By Bernard Hickey
Many voters will have welcomed the government's decision last Tuesday to defer a 1.5 cent a litre fuel tax increase. See Alex Tarrant's article on the fuel tax deferral.
The economic and political pain around the rise this year in petrol prices to around NZ$2.20 a litre is intense, but many can't imagine the prospect of it going much higher or haven't thought too much about what a permanently higher petrol price means for them and the wider economy. The assumption is the rise is temporary in the same way that high oil prices in 1975, 1979 and 2008 were temporary.
But what if this time is different and the price of oil and petrol is about to shift permanently higher?
It's worth looking at the trends in oil production, oil demand and in currencies to get a sense of where prices might head.
Some analysts believe the near record high oil prices are simply a result of financial market speculation and by a rush by many investors to hold 'hard' inflation proof assets rather than the US dollar, which is being printed at an alarming rate and at alarming interest rate of 0% by the US Federal Reserve.
But in recent months the debate around peak oil has migrated from the greener fringes into the centre of economic and financial debate.
This week renowned hedge fund manager Jeremy Grantham issued a detailed paper predicting the world was at one of its "giant inflection points in human history" with an epic shift higher likely in commodity prices, led by oil as rising demand from China and India hit peak oil supply.
He is not the only one. HSBC, one of the world's biggest banks. predicted oil would run out in 50 years, even if demand was flat at current levels.
The trouble for the world and petrol consumers everywhere is that oil demand is not flat. It's growing, largely because of China's explosive and intensive demand for oil. India is not far behind.
Both nations are rapidly motorising their economies and are entering a phase of industrialisation where energy and oil usage becomes most intense. As well as expanding their fleets of cars and trucks, they are building new motorways, buildings and other infrastructure that uses a lot of steel and concrete. Both require large amounts of energy. Some of it will come from coal, but the end result is strong demand for oil.
For example, China is now the world's largest car market. It is expected to add another 220 million cars to its fleet by 2020. That would add 8 million barrels a day of demand at a time when the International Monetary Fund forecasts oil supply rising just 1 million barrels a day.
Some economists are forecasting an oil price well over US$200 a barrel within 5 years. Even the US Energy Information Agency has forecast a rise to US$200 a barrel within 20 years.
Even if the New Zealand dollar was to rise to parity with the US dollar, a rise in the oil price to US$200 a barrel would push the petrol price towards NZ$4 a litre, particularly once the deferred tax increases are included in 2012 and 2013.
Are New Zealand's businesses ready for that? Are they planning to have smaller, more fuel efficient cars and trucks? Are we building better public transport and encouraging cycling? Higher oil prices also feed through into higher food and other prices because so much of our supply chain is infused with oil and transport costs. Are we ready to eat and consume less and differently?
Our government should be using tax increases such as the one deferred this week to gradually adjust New Zealanders to permanently higher oil prices rather than focusing on its election prospects.
Oil and Petrol
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207 Comments
Kermit,
Why do you say it's ridiculous?
This shock will come, it's just a matter of when and how big of a shock it is. We can choose to phase it in over time or get the fright of our lives.
A tax on petrol is also a pretty efficient and reasonably fair way to increase tax revenues, which we surely need to do if we're going to get the budget back anywhere near surplus.
cheers
Bernard
Bernard,
If we had re-labelled the existing hydrocarbon excise tax a carbon tax - which it is, we could have added a few cents and done away with an ETS. Problem from an international perspective solved !
It is so close to all pervading that it is a reasonable proxy for an ETS.
Vote climate change is costing us 1 $ billion pa and achieving exactly nothing except increasing government staffing levels.
The cost of any increase in the excise tax is basically nil as all the mechanisms are in place now.
Governments never consider transaction costs - and they are considerable.
The ETS will go down as one of the dumbest pieces of legislation ever.
Remember the Chinese 5 year plan doubles emissions of the world's largest emitter. Sure it reduces intensity - but also assumes strong growth.
We have to live in a real world that is affordable.
Compare the large amount of tax on petrol in Western Europe with the small amount in the US. This has a direct effect on the cars people buy and the way cars are used. The net result is the cars are far more fuel efficient in Western Europe than in the US, and car ownership is lower.
Now introduce a price spike in the raw material; petrol price goes up. Now who is going to weather the storm better?
One of the Daily Reckoning guys put it well; something about you can run a heck of a lot of mopeds (they were thinking Asia) for a single big US SUV.
I was thinking of this conversation as I drove round Auckland's eastern suburbs today, seeing all the big gas guzzlers
interesting times!
Auckland has more to lose than other places in NZ in terms of rising petrol prices, just by virtue of its size and traffic congestion. Businesses and commuters will be hit significantly harder in Auck than in other localities
Yet another reason to suspect Auckland will struggle in the next 1-2 years
Here's another thought - Auckland stands to gain much more from a strong NZ dollar than regional NZ. This helps protect Auckland against petrol price spikes, and Auckland is also less reliant on exporting than the regions. The regions are more reliant on exporting and tourism
Gloom - spoke to our friendly little Eastern suburbs gas station last week.
Demand down 20 % over Easter.
Just like the text books ! Funny that - 101 was right after all.
The Chicken Little's all seem to forgot that elasticity applies to gasoline and as prices rise demand will fall.
So should we be re-buiding a de-centralised Christchurch, then, and look for the city centres of Auckland and Wellington etc. to fragment outwards? If petrol rises, 'the commute' will become an expensive thing of the past, and work will concentrate where the people are, and that won't be in the city centres as businesses look to move to a cheaper locations and more localised/non-office based work?
Yeah $4:00 petrol is a scary notion for people I imagine. Personally I've moved into the city and haven't had a car for four years. Am I missing out? Yes, but it is great to have the extra money in my pocket when I go out for dinner.
Of-course the whole of the Middle East is in civil upraising in one form or another and probably the main cause is US$ printing with the associated food and transport inflation happening globally.
The increase in petrol prices would mainly be in the cross trade - NZ$ to US$ / US$ to petrol, and there is talk to fix this problem with either a single global currency. It's just talk of-course but the $US wont be around in its current form for too much longer.
