Fossil Fuels

World energy consumption since 1820 in charts

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In this post, I provide…charts showing long-term changes in energy supply, together with some observations regarding implications. One such implication is how economists can be misled by past patterns, if they do not realize that past patterns reflect very different energy growth patterns than we will likely see in the future.

ODAC Newsletter – Mar 16

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Finally, a plausible explanation for the Obama-Cameron political orgy — ‘love-in’ doesn’t quite do it — in Washington this week. For Cameron the benefit of this floorshow was obvious — like Blair with Bush, revelling in the reflected glory of US power — but Obama’s motive remained a mystery. What could possibly justify gifting all that folderol and face time with the world’s most powerful man? Yesterday we got the answer: international cover for a politically motivated release from strategic petroleum reserves, that’s what.

The peak oil crisis: surging gasoline

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The Washington Post is beginning to understand the realities underlying America’s gasoline price problem and look behind the political bombast far enough to develop a somewhat realistic appraisal of our energy situation.

However, the newspaper has to take one more giant step before it comes completely in touch with reality. One searches in vain for any mention in a recent article that conventional petroleum production, from which our high-priced gasoline is made, has been stagnant for the last six years – i.e. global oil production is peaking. Once this threshold is crossed we (the press, the administration, political candidates, and the body politic) can begin a meaningful discussion of our options for the future.

Home Heating for the Hardy

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If you are on-board with the sentiment that we should strive to reduce the amount of energy we consume as a means to relieve pressure on a world suffering impending energy scarcity, then you probably want to know how one might proceed. In this post, I will describe the single-biggest energy-saving strategy I have employed in my home in the past five years, which slashed my natural gas consumption by almost a factor of five.

Has the global economy become less vulnerable to oil price shocks?

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This paper examines the impact of oil price changes on global economic growth. Unlike some recent studies, this paper finds that oil price rises have had significant negative impacts on world economic growth. A time-series analysis of the data from 1971 to 2010 finds that an increase in real oil price by 10 dollars is associated with a reduction of world economic growth rate by between 0.4 and 1% in the following year. As oil prices approach historical highs, the global economy may be vulnerable to another oil price shock.

Understanding the new price of oil

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In the spring of 2011, when Libyan oil production — over 1 million barrels a day (mpd) — was suddenly taken offline, the world received its first real-time test of the global pricing system for oil since the crash lows of 2009. Oil prices, already at the $85 level for WTIC, bolted above $100, and eventually hit a high near $115 over the following two months. More importantly, however, is that — save for a brief eight week period in the autumn — oil prices have stubbornly remained over the $85 pre-Libya level ever since. Even as the debt crisis in Europe has flared.

A tough-oil world

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The principal cause of higher prices — a fundamental shift in the structure of the oil industry — cannot be reversed, and so oil prices are destined to remain high for a long time to come.

We are now entering a world whose grim nature has yet to be fully grasped. This pivotal shift has been brought about by the disappearance of relatively accessible and inexpensive petroleum — “easy oil,” in the parlance of industry analysts; in other words, the kind of oil that powered a staggering expansion of global wealth over the past 65 years and the creation of endless car-oriented suburban communities. This oil is now nearly gone.

Tough-oil reserves will provide most of the world’s new oil in the years ahead. One thing is clear: even if they can replace easy oil in our lives, the cost of everything oil-related — whether at the gas pump, in oil-based products, in fertilizers, in just about every nook and cranny of our lives — is going to rise. Get used to it. If things proceed as presently planned, we will be in hock to big oil for decades to come.