- Oil prices could double by 2022, IMF warned
- Jeff Rubin argues in "The End of Growth" that central bankers must focus on high energy prices
- Jevons paradox busted by new emissions fee mechanism.
- No clear correlation between energy use and growth rate of the economy in the EU

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Energy and peak oil - May 14

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Many more articles are available through the Energy Bulletin homepage.


Peak Oil: The Sun Also Rises - Forbes author concedes on "Net Exports" debate

Tom Konrad, Forbes
I concede the point on Net Exports. In particular, after a discussion in the comments with Jeffrey Brown (the geologist who created the concept), I believe Net Exports help to clearly explain the combined dangers of peak oil and oil subsidies.

Why did I persist in my resistance to the net exports concept so long? Because, from an economics perspective, net exports are an unnecessary complication to my oil supply/demand elasticity model. If the world were filled with economists, there would probably be no need for the concept of net exports. Economist Mike Giberson certainly thinks so.

But the world is filled with people with limited understanding of the “dismal science,” and the economic realities of peak oil affect everyone. It falls to us to explain those economic realities to everyone in the clearest terms possible. And net exports are a lot clearer than elasticity models.

Oil for Electricity

While the net exports concept is a great pedagogical tool, I worry that it may distract us from the ways that even subsidized demand for oil in oil exporting countries responds to changes in the oil price. For instance, Saudi Arabian consumers may not feel the impact of changes in the world price of oil, but their government does.
(13 May 2012)
Congrats to author Tom Konrad for keeping an open mind, and to peak oil geologist Jeffrey Brown with his friendly, persistent approach that works wonders.

Jeffrey Brown writes:

"I still don't think that Tom Konrad fully gets the point that subsidies, in a post-peak oil exporting country, only worsen the net export decline rate."

"Given an ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate that production declines, or at a rate faster than the production decline rate, the net export decline rate will exceed the production decline rate, and the net export decline rate will accelerate with time."

-BA


Oil prices could double by 2022, IMF warned

Terry Macalister and Lionel Badal
Global trade would be profoundly affected if crude prices permanently doubled from current historic high of $113 a barrel
---
The International Monetary Fund (IMF) has been warned by its internal research team that there could be a permanent doubling of oil prices in the coming decade with profound implications for global trade.

"This is uncharted territory for the world economy, which has never experienced such prices for more than a few months," the report warns.

The new IMF "working paper" come as the value of crude on world markets remains at the historically high level of $113 a barrel and just after the International Energy Agency reported that consumption would accelerate for the rest of this year in line with a wider economic recovery.

Undertaken amid mounting concerns about "peak oil", the IMF study does not presume that there is a constraint on how much oil can be taken out of the ground. It prefers to believe that extraction rates will depend on the price that will be able to be charged for the final product.
(13 May 2012)



Jeff Rubin argues in "The End of Growth" that central bankers must focus on high energy prices

Charlie Smith, Straight (Vancouver)

The End of Growth
By Jeff Rubin.
Random House Canada, 274 pp, hardcover

Former CIBC chief economist Jeff Rubin isn't lacking in self-confidence.

... [In 2009] he forecast $225-per-barrel oil by 2012. A couple of months after this prediction, oil prices peaked at $147 per barrel, before dropping through the floor in the wake of a global economic meltdown.

For a while, Rubin became a bit of a pariah to his employer, leaving CIBC for reasons that weren't made clear at the time. During this period, he also wrote his first book, Why Your World Is About to Get a Whole Lot Smaller, which suggested that higher oil prices would eventually curtail transcontinental trade and revive domestic manufacturing.

But a curious situation has developed since then: oil prices have been creeping higher, at times puncturing the $100-per-barrel threshold. And the global economy appears to be stuck in neutral—giving credence to Rubin's oft-stated claims that higher energy prices are an underappreciated factor in choking economic growth.

... Whereas his first book looked at the impact of rising oil consumption in oil-producing countries, The End of Growth examines the failure of economists, central bankers, and the environmental movement to consider the ramifications of higher energy prices over the medium to long term.