Not at all ridiculous - could easily be $2.65 within a couple of months - say the dollar corrects down to 72 cents - 10% not hard to envision when the true state of the NZ economy comes through - and oil jumps 10 % as the crisis in the middle east effects just one of the major producers there - pretty much that would see us at $2.65 ish
Just a thought on the american deficit though - they virtually dont tax fuel hence the extremely cheap petrol costs - maybe if they were to add 20C a litre in duty it might make a huge dent in their budget deficit
The dependency of New Zealand from other countries is growing, mostly because of mismanagement of our economy by the government.
Instead of allocating orders for public transport, telecommunication and energy, supporting NZcompanies the NZworkforce with all it’s advantages, the government (Joyce/ Brownlee) spend more money on roads and imports in the billions – what an economy !!??
I'm all for high petrol prices if it can help change people's mentality, in particular that of older managers (45+, not the elderly!) who insist on staff coming to work everyday to do a job that can be done just as well from home.
Now I am well aware that not all jobs can be done off-site but many can be. If all the people who don't have to commute to do their jobs were able to do it where they live, it'd cut down our petrol consumption significantly and who knows, it may even result in lower petrol prices (even if only temporarily) as a result of a lower demand.
As for being ready, personnally yes although I'm considering getting a nice horse carriage to travel in (princess-like) style :)
Same as you - we're in IT (mostly) and my husband and I decided to leave the PAYE system primarily due to the ridiculous lack of flexibility. We did work from home on and off during the 12 years we were employees but it was always a struggle to get it accepted (hence why I feel strongly about this issue!).
From experience in the last couple of years, my clients couldn't care less where and when I do the work. And quite frankly why should they so long as it is done well and on schedule (which it is!). In fact, they love having people willing to work outside of office hours (usually to make up for their poor planning), something we wouldn't do if we had to travel to work and we've had nothing but praise from them.
The way I see it, where there is a team of people involved on a project, a Skype videoconf at a set time each day to make sure the team is organised and one face-to-face meeting a week is more than enough to work efficiently. Plus I reckon people are far more motivated to do the best possible job when they feel that their boss trusts them and that they have some control over the way they work. Not to mention that cutting the commute time has a positive impact on the work/life balance and the environment and takes away some stress and the risks associated with spending time on the roads.
LOL. IT is not the only thing I do, and I assure you the other stuff requires a lot of interpersonal skills :)
That said, you are right that the main downside to working-from-home is the lack of social interaction, but thankfully you don't have to be holed up 24/7 or to work 100% from home. Not to mention there is a life outside work so believe it or not, work is not the only place to get social interaction...(By engaging with your colleagues, did you mean gossiping over coffee and flirting with the secretary? Just kidding).
The sad thing is that you were actually correct about IT people, very generally speaking. When I moved to the UK, my colleages had barely even said hello after 3 weeks at work. Their eyes were constantly riveted on their computer. Quite a shock for a young woman coming from France where you get 4 kisses every morning from each of your colleague just as a greeting when you enter the room!
Then here, for the 6 years I was an employee I was lucky enough to make lots of friends in the marketing & support depts. Just as well because none of the guys in my IT team ever walked to the coffee shop with me during the breaks. All they seemed interested in was their computer screen and the latest Microsoft updates. Sad...
LOL...lots of laugh, but lots of love would do too!
Thanks to the Feb 22 earthquake we're not allowed anywhere near our building, so we're all now working from home. Yes, IT. Virtual private networks, VoIP phones, servers in data centre. We'll have to see if it works long term, but I have a personal interest in making sure it does!
I didn't use the car much for going to work before, cycling most of the time. So now the challenge is to get enough exercise. It's all too easy to 'just do one thing' on the time vampire, and the entire day and half the night is gone. The commute is good though; I stand up from working, walk two seconds, and I'm in the kitchen.
Still, the effects of food prices as a by-product of $4 petrol will be a worry. Best to get the garden doing its job of supplying food. Remember, lawn is a plant for a society with excess.
Lol isn't all science just the best guess at the time, but this was an advancement of the work of Carl Jung.
I have seem some pretty compelling stats around certain types being over dominant in certain professions, 2/3rd of Dentists in one study.
Can be pretty useful in predicting behaviour, you can bet the reality TV programs like survivor stack the deck by profiling all applicants.
Combined with the Guildord model of intelligence you have a pretty powerful tool in understanding the different ways that people operate.
You will find that most people don't care however, which is exactly the sort of head in the sand behaviour that has resulted in the mess we are in, and about to face.
mate, I've had far too many managers over the years who've believed all that babble, what colour is your parachute etc etc. humans are too complex to group into broad categories, many people defy simplistic categorisation. Sure some of that babble has its uses, but personally I think nothing beats just good old fashioned human understanding, empathy and appreciation of differences!
Ahh but already you describe the difference between the thinkers and the feelers. Your average engineer just isn't the one to be empathetic, just as you wouldn't want your average caregiver designing bridges.
I don't know that you are really refering to Myer Briggs, as I haven't found many know of it or understand it, least of all most managers. I have however seen other profiling on teams, but this is nothing to do with Myer Briggs.
But hey appreciation of differences is what I hint at above, with most people not caring.
The supervisor types usually display this exact lack of understanding, that why can't everybody be the same as me type that I am sure you know.
Guilford is not really known of at all, and is a recent addition to the internet.
Always biked to work too, one hour round-trip. Now I do it in a nice landscape instead of in the city. Ah, the joys of working from home... nothing like working till midnight on a Sunday for an Auckland-based customer :)
I like your saying about lawn by the way, but we've got 4 ha so I'm not gonna plant that large a veggie garden! Good night.
Yep.....i use public transport so that increase doubles my one tan/k to $140....once per 4 to 6 weeks...Im going to notice but not scream.....
Others on 1 to 1 1/2 tanks of gas per week and thats SUVs n' stuff (bigger tank) yes, ppl are complaining now....would they listen to me a decade ago? no......
and yes the wider economy....for the US every time the energy cost gets to around 6% of GDP they get a recession.....thats about now and $4US a US gallon...though we are paying over $6US a US gallon as a comparison...
regards...
