stuff anymore.

  • ||

    "What stuff ? We don't make stuff anymore"

    We make lots of stuff and services to. The cheap dollar has been a boon to exporters. At some point the rest of the world will get tired of US companies having such an advantage and will push their central banks to drive up the price of the dollar. It is interesting how we accuse other countries of manipulating their currency down for an unfair advantage but we have managed to do the same thing.

  • Guy Montag||

    Actually, I find it quite misleadign to reflexively call rises in commodity prices "inflation". If the demand is going up for a particular commodity, or a small set of them then the price goes up due to price appreciation. Same as when useable land is in short supply, for whatever reason, the price of the useable land increases due to price appreciation.

    It is inflation when all/almost all prices rise due to an oversupply of money.

    The Econ PhDs out there might have different words that they made up, so I will stick with being descriptive and accurate.

    Also, I must thank the advertising coders for tossing the "I survived roe v. wade" chick on screen.

  • ||

    Thomas Everth,

    Necessity is the mother of invention. No one will really make any progress on alternative fuels until we actually need said alternatives.

    And no government sanction or restriction will change the very simple rule of supply and demand.

  • ||

    Neat, forgetting to close that tag left my post looking like an oil spill site...

  • ||

    Fred has ironically made one of the points of the peak oil theory: the world will not run out of oil. Production peaks and then goes down, requiring ever more effort to extract, until eventually it just isn't cost or energy efficient to extract it any more.

    That said, it's pretty clear that a lot of the volatility in the oil market is due to psychology. Many traders are aware of the theory, and the geopolitical uncertainty in many of the nations under which the oil resources lay doesn't help matters. However, the fact that, since 2005, production has remained flat while demand has increased hasn't helped matters either.

  • ||

    Guy,

    Also if Oil is priced in dollars and the value of the dollar goes down relative to other currencies and the price of oil, in dollars will go up, even though the real value of oil stays the same. I think the fall in the dollar is at least some of the rise in the price of oil, although clearly not all of it.

  • ||

    Tim:
    If you believe the likes of the Cato Institute, the US still makes stuff, now more than ever. But due to mechanization, that sector employs a continuously decreasing number of people.

  • Syloson of Samos||

    Taktix,

    Neccessity is not necessarily the mother of invention. It is often the case that products are created where no "need" by the public before their adoption was felt. Not that there is anything wrong with that.

  • ||

    Also, I must thank the advertising coders for tossing the "I survived roe v. wade" chick on screen.



    You got the roe-v-wade chick? No fair! All I got was Giuliani's face!

  • ||

    Let me get this straight:

    1) We are running out of oil, so we are going to have less available and therefore the economy is going to go in the dumpster.

    OTOH

    2) If we keep burning oil at the present rate, Global Warming is going to cause so many problems that the economy is going to go in the dumpster.

    Sounds like a "box of poisoned candy" problem to me.

    In either case, just how is Government Intervention going to save us?

  • ||

    If the fed would get off of its ass and protect the value of the dollar better, the price of oil would fall.

    What should the Federal Reserve Board be doing? Most currency exchange rates are floating, fucking around with them will only bring about nominal changes.

  • ||

    "What should the Federal Reserve Board be doing? Most currency exchange rates are floating, fucking around with them will only bring about nominal changes."

    It can raise the prime rate to make investing in US securities more valuable and it can sell bonds on the open market thus reducing the supply of money. It also can set the raise the reserve requirement for banks also reducing the supply of money. If the supply of dollars goes down, the value of the remaining dollars goes up. It is the primary function of the federal reserve to protect the value of the dollar.

  • Guy Montag||

    John,

    I was not arguing against you and agree with what you said. I was heading off the inflation posters at the pass.

    Unless you are under the impression that the declining value of the dollar, due to factors besides oversupply of dollars, is properly called inflation. In that case I would be arguing with you.

    One good way to identify inflation is, well, what I posted earlier about all prices rising. Another way, IIRC, is to look at many terms/durations of government bonds and see if they are rising too.

  • ||

    It is interesting Guy. Real inflation always gives you high interst rates. If the infaltion rate is 5%, I have to charge 5% interest to even break even if I am lending money. Right now, bond rates or low and it doesn't look like there is any pressure on long term interest rates to rise. But at the same time, commodity prices are booming and the dollar is in the toilet. I frankly can't figure out what the hell it means. I think the rise in comodity prices is probably the result of a really good global economy increasing demand. I am not happy the dollar going down so far, but I will be the first to admit that people who are smarter than me don't think it is a problem.

  • ||

    The peak-oilers are probably right that the world's supply of cheaply available oil has, or is about to, run out.

    The peak-oilers are definitely wrong that this will cause some cataclysm to our western, technological liberal democratic society.

    We went through peak horse a little under a century ago. Horses are not really cheap now, but there is no big struggle to obtain the last drop of horse.

  • Guy Montag||

    I frankly can't figure out what the hell it means. I think the rise in comodity prices is probably the result of a really good global economy increasing demand.

    From that last sentence it seems that you have figured it out, but just refuse to believe your lying eyes :)

    Larry Kudlo(sp?) wrote something about this today at The Corner on NRO. Anyway, I just see it as price appresiation for a few things that are in greater demand than they have been in the recent past causing them to increase in value.

    Now, about that hybrid Segeway idea . . .

  • ||

    there is no big struggle to obtain the last drop of horse.

    You have obviously never cleaned stalls. Some horses can get very possessive about their droppings.

    ;)

  • Guy Montag||

  • iih||

    Ron- Thanks for depressing me!

    Aresen- What would you care. You have your self-sufficient Alberta oil. If only I can tell you of the pains of the current exchange rates (I currently pay a lot of my US income in Canada -- bummer, it hurts!)

  • ||

    It can raise the prime rate to make investing in US securities more valuable and it can sell bonds on the open market thus reducing the supply of money. It also can set the raise the reserve requirement for banks also reducing the supply of money.

    I think you mean the discount rate not the prime rate. I am not clear what you think an increase in the reserve ratio will do to the exchange rate. Remember also that if the Fed lowers the price of bonds today they still have to retire them upon maturity, and they are already priced for market clearing.

    So if the FOMC does what you recommend what will happen to the exchange rate, and ultimately the price of oil?

  • Edward||

    There has to be an infinite amount of oil to match the infinite amount of libertarian optimism about the amount of oil.

  • ||

    So we are running out of oil. AGAIN? Actally I'm concerned. I'm concerned about a jillion different things. I'm worried about a lot less. Peak oil doesn't make my worry list. In a 100 billion years or so, when the universe will be running out of usable energy, remind me. I promise to work the worry beads night and day then.

  • SD82||

    Can anyone here describe to me how the free market can successfully deal with global warming? When that happens I'll trust libertarians on other issues. Until then, I trust the popularly elected government to do necessary things long before I trust unelected corporate boards.

  • Jennifer||

    The peak-oilers are definitely wrong that this will cause some cataclysm to our western, technological liberal democratic society.

    How do you know?

    We went through peak horse a little under a century ago. Horses are not really cheap now, but there is no big struggle to obtain the last drop of horse.

    People stopped using horses because they chose to switch to a better, more convenient form of transportation; there will still plenty of horses available. Where transportation is concerned, I haven't noticed the gasoline-powered internal combustion engine being phased out as more and more people switch to some better alternative.

  • Slick||

    "Can anyone here describe to me how the free market can successfully deal with global warming?"

