Commodities markets

$20 Oil Soon? Resource Depletionists Go Hide Your Heads in Shame!

How low can the slide downward from the peak of the most recent commodity super-cycle go?



The price for West Texas Intermediate crude oil continues to sink toward $30 per barrel. Now the analysts at the financial services firm Morgan Stanley are saying that it could go as low as $20 per barrel later this year. Not just because rising global supply is colliding with weakening demand, but also because the U.S. dollar is likely to rise in value. As notes, a Morgan Stanley research report …

…attributes the sharp slump in crude prices to the strength of America's currency. Morgan Stanley says that if the U.S. dollar appreciates a mere 5 percent, it could force crude oil prices down by another 10 to 25 percent…

Not only that, but a steeper drop could be just around the corner, again because of the strengthening greenback. "Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency," wrote Morgan Stanley's analysts in their latest report. "The U.S. dollar and non-fundamental factors continue to drive oil prices."

Last fall, Goldman Sachs even suggested that the current oil price slump mirrors what happened when oil prices collapsed in the 1980s and remained low throughout the 1990s. In other words, humanity may enjoy low oil prices for perhaps another 15 years.

In my book, The End of Doom: Environmental Renewal in the Twenty-first Century, I reported various depletionist predictions:

"The world is at, nearing, or past the points of peak production of a number of critical nonrenewable resources—including oil, natural gas, and coal, as well as many economically important minerals ranging from antimony to zinc," warned prominent environmentalist Richard Heinberg in his 2010 article "Beyond the Limits to Growth." Heinberg had earlier made plain his collapsist beliefs in his 2007 book Peak Everything: Waking Up to a Century of Declines. In 2012, Michael Klare, Hampshire College political scientist and defense correspondent for The Nation, piled on in his book The Race for What's Left: The Global Scramble for the World's Last Resources. "Government and corporate officials recognize that existing reserves are being depleted at a terrifying pace and will be largely exhausted in the not-too-distant future," declared Klare.

Wrong again.

As recently as July, I was part of a Cato Unbound debate with economist Dambisa Moyo who was still unaccountably arguing that brilliant Chinese central planners were locking up all the world's fast-depleting resources for their country.

In fact, it is very likely that the world is now experiencing the downward sloping side of latest commodity super-cycle. Generally speaking, as each succeeding super-cycle unfolds resource prices eventually reach levels even lower than the nadir of the previous cycle. In any case, depletionist innovation-deniers need to be publicly shamed.

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  1. If we were all shills for oil companies wouldn’t falling oil prices make us unhappy? How many leftists will consider the implications of this to their worldview?

    1. Um, zero? Less than zero?

    2. You hate mother Gaia, you Koch puppet! You just want to kill green energy!, that’s the only reason you want cheap oil! Because everyone only thinks in political terms all of the time, they never think of the benefit things might have on themselves and their family.

      1. That’s a pretty good impression.

      2. Kochpet
        New word! Spread its fame!

    3. I’m receiving almost no fracking royalties because of this, and I’m fine with that. Lower fuel costs also drops the price of pretty much everything else I buy.

    4. Mar,

      I’ve been through this on a tech and futurist “Forum” site I read and comment on. The defenders of “Peak Oil” are immune to logic and data. They have reams of pubs that go in all different directions to reference. Decades ago oil companies agreed with Peak calculations, and that’s part of their certainty. Later publications of academic studies and industry papers are tossed around and linked to, and they simply redefine terms until the idea of “peak” anything becomes “the old peak, not this one. No, this peak is still peaking.” Its like the scholasticism of the Middle Ages, and debating theoretical spiritual beings.

  2. How the dollar appreciating? Is everyone just devaluing their currency quicker than we are?

    1. Bubble?

    2. Everyone went full on socialism quicker than we did. But don’t worry, we’re working on it, it won’t be long before $100 will buy you a gallon of milk, comrade, the glory days are coming.

      1. China and Vietnam and India are moving away from socialism. So is Argentina.

        1. Well, most of South American is doing so and even Europe is showing signs. But we’re still on a full steam ahead path to a glorious socialist utopia.

          India? Have you ever talked to any Indians about the politics there?