Yes I have to thoroughly agree with you Bernard, tax increases to gradually reposition ourselves to handle higher energy costs is vital - eitherway the public is going to pay higher costs, but would they prefer just higher, or hugely higher prices ? Most Govts around the world deserve a huge kicking for having not moved much this way 10 years ago, and as a consequence we're all going to be feeling a whole lot more pain than we should have.
Snarlypuss - I'd have some agreement with you if they rebuild Chch the way it was, but what is being mooted might be the exact solution for peak oil. The city is likely to be rebuild with retail/businesses on the ground floor or two, and inter-city accomodation on the next floor or two (3-4 being about the most anyone will stand for the next decade or so).
Lets be honest, we're not ready for rising energy costs. I doubt the majority of people in the country have thought about the implications of rising energy prices, or what the effect will be on their lifestyles in the future.
If our current government is anything to go by then a 'head in the sand' approach seems to be the favored way for addressing these issues. As far as they are concerned this is probably just a temporary blip before the status quo resumes, or before a new fantastic cheap energy source is discovered which will save the day.
IMO don't hold your breath.
Bernard - at what point would you say the govt taxes fuel enough? 200% 300% 500%? I mean why not just whack a 100000000% tax on and then the govt can all buy us all electric cars and stick a windmill in everyones backyard. That sounds ok doesn't it? Just think of all the jobs it would "create or save"(to use an Obama-ism)
A while ago you wrote about how you used to believe in free markets (not that we ever really have had it because of central banks regulating interest rates). My question is did you ever actually believe in free markets? Really in your heart of hearts did you? Because if you actually did, you have had a massive lurch out of reallity and into the twilight zone of the far left my friend.
Bigger govt, more regulation and more taxation is not, and will never be, our saviour.
It is the nemesis of individual liberty and a free society.
http://www.oftwominds.com/blog.html
There are two parts to this: First is that readers may not realize the gravity of the situation concerning food and Peak Oil. There is a wing of the Peak Oil argument that statistically demonstrates how food presently can be said to be a form of oil. Numbers run as high as 10 calories of oil per calorie of food, which with 2,000 mile Caesar salads from California and 10,000 mile apples from New Zealand, is not hard to believe.
Prices of gas in the California by the gallon, I hope this pastes ok didnt work, any way my daughter in California now has a scooter and fuel is heading to $5 a gallon way to fast for people to adapt even if they could afford to. already she is paying $4.50 a gallon.Its going to be more than just what we pay at the pumps its a whole way of life ending.
regards andrew
Great idea Bernard. It beggars belief that with such known facts, Govt continue to push money into bigger and better roads. Congestion will be a non issue in a few years - we simply do not need to spend another cent on new roads. Why do we still do it? Denial of the looming price increases I guess!
NZ not prepared for NZ$ 4.- petrol /ltr – a good wake up call – or bad ?
Some people here do obviously not know the consequences for our already failing economy. Under a longer lasting NZ$ 4.- petrol price or higher, not only a high number of families would go bankrupt, even major NZcompanies, NZfarmers - the NZeconomy could literally run into a standstill with severe effects.
In today’s world - building “Working and Living Communities” is the way to go, combined with good public transport, which do not exist unfortunately.
Considering the worldwide scenario, parliamentarians/ policy makers in this country will be forced to plan ahead, towards urgently implementing a more structured/ organised economy. What a shame !!!
In response to your comment about my comment above, that was deleted
Ok first lets look at motorsport
Formula 1 - introduction of KERS system check out this link
http://www.formula1.com/inside_f1/understanding_the_sport/8763.html
V8 Supercars - switched to E85 quite a few years ago in fact before it was widely available in Aus.
While motorsport does use fuel it is such a small amount in proportion to worldwide consumption I'm not really sure what you point is. It's really a rounding error in comparision. Plus because of viewership around the world it brings "greener" tech like this into the mainstream. If this exposure make more people change behaviour they wouldn't have otherwise done, is it a net positive? Remember 100's of millions worldwide watch F1 every year.
Smoking - If people want to smoke let them. I don't think there are many people on earth that don't know its bad for them and could eventually kill them. It's called free will.
I've read a few of your posts Kunst. You are always bitching about pollies and their policies. But yet now you are saying they should impose more rules and taxes. Which is it? Are they good policy makers or are they idiots?
Because what you are actually saying is that these people that you are so unhappy with need to decide more of your life for you because you are too stupid (you implied that not me) to make the right choice.
Yet you know enough to know they make bad policy all the time.
Maybe you are not as dumb as you think you are :)
I don’t know why my previous article was deleted – very strange.
Marc - in general natural resources if extracted or/ and used, causing potential damage to the environment/ human should be taxed. Wasteful consumption – we just cannot afford any longer. Societies often don’t care, but are greedy and selfish – motorsport and other petrol guzzlers are a clear example of that. High taxation is a sensible method to change that behaviour. The next generation has a right to use resources sustainably too.
To answer your question: I debate for better policies in this country – that’s it.
Marc - before misinterpreting my articles, just keep in prospective, we have good policy makers/ pollies and bad ones. Minister Joyce is bad news, so bad he should be sacked.
http://www.aucklandtrains.co.nz/2010/12/01/ lee-blasts-joyce-over-cbd-link/
..and then there is another story – but already almost forgotten. The massive durst for more and more.
http://healthfreedoms.org/2011/04/26/bp-buys-off-coastal-cities-with-un…
..and nothing changes
I don't know if you know, or even care, but almost all of the fuel saving tech advancement (fuel injection, muti valve cylinders etc etc) are because of motor racing. Not despite it. Combustion engines are just air pumps and the more efficient they are, the more competitive they are. You should really look at the development that goes into something like F1. Its on par with NASA. The battery tech is amazing.
And even more amazingly this development goes on without govt mandating it.
"Wasteful consumption – we just cannot afford any longer"
And in a free market as demand for products increase and production either stays static or falls - price increases and wasteful consumption decreases. No govt intervention required.