    George Carlin's "The Planet Is Fine":

    We're so self-important. So self-important. Everybody's going to save something now. "Save the trees, save the bees, save the whales, save those snails." And the greatest arrogance of all: save the planet. What? Are these fucking people kidding me? Save the planet, we don't even know how to take care of ourselves yet. We haven't learned how to care for one another, we're gonna save the fucking planet?

    I'm getting tired of that shit. Tired of that shit. I'm tired of fucking Earth Day, I'm tired of these self-righteous environmentalists, these white, bourgeois liberals who think the only thing wrong with this country is there aren't enough bicycle paths. People trying to make the world save for their Volvos. Besides, environmentalists don't give a shit about the planet. They don't care about the planet. Not in the abstract they don't. Not in the abstract they don't. You know what they're interested in? A clean place to live. Their own habitat. They're worried that some day in the future, they might be personally inconvenienced. Narrow, unenlightened self-interest doesn't impress me.

    Besides, there is nothing wrong with the planet. Nothing wrong with the planet. The planet is fine. The PEOPLE are fucked. Difference. Difference. The planet is fine. Compared to the people, the planet is doing great. Been here four and a half billion years. Did you ever think about the arithmetic? The planet has been here four and a half billion years. We've been here, what, a hundred thousand? Maybe two hundred thousand? And we've only been engaged in heavy industry for a little over two hundred years. Two hundred years versus four and a half billion. And we have the CONCEIT to think that somehow we're a threat? That somehow we're gonna put in jeopardy this beautiful little blue-green ball that's just a-floatin' around the sun?

    The planet has been through a lot worse than us. Been through all kinds of things worse than us. Been through earthquakes, volcanoes, plate tectonics, continental drift, solar flares, sun spots, magnetic storms, the magnetic reversal of the poles...hundreds of thousands of years of bombardment by comets and asteroids and meteors, worlwide floods, tidal waves, worldwide fires, erosion, cosmic rays, recurring ice ages...And we think some plastic bags, and some aluminum cans are going to make a difference? The planet...the planet...the planet isn't going anywhere. WE ARE!

    We're going away. Pack your shit, folks. We're going away. And we won't leave much of a trace, either. Thank God for that. Maybe a little styrofoam. Maybe. A little styrofoam. The planet'll be here and we'll be long gone. Just another failed mutation. Just another closed-end biological mistake. An evolutionary cul-de-sac. The planet'll shake us off like a bad case of fleas. A surface nuisance.

    You wanna know how the planet's doing? Ask those people at Pompeii, who are frozen into position from volcanic ash, how the planet's doing. You wanna know if the planet's all right, ask those people in Mexico City or Armenia or a hundred other places buried under thousands of tons of earthquake rubble, if they feel like a threat to the planet this week. Or how about those people in Kilowaia, Hawaii, who built their homes right next to an active volcano, and then wonder why they have lava in the living room.

    The planet will be here for a long, long, LONG time after we're gone, and it will heal itself, it will cleanse itself, 'cause that's what it does. It's a self-correcting system. The air and the water will recover, the earth will be renewed, and if it's true that plastic is not degradable, well, the planet will simply incorporate plastic into a new pardigm: the earth plus plastic. The earth doesn't share our prejudice towards plastic. Plastic came out of the earth. The earth probably sees plastic as just another one of its children. Could be the only reason the earth allowed us to be spawned from it in the first place. It wanted plastic for itself. Didn't know how to make it. Needed us. Could be the answer to our age-old egocentric philosophical question, "Why are we here?" Plastic...asshole.

    So, the plastic is here, our job is done, we can be phased out now. And I think that's begun. Don't you think that's already started? I think, to be fair, the planet sees us as a mild threat. Something to be dealt with. And the planet can defend itself in an organized, collective way, the way a beehive or an ant colony can. A collective defense mechanism. The planet will think of something. What would you do if you were the planet? How would you defend yourself against this troublesome, pesky species? Let's see... Viruses. Viruses might be good. They seem vulnerable to viruses. And, uh...viruses are tricky, always mutating and forming new strains whenever a vaccine is developed. Perhaps, this first virus could be one that compromises the immune system of these creatures. Perhaps a human immunodeficiency virus, making them vulnerable to all sorts of other diseases and infections that might come along. And maybe it could be spread sexually, making them a little reluctant to engage in the act of reproduction.

    Well, that's a poetic note. And it's a start. And I can dream, can't I? See I don't worry about the little things: bees, trees, whales, snails. I think we're part of a greater wisdom than we will ever understand. A higher order. Call it what you want. Know what I call it? The Big Electron. The Big Electron...whoooa. Whoooa. Whoooa. It doesn't punish, it doesn't reward, it doesn't judge at all. It just is. And so are we. For a little while.

  • paul||

    http://www.youtube.com/watch?v=g0P8yQSTU74
    nuff said

  • SD82||

    Thank you Slick. I enjoy Carlin too.

    But, as I suspected, the only real answer being "well, all humans will die, but that's OK because that's what the market demanded!", the libertarian dogma when it comes to the issue of global warming is not satisfactory for reasons that should be obvious.

  • ||

    "Some day peak oil production will be reached, but most oil reserve estimates suggest that there are good reasons to doubt that that day is now at hand."

    Ron, dude, just go wild! "Some day peak oil production will be reached, but IT WON'T HAPPEN SOON." The phrase "most oil reserve estimates suggest that there are good reasons to doubt that that day is now at hand"="I don't know what the f*ck I'm talking about" and, actually, you do!

  • ||

    SD82,

    Before we can answer your question, what do you think would happen if nobody did anything about global warming?

    The reason why I ask is that people's fears range from a reasonable fear of large-scale migrations to insane ones about the entire human race asphyxiating (don't laugh, I debated someone at work who thought we would all asphyxiate on CO2).

    So what do you fear is going to happen?

  • SD82||

    tarran,

    I trust mainstream science. I don't fear anything (I've been accused of being emotionless). I'm talking about actions and consequences, some desirable some not.

    Of course I fear (rhetorically) that we can't even reach a consensus about whether the consequences of global warming (whether large migration or full-scale extinction) are all that bad. Unfortunately, to any sane person, they are all bad. Surely we can agree that ideally global warming has to be stopped. My only question is, what evidence is there that it is a problem that can be solved naturally, in a laissez-faire environment, better than one in which policymakers make deliberate efforts?

  • Gilbert Martin||

    I don't think the "peak oil" people are factoring in all the oil locked up in the oil shale deposits in Canada and the western US.

    I read a story not long ago about some new process Chevreon has been working on to extract oil from those type deposits in Utah.

    And there are also ongoing work on coming up with more economical ways to create synthetic fuel out of coal - which we certainly have plenty of.

  • iih||

    The world is at the beginning of a structural change of its economic system.

    Good. We can all work near where we live and save commuting time. So not all bad news.

  • ||

    oh for pete's sake.

    we will find alternatives for oil (petroleum) long before we run out. it ALWAYS works that way (capitalism). worrying about running out of oil is like if we would have worried (many moons ago) about running out of whale oil. we found a better alternative, and we will do the same with oil. does anybody honestly believe that we will be using petroleum products to the extent we do know, in 30-50 years? really?

    we are amazingly inventive, resourceful creatures. this is especially true when the engine of our inventiveness is capitalism iow $$$$$.

    fwiw, i trade oil, natgas, and index futures. that's how i make my $$$. so, i believe i am pretty "in tune" with how the supply/demand curve works in regards to energy. although i will be the first to admit - eric bolling i am not

    the market may be hyping stuff like ethanol (reflected in corn futures, etc.) but really... it's a joke.

    yes, oil shale is interesting, but again... the idea that we will be reliant on petro products 5-10 decades from now is laughable.