          1. Modi isn’t quite Indian Reagan and is a bit of a dissapointment, but he has enacted some serious reform, including opening the place up to more foreign investment. He also wants to fast-track bankruptcy which will be a HUGE shift.

        2. In Argie, the old Pres is trying to block the newly elected Pres using her appointed Supreme Court leader, other appointed Judges and many bureaucrats. The new Pres had to go to court to get a warrant allowing him to peel on department head he fired out of his office. So lets hope the Argies can make it back to relatively more open markets-the Socialists will not go quietly, and like our Dems, will lie, cheat and steal to get back in power.

      2. It’s like being the least-ugly kid at a school dance. Or the whole, “you just have to run faster than the other guy when being chased by a bear.”

    3. Yes. I would say the reason the dollar has ANY strength is because everyone else is more fucked up. to quit Jack Nicholson in The Two Jakes “In this town, I’m the leper with the most fingers”.

    4. The dollar is still the world’s reserve and a relative hedge against the inflation of traditional BFE nations. China was supposed to be buying up huge quantities of gold for the past couple of years in a (don your Zero Hedge Brand tinfoil hat) in an effort to eventually squeeze out the post-Nixon dollar, but it doesn’t look likely that the dollar is going anywhere anytime soon, at least until the government inflates away its interest repayments when they become too onerous and they can’t find enough people willing to buy bonds.

      So the wall and the USSR fell, we were supposed to be blessed with a peace dividend, and then the whole world turned into a bunch of lukewarm socialist idiots who justify eating their nation’s seed corn with a bunch of Keynesian/technocratic blather.

      1. Yeah, the elusive “peace dividend.” Fast forward, trillions spent to “inject/slather on/get ‘er dun” make a democracy functional in Iraq and Afghanland. And by a Repub who ran making fun of “democracy building overseas.” Gee, I wonder why we didn’t never save no money-they dun promised they only needed it for the cold war. Gosh, I feel cheated somehow!

    5. “How the dollar appreciating? Is everyone just devaluing their currency quicker than we are?”

      We’re the prettiest horse in the glue factory.

      But we are still in the glue factory.

  3. In any case, depletionist innovation-deniers need to be publicly shamed.

    You can’t shame someone who has no integrity, Ron.

    Unfortunately, doom sells. And so you will always have people peddling it, facts be damned.

    1. Unfortunately, doom sells.

      It does, which is why you should consider purchasing Ron’s excellent book The End of Doom.

      1. CJ: Just “consider” purchasing?

      2. A copy of The End of Doom would be a wonderful Martin Luther King, Jr., Day present for nearly anyone on your gift list.

  4. The title implies that they actually have shame.

  5. It can’t be. We were going to run out of oil by the 1980s.

  6. How much are these supercycles a consequence of tech breakthroughs that make things more abundant vs monetary policy?

  7. Isn’t this a cap in the knee for the environmental movement? Their stupid renewables garbage only stood a sliver of a chance when oil was expensive. Not it and natgas are cheap and probably staying that way.

    1. You say that, but the Green industry has a continuous money enema from the gummint.

      That’s why Germany has all of those solar energy systems despite having no, you know, “sunshine”.

      1. They buy oil from Putin to run generators to shine lights on the “free energy” solar panels.

    2. Isn’t this a cap in the knee for the environmental movement?

      why? You cannot shame the shameless.

      1. But you can make their trendy investments worthless.

  8. Resource Depletionists Go Hide Your Heads in Shame!

    First they would have to be capable of shame. If Paul Ehrlich hasn’t killed himself from shame yet, it’s probably a safe assumption that he’s incapable of feeling any.

  9. It might surprise some people just how much of the population here in the US is comprised of depletionist, innovation-deniers, luddites, malthusians, and doom sayers.

    Just read any science blog comments on subjects like CRISPR, 3D printing, cloning, genetic engineering, extending human lifespan, and other topics and listen to their predictions of doom if we dare defy gawd or the laws of natures and embark on any of these evil experiments.

    Any new technology is just another development in the natural evolution of humans. We are now a technological species, there is nothing unnatural about any of these new technologies. Even if we invent super intelligent AI and that AI develops technology beyond the reach of humans, it’s still a natural progression.