"Societies often don’t care, but are greedy and selfish"
Thats a pretty cynical view of the world. Which you of course are entitled to have. I have to say I dont agree. I think people generally are decent and moral. Obviously not everyone is but the vast majority are. I would point to the earthquake response. Even people on this site were offering people they may not know help. If your view was correct that wouldn't happen.
"High taxation is a sensible method to change that behaviour."
I would agree it changes behaviour. The state of Illinois recently increased state tax to support the bloated state govt. What happens? Businesses move to a state where tax is lower. People move to were state taxes are lower and to where the jobs have just moved to. That remaining citizens get hammered. Economic activity decreases. Everyone looses. And as usual pollies are the last to figure out they just screwed everyone.
Is it sensible? Not if you want a job.
"I debate for better policies in this country – that’s it."
You may be debating that but your conclusion is that people are greedy and need to be forced to do what you perceive is correct because they can't be trusted to make the right choice. It is actually irrelevent if you are correct or not. In order to do what you are suggesting you have to take individual liberty away from the population and centralise increasing amounts of power to govts.
This is probably the most dangerous thing a govt can do to a society because eventually a crazy will get into power. And thats when people get killed in the name of what particular thing that group believes in.
History replays that senario over and over again.
Marc – I understand your views, but disagree. Your first response is the most obvious, why nothing changes for the better – away from consumerism, greed, selfishness – but resulting in further destruction.
Motor racing isn’t needed to improve technology. Cars should be used as transport – nothing more.
Furthermore your explanations are only a confirmation of what I’m saying about parts of societies – often lead by misconceptions, because of consumerism, etc.
This is a good and timely discussion.
Elley, I agree there needs to be more flexibility around working arrangements. From my experience, usually where managers don't permit it this is due to some lack of trust, rather than it can't feasibly be done. This is disappointing - if employer can't trust employee then they shouldn't be there anyway.
I'm certainly no advocate of employees spending the majority of their time working from home - face to face contact is important in most jobs. But I think in many jobs a 50/50 split could be arrived at. This would automatically heavily reduce car travel.
Of course there are many scenarios where car use is unavoidable. For us, driving our son to and from soccer practices and to games all over Auckland is an obvious situation.
We intentionally live in a central location so that we can get by on one car. I bus / walk to work, and my son bus / walks to school. Of course you don't have to be in a central location. Only about 15% of Auckland's jobs are in the CBD! So , its more about being located in reasonable proximity to your place of work. If you work in Takapuna, live in Takapuna or nearby.
$4 a litre? Maybe, but when? If it happens 3 /4 years later it mightn't be as bad as it sounds, with general inflation and wage increases. Of course it will mean more of your wage increase goes to fuel purchase rather than other things.
If we hit $2.65 some time later this year, thats a bit painful but not necesarily disastrous on a personal level. Personal behaviour is likely to be able to modify relatively easily to get around it. I'm more concerned about wider macro economic impacts of another price surge - it has the potential to plunge the world back into recession (depression?)
Scale and time scale....ie building that many cars and that many at once (ie per day) and then having a grid to charge them....oh and if Im typical $4k for a car is a lot let alone $45k+...
Not ten years from now, 10 years ago. We did do it the EV1 for one.
regards
One thing you haven’t added to your story, Bernard, since it’s all China’s fault (but then few do) is what do you think $4-a-litre-petrol will do to China’s demand for a greater number of cars on its roads and by definition, its demand on gobal oil. In other words, how do you think the average low-wage Chinese peasant (and most of them still are) will be able to afford the petrol to run all the cars you say they will be buying?
Are New Zealand's businesses ready for that?
Some will have longterm scenarios and contingency plans that factor in variables like that. Most won't.
Are they planning to have smaller, more fuel efficient cars and trucks?
No. That would mean rapidly replacing NZ's stock of aging Japanese imports and the private sector has no longer access to the capital to do that
Are we building better public transport and encouraging cycling?
No. Look at the impact of mild fuel price increases on the number of bus passengers in Auckland and the floundering efforts of providers to ramp up capacity to meet demand. How long were the queues at peak - 150 metres?
Higher oil prices also feed through into higher food and other prices because so much of our supply chain is infused with oil and transport costs. Are we ready to eat and consume less and differently?
Ready? No. Will we be forced to? Yes. Will there be huge swathes of the population who won't know what to do with an unprocessed potato? Yes
Don't know if anyone has seen 'end of suburbia'? good doco on the geography of future energy, bit old now, but still worth a look. I'm an advocate of some way to lower the value of the kiwi in order to prepare nz for the coming shift away from oil (i.e. make fuel more expensive here). A bit of pain now will ready us for the inevitable, and the bonus is we will actually be able to earn our keep from competitive exports?
Credit where credit's due. This is a brave piece, starting from an economics background.
Well done, Bernard.
Watch out, though. The Nact spinmeisters will be working out how to squeeze you off the air, and out of the public arena.
It'll be known as the Night of the Long Taiaha's.
That's a hiki-hand-grenade and a half this week. A twofa. Two for the price of one. Yes things are different. During the previous oil shocks when oil hit $150 pb, the price of gasolene in the US topped out at USD $4 per gallon. This time, oil is at USD $110 pb and gasolene is already above $4 in many states, some nearing $5, with some just under $4. Your assertion that increased demand from China (who has the money) and India, is correct. The USA (who doesn't have the money) is being trumped in the "business game". China is tightening the screws on the US, and indirectly NZ.
Good reply Gavin Jones but it will fall on deaf ears . Bernard when will you get off this peak oil trip with old power up kiwi following close behind. There is No Peak Oil.
I replied to this blog a few weeks back about the middle east destuction that is happening by design , who cares what Jeremy Grantham says its a load of rubbish tell me Bernard whats going to happen in two months time then six months time whats the US dollar going to be worth in late 2012. The middle east states are all going to fall that includes Saudi Arabia Oil will go up and up thats not Peak oil thats the petro Dollar. Those Arabs are going back to riding camels. The days of cheap oil are over you see the arabs have been selling cheap oil for years and in return have been buying US Debt , but thats going to finish with millions of lives affected. And China has a false economy all stats are goverment controlled how knows whats going on over there but one thing is for sure its not good.