  • fyodor||

    Surely we can agree that ideally global warming has to be stopped. My only question is, what evidence is there that it is a problem that can be solved naturally, in a laissez-faire environment, better than one in which policymakers make deliberate efforts?

    Sigh.

    First of all, SD82, nothing is going to stop global warming. Curtail it somewhat, maybe. Stop it, no way. Get used to it.

    Advantages of a laissez-faire approach include increased efficiency from technological advances resulting from the maximization of wealth resulting from the minimization of governmental intrusion. Another could be people knowing that they, not their neighbors nor their rulers, are responsible for their decisions, thus making more responsible decisions. Not guaranteed, but very possible.

    That said, it may be the case that pure libertarian free market economics may not be best suited for issues involving an inevitable commons. Some of us who generally toe the libertarian line on most issues are open to the idea of a tax on carbon emissions. The more carbon you release into the atmosphere, the more you pay. Hopefully coupled with equivalent cuts in existing taxes. Theoretically, this would be the most fair and efficient means to curtail global warming producing activities and, hopefully, global warming itself. There are pros and cons to this approach, which I won't bother to go into right now.

    The other choice for "solving" this problems seems to be to allow give the government the power to directly influence what activities should be encouraged and which should be discouraged. Command and control. This is a crap shoot for curtailing global warming because top down "experts" don't really know what will or won't curtail carbon emissions. Ethanol has been pushed for years as a fossil fuel alternative, but now some say that the production of ethanol would result in more carbon emissions than it would save in its replacement of gasoline in cars. Who knows? There's no way to figure this out from the ivory towers. You could easily make things worse, while curtailing liberties and the economic freedom that produces the wealth that people want and which enables technological advance. This would be the worst way to go.

  • ||

    The peak-oilers are definitely wrong that this will cause some cataclysm to our western, technological liberal democratic society.

    How do you know?



    Because, Ms. Jennifer, it's obviously going to be Islamofascism or the MexicanMenancingMindofMenciaGovernment that brings about the end of western civilization. ;)

    Seriously, you answer this yourself by your next statement.

    Where transportation is concerned, I haven't noticed the gasoline-powered internal combustion engine being phased out as more and more people switch to some better alternative.



    But they are, at least at the margins. As hydrid, electric, hyrdogen fuel cells, or whatever comes next becomes a more convienient form of tranportation (and *cheaper* than traditional sources), people wil switch to the better alternative, and the gasoline powered engines will become antiques. The same thing will happen on the industrial scale energy requirements.

    The key part of why stability will be maintained is that the changeover will happen slowly, over the course of decades, and will only become obvious upon retrospect.

  • ||

    The key part of why stability will be maintained is that the changeover will happen slowly, over the course of decades, and will only become obvious upon retrospect.

    It's obvious to lots of people now, but that doesn't sell papers or bring out your electoral base.

  • Paul||

    Some 77 percent of world reserves are owned by governments-and they are trying to extract as much revenue as possible from them.

    Interesting how if a private entity did this, it would be considered immoral.

  • ||

    Over the long term the earth is either cooling or warming, it will not stay the same. The earth has no "normal" temperature. Believe me when you live north of 53, warmer is always better.

  • ||

    Hey, how can peak oil be a problem? Why, any day now the OIL COMPANIES will break out all those 200 mpg carburetors they bought the designs for back in the fifties and sixties and locked up in their vaults so we'd stay trapped buying their overpriced twenty-eight-point-nine cent a gallon gasoline*.

    Oh, come on, you know, everyone back then knew someone who's best freind's cousin had a friend who's uncle had invented one but had sold his rights to the OIL COMPANY so they could lock it away so noone could ever use it.

    Yes, that's how seriously I take talk of peak oil.

    *I realize that adjusted for inflation that's not nearly as cheap as it looks. And, yes, I'm really proud of that run-on sentence.

  • ||

    Alfrom Alberta

    "...north of 53."

    Holy crap, where are you? Peace River or Fort MacMurray?

  • Paul||

    The more carbon you release into the atmosphere, the more you pay. Hopefully coupled with equivalent cuts in existing taxes.

    Fyodor, great post, but this statement above is a big 'hopeful'.

    States which rely heavily on gas tax revenue (Washington) are complaining that their revenue is dropping like Republican trowsers at a Gay Pride parade because people are driving less. High gas prices lead to less consumption. Governments rely on consumption in all sectors for their revenue. Without it, they're doomed. So on the one hand, your governments are mailing flyers by the thousands, telling us to save, drive less, turn off the lights, quit doing whatever it is we're doing because doing "stuff" hurts the environment. We respond, and the state cries about a drop in revenue, so they shift tax burdens to other stuff we're still doing. So we stop doing that, too.

    My guess is if current trends keep up, you'll be taxed on your carbon, and then taxed somewhere else because people will curtail carbon emissions.

  • ||

    The optimism of the neo liberal capitalist 'reason' crowd in here is reminiscent to the the world view of a yeast bug in brewing vet:

    "Surly" it 'reasons' "I have been going on dividing every 10 minutes for many generations now. There will be plenty of sugar in here for eternity and if that runs out something else will pop up. That talk about the fallacy of exponential growth being a 'problem' must be some liberal greenie nonsense..."

    10 Minutes later the yeast bugs in the vet divided again, for the very last time. Then the sugars where all turned to alcohol and the rest of the story ends at night out at the pub...

  • ||

    The sky is falling in!
    The sky is falling in!
    Run!
    Run!
    Run!
    The sky is falling in!

  • Paul||

    Observer:

    If we were single-celled yeast bugs, sure. But we're not. We don't live in a vat and live exclusively on sugar. The notion of the static model is by definition the "liberal greenie nonsense" view of humankind.

    The inability to think outside of a static "this is the way it is...forever" model is unique to the green philosophy.

  • ||

    Issac

    Edmonton is north of the 53rd. Peace River and Fort Mac are around the 55th.

    observer

    gee. That is almost as good an analogy as the one about the guy who jumped off the 100 story building, who at the 10th floor says "everything is OK so far."

    The fact that the earth is finite is not in question. What is ridiculous is defining your resources only in terms of your present knowledge, which is what the "environmentalists" do.

  • ||

    No, the sky won't fall in.

    But by the end of this century civilization will live by a different paradigm, an old paradigm really:

    That all we do must be limited by the amount of energy passing through our biosphere (solar) and the amount of it we can harvest without degrading the environment. By that time it is likely that there will be much less of us around than today. There is simply no other option. And those who can not see this clearly should wake up to the facts.

  • ||

    Oh, come on, you know, everyone back then knew someone who's best freind's cousin...

    Sure did. ;-)

  • ||

    That all we do must be limited by the amount of energy passing through our biosphere (solar) and the amount of it we can harvest without degrading the environment.

    You sir, are an idiot!

    V/R
    J sub D

  • Paul||

    By that time it is likely that there will be much less of us around than today. There is simply no other option.

    "The battle to feed all of humanity is over. In the [1970s and 1980s 1980s and 1990s 1990s and 2000s near future] hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate..." --Paul Ehrlich.

