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Deffeyes: To The Peak Oil Community
Ken Deffeyes, Hubbert’s Peak
This message from Robert Hirsch to the peak-oil community appeared in the November 14 issue of the Wall Street Journal. He’s asking us to take a vacation from preaching Hubbert sermons.
… World crude oil production stopped growing in 2005, it’s hard to hide that one behind the curtain. But with oil less than $50 per barrel and gasoline under $2 per gallon, we could pretend that the oil problem has gone away.
Many of us are hoping that President Obama will be another FDR. If the oil trap snares him, he could be forced into the Herbert Hoover mold. Maybe Karl Marx was right.
Don’t nobody tell, but Oil & Gas Journal (November 17, 2008) reports that Henry Waxman, the new chairman of the House Committee on Energy and Commerce, is an opponent of the hydrofrac technique. Frac jobs have been around a while; Hubbert and Willis published on frac physics in 1957. Anybody know where Waxman stands on water flooding and drilling mud? Don’t ask, don’t tell.
I promise not to relay the many postponement or cancellation announcements of energy project construction, drilling campaigns, or equipment manufacture. If the investors can’t see the bottom of the oil-price drop, they won’t put up the money. Matt Simmons, for good reason, has proposed a minimum support price for oil and natural gas. Forewarned is forearmed.
This morning’s New York Times reports on page 1, above the fold, that the Standard & Poor’s index of 500 stocks dropped more that 6 percent on both August 19 and August 20, 2008. Not to worry, that has happened before. Most recently, it happened on July 20 and 21 of 1933. Try not to worry about it.
It’s still there. “Eppur si muove.”
But I’ll take Hirsch’s advice. I’m taking my family on vacation to Hawaii. We’ll be on the west slope of Hualalai, which last sent lava flows to the sea in 1801. What, me worry?
(22 November 2008)
Peak oil performance artist Kriscan has a YouTube Memo to Robert Hirsch.
Shocks, Shortages, and Scenarios – Planning for a Post-Oil Future
Peak Moment Television via Global Public Media
Responding to peak oil will require reshaping our communities. These two interviews, taped in September 2008 at the ASPO-USA conference, are with Megan Quinn Bachman of Community Solutions, and Bryn Davidson of Dynamic Cities Project.
Megan observes that while the ASPO-USA conference focuses on the energy depletion problem, what’s needed are solutions and strategies for communities and people. Her town’s anxious response to a recent power outage provided a lesson, as many people didn’t know what to do, nor had they built a network of mutual support. We need community contingency plans for sharing and surviving with less energy.
Focusing on urban planning, Bryn Davidson uses scenarios to test strategies for an energy-constrained future, particularly for infrastructure like roads. He asks, how do we invest today that’ll pay us back in multiple plausible futures — from “business as usual” to long-term energy decline and shortages. He notes wryly that as a result of peak oil, we may have also reached “peak roads”.
(6 November 2008)
IEA WEO 2008: The Oil Model – Summary and Suggestions for the WEO 2009
Dr. Steffen Bukold, EnergyCommen (German-language site)
Dr. Bukold writes:
EnergyComment, the new Hamburg-based expert site for oil politics and oil markets, has published its latest analysis of the World Energy Outlook (WEO) of the IEA. It focuses on the oil model and suggests new elements for the next WEO edition in 2009. It supplements the oil field analysis which has been published on November, 13th.
Topics of the model analysis are: The mixture of exogenous and endogenous variables; the oil intensity; the price elasticity of demand; supply assumptions; risk factors; the oil price model and the assessment of financial markets.
Suggestions address: the role of political analysis, the significance of capital markets, the necessity of a peak and a crisis scenario, the role of expectations as opposed to “hard” facts, the price sensitivity of demand and supply.
The text (7 pages) is available in German only but the graphs are in English. A complete translation is planned. The analysis including the English graphs can be accessed free on the website. Please leave a note if you are interested in receiving the complete English version once it is completed.
The article itself begins:
Über Kühlschränke und Öl: Das Ölmodell des IEA WEO 2008 – Vorschläge für den WEO 2009
Marktmodelle für Allerweltsprodukte wie z.B. Kühlschränke sind keine sonderlich komplexe Herausforderung: Es gibt diverse Anbieter, eine weltweite Nachfrage, Marktpreise und ein paar Rahmenbedingungen. Es gibt keine Kühlschrank-Peaktheorie, keine komplexen Kühlschrank-Futures an Terminbörsen und die geopolitischen Komponenten sind vernachlässigbar. Wenn das Angebot zu knapp wird, entsteht eine zusätzliche Fabrik.
Anders bei Öl. Trotz der relativ homogenen Produkte ist dieser Markt mit seinen mannigfachen politischen, wirtschaftlichen und finanztechnischen Einflüssen kaum zu erfassen. Hinzu kommen plausible Vermutungen, dass wir gerade Trendbrüche erleben: Stoßen Produktion und Reserven an ihre Grenzen? Dominieren Finanzmärkte den Preis?
Wie soll der Modellbauer reagieren, wenn z.B. seine Ölpreismodelle Jahr für Jahr versagen und eine neue Variablenmischung erforderlich wird? Jedes Modell ist ein Kompromiss: Wie gehe ich mit dem Problem fehlender Daten um? Ignoriere ich die Variable oder verwende ich angreifbare Schätzwerte? Welche Stellschrauben verwende ich? Wo setze ich Annahmen, wo wage ich Berechnungen? Welche Variablen sind exogen, welche endogen?
(21 November 2008)
What’s up with the price of oil?
Fabius Maximus
Question: What about the extraordinary movements in oil prices? Do these refute Peak Oil?
Answer: There is neither anything unusual in these things, nor are these price movements unique to oil. Here are some brief answers, with links to longer discussions.
1. Oil prices rose along with commodity prices during the boom
2. The price of commodities varies with global economic activity
3. In recessions the price of oil drops below the marginal cost of production
4. Effects of the recession on peak oil
1. Oil prices rose along with commodity prices during the boom
The prices of most industrial commodities have increased since 2003. When a wide range of industrial commodities rise in price (especially vs. gold) we can examine each individual commodity to determine specific reasons for the rise. That is probably pointless, as there is likely a common cause. In this case, all have strong price elasticity to rising global GDP. This is easily understandable, as demand increases far faster than existing mines can be expanded or new mines (or oil fields) developed.
In the most recent cycle (roughly since 2003) copper increased slightly more than Brent oil. (The sensitivity of copper prices to economic growth has earned it the nickname of Dr. Copper.) Small changes in demand for commodities produce large swings in price because their production can quickly be changed only by small amounts.
(24 November 2008)
Related at Financial Sense: A Bridge Too Far: The energy sector will be back, all too soon (Tony Allison)