Baz
Baz
Nonsense. Gavin Jones said diddly-squat.
Yes, oil prices are part civic unrest, part speculation. So what?
But all oil exporting nations become oil importing nations - the combination of depletion of finite supplies, and greater internal consumption.
Indonesia is a classic example, as is the UK.
2 seconds of googling (getting informed is so much better than trotting out "is a load of rubbish" comments), gives you this:
http://peakoilquestionoftheday.blogspot.com/2011/03/saudi-internal-cons…
It's the same for every oil producing nation.
The price wouldn't be an issue if things weren't so close to the margin. If there was say 10mbpd (light sweet crude) sitting waiting to be tapped at a reasonable EROEI, there would be no upward-forcing speculation, competition, or hedging.
Sure, the US racked up an insurmountable debt, but only because (and mostly since) she went into energy debt. 1970, for the record. Ring any bells? When did Nixon cut loose from the gold standard? Why did Kissinger organise that the trade of oil would be in US$ ?
We can't do much about the super-power scrap over access to what's left, nor can we probably defend ourselves, but we can be self-sufficient, and fuel is a large (and getting larger) part of our debt.
pdk
Given SASOL have been producing oil from coal successfully for many years, as did Germany for many years - why is this not a perfectly viable method of expanding supply as prices rise.
It has nothing whatsoever to do with your beloved EROEI ratio which ignores prices.
We have over 1000 years supply of liquid fuels in the Southland lignite so above $ 100 / bbl we are in clover - fuel wise.
My understanding is that Sasol use Coal, not Lignite.
There is indeed an EROEI diffo there, lignite is one stage up from peat, and look at the Irish....
I haven't seen 1000 years, it seems to creep up. I've seen some hundreds, but never have I seen 'at what rate of usage".
Until I do, I ignore. They're either ignorant, or spinmeisters.
Or both.
ah another dodo....how's the sand? tickling the nostril too much?
Peak oil is in effect a mathematical / natural law....we live on a finite planet, therefore everything on it is finite......the Q is, not if its when....Simple.
The far east could well get out of hand and implode our [global] economy....then $4 a litre will be a great deal because we wont be able to buy any....or it will be severely rationed.....
Not millions, billions....7....
regards
Head a stat that I had been looking for on a video link posted on this site.
At current rates we are consuming 400 years of energy annually. So when we run out we will have 0.25% of the energy available to us now, not allowing for recharging the planet of what we have used. We may make up some of that with technology, but I don't yet know of any technology that can replace a tree.
Good to see BH wading into the Peak Oil issue at last. He's only ankle deep, but I am ever hopeful of a fuller immersion one day.
Even the IEA in its World Energy Outlook 2010, acknowledged that conventional crude production peaked in 2006. For fear of upsetting it's political paymasters, it magicked up projected future increases in total oil production through new fields yet to be found, plus wildly increased production of oil from unconventional sources (eg tar sands, natural gas liquids). There IS one proven commodity which the IEA has in abundance, and that is called 'hope'.
If unconventional oil production (and oil from yet-to-be-developed oil fields) ends up falling well short of the optimistic levels projected by the IEA, oil companies, etc - then in short order we will be looking with nostalgia at the days when oil prices were as low as US$ 200 a barrel.
And we will wonder what possessed Steven Joyce and John Key to pour so much of our country's already scarce capital into new roading projects.
Bernard you may have noted my comments on our poor urban design. Well I actually see the end of oil as a bonus for society, after a period of adjustment that may not be so pretty.
See we have immersed ourselves in the culture of the motor vehicle, mistakenly believing that it gave us freedom. But in the process we lost our community. Our cities are to sparse and are really just a collection of people living together, rather than communities.
For petrol to go up 8.3% means a rise from $1.20 per litre to $1.30 per litre. Interesting if the price goes higher than that, what will our future annual CPI reveal? Yearly inflation 5%? probably. Will that really reflect our cost of living increases. No!
My local kebab place just put most kebabs up from $12 to $13. That's an 8.8% rise - overnight. If petrol goes up to $1.60 this year - a 33% increase, will my kebab go up to $16? Or will the kebab shop shut down?
The problem for many of you is that you have been brought up in an Education system that has taught you lies as if it is Truth. The media propagates these same lies. Sadly many of you have not done enough research to figure out what is really going on.
It is not a time to go with the crowd!
What you mean like housing is good, we should all become property investers as that will make us all rich. Land is a great investment as they aren't making any more. The recession is over, time to mortgage up to the eyeballs again.
Good until you do your homework and find 75% of debt in NZ is against residential property. A futher 8% is personal debt. Doesn't leave much for business.
Actually Gavin I am not a major proponent of global warming, but that is a red herring for larger issues ruining the planet. Our food chain could go under very quickly.
Peak oil is a reality, I know too many people that have, or are working, in the oil industry. They have all turned their attention to alternatives. I also know someone from the fertiliser business. Less oil means less fertiliser, less fertiliser = less food, simple really.
I have no idea what you are talking about....
Apart from, no, actually the lies have been that growth is for ever and wel will all get better off as taxes are dropped and growth takes place....meanwhile we have trickle down economics which is a farce. Oh and and peak oil was a lie or many decades in the future. The first was a lie and the last morally corrupt...
Research has been done, some have not gone with the crowd and idenified peak oil as an issue over a decade ago, indeed some rare ppl were talking about it in the 50's.
regards
Been a peakoiler for 7 years, took a huge punt on a company with putative massive reserves which went BK and it looked like I faced penury, until I sued along with a few others and won.( the BK was contrived) Now sitting pretty, (but no details will be given and not at all concerned as to whether you believe me or not.) The point is that we should all be prepared and having money or oil shares does not guarantee immunity from what is inevitable - an endless depletion of energy availability with periodic economic crashes, sinking oil prices, then moonshots in price. Make friends with your neighbours, plant a garden, get out of debt etc. I had three vehicles, a Honda Odyssey, gave it to a friend, sold my vintage car and Toyoace truck at bargain prices to get rid of them. Just take a look at the prices for classic cars on trademe, some of those vehicles have been there for three years, they won't selll as the owners are totally unrealistic with values and @ $4 a litre some day who can fill them up?