  • ||

    ***Paging Reverend Malthus, Reverend Thomas Malthus, please report to the courtesy desk. Your theories have been turned into the lost&found by a Mr. observer.***

  • SD82||

    "The fact that the earth is finite is not in question. What is ridiculous is defining your resources only in terms of your present knowledge, which is what the "environmentalists" do."

    Okay but the entire point is, what if we can't magically birth via the market smart enough technology to actually mitigate the problem in time?

    It's just supreme idiocy to say that the market will solve it before directed, highly-funded government action.

    The market didn't land us on the moon--not a problem in high demand of solving perhaps, but that's just why it was necessary for the government, with its vast resources and accountability to popular sentiment, to do it.

    I'm not convinced the blind economy recognizes environmental perils, at least not until it's too late. Entire populations do die off because they didn't innovate in time--or worse, they didn't see the problem until it was too late. And the relative anarchy of these ancient civilizations means the market worked in a much more unadulterated form for them.

    In the end, all of this amounts to the perverse opposite of henny penny hysteria: "The sky will never fall." It can, and has before. So we have only one question, do we do anything about it or sit around until it happens?

  • ||

    "The optimism of the neo liberal capitalist 'reason' crowd in here is reminiscent to the the world view of a yeast bug in brewing vet:"


    no... as others have pointed out your analogy is stupid and one that leftists use all the time. they fail to understand the difference between zero sum games and dynamic open systems. our economy is not zero sum, and even GIVEN the limited (although hardly exhausted ) supply of OIL, it fails to take into account increased efficiencies, alternative inventions, etc. etc.

    not only was malthus wrong about growth rates, he also (among other things) failed to understand how economies grow wealth by invention, by new technology, by increased efficiency, etc.

    look at yield per acre, look at man-hours of labor per bushel, etc. etc. etc.

    it's ignorant and ignores history to think that there is any kind of peak oil crisis.

    markets find solutions. there are many many many sources of energy, they just aren't especially efficient NOW (solar for example) but the idea that we will remain static in our technology and thus will have equivalent demand per person for oil in 20, 40, 60 years as we do now is astoundingly ignorant.

    to paraphrase jurassic park - capitalism finds a way

  • AB||

    "to paraphrase jurassic park - capitalism finds a way"

    Except when it doesn't.

    That sentiment is as shallow and uninformed about economics as Jurassic Park's was about biology.

  • ||

    Paul: We don't live in a vat and live exclusively on sugar.

    Paul, actually, we DO live in a vat, or on something as finite as a vat. Given that NASA is struggling to keep three shuttles operating I don't think our asteroid mining plans are going to come to fruition any time soon.

    And the argument doesn't change if you substitute some vector [R1...Rn] of non-renewable resources instead of a single resource. There is no natural law of the universe that says that a new resource Rn+1 must appear as soon as Rn runs out that will let you conduct business as usual. That's the way it has worked so far... maybe we've just been lucky.

    So where are we? Doom next week or fine and dandy for a million years? You have to look hard at what oil does in our society, and what the substitutes are, and how suitable they are, in order to answer that.

    Many people who have a background in science who have looked at this are worried.... they think that the physical characteristics of oil and its substitutes mean that things really are different this time. Many of the people who AREN'T worried understand nothing but economics and market dogma: "everything's been fine up till now" reasoning. The latter people are no brighter than yeast IMHO.

    (I have a grad degree in economics, but lots of undergrad exposure to other stuff and I've read widely: economics is not the only thing I know. Something that really blew me away was how unbelievably IGNORANT many of my classmates were about anything that wasn't economics.)

  • Anonymous Bastert||

    "It's just supreme idiocy to say that the market will solve it before directed, highly-funded government action."

    Now THAT'S a gem. After all, what is there that directed, highly-funded government action CAN'T do?

  • Nissl||

    A number of by-project analyses of the coming years (i.e. most oil projects are announced 7-8 years in advance) show a peak in 2011 or so. This includes projections of growth in alternative fuels production and incorporates an industry standard decline rate of 4.5% in existing wells.

    Even if this peak in production is geopolitically driven, it is nonetheless a peak that importing countries like the U.S. are going to have to face. We can meet much of the early decline by switching to hybrid/PHEV vehicles, but industry is not currently on track to ramp production to anything near the necessary levels. In the short term, prices are going to go up until people reduce demand by driving less - carpooling, public transport, telecommuting, cutting unnecessary trips, etc.

  • ||

    Kenny: "The key part of why stability will be maintained is that the changeover will happen slowly, over the course of decades, and will only become obvious upon retrospect."

    So you think we can continue to pump many tens of mbbl/day for decades yet, do you? If we can't, it won't be a slow changeover... it will be a fast one... and a changeover to what? The next best thing, yes, of course. But how good is the next best thing?

    whit: "does anybody honestly believe that we will be using petroleum products to the extent we do know, in 30-50 years? really?"

    No, nobody believes that. The question is whether we'll be (A) flying our nuclear powered spaceships to the moon for lunar vacations or (B) bashing each other over the head for the last can of beans. Many posters here seem to think that a market economy somehow GUARANTEES (A) instead of (B). It doesn't.

  • ||

    Mr SD 82:
    You say:

    It's just supreme idiocy to say that the market will solve it before directed, highly-funded government action.



    but then use the example of landing a man on the moon.

    "Land a man on the moon, and bring him safely back to Earth, by the end of the decade" is a large, but discrete and objectively measurable goal. Just like "Get the Japanese government to unconditionally surrender, and shake hands with Russians at the Elbe" is a large, but objectively measurable goal. These are the things the government is capable of doing (whether they should do it is beside the point, for the record, I like that they did both)

    "Transform our energy infracture" is *not* a discrete measurable goal, and so is by definition, unachievable. Just like "end poverty," "end drug addiction," and "transform the middle east." Directed highly funded government action has not "fixed" these problems, and in many cases made matters worse.

  • ||

    I don't think these debates of public vs. private action are the most important aspect of peak oil. The usual way an economist approaches these matters is to ask what a "social planner" would ideally do, and only then ask whether government action or the market (each with strengths and weaknesses in different situations) gets us closer to the ideal.

    The concern that peak-oilers have (which may be right or wrong) is that not even the social planner could do anything that would allow modern industrial civilization (in its current, massively hypertrophied state) to continue in the absense of the cheap, easily-exploited, and energy-dense fossil fuels which allowed it to get this big to start with. Since 6.5bn of us rely on that industrial civilization to get enough to eat every day, that's kind of an interesting question IMHO.

  • ||

    D-Slam-
    Mr D slam:
    Per

    we DO live in a vat, or on something as finite as a vat.


    and

    So you think we can continue to pump many tens of mbbl/day for decades yet, do you



    I have said that we probably are at the end of "cheap" i.e. $10/bbl or equivalently, approx .5 hr of first world labor.

    But, from what I understand, huge (100yrs, but not infinite) amounts of oil are avail at $100/ bbl (or 5 hr of 1st world labor)

    Obviously DEMAND KURV says that the market price will not be determined by the cost of extraction, but it will provide a feedback effect.

    Then, even if supply and demand for oil push it up to 200-300 bbl, coal and nuclear is still there, and the wind/solar/hydro/goethermal all look better.

    I've said this before in another forum. Replacing the energy infrastrucure will take exacly as long as it needs. As alternatives become cheaper, people will changeover.

