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Economic Impact of Peak Oil Part 3: What’s Ahead?
Gail Tverberg, The Oil Drum
This is the third article in a 3-part series. (Here’s a link to Part 1 and Part 2.)
We cannot know exactly what is ahead. In this part, we look at one possible future scenario. When we think of economic impacts, we usually think of the impacts that the squeeze of higher oil prices will bring–such as energy price inflation, food price inflation, and the need for more mass transit.
While these “squeeze” impacts are expected to occur, the real problem may be the discontinuities that occur, because of pressure on monetary systems and pressure on political systems. These pressures can cause unexpected results such as:
- Hyperinflation or deflation that indirectly results in a major decline in imports of all kinds (not just oil),
- Major changes in governments, and
- Fast declines in oil production in some oil exporting countries.
(1 October 2007)
Two Clues for the Clueless
James Howard Kunstler, blog
…this dependence on foreign oil is not itself the problem. The problem is that we have adopted a living arrangement so hopelessly centered around cars and incessant motoring and one of the consequences is an addiction to oil, which we happen to have a declining supply of in our own land.
In other words, the problem is not the fact that two-thirds of the oil we use comes from other nations, but is about our own behavior in our own nation. In a reality-based existence, it is more effective to modify one’s own behavior than to try to govern the behavior of other sovereign individuals and entities. It ought to be a test of anybody applying for the position of president to realize this, and to communicate it to the public. One might expect a Republican candidate to artfully avoid this reality — since car-dealers and suburban sprawl developers are among the heartiest Republicans. But it’s disgraceful for the Democratic opposition to ignore this reality.
The gravest problem this nation faces, therefore, is the inability of the American public and its leaders to confront the fact that we can’t continue to live the way we do — and, by the way, when I say “leaders,” I don’t restrict myself to political leaders. Our failures of leadership are comprehensive, including leadership in my nominal sector, journalism. For two weeks in a row, the price of oil on the futures markets has closed above $80-a-barrel, and for these two weeks The New York Times Sunday Business Section has failed to run one story on the consequences of oil rising into this uncharted territory of high price. Are the Times editors on crack? Surely $80-plus oil will thunder through the American economy.
(1 October 2007)
Two good articles in the MSM about higher fuel prices:
Costly Fuel Is Never Far From a Match (Jad Mouawad, New York Times)
How Economy Could Survive Oil At $100 a Barrel (Fritsch and Evans, Wall Street Journal)
How Economy Could Survive Oil At $100 a Barrel
Peter Fritsch and Kelly Evans, Wall Street Journal)
Compared to 1980, U.S. Is More Able to Handle Once-Unthinkable Rise
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The world economy has managed, with some indigestion, to swallow the rise of oil prices past $80 a barrel. How well could it survive $100 a barrel?
The answer is quite well — so long as several conditions still hold true. The price rise would probably have to be gradual. Inflation couldn’t get so bad as to force big interest-rate hikes. Oil-rich nations would need to pump their profits back into U.S. and European economies.
All of this has happened so far. The happy confluence may continue, though fears remain strong that high energy prices will tip the U.S. into recession.
A host of factors, including tight oil supplies and a weak U.S. dollar, suggest that oil prices have further to rise. Some analysts continue to believe that oil is destined to reach an all-time high, as measured in today’s dollars, of more than $101 a barrel
(29 September 2007)
Also posted at Cattle Network.
Costly Fuel Is Never Far From a Match
Jad Mouawad, New York Times
THERE are deep roots to Myanmar’s current unrest, pitting its repressive regime against Buddhist monks, but the immediate spark was the junta’s unexpected decision in August to double fuel prices. Overnight, diesel prices skyrocketed, and compressed natural gas rose fivefold.
In this respect, Myanmar is not an isolated case. Rising oil prices in recent years have created all kinds of headaches as they have rippled across the world. Many governments, especially in the developing world, have had to choose between raising domestic subsidies to offset the increases or letting the people bear the brunt.
Neither choice – higher government spending or the risk of popular discontent – has great appeal.