I have just spent a week in Yunnan and Sechuan and the infrastructure spend there on roads, and in particular railways, is stupendous. The Peoples Liberation Army will be able to scoot around the country unchallenged as the oil depletes "liberating" protestors at the new world order.
The future is going to be very different and while it will be very challenging, in some respects it might not be a bad thing for us all in the long run.
Now, how do I communicate all this to my brother in law? Perhaps start with the 40% overstating of KSA reserves! Saw this on Bloomberg on March 7 and this is from an email I sent a friend.
Swiss Asia Capital CIO Juerg Kiener said
- Saudi Arabia is past peak
- Their oil reserves are exaggerated by 40%
- They are doing all they can to keep up production
- There is no spare capacity
- Oil prices are fairly in the 150 - 200 region and going higher
I dont think you can communicate this to the ppl in the street if for no other reason the Pollies have promised us un-ending growth....4% per annum growth == 2.5% more oil use....ergo 4% decline 2.5% or more GDP decline....The pollies entire political structure and outlook is based on promising us more and more and when that doesnt appear keeping us quiet while while they pray the problem goes away.
The problem is its a confidence trick its OK keep your eyes closed it will be OK soon......once ppl realise this isnt the case NZ's economy is toast....ppl will start to think and realise just how pointless a decent % of our economy is, the result is a severe depression while that % unwinds...
Oil to $200USD, in today's terms Im not so sure, I think the world's economy will collapse before that price is reached, or at least wont stay there long....
regards
Power up kiwi this peak oil is a myth as is man made global warming its not about riding the world of toxic biproducts of incomplete combustion, industry wastes etc etc this is all about control of how we live, this co2 emissons is a total lie in fact its the greatest lie ever told.
We are watching America die this will affect all of our lives, Who will fill the gap ?
Carbon Tax is all about destroying production, industry wealth. Giving up our wealth to some unelected group off nazis like the UN,.IMF, the list goes on they have the middle class in their sights .
When you have complete combustion of say a motor car engine be it petrol or diesel the main by products are Nitrogen,water vapour, and CO2 and co2 is always going to be there so its nontoxic and plants absorb it but hey its now a HARMFUL GAS ''''
You see power up I have three motor vehicles they are petrol and diesel and thay are emission free they have approx 20% more power use 20% less fuel and theres no pollution but the powers to be dont want to no about it because hey your a smart guy work out the $ I am saving and the best part is the % the oil companies are missing out of and the taxes the goverments not getting. THATS why its not about toxic emissions its all about carbon tax because carbons going to be the new dollar .
Baz
Baz, why is peak oil a myth? Are you saying it's impossible for oil demand to ever exceed production? Because this is essentially what you're saying. I'd love for you to provide some evidence to justify your views, because at the moment neither your nor Gavin have provided solid data other then personal opinions which is 'it's bullshit and won't happen'.
That may reassure you and your pals but you'll actually need some data to win other people over.
In terms of global warming, yes CO2 is the major product produced during complete combustion. I don't think the issue is that it is a "toxic gas" as you imply. The reason it's an issue is the greenhouse effect. I.e. shortwave energy (that emitted by the sun) passes through the atmosphere pretty much unimpeded, reaching the ground. The warm ground emits longwave radiation in proportion to the fourth power of its temperature. Therefore in a completely dry, CO2-less and ozone-less atmosphere, this upwelling longwave radiation would all be lost to space. However, CO2 absorbs upwelling long wave radiation and re-emits it back to the ground, thereby reducing the amount of heat that escapes to space and warming the planet. The warmer planet evaporates more water, and the water vapor absorbs even more longwave radiation Ithan the carbon dioxide, warming the planet even more and so on... What will warmer temperatures mean?? Perhaps you can google that for yourself.
Baz - not sure that this is a climate change thread.
Here's the graph of global oil discoveries. The bars are what is discovered, the line is what is used. Clearly, when the area under the line equals the area in the bars, you've used up your resource.
http://www.durangobill.com/Rollover.html
That graph is not in dispute by anyone, anywhere. It's big, global, and has no noise.
This is as simple as running out of fuel in any of your vehicles. I hasten to add, that it's not that we're running out. The problem comes essentially at the peak of production.
The Gummster has a simple philosophy to life ; if there is a good or service that you substaintially utilise in your daily life , get the hip-pocket nerve engaged by investing in that , or in those , industries .....
........ We suck alotta gasoline in our vehicles and fishing boats , so I picked up a stake in some oil fields . If the price of crude goes down , my investment falls in value , but tanking up the fleet gets cheaper .... .... vice versa if oil goes up in price .
It's an insurance policy in a way , not the AMI way of course , but in a personal comprehensively funded way .
Roger – your philosophy only applies to half of the population – the other half behaves differently and need to be regulated – unfortunately implementing more taxes, rules and regulations.
How many idiots are greedy/ selfish – don’t care about environment and other people – yes too many.
No , Walter , people do not " need " to be regulated . But many choose to be so . Many fear the consequences of taking personal responsibility for their lives , the fear of failure , so they keep voting for politicians who pander to their lazy lifestyles ..... Usually this is the territory of the NZ Labour Party , but the current National government are copying Labour , because it guarantees re-election .......
........ We most certainly do not need more taxes , rules and regulations ............ That is wot got cousin Rodney ousted from ACT ; a failure to cut down on government wastage / red tape / and unnecessary bureaucratism .
Until the NZ Government stops sugar coating and guaranteeing the cold harsh realities of the real world from it's citizenry ........ We will continue down the path towards bankruptcy and serf-dom .
Walter : You tell me ! ........ I've got better things to do than puzzle over the vagariies of mankind .......... For one , my DVD set of " Get Smart " has arrived ( GST free ) from Amazon . Whole of series one , including the pilot episode in B/W ..........
........... High time that the Gummster clued up , gonna Get Smart now .
Auf wiedersehen , agent Kunst .
That's because I don't believe in social engineering ! ......... Pose your question to a Labour or to a Greens supporter , that's their raison d'etre , attempting to micro-manage individuals' lives .