    Plus, I am hopelessly optitmistic when I am looking at the totallity. We, all 6 or 7 billion of us, even when we are able to achieve a first world standard of living, are a pinprick on the total potential and radiant energy of the planet. It will only start to become a problem when we get into Asimov's "Last Question" territory

  • ||

    Wait a minute... let me get my rose colored glasses on. You guys are subscribing to the Pollyanna world view and need a dose of reality if you believe world oil reserves are infinite - or that mankind can access them in time.

    Peak oil will put a great hurt on all of those that do not prepare for it. Numbers on global production have been down and dropping lower since 2005 so I'd say we have one more year to see clearly where the oil resource is heading. CERA and the like is optomistic and unrealistic in their expectations for peak oil. Their predictions have never been on target yet the government puts their drivel on top and over those geologists that have nothing to gain in their concern for civilization. Articles like this do a great disservice to the reading public.

    It can happen here.

    It will happen here.

    We don't need hope, we need action.

  • ||

    What I really don't get is that the people that are the "doom&gloomers" among the peak-oil adherents are generally self-described progressives. I can't understand how progressivism as a philosophy has migrated to such negativism about the future, when it used to be just the opposite. (in fact maybe a little too much so in the case of the subset of the "glorious revolutionary future" strands of progressivism)

  • ||

    Edmonton is north of the 53rd. Peace River and Fort Mac are around the 55th.



    Oh, OK. Guess I got my map scales screwed up. :)

    That's what I get living in Regina, so close to the border and all. (God, I am glad to be out of there).

    And I've even been to Edmonton. Should've brought my sextant with me, I guess. :)

    OK, right the south border is the 49th and the north border is the 60th (that's purely from memory, how's that, eh?) So, that means Edmonton about 3/5 of the way up and those other spots (and I bitched about living in Regina) are halfway up.

    Really, I knew Edmonton was up there, (as I see it, it's the northernmost civilized city in Canada) but, honestly I didn't realize it was that far up there.

    I stand corrected.

  • ||

    Northern Perspective-
    Peak oil will put a great hurt on all of those that do not prepare for it

    So he who controls the spice controls the universe.

    Well, its true as far as it goes, and was a factor in many of the twentieth century conflicts, (and a factor in a current one).

    But, in the long run, heck even now, oil is not the sole energy source in the world. It is right now, the cheapest and most convienient for a variety of uses. But it is not the only game in town, and people will switch as it becomes less convienient and/or more expensive.

  • ||

    It's just supreme idiocy to say that the market will solve it before directed, highly-funded government action.



    Yes Government action like sterilizing "defectives" to solve the Eugenics problem and Jim Crow to solve the "Negro" problem, perhaps?

    You might perhaps forgive some of us who have some recollection of the negative consequences of "directed, highly-funded government action" for having some reluctance to turning over much of our autonomy to "experts" "who know what is best for us".

  • ||

    Wow, these peak oil discussions are repeatedly inange and useless, as are many discussions with libertarians (which is why I cancelled my subscription to the magazine--it never said anything useful).

    Five years ago I look at theories on oil production and commodities and decided they made sense and it made sense to move large amounts of money into energy and commodity stocks and investments.

    I won. The libertarians who argued against me lost.

    Nothing more to contribute here. These discussions are pointless. I'm still heavily invested in energy and commodities though.

  • Gilbert Martin||

    From a "Fortune: article:

    "Vinegar is the energy industry's leading expert on the complex petroscience of transforming solid oil shale into synthetic crude - a liquid fuel that can be refined into diesel and gasoline. The breakthroughs this 58-year-old physicist has achieved could turn out to be the biggest game changer the American oil industry has seen since crude was discovered near Alaska's Prudhoe Bay in 1968.

    If that sounds like hyperbole, then consider this: Several hundred feet below where Vinegar is strolling lies the Green River Formation, arguably the largest unconventional oil reserve on the planet. ("Unconventional oil" encompasses oil shale, Canadian tar sands, and the extra-heavy oils of Venezuela - essentially, anything that is not just pumped to the surface.)

    Spanning some 17,000 square miles across parts of Colorado, Utah and Wyoming, this underground lakebed holds at least 800 billion barrels of recoverable oil. That's triple the reserves of Saudi Arabia."

    http://money.cnn.com/2007/10/30/magazines/fortune/Oil_from_stone.fortune/index.htm

  • Mark Bahner||

    I don't think the "peak oil" people are factoring in all the oil locked up in the oil shale deposits in Canada and the western US.



    The world currently uses about 400 quads (quadrillion Btus) of energy each year. That's total energy of all types...fossil, nuclear, renewable.

    That 400 quads is equivalent to 400 trillion cubic feet of natural gas.

    Estimates of the natural gas available worldwide in methane hydrates are as high as 400 MILLION trillion cubic feet of natural gas. That's enough gas to power the entire world at the current rate of energy consumption for 1 MILLION years.

    So...who's worried about peak oil?

  • ||

    GEN Specific-
    I applaud you for being able to earn a profit on a market disequilibrium condition. But it does not mean over the long run that western civlization is doomed.

  • Gilbert Martin||

    "Estimates of the natural gas available worldwide in methane hydrates are as high as 400 MILLION trillion cubic feet of natural gas. That's enough gas to power the entire world at the current rate of energy consumption for 1 MILLION years."

    Cool.

    All that and enormous coal reserves too.

  • ||

    Kenny: "But, from what I understand, huge (100yrs, but not infinite) amounts of oil are avail at $100/ bbl (or 5 hr of 1st world labor)"

    A few points to note here:
    1. Yes, the quantities are still there, in unconventional supplies. But the rate at which this stuff can be extracted will never offset depletion. Northern Alberta has huge oil sands, but it will not do more than 3mbbl per day for a long time. (it does around 1m now I believe). The reason is that oil sands are incredibly difficult to exploit... multi-billion dollar investments are required (and it takes a long time to do that in a remote area) - this isn't Spindletop where you turn the tap and get a gusher.
    2. Energy sources are substitutes, but they are also complements.... it often takes one to exploit another. The oil sands consume vast amounts of natural gas, and guess what, that stuff is non-renewable too. They've proposed building a nuke plant up there for power, and at some point they probably will. Uranium mining and building nuclear power plants use up a lot of.... you guessed it, oil.
    3. It is a meaningless rhetorical trick to say that one barrel of oil "only" represents X hours of labour.... that barrel of oil is a complement to every other good. Every time you buy practically ANYTHING, you're buying a little bit of oil too, the oil used to make it, transport it, shop for it...

    Kenny: "Then, even if supply and demand for oil push it up to 200-300 bbl, coal and nuclear is still there, and the wind/solar/hydro/goethermal all look better."

    Yep, I think we'll see 200+ as this thing starts to unwind, and a lot of people are going to find that painful. $3 gasoline is going to seem like the good old days very soon.

    Wind and solar are going to start looking "better", yes, but basic physics suggests they'll still be crap compared to the portability, power, and reliability of oil. Nuclear and coal will keep the grid running for a while longer, but we're going to need about 100 million new electric tractors to keep the vittles coming, and you'll be waiting a while for your coal-powered airplane. And so on...

    That's the question you can't seem to ask yourself... we'll go to the next best thing through the power of market magic... but is the next best thing any GOOD? For a website called "reason" there is sure a lot of faith around here.