In oil-rich Iran, civil unrest spread through Tehran this summer after the government rationed gasoline in an effort to curb the country’s addiction to cheap fuel; gasoline in Iran, imported because the country lacks refining capacity, is heavily subsidized and cost about 40 cents a gallon at the time. After two days of upheaval, the Islamic theocracy restored order and kept the policy.
In Nigeria, the outcome was different. Striking oil workers in June threatened to shut down the country’s oil production if fuel subsidies were dropped. Faced with the threat of losing its biggest source of revenue, the government quickly backed down.
Fuel prices go to the heart of people’s ability to move, stay warm or feed themselves. So it is no surprise that governments around the world have tried to blunt the effects of oil prices that have tripled in the past four years.
But interfering with energy markets can be a risky and costly game. Prices kept high by market forces and taxes dampen expectations of cheap fuel. Fuel subsidies do the opposite, and countries that rely on them play with fire.
(30 September 2007)
Excellent article which takes up an aspect of peak oil that few others have examined – how rising fuel prices create political instability. Although energy journalist Jad Mouawad has not yet gotten on the peak oil bandwagon, one should not ignore his otherwise excellent reporting. -BA
ASPO’S Steve Andrews: Online peak oil lecture Tuesday
Futures studies, University of Houston
This Tuesday, October 2nd at 6pm central, co-founder of the American Association for the Study of Peak Oil, Steve Andrews, will present a live, online lecture, “The Peak Oil Debate; How Close Are We?” Is oil production in decline worldwide? Are we about to run out of petroleum or will supplies remain plentiful for the next 100 years? Why do the forecasts about oil reserves vary so wildly? How do politics play into our energy future? Join Mr. Andrews and Dr. Peter Bishop, noted futurist and associate professor of Strategic Foresight, to learn more about Peak Oil and the possible ramifications to our global and local future.
The Futures Studies program at the University of Houston is offering a closer look at the energy issue with its lecture series “The Future of Energy and the Environment.” From the viability of energy alternatives to the reality of Peak Oil, how we power our lives defines our world. Understanding the changes in our energy present helps us be prepared for our energy future; environmentally, economically and personally. Don’t be left in the dark. Please join us for this enlightening lecture series.
“The Future of Energy and the Environment” lectures series, which can be attended in person or online is free and open to public, takes place on Tuesdays at 6pm central though November 13. To attend virtually please email, [email protected] for directions on how to login. To attend in person, please come to room 101 of the Cameron Building at the corner of Wheeler and Cullen on the University of Houston campus.
(28 September 2007)
Schedule of lectures.
Buckee of Talisman “believes in Peak Oil theory”
Original: STELLAR PERFORMANCE WITH ASTROPHYSICIST AT THE HELM
The Press & Journal (North Scotland)
…A Brit with an Oxford PhD in astrophysics, [James] Buckee has, in reality, been a career oilman, with BP, Burmah Oil and Shell written into his CV, likewise the North Sea, Alaska and other key energy provinces.
It was in 1991 that he became president and COO of Talisman (formerly BP Canada), then CEO/president in 1993. And three years on from that he anchored the company in the North Sea with the MAST deal, whereby Talisman bought the Beatrice, Buchan and Clyde fields from BP.
…”Because Talisman was previously BP Canada, we had people who had been in the North Sea, were experienced, and therefore we felt comfortable that we could operate there. I’d worked in the North Sea a bit and had a comfort level. While I didn’t know the MAST assets well from an operational sense, I had been BP’s chief reservoir engineer, so I knew fields like Buchan and various others from that perspective.”
For Buckee, the high cards in Talisman’s hand were an ability to take existing assets and regenerate them – that was the backbone of Canadian gas production – and to assume high working interests.
…So how was Talisman viewed when it bought MAST? Not very favourably, it seems, or at least by North American analysts who still fail to understand North Sea values, in his view.
…Talisman has been in the North Sea for 11 years, and as far as Buckee is concerned, the strategic value of the province has not waned at all.