Rubin notes that in 2000, approximately 76 million barrels of oil per day were consumed. At the time, the average price of Brent crude was $28.50 per barrel, which meant that the world spent about $791 million on oil that year.

By 2010 with Brent crude averaging $79.50 and consumption rising to 87 million barrels per day, $2.5 trillion was spent on oil.

"When the world's annual fuel bill was less than $800 billion, oil-importing nations like the United States clocked healthy economic growth year after year," Rubin writes. "Now that the world is spending more than $3 trillion a year on oil, those same economies are floundering. This isn't a coincidence."

The bottom line, he suggests, is that slow or no growth is a reality. And he criticizes central bankers' attempts to stimulate spending in this environment with quantitative easing (i.e. the central bank dumping more money into the system by buying more bonds and treasury bills) to try to recreate the economy of the past.
(13 May 2012)
Suggested by Gail Tverberg who writes: "I agree--high oil prices are a huge problem for economies. Substitutes with high prices are likely to be of little help."


Jevons paradox bust by new emissions fee mechanism.

Stephen Hinton, A Very Beautiful Place
Many inventors’ eyes glaze over in wonder at the thought of having the opportunity to invent clean, more efficient technology.

If only there were a market for it, the most wondrous machines could be manufactured and sold at a huge profit, they reason. And pollution would stop.

But more effective solutions actually, according to the famous Jevon’s paradox, encourage more consumption. Famously, refrigerators are far more efficient that they were 40 years ago. On the other hand, the total energy used by refrigerators is still increasing, as more people are buying larger refrigerators – because they are relatively cheaper.

(http://en.wikipedia.org/wiki/Jevons_paradox)

Recent work in a report by the Nordic Council of Ministers focused on putting a price on pollution. The report reasoned that a flexible fee, levied high upstream (in the case of oil, at the harbor) could be made progressively higher until the market behaved to introduce renewable – based alternatives.

This progressive increase of fee acts like a price discovery mechanism: the price of pollution is the cost to not pollute.

- “But would this not just encourage more effective uses which would encourage the same or more consumption ,“ argued detractors.
“It would”, replied the inventor, Anders Höglund, “if it were not for the return of the fee income back into the economy”.

The mechanism investigated includes a general return of collected fees, possibly as a tax rebate.

Says Höglund “the more fossil fuel that is introduced into a country, and the longer it is used, the higher the fees and the more money collected”.

This money goes into the economy for consumers to spend. But fossil-fuel based solutions will be more expensive. So there will be an incentive for consumers to choose the alternatives. In this way we beat the Jevons paradox.

Read the full report here.
(10 May 2012)


No clear correlation between energy use and growth rate of the economy in the EU

Etienne Bayenet, Energy Bulletin
I was wondering if there was a link between the growth rate and the petrol use of the EU lands during the last years. I checked the data on Eurostat. Here are the results.

The data I used are the GDP values in Euro, the tep (ton equivalent petrol) for energy consumption and tep petrol products consumption and the growth rate of the different countries.

GRAPH: Energy per GDP and growth rate

I have the feeling that there is nothing to conclude from this graph. The highest level of energy per GDP is reached by Bulgaria.

There is no low energy user in the lowest growth rates in 2009 and 2010, but Bulgaria, the country with the highest energy per GDP, isn't doing so badly.

GRAPH: Petrol per GDP and Growth rate

Regarding petrol use, the only thing that can be said is that the highest level of Petrol per GDP are reached by islands (Malta and Cyprus), Bulgaria is in the 3rd position.

I don't see any correlation between energy use and GDP.

What I found more interesting is the evolution of the Energy per GDP and Petrol per GDB factors
since 2002.

GRAPH: Energy per GDP

Huge improvements in energy efficiency have happened, mainly in the eastern part of the EU. The graph doesn't tell if low efficient factories have improved or closed.

GRAPH: Petrol per GDP

On the Petrol per GDP curve, you can see that islands without natural gas (Malta and Cyprus) are much more dependent of an easily transported and stored energy.

Etienne Bayenet
Engineer
Luxembourg

For full report with graphs (PDF), see
http://energybulletin.net/sites/default/files/Energy per GDP and growth rate EU-V2.pdf

(13 May 2012)

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