    Kenny: "What I really don't get is that the people that are the "doom&gloomers" among the peak-oil adherents are generally self-described progressives. I can't understand how progressivism as a philosophy has migrated to such negativism about the future"

    Yeah, that's a complicated one. I spend a lot of time on peakoil.com. If you think *I'm* pessimistic you should see those guys. A lot of them hate industrial civilization and WANT to see it fall. Me, I'm just a realist.

    re: oil shale - if it takes two barrels of oil to recover one barrel of oil shale, you've got a problem. There's a reason nobody's tried for that stuff yet.

  • ||

    This is fun. Being called an 'idiot' here means I must have struck a nerve.

    Somebody mentioned the huge increase in yields/acre over the last century. Sure! And did you ever ask yourself what brought that about?
    The answer: artificial nitrogen fertilizers made with massive input of fossil fuels and pesticides and mechanization of production.

    Did you know that grain resreves have fallen to levels of 1948 in the US over the past decades? Did you know that world wide only 57 days of consumption are now in stock?

    Human ingenuity is limitless you all say. Well sure, but you forgot the law of diminishing returns and the fact that we are bound by the laws of physics. A better way to put this: our fantasy is limitless, the real world around us will impose its limits relentlessly on anything and anybody who tests them.

    The current status of exponential growth as paradigm for the entire system's functioning is fatally flawed.

  • ||

    I never said end of civilization. That's the other boring half of the peak oil discussion. Cornucopians (who promote oil shale for example) on the one side and doomers (who think we'll be eating our children) on the other.

    My main point: the discussion is largely juvenile and pointless because useless information is thrown around (about tar sands, oil shale, whale oil, etc).

    Oil Drum is a good source for energy information, and James Hamilton's blog econbrowser.

    I expect oil to soon pass $100 and, given the drilling rig counts and production and consumption path, for it to probably never go that far south again of that number again.


    BTW: I wouldn't invest a dime in oil shale. I think it's a lost cause.

    It's a new world. Not the end of the world. But most likely a new world. And it will include some difficult dislocations.

  • ||

    There is a clever group of people who started to restructure their local communities towards coping with the times at hand:

    www.transitiontowns.org

    This is grass roots entrepreneurial development that will make a difference.

  • ||

    I think many of you miss the point of 'Peak Oil'.

    It's the peak of the daily production of crude oil, so it does not matter if you have 60 trillion barrels of oil-equivalent in tar sands or shale or the moons of Saturn. How quickly can you ramp up production of crude oil from these sources (while the easily pumped conventional crude is dropping down the right side of a bell curve) and how much crude oil equivalent can you make per day ?

    For example, the Alberta Oil Sands are water and heat limited. Sure, if you divert another river and build a nuclear power plant nearby, maybe you can go from 3 million barrels/day to 6 million in 10 years. Meanwhile, the top four mega oil fields are past their peak and dropping fast. You have to *make up* the production lost from the huge, easy fields, *plus* try to add production.

    Sure, given enough time, humans can figure it out. But it's all about the timing. If I have a 5 day walk through a desert with only enough water for one day, it doesn't matter if I invent a great way to extract water from tree sap on the other side of the desert. It is much better to plan for a water shortage *before* you enter the desert.

  • ||

    Gp, Obs, and D-Slam-

    1) First, my main purpose on this thread was to counteract my perception of the peak oil people that western technological liberal democracy is doomed and will be replaced by a) Military/Fascist dictatorship, b)Theocratic/Oil Oligarch dictatorship c)Communist/Green dictatorship d)Post Apocalyptic Feudal Fiefdoms, or e)some combo of (a)-(d). If this is a strawman that does not apply to you, please accept my apologies. But, it seems from your posts above that some people like this do exist

    2)a) I am a nuclear/electrical engineer by training, so I do not have much knowledge of the oil business itself, so I will stipulate everything stated by D-slam in 10:56 as correct about how much oil their actually is, and how easy it is to process and maintain. I have already stated that I agree with the peak oil premise that the end of cheap and easy oil is probably over. Also, my equating to labor was not meant a rhetorical trick; it was trying (unsucessfully) of taking oil price increases in context with overall inflation and the current weakness of the US dollar. I would have used oz of gold, but am not much of a gold bug.
    b) But on your 10:56 post, you say it takes oil to get at other sources. True, as far as it goes. That is part of my larger point: right now oil is cheap and portable, just like donkeys and horses were cheap and portable to get the first veins of coal out of the ground a century and a half ago. As the technology changed, the motive forces for the process changed, and only as fast as the comparative economics (of the balance of the combined trio of human, animal, and machine labor) changed. Those electric tractors will come as soon as they are cheaper than diesels.
    c) I have no good answers on airplanes, (especially since I live on an island in the middle of the pacific), but western civilization did reach Hawaii (and overthow their monarchy) before its invention. We may just have to go back to trains, ships, and zepplins.

    3) On exponential growth: Well, at least for 1st world human beings, the natural growth rate is not only not exponential, its negative. Even pessimistic estimates by the UN have the world population leveling off sometime early next century at around 10 billion. I see no reason why the trend of improved education for women will reverse anytime soon. As for just about every other human endeavours, growth follows an S-curve, which just looks exponential after its start.

    4) Lastly, I wish to clarify that I do not believe this will be cost free. What I do believe, however, is that we can afford it. We have improved the average standard of living in the western world from less than a dollar a day in 1820 to something on the order of $30,000 at the beginning of this century. Just like a car will stall if starting from a standstill from a stop in 4th gear, we needed the oil to "prime the pump." But now, that we're rolling at 50-60 mph, we should be able to shift to 4, 5, or even 6th gear without wrecking the car. We will damage something, however, if we try to jam the shifter in reverse

    Thank you all for the debate on this issue.

  • ||

    SD82 wrote:
    "Can anyone here describe to me how the free market can successfully deal with global warming? "

    w while ago I wrote up a little bit as a response here on Hit and Run, saved it here it is again...and it is worth noting that noone muchcontested it, though noone has added to it either:

    "I don't like too many regulations, as the climate change future will require flexibility with which to adapt to the coming changes. Regulations get in the way.

The best start is to stop providing corporate welfare to the fossil fuel companies. In the U.S. this is peanuts at $15 billion a year in various monies and protections, but even doing away with that is an important signal to industry. Elsewhere, this would be harder, as fuels are often directly subsidized.

Next end subsidies and many regulations in the agricultural industries; not all, but these things prevent the freemarket development of biofuels. And the subsidies do hurt the development of other developing nations; and if they don't develop, we may likely get pulled into nasty expensive wars that would otherwise be avoided; this would be due to panic response to climate change s they did not/could not prepare for. On that note, helping to end corruption in foreign lands would help them be willing to prepare.

Third, don't require consumers/producers to be more efficient/use renewables etc.; but do require that our governments to be effectively carbon-neutral. We need is real leadership with a critical mass of demand and supply. The purchasing power of our governments can provide this.

Lastly, it is more or less the right of governments to control their borders. So simply require that all persons, products, and possibly services crossing borders be effectively carbon neutral via a carbon-tariff. This will boost local economies, at the expense of the global. But it will not destroy civilization.

All the above is not anti-capitalist at all, and provides a balanced solution to our near term climate issues. (it could use some improving though)"

    Mark Bahner,
    Re: Methane Hydrates. Has anyone devised an economical way of extracting it?

  • ||

    Oh yeah,
    I started taking the bus today instead of driving. It helps(!?) that the car's engine won't start. It costs more in terms of of Gallons to bus tickets to take the bus than it does to drive. But then the roads are subsidized. The gov't is going to spend 800 million dollars over the next ten years expanding the route I go on. I figure it would be cheaper to just subsidize the busses for those car owners who might consider taking the bus...even if just to make it somewhat cheaper to take the bus instead of drive. Much cheaper than paying for raod expansion.