“The world consumes 30-plus billion barrels of oil a year, but is finding less than 10billion. This is unsustainable. I do believe in the Peak Oil theory. It’s obvious, which means oil prices will move higher. It also means that a premium is placed on existing fields.
“In the North Sea, we have the infrastructure and we have lots of oil in place beneath. I believe we can keep on improving the recovery factor of such fields for quite a long time yet.”
(1 October 2007)
Painting a Whole New Future – Without Oil?
Jess Albee, University Credit Union – Googolplex
College sophomore Jess Albee’s life changed in the blink of an eye when she learned that the world is on the verge of oil peak production.
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You know how you hear stories about people’s lives changing in the blink of an eye?
That’s what happened to me when I learned that the world is on the verge of oil peak production, in my English class at the University of Southern Maine last fall.
As an artist, the oil I think about most is made for painting. But the subject of the paper I was assigned was about the oil we use as a source of energy.
That oil is one I hadn’t really given a second thought to. I hadn’t realized just how crucial it is to our survival, and to the things we depend on every day.
There is a big threat that soon, we’ll be using more than we can find.
This predicament is called global oil-production peak.
(No date. ? October 1 2007)
Peak oil 10-20 years away, claims World Energy Council
The Press & Journal (North Scotland)
PEAK OIL 10-20 YEARS AWAY, CLAIMS WORLD ENERGY COUNCIL
Global proved recoverable oil reserves stood at 1.215trillion barrels (160billion tonnes) at the end of 2005, according to the World Energy Council. It says in a new report that this is 117billion barrels (11billion tonnes) higher than at the end of 2002.
However, it acknowledges that Peak Oil may be just a few years off.
The Middle East remains the principal location of oil reserves with 61% of the global total, followed by Africa with 11%, South America and Europe (including the whole of the Russian Federation) with 8% each and North America at just under 5%.
Pointing to work carried out by the Federal Institute for Geosciences and Natural Resources (BGR) in Germany, WEC notes that ultimate recoverable reserves of conventional oil are some 387billion tonnes, of which about 143billion tonnes had been produced up to the end of 2005.
After adjustments for technical reserves, according to the BGR, there are some 625billion barrels of additional recoverable conventional oil remaining in the world – equivalent to just over another 50% on top of the existing level of proved reserves.
(1 October 2007)
ODAC News – Monday 01 Oct
Doug Low, Oil Depletion Analysis Centre
The Hedberg Conference
1/ Private industry conference finds much less oil [interview with Ray Leonard on the Hedberg conference] (Lastoilshock.com, Fri 28 Sep)
Norwegian Oil Production – the Snoehvit field and IEA Projections
2/ No oil development at Snoehvit (The Norway Post, Thu 27 Sep)
UK Natural Gas Supplies
3/ Gas supplies rise but lower bills unlikely (Financial Times, Thu 27 Sep)
Russian Gas Imports – Turkmenistan
4/ Turkmenistan plans 50% hike in gas price for Gazprom: report (Platts, Thu 27 Sep)
Economics – UK
5/ Poorest could see mortgage payments shoot up 60% (The Guardian, Fri 28 Sep)
Russia – Car Sales Growth
6/ Russia’s Auto Market Ranks 8th in the World (FC Novosti, Fri 28 Sep)
Natural Gas supplies – Italy
7/ Italy Warns of Possible Winter Blackouts (Energy Intelligence [International Oil Daily], Fri 28 Sep)
Food – Wheat
8a/ Australia Beef Crisis Hits as Drought Decimates Wheat (Planet Ark [Reuters], Fri 28 Sep)
8b/ Record [prices] for wheat as crop forecasts shrivel (Financial Times, Thu 27 Sep)
Petrol Prices – Australia
9/ Report warns of petrol chaos (Courier Mail [Australia], Sat 15 Sep)
Natural Gas Exports – Iran
10/ Iran to produce 11m tons LNG in 2010 (Press TV, Fri 28 Sep)
Coal Prices
11/ Coal prices soar to record over $100 (Reuters, Thu 27 Sep)
(1 October 2007)