.... Chaos is a fact of daily life , get smart and accept that .
............ I agree with Don Brash : Get the economy mended , and re-balanced .......... And let people be bold enough to make their own daily decisions .
[ .... and Walter , I dispute your assertion about " greed " and " crime " , and " destruction of the environment " ............ Show us all some facts that these things are increasing ..... Can you ? ....]
I think Walter wants to be held by the hand Gummy....lots of humans want to be held by the hand...it explains the attraction of religion...and politicians....humans are a weak species...the aliens will wipe them out.
Now the socialists and pink greenies see potential power for themselves in harnessing this hand holding urge...even Hone is onto this lurk....he knows there are heaps of neo Maori desperate to have their hand held and he's there to reap the reward.
I find it quite amusing how you guys are still in traditional ways of thinking. It is all very stubborn, putting people in political categories, while most of us depending on the issue are socialists and capitalists, left or/ and right, green or/ and blue. How can we possibly make progress otherwise, especially now in difficult times?
I think Walter wants to be held by the hand Gummy.
Probably not Walter – Wolly wrong assumption - I’m very independent, take care and responsible what I’m doing for over 45 years of my life. What I’m reflecting in my articles are entire societies not just people like us. Unfortunately that picture as you wrote tells us a different story.
Roger, open your eyes and you find destruction, because of greed everywhere.
Hmmm ? ........ Peepers open : Coconut palms , azure blue ocean , some sparrows , nipa hut ........... Gonna have to get to you on that one Walter , I'll let you know when I find the " destruction , because of greed everywhere " which so concerns you .
....... Keep up the good work , my friend .
Obviously you never heard about – so a little introduction - just for you Rogie.
Power up my vehicles are all emission free that is they have complete burn of the fuel in the cylinder it is done quite cheaply My truck is 26 years old big straight six engine runs better than a 2011 engine and produces no emissions due to the complete burn of the fuel. no vehicle produced at prescent is doing that.
BAZ
A similar "peak everything" article.
http://www.moneyweek.com/investments/commodities/money-morning-peak-eve…
The USGS is un-realistically optimistic...but even they show peak oil in their graphs...its just a question of when.
The problem with the remaining oil in the USA is its declining, it passed peak in 1970~71....yet more evidence your lying eyes are missing...
In terms of lots of oil in the US, we need to find a new saudi every 4 years, and it takes 8 years per field, so we should have found the first one 4 years ago...so even if the US could magically find another 4 to 8mbpd its a one off and they have not. Also the US is about the most heavily drilled counytry in the world....the best technolgy and ability has gone in there to find and produce the oil, and even with the most lax regulation the US's output has still declined.
regards
Easy, ppl only have so much money, so if petrol is $4 other things dont get bought as its spent on petrol so they have to deflate in order to get a sale...but of course those oil based goods cost more to make so the price should go up....but it cant, no one is buying.... So since no one is buying firms close their doors and then ppl get laid off.....thats less money again in the economy....thats less spending which is deflationary...and that's then a depression and oil prices collapse to $35 as demand evapourates, maybe even $10USD.....trouble is we are then too poor to buy it...its like the last straw breaking the camels back...
BTW, insults we dont need...if you cant contribute an intelligent and logical argument why bother? abuse isnt an acceptable alternative....funny that it always sems to be the poorly educated rabid right / libertarainz who seem to get down to this level so fast....
regards
$4...oh yeah not long now....go read this and know where we is at!
"the Fed's global impact may soon reach an all-time high. And that impact won't be pretty. For far from being a "safe haven", an increasingly debased dollar could be the cause of the next global financial crisis."
Into May we go with Bollard thieving from savers to bailout the banks under direction of the Beehive fools who take their instrcutions from the aussie bank bosses. Expect the inflation obfuscation to rule while prices fees charges rates premiums and costs rise and rise. The useless gutless media will remain incapable of cornering English and treating him to a 'Minty' moment in full view of the idiot public.
Distractions galore excite the poodle press...they dive into Brash BS and are handing hone a hangi full of free publicity. ....English must be beside himself with laughter.
Meanwhile the state splurge continues apace with govt debt expanding to match Gerry's wasteline inch measurment in billions owed.
$4 a litre will be small beer when the shit hits the fan.
NZers will maybe have to say goodbye to their gas guzzlers and buy fuel efficient cars. That probably can be handled.
I would be more curious about the effect of high and rising fuel prices on the cost of air tickets and in turn on incoming tourism. A significant decrease in overseas tourists would probably be a much bigger problem for NZ than having to drive less and/or more fuel efficient - given that with this government (and the next) it must be expected that capital flows will continue to go into real estate speculation rather than the creation of new industries that can provide for future generations.
The $200/bbl of oil argument.
I agree Oil can hit $200/bbl in the next few years. Maybe even the next few months but not for the reasons Bernard is stating. However, his facts will be used by the Peak advocates to explain the price “discrepancy”. The US dollar just it a historic fiat low. So any talk of the price of oil must use the escalating depreciation of the USD as context for their argument. The USD is priced in oil and oil is the only commodity left backing the USD. Right now the “real” price of oil is real hovering around $70/bbl if you add in rampant speculation it is down to $50/bbl. If the USD continues its decline the price of Oil will be $200 and the NZD will be $1.20 USD.
If you take the price in isolation from the consumption, geology and engineering well I guess any theory is possible....in this case however your theory falls over when you look at the above three things, so you are wrong...
I could repeat the arguments, but Ive said them enough...
regards
Steve,
Believe it or not I’m a huge environmentalist. I pride myself on have an incredible low carbon footprint, my trash output is 200% lower than any of my neighbors and I like the idea of “off grid” living. And I am willing to acknowledge Peak Oil WHEN i see real objective evidence of it. I challenge and change my world view can you say the same? I was like you in the early 90’s but at some point I decide to step out of my confirmation bias and speak from fact and not opinion. I agree there will be peak oil eventually but we are no wear near the yet. Yes I have read all the data about 2006 being the magic date but I’m still waiting to see what, if any, affect the 2008 great recession had on demand. I can change my mind on the available objective data but you can’t. So let’s agree to disagree and move forward.
