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Peak Oil
U.C.-San Diego economist Hamilton weighs in on ‘peak oil’ and the world economy (video and transcript)
James Hamilton, American Enterprise Institute via E&ETV
Many analysts have begun speculating that world oil production may be nearing its apex. Will energy companies be able to keep up with rising demand from the United States, China and other countries? If accurate, what exactly does the so-called “peak oil” phenomenon mean for the world economy, and how will consumers and businesses respond? In a speech at the American Enterprise Institute last week, James Hamilton, an economist with the University of California-San Diego, took an in-depth look at these questions, and more.
Conclusion:
So what should we expect to see from here? Well I’m persuaded we’re going to see the price of oil rise over time. I think that this trend we’ve seen over the last couple years is the beginning of that long run reality that I think is unavoidable. That the industrialization of China and India and other parts of the world is for real. That’s adding a very significant kick to world demand. And even if it’s true that we do have the resources to produce some more oil for the next five years, the next 10 years, I can’t imagine it being extrapolated at these rates that far into the future. So I think that what we’ve seen of the last couple of years is not just a temporary imbalance between supply and demand, it’s a fundamental response to the fact that this was a major source of demand. And we really have to learn to live with it. So I expect to see the price of oil rise over time, rise relative to inflation. I don’t know for sure that’s going to happen over the next couple of years. We could see a retraction in response to these demand adjustments, but I see a long run trend as up because the man has to be contained.
A second thing that I think we can probably count on is that these temporary disruptions are going to become more severe. We have to worry more about hurricanes now because that’s the place we have to look for oil. And we’re more vulnerable to supply disruptions now than we were when all the oil came out of Texas because the places we’re getting oil from are inherently more hazardous and more subject to disruptions than Texas.
And a third prediction I’m comfortable offering for you is that while all of this is going on who is the public going to blame? Well the public is going to blame the greedy oil companies, doesn’t have anything to do is apply, doesn’t have anything to do with demand, doesn’t have anything to do with geography or geopolitics or weather. That’s something I think we can count on.
So in a nutshell, what is the peak oil going to look like? I think it’s going to look like our sources of oil are less and less attractive. We’re more and more vulnerable to disruptions. We pay a higher and higher price. In other words I think peak oil is going to look a whole lot like where we are right now.
(10 November 2005)
Economist James Hamilton has been engaging in online conversations with the Peak Oil community over the last few months.
Black gold and real gold
Roland Watson, New Era Investor
Peak Oil is a defining event and process. As the oil wave we have ridden for the last 150 years begins to ebb and roll back forever, it will suck back into its retreating wake many things that we have enjoyed and taken for granted. One of these things is easy money.
Oil makes the world go round because money makes the world go round. Easy and cheap oil has acted as guarantor for the trillions of easy and cheap dollars that swim around this debt-ridden world in ever increasing amounts. So long as the tens of millions of barrels of oil keep gushing out of the wells, the money can keep gushing out of the banks to finance personal, corporate and government debt by the billions each day and every day, on the hour, every hour.
,,,Now as Peak Oil approaches, the guarantor is beginning to lose his creditworthiness. As crude oil production begins to falter globally, GDP will begin to falter globally. Players of the futures markets will know what happens when a leveraged bet goes against you, you lose big time and the margin calls come in. When GDP begins to decrease for years to come on this type of leverage, the equivalent of margin calls will be made to governments across the world.
What will they do? You either pay the extra margin (inflate the money supply) or you close out your position at a loss (default on your debt). One is inflationary, the other is deflationary. We think the government will pay the extra margin but the private sector will close out. Either way, the economy must contract and money must seek a new backer. That backer will be Gold, an old friend long spurned but one who can be trusted and whose time will come next decade at the earliest.
(8 November 2005)
Remarks by James Howard Kunstler at the meeting of The Second Vermont Republic
James Howard Kunstler, Clusterf*ck Nation
When we think about the destiny of our land, there are a few questions we might ask:
What do we mean by ‘our land?’
