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Goldilocks and the three fuels
Richard Heinberg, Reuters
… As prices lofted, oil companies and private investors also saw opportunity and started funding expensive projects to explore for oil in remote and inconvenient places, or to make synthetic liquid fuels out of lower-grade carbon materials like bitumen, coal, or kerogen.
But then in 2008, as the price of a barrel of oil reached its all-time high of $147, the economy crashed. Airlines and trucking companies downsized, motorists stayed home, and demand for oil plummeted. So did the price, bottoming out at $32 at the end of 2008.
But with prices so low, investments in hard-to-find oil and hard-to-make substitutes began to look tenuous, so tens of billions of dollars’ worth of projects got canceled. Yet the industry had been counting on those projects to maintain a steady stream of liquid fuels a few years out, so worries about a future supply crunch began to make headlines.
By mid-2009 the oil price had settled within a Goldilocks range—not too high (so as to kill the economy and, with it, fuel demand), and not too low (so as to scare away investment in future energy projects and thus reduce supply). That just-right price band appeared to be between $60 and $80 a barrel.
How long prices can stay in the Goldilocks range is anybody’s guess, but production declines in the world’s old super-giant oilfields continue to accelerate and exploration costs continue to mount, which means that the lower boundary of that just-right range will inevitably continue to migrate upward.
Meanwhile the world economy remains frail, so that even $80 oil could strain the recovery.
When discussing the increasing perils of the current oil supply-demand-price balancing act, some commentators opine that the world supply of oil has peaked; others say it is demand that has peaked. It is a distinction without a difference.
(18 February 2010)
Richard Heinberg is a Fellow of the Post Carbon Institute. His suggestion sparked the founding of Energy Bulletin. -BA
Israel Urges Iran Oil Embargo Even Without U.N. Okay
Reuters
Israeli Prime Minister Benjamin Netanyahu called on Monday for an immediate embargo on Iran’s energy sector, saying the U.N. Security Council should be sidestepped if it cannot agree on the move.
Iran’s uranium enrichment in defiance of several rounds of Security Council sanctions has spurred world powers to consider tougher measures to halt what the West fears is a drive to produce nuclear weapons.
Israel has endorsed the talks while hinting at preemptive military action should it deem diplomacy a dead end.
If the world “is serious about stopping Iran, then what it needs to do is not watered-down sanctions, moderate sanctions … but effective, biting sanctions that curtail the import and export of oil into Iran,” Netanyahu said in a speech.
“This is what is required now. It may not do the job, but nothing else will, and at least we will have known that it’s been tried. And if this cannot pass in the Security Council, then it should be done outside the Security Council, but immediately.”
Though it is the world’s fifth-largest oil exporter, Iran imports some 40 percent of its gasoline from foreign refineries.
…Iran says its uranium enrichment is for energy or medical needs, but Tehran’s anti-Israel rhetoric and support for Islamic guerrillas on the Jewish state’s borders, as well as concerns over an Israeli military strike, have stirred fears of conflict.
Netanyahu made no reference to the possibility that Israel, which is assumed to have the Middle East’s only atomic arsenal, would try to attack Iran’s nuclear facilities. Some analysts believe this option is circumscribed by the long ranges, Iranian defences, and U.S. reluctance to see another regional conflict.
(22 February 2010)
Why Peak Oil Is The Only Thing That Can Stop The Chinese Export Deluge
Paul Larson, Business Insider
Oil prices that are significantly higher than earlier in our lifetimes will bring about great change, yet I firmly believe that our economy has the ability to successfully adapt.
Despite the strong headwind oil scarcity will create, I am still an optimist.
Last month, I explained in an article how and why the world is approaching a worldwide peak in oil production sometime in the next decade. Although there are large implications throughout the economy, I want to say upfront that I do not think this will bring on Armageddon. Oil prices that are significantly higher than earlier in our lifetimes will bring about great change, yet I firmly believe that our economy has the ability to successfully adapt. Despite the strong headwind oil scarcity will create, I am still an optimist.
I have structured this article by segmenting the “winners” and the “losers.” These monikers may be a bit strong, and it is worth noting that even a company that might have a slower growth rate than before because of peak oil can still be a good investment. In other words, I’m not running out to buy the peak-oil benefactors, nor am I dumping the peak-oil losers. Rather, increased oil scarcity is but one of many factors Morningstar’s analysts and I consider when projecting future cash flows and business positions. With that, let’s jump right to it.
(17 February 2010)
Sent in by EB reader slightly:
Interesting that Peak Oil is now openly accepted by an equity trading firm.
Author sells equities for a living so perhaps business as usual (BAU) – well nearly is the line.
Slightly.