    Besides price, it is annoying that annother 2 hours of my day is spent commuting. Less time to read comments on H&R.

  • Guy Montag||

    Actually, I am in agreement that massive, radical, government action is needed to solve this problem. I just disagree on what those measures should be.

    1. Federal law must be enacted to protect the rights of property owners to use their property as they see fit.

    2. Federal property, not enumerated in the Constitution for it to posess, should be sold (NOT leased) to the highest bidder.

    There, problem solved.

  • ||

    Hey, how can peak oil be a problem? I thought we invaded Iraq specifically "for the oil". Now we have the oil. George Bush keeps it in his refrigerator, I think. He and Dick Cheney brush their teeth with it and get all slicked up and wrestle (or is that rassle) in the oval office.

  • Guy Montag||

    Isn't VP Cheney being impeached for brushing his teeth with crude oil and being "evil" or something?

    Wondering if the House Rep. who submitted the counts included a failure to believe in exteraterrestrials?

    There is a big story in that vote about Republican flip-flopping DURING the vote too! I suspect that Reason and TNR will be running joint coverage on this one as the primaries heat up.

  • ||

    Isn't VP Cheney being impeached for brushing his teeth with crude oil and being "evil" or something?


    Pictures of Cheney with oil dripping from his fangs has been known to cause watery bowl syndrome amongst many sensitive democrats.

  • SD82||

    "Now THAT'S a gem. After all, what is there that directed, highly-funded government action CAN'T do?"

    Well, there are a lot of things no one wants it to do. But in the specific instance of counteracting global warming, I think policy is much more useful than markets, which, as far as I can tell, have never really considered environmental destruction in their equations.

    The notion that we'll solve the problem with new technology is beside the point. How do we get that technology up and running, and quickly? No one has sufficiently explained to me why an unregulated economy will somehow get the oil companies to stop doing business as usual (the most profitable business in the world!), which just so happens to be destroying the planet.

    Frankly I don't find this position that controversial. Surely the government has SOME purposes. Shouldn't protecting the common environment be one of them?

  • Guy Montag||

    If you guys would just start calling it organic hydrogen, or even organic hydrocarbons, then this "problem" will go away.

  • justin Paglino||

    Peak Oil is a reality, deal with it. Oil discoveries peaked FORTY YEARS AGO. Production will plateu, then decline. Anyone who thinks otherwise is ignoring what geology tells us. Oil is finite, 'production'(extraction) can not go on forever. Eventually it will be G-O-N-E.

    IF WE KEEP BLAMING PUBLICLY/STATE-OWNED OIL COUNTRIES for the fact of peak oil, THEN WE WILL HAVE TO INVADE THEM AND KILL MORE PEOPLE FOR OIL. THE ONLY WAY TO A PEACEFUL FUTURE IS TO GET OFF OIL. Do your part now. YOU ARE RESPONSIBLE.

  • Mark Bahner||

    Mark Bahner,
    Re: Methane Hydrates. Has anyone devised an economical way of extracting it?"

    Some questions back at you:

    1) All 1 million years of methane hydrates, or just the easiest 50-100 years?

    2) "Economical" at what well-head of natural gas? $2 per thousand cubic feet? $4 per thousand cubic feet? $8 per thousand cubic feet? $16 per thousand cubic feet?

    3) Will the methane ice worm be protected...or sacrificed to human progress?

    Comments on questions:

    1) Obviously, recovering just a tiny fraction of a resource is much easier than trying to recover a substantial amount. For example, gold used to be available in California and Alaska simply by panning in a river, and oil used to be available in the "Quaker State" of PA simply by drilling shallow wells. In a similar manner, there are methane hydrates at the surface and just below the surface in Alaska, which could be recovered easily. But the really big deposits are under the world's oceans…and these are more difficult to recover.

    2) As recently as 1970, the well-head price of natural gas was only about 20 cents per 1000 cubic feet. And as recently as 1998, it was only $2 per 1000 cubic feet. Right now, the well-head price is about $7 per 1000 cubic feet:

    Natural gas prices

    The higher the price of *conventional* natural gas goes, the more likely methane hydrates are to be "economical."

    3) I'm throwing in the methane ice worms mostly as tongue-in-cheek…but if there is some sort of public outcry against methane hydrates production, that would obviously raise the cost.

    The short answer to your question is, "Maybe. It's still being investigated."

    Mechanical Engineering magazine article on methane hydrates

  • Mark Bahner||

    No one has sufficiently explained to me why an unregulated economy will somehow get the oil companies to stop doing business as usual (the most profitable business in the world!), which just so happens to be destroying the planet.



    There's no reason oil companies have to stop doing business as usual. Right now, oil is ~$90 a barrel, and gasoline in the U.S. is about $3 a gallon.

    I don't know and am too lazy to find the exact numbers, but if a person owns a plug-in hybrid electric/gasoline vehicle, the miles traveled completely on batteries work out to somewhere between $1 and $2 a gallon.

    So oil companies don't need to do anything to encourage the switchover to electricity-based automobiles.

    This is comparable to the replacement of urban horse-drawn carriages (and their incredibly large and negative environmental impacts) with automobiles. No anti-horse regulations were necessary. Automobiles were simply better.

  • Guy Montag||

    This is comparable to the replacement of urban horse-drawn carriages (and their incredibly large and negative environmental impacts) with automobiles. No anti-horse regulations were necessary. Automobiles were simply better.

    If we go back to horses we can skip that whole brewery/distillery process for turning grain into fuel.

    If we go back to train oil we have a renewable source of biodiesel that "big oil" killed around a century ago!

    Note: this has nothing really to do with the quoted comment other than the quote mentions animal power.

  • ||

    Mark B,

    thanks for the links.

  • Paul||

    Paul, actually, we DO live in a vat, or on something as finite as a vat. Given that NASA is struggling to keep three shuttles operating I don't think our asteroid mining plans are going to come to fruition any time soon.

    D-Slam we DO NOT live in a vat, or something as finite as a vat. The vat analogy suggests that the only resource for energy is sugar, and being single celled creatures, cannot create efficiencies in their use of said sugar, let alone develop new vectors for energy supply. Today: Sugar, tomorrow: Nuclear. And you have a grad degree in economics?

    It was believed, sincerely believed at one point that the carrying capacity of the earth was limited by the quantity of wood on the planet for use in fires. This was an obvious fact. People burned wood for their energy. End of discussion. We burn wood at this rate for X years and we'll deforest the planet-- carrying capacity exceeded.

    Oh how simple it all seemed. But then we started discovering sources of fuel with much higher energy density.

    You have a grad degree in economics and you seem convinced...convinced that we're a bunch of men living in a burlap sack trading hats for a living.

    Oh, and I don't know what your personal position is on alternative energy, but detecting some hypocrisy on both sides of the issue.

    If peak oil is a problem, then we'll just go out and develop all of those alternative forms of energy that the (soon-to-be dried up) oil companies have been keeping hidden from us. Or is it that those alternative forms of energy aren't as viable as the enviros would have us believe?

  • ||

    Yes, Paul, I really do have a grad degree in economics, but unlike you I seem to know about more things than economics. Physics, for one. Logic, for another. If you're going to try reasoning by induction then at least learn to do it properly: "the doomers were wrong at point n, n+1, and n+2. Therefore they are always wrong. QED" doesn't quite cut it.