Troy, there is more than enough evidence peak oil happened or will happen in the 2004 to 2014 time frame....we are really on a plateau....there is no real confidence that oil production will significantly increase from here and stay up....recessions etc, again there is quite a bit written on this and indeed to small finds we are seeing, these allow months extra of staying on the plateau....Im happy to chnage that date when someone shows me some real information suggesting its decades away...or there are viable alternatives....
The problem is with either of these two is we need 1 to 2 decades to move off oil....so we sit here not knowing when exactly that is, it might be as late as 2018...even 2030 is very close interms of many years of work...sitting here doing nothing means a huge if not disasterous effect on the global economy when it happens...
Black Swans that will extend oil:
The logical fallacy in your argument is that there will be some strange from of demand status quo for the next 20 years. The US “financial” collapse. This will lead to an immediate retraction in oil demand. The US military is the top user of oil right now. Once the US stops fighting foreign wars and engaging in empire building I see the US daily demand below 10million/bbl a day. That is a sustainable figure since the US can easily meet the demand on its own. The financial depression will also cause market vicissitudes to permeate the marco-market and cause oil demand to plummet to demand levels not seen since the early 80’s. China will step in but it’s going to take 10+ years for them to increase demand to peak levels. So in my mind peak oil will not be a factor till 2050 at the earliest.
Troy
again:
http://www.durangobill.com/Rollover.html
you can't produce oil that has not been discovered, and it would be a brave statistician who would rebut that graph.
The inelasticity has been remarked on, back in 2008 and now.
We do have one path, and I'm proof that there is a lot of potential down it - efficiency.
But don't expect real economic growth (I'm not talking GDP here, I mean real growth) from here on. You might get it for a while, if all hands went about efficiencies intelligently, but the free market is neither intelligent, nor forward looking. It's just a bunch of dogs eating dogs, at the end of the day.
And if that graph is correct i would expect oil to increase proportionally NOT exponentially. When I start seeing exponential price shifts in anything alarm bells start going off in my head. That includes Gold and Silver but that is a different argument. There is a case for exponential pricing but that will occur towards the right side of the graph not at the beginning of the peak. You can say "OMGWTFBBQ we hit peak oil!" and then immediately raise the price 3 fold. That is a supply and scam not supply and demand.
Troy - I think the exponential bit is expected because of the inelasticity. Folk just must have energy, and I guess they bid until they can't bid any more. It's a little ironic that they're being outbid by folk who are borrowing to bid, though.
The bit I can't get my head around, is what happens when the oil (which, when you remove discretionary use and add in efficiencies, is essentially 'wealth') peaks, what happens to 'wealth', and is 'price' a measure of the scarcity of an essential, beyond peak?
What price deckchairs on a sloping deck - or more relevantly, what price a place in the lifeboat? You bid until you drop out.
You see?
10mbpd demand the US can meet?
Sure that is possible except the US's economy will have gone bye bye and the un-employment will be somewhere past 30% if not 40%....the US will be one huge geto....NZ wont be much better...
At the prices we could see ie less than $80 then no one will be developing new oil fields....peak oil wont be a geological fact it will be a financial/economic fact and the latter will simply be swapped for the former...more oil will remain in the ground....so the tail will indeed propbably be longer...in eitehr case its about now.
regards
Ok Pureant /Baz and Plutocracy I will have one attempt at justifying my stance.
However I am not going to use the current argument as you have possibly been to pre programned. Instead I will use another example that illustrates my point.
If I asked you the question Is there Light and is there Darkness more than likely your response would be YES. However you would be basing this answer on evidence that you have seen, allowing you to make an incorrect assumption because of facts. However facts often have absolutely nothing to do will the truth.
In actual fact the Truth is there is no darkness, just an absence of Light. The only way you can make dark darker is to reduce light. It is impossible to increase darkness without reducing light.
Why to you think for photography they use light meters? I have never seen anyone measure darkness.
Therefore night time is a time of reduced light, not increased darkness.
I come back to our current Education system that is teaching as Truth many "theories" that in fact don't stack up to scrutiny. Now go and do you own research on the other topics as there is ample evidence if you really want to find the Truth!
Thank you for avoiding my question. While I appreciate your analogy you can't seriously believe that this answer is sufficient to satisfy me.
Secondly the education system taught nothing on peak oil while I was schooled. Even at university while studying chemistry and physics it was never mentioned. To assume that all of the skeptics have been conditioned by the education system is nonsense. I came to the conclusion myself after researching energy use, supply and having a firm handle on thermodynamics (which conincidently was taught at university).
So... to answer my question on your view, why do you think this?
- Do you believe there huge undiscovered fields that we are yet to find?
- Do you believe in the abiotic theory, and oil is regenerating quicker then we use it?
- Do you think that nuclear fusion or shale rock will 'save the day'
- Is peak oil a socialist conspiracy to stop you enjoying life?
Why?
At the end of the day we have finite physical limits, and as university has taught ("brainwashed") me 'you can't avoid the laws of thermodynamics', or can you Gavin?!?
LOL, so the entire education system is uh wrong according to Gavin....?
The problem with going out and doing your own research is you have to have a sufficient level of education, knowledge and know how to further your own education by yourself and its risky. The biggest dis-advantge of this is you dont know whether the conclusions you draw are valid unless they are peer reviewed or checked and collaborated by some other person who knows as much or more than you....
Otherwise you just teach yourself rubbish and take it as gospel....that isnt truth....
regards
What would dramatically increased fuel prices do to the skew of property prices? Would we see a polarisation of the market where those properties located on efficient public transport links or within easy commuting/walking distance of city centre become 'hot property' whereas those out in the suburbs may be less desirable? My personal opinion is that inner and fringe city prices will increase and those properties further out of town will either flatline or decrease in value. Inner/fringe apartments will also see a resurgence in demand. Make your own mind up!
And then, 'the work' goes out to those cheaper fringe areas? So the fringe may be 'a buy' if petrol goes up. What is it that is done in central Auckland that cannot be done on the fringe, or even in the other city regions? Ask someone