What has been holding it together?
Who are we?
And who will we become?
For about 210 years we have been a federal democratic republic composed of more than a few states, eventually adding up to fifty. At times, the citizen’s identity has shifted from allegiance to a particular state to the republic as a whole – as when Robert E. Lee, for instance, famously declared that he was first a citizen of Virginia.
Lately the tendency has been for citizens to think of themselves first as Americans, and secondarily as New Yorkers or Virginians or Vermonters.
What has held us together – at least since the convulsion of the Civil War – is a common culture and especially the common enterprise of a great industrial economy.
For much of our history, including the first half of the 20th century, we were a resourceful, adaptive, generous, brave, forward-looking people who believed in earnest effort, who occupied a beautiful landscape full of places worth caring about and worth defending.
Since then, lost in raptures of easy motoring, fried food, incessant infotainment, and desperate moneygrubbing, we became a nation of overfed clowns who believed that it was possible to get something for nothing, who ravaged the landscape in an orgy of wanton carelessness, who believed they were entitled to lives of everlasting comfort and convenience, no matter what, and expected the rest of the world to pay for it. We even elected a vice-president who declared that this American way of life was non-negotiable.
We now face the most serious challenge to our collective identity, economy, culture, and security since the Civil War. The end of the cheap fossil fuel era will change everything about how we live in this country. It will challenge all of our assumptions. It will compel us to do things differently – whether we like it or not.
(October 28, 2005)
ASPO-USA Denver Conference Report (Thursday)
Stuart Staniford, The Oil Drum
Here’s my report on the first day (Thurs) of the ASPO-USA conference in Denver….
First, my overall impressions. In particular it’s interesting to constrast this conference with the Peak Oil and Community Solutions conference in Yellow Springs a couple of months ago. If that conference could have been subtitled “Peak Oil for Grey Ponytails”, this one is “Revenge of the Suits”. More than half of the attendees are attired in that fine expression of sartorial status in Western culture, with most of the rest in either “academic sports-jacket”, or business “I escaped the office to this conference” smart casual (the latter category including yours truly).
The attendees are in fact an extremely interesting cross section. There are a very roughly equal mix of:
* Hydrocarbon production industry folks,
* Alternative energy folks
* Financial/investment/analyst community
* Academics/researchers
* Policy/legislative people
* Non-profit/environmental/peak-oil activists
* Media folks
(11 November 2005)
Also on The Oil Drum is a report on the first day of the conference from Heading Out. Continuing coverage will probably be on the The Oil Drum homepage. More background is on the ASPO-USA website.
ASPO USA Denver World Oil Conference Highlights, Day 1 (AUDIO)
Global Public Media
Highlights from Day 1 of the Denver World Oil Conference, sponsored by ASPO-USA, November 10 & 11 in Denver Colorado. Speakers include
Randy Udall & Steve Andrews of ASPO-USA,
Chris Skrebowski of the UK Petroleum Review,
Tom Petrie of Petrie Parkman & Co.,
BP Retired Chief Petroleum Engineer Jeremy Gilbert,
oil industry analyst Henry Groppe,
energy investment banker Matt Simmons and others.
More audio coming soon- check back later!
(11 November 2005)
Analyst sees end to oil’s heyday
Steve Raabe, Denver Post
Noted author and energy analyst Matthew Simmons spread the gospel of “peak oil” at a Denver conference Thursday, arguing that statistics clearly show an impending peak in world oil production, followed by a decline.
Meanwhile, outside conference doors, a person in a chicken suit passed out letters to attendees from Denver oilman Alex Cranberg, saying the issue is being perpetuated by “Chicken Littles” even though plentiful petroleum exists.
So goes the debate on how soon, if ever, the world needs to start worrying about falling supplies of its economic lifeblood.
(11 November 2005)