    1. I really was expecting that first paragraph to end with “bank robbers, ass-kickers, shit-kickers, and Methodists.”

    2. Hyp,

      Sadly true. I use a Forum on one regularly and am one of a few Capitalists or free marketers among many socialists or (truly amazing to me, the first time I saw it) clearly well educated, actual true believers in PC as a good thing. This site may be crude *gasp* but it’s refreshingly heavily slanted toward freedom.

  10. It’s not like countries like Saudi Arabia can cut back production to maximize profit either. They have to maximize revenue–not profit. In some ways, the lower the prices go, the more they’re incentivized to boost production to make up for revenue shortfalls.

    1. Ken,

      No. They need profit. Saudi set off the plunge to overproduction. Overproduction only makes sense from a profit viewpoint, because as you produce over a certain point, you shorten the time into the future when your wells will pump as easily as they do now. Saudi and the other famous producers fear that day. Now with fracking, they should be reassured. Instead, they fear it. They are overproducing with the openly stated reason that our rampantly growing (due to fracking) nat gas and oil production was heavily denting thier profits here, in one of their biggest markets.

      And with talk of us selling our stuff on the world market, they feared yet more market share loss. This would mean that over time they would have less – heres that word again – profit in the future. They didn’t realize that while they could kill some Yankee fracking wells and production companies, other Yankees would snap up the “dead” property as it became available and either keep pumping or wait. As it happens, they kept pumping.

      The other producers are holding their noses and pumping, rather than holding and waiting for an increase, because the demand for – yes, that word again – profits from their oil is great in each country. Like ours, each is full of those eager to spend, spend, spend. As you say, they need to “make up for revenue shortfalls.” They do that with profits from selling oil.

  11. In any case, depletionist innovation-deniers need to be publicly shamed.

    I would love it if that were to work, but this to be a moral argument first and a technical one second. If you believe in your heart of hearts that an oil derrick is a knife in the bosom of Mother Earth, no amount of Julian Simon or assertions about economic substitution are going to change your mind.

    The role of the public intellectuals you cite is to justify these beliefs with a plausible-sounding, or better yet, intensely technical and erudite, argument, which is a strategy as old as theology.

  12. “The world is at, nearing, or past the points of peak production of a number of critical nonrenewable resources?including oil, natural gas, and coal, as well as many economically important minerals ranging from antimony to zinc,” warned prominent environmentalist Richard Heinberg in his 2010 article “Beyond the Limits to Growth.” Heinberg had earlier made plain his collapsist beliefs in his 2007 book Peak Everything: Waking Up to a Century of Declines.

    I can’t speak for Heinberg without reading up on him, but one thing that is truly staggering is that such people usually believe that global warming is civilization threatening while also believing that fossil fuel use is in inevitable decline.

    First, you can’t believe both! Future climate model predictions are predicated on virtually unlimited low cost carbon fuel supply.

    Second, what is sold as a calamity on one hand — limited fossil fuels due to depletion — is sold as a solution on the other hand — limiting fossil fuels to decrease greenhouse gas emission.

    But such environmentalists inevitably are more comfortable with government throttling things for technocratic reasons than for markets throttling things for natural reasons. The latter is scary while the former gives a sense of control. A frightening worldview indeed: control for the sake of control.

    1. Great analysis, but I think there’s an additional factor, especially with environmentalists who are not in power but just ordinary Progs: the importance of intentions over results.

      Intentions are what determines whether they view something as positive or negative. So if government, made up of TOP MEN, mandates reductions in the use of fossil fuels, that’s good. But if the free market arrives at essentially the same outcome, the underlying motive is “greed,” so that’s bad.

      The same idea of motivations played out in the 1970s, when it first became evident that the welfare system was having a side-effect of breaking up poor (mostly minority) families. That didn’t matter a bit, because the policy was born out of altruistic motives of helping others (albeit with OTHER PEOPLE’S money). Say there had instead been an explosion in private sector urban job creation as a result of eliminating the minimum wage and relaxing business licensing requirements — even if the result was many previously unemployed minorities getting jobs or starting businesses, and moving out of poverty as they gained experience — that would have been EVIL because the underlying motivation would be self-serving “greed.”

      What they consistently ignore is that power-seeking is also a form of greed. I’d that working to wield power over other adults who should have self-agency and self-determination is far more destructive than just trying to amass wealth, but of course Progs don’t see it that way.

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