    I do not know how large "the vat" is and how close we are to the edge of it (the answer to that question is determined by the intersection of human ingenuity, geology, and physics), but it IS "a vat" (a closed system) unless one of two things changes:

    1. We get solar going in a serious way, and the more one learns about that the less confident one becomes that solar could ever provide more than niche power to an industrial civilization.
    2. We start mining the asteroids, and again, I am not sanguine about the possibility of this happening any time soon.

    Other than that, there ain't nobody here but us yeast, plus whatever we've got in the vat with us: oil, natural gas, uranium. Can these things be exploited more efficiently than we do now? Of course... but unless you believe we'll get to infinite efficiency some day (that is, unless you have no acquaintance with basic physics, which is a sadly prevalent condition amongst economists and their fellow travellers), then the fact that we are in a vat remains. Ditto if we discover element X and push the walls of "the vat" further away once again.

    I am not an "enviro", and it is precisely my contention that those alternative forms of energy are not as viable as the enviros would have us believe (that is, "alternative energy" is not compatible with keeping 7bn people alive and fed, which is how I'd define "viable")

  • ||

    Another thing.... burning up all the wood has in fact led to the complete decline, ruin, and extinction of at least one civilization (Easter Island).

    Substitute "oil, gas, uranium", (add a few more if you like, but on a finite earth the list is not infinite) for "wood" and "Earth" for "Easter Island", and you'll start to get it.

  • ||

    There is no such thing as Peak Oil.

    There is Peak Cheap Oil.

    But when oil is no longer cheap to extract from the ground, there are hundreds of years of shale deposits in North America that can be profitably refined for $35-45/bbl or so, as opposed to the $2/bbl it costs to pull out of Saudi Arabia.

    We may very well be past the cheap oil peak. But we are in no danger of running out of petroleum for fuels or plastics. What that may do to the environment is not within the scope of this comment.

  • ||

    EXACTLY...we are not simply talking about supply...but something called EROEI (Energy Return on Energy Investment) while there is a large amount of oil in shales and sands, the cost to extract it is exorbitant and the supply of the really cheap oil is decreasing rapidly.

    And by all means...For god sakes everyone drop your worthless dollars! END THE PETRODOLLAR!

  • ||

    Dr Ken: I am suspicious of that $45 figure... it rests (it MUST rest, since shale is incredibly energy intensive to exploit) on assumptions for the price and availability of natural gas which might not hold by the time shale ramps up.

    Even allowing for that, peak shale production is forecast to be something like 2mbbl/day... that's not going to delay the peak of oil production (aka "Peak Oil") materially.

  • mrobert||

    A history of Yergin.

    Tell me again, Ron, who has the credibility problem?

    February 2002
    Technology may help combat volatile oil prices, study suggests....
    $6.95 - Oil and Gas Investor - AccessMyLibrary.com - Feb 1, 2002

    "oil prices are projected to average $20 a barrel in 2002, compared with approximately $26 in 2001, CERA president Joseph Stanislaw said."

    What was the reality? Well in 2001, according to the BP Statistical World Review of Energy, the price of WTI averaged $25.93. CERA predicted $20, but BP says the actual number was $26.16--totally in the wrong direction. The price went UP, not down as CERA said.

    February 2003
    US commercial oil stocks reach low
    Subscription - Financial Times - Feb 20, 2003

    "Cambridge Energy research Associates (Cera), the Boston-based consulting group, expects world oil prices to drop after any war to the low to mid $20 range."

    The reality was that the average price in 2003 was $31.07 and the price never did fall into the low $20's range after the Iraq war.

    February 2004
    As Demand Rises, Oil Firms Focus on Finding New Reserves, Expanding...
    $6.95 - Dallas Morning News - AccessMyLibrary.com - Feb 11, 2004

    "Oil prices are expected to remain in the upper $20 to low $30 per barrel range through 2005, CERA Analysts said Tuesday. "

    The reality was that the price ended up at $65 at the end of 2005. Wrong again.

    June 2005
    Putting a cap on oil supply worries.
    Subscription - Dallas Morning News - HighBeam Research - Jun 22, 2005
    "The growth in oil supplies could force prices well below $40 a barrel as early as 2007, The CERA report said."

    This is a full paragraph report on the same claim

    "In a June report, CERA said it believed that between now and 2010 there will be a substantial increase in worldwide oil production capacity, providing a supply cushion of 6 million to 7.5 million barrels per day that could cause oil prices to "slip well below $40 a barrel as 2007-08 nears."Peter Enav, "Uncertain Saudi Supplies Hold Key to China's Growing Thirst for Oil," Pittsburgh's Post-Gazette, http://www.post-gazette.com/pg/05236/558766.stm

    This year, started at oil in the mid $50s but as everyone knows, we are now at $80/bbl. Cera's perfect record continues.

    It was this prediction, which caused Jeff Brown to declare "Daniel Yergin Day," when, contrary to Yergin's prediction of $38/bbl, the price reached twice that value in little more than a year! http://graphoilogy.blogspot.com/2006/07/daniel-yergin-day-july-13-2006.html



    2006
    As near as I can tell, CERA and Yergin took 2006 off and didn't predict future prices. Indeed, the few comments made in 2006 seemed to indicate that Yergin and CERA were beginning to get the idea that the fundamentals of supply and demand were favorable for higher prices. Yergin was quoted as saying:

    "The world oil market is in the grip of a slow-motion supply shock, in which a $70 to $75 barrel price reflects an aggregate disruption of over 2 million barrels a day," Daniel Yergin, the chairman of Cambridge Energy Research Associates, said in remarks this week at a Washington energy conference. http://www.signonsandiego.com/uniontrib/20060427/news_1b27oilecon.html

    But, it appears that he was right, but for the wrong reasons. On July 15, 2006 he ascribed the rise in price to geopolitical tensions:

    CRUDE TOPS $78 PER BARREL ON M-EAST, NIGERIA SUPPLY WORRIES
    Subscription - All Africa - HighBeam Research - Jul 15, 2006

    "the oil price has become a register of geopolitical tensions and fears," said Daniel Yergin, who heads Cambridge energy Research Associates."

    According to this theory, I presume, if Rodney King had his way, and we could all just get along, oil prices would plummet. If this is the true explanation for the rise in oil price over the past 5 years, the world must be becoming more geopolitically tense and fearful.

    June 2007
    But as we enter 2007, Yergin and CERA are back pounding the drum that oil prices will fall. This is what I heard Yergin imply on Larry Kudlow's program. It reflects what he said in print earlier in the year. In June, 2007, a Yergin interview reported this:

    "ISTANBUL, June 27 (Reuters) - World oil prices will drop to the low $60 range by the beginning of next year as long as the security premium in the world oil market does not rise, said Daniel Yergin, chairman of Cambridge Energy Research Associates. " http://uk.reuters.com/article/oilRpt/idUKL2727647820070627?pageNumber=2

  • ||

    over at Peakoil.com they've taken to reporting the oil price in "Yergins", a currency unit = $38. The price is now north of 2.2 Yergins!

    I have a grad degree in economics, and I know first hand they work very hard to beat the common sense out of you. Economists of my acquaintance (and I know many) by and large Don't Get It.

    Economics isn't "wrong", but energy supply is conditioned by physics and geology as well as by human ingenuity and investment, and the physics and geology are growing unfavourable. The True Believers just can't wrap their heads around that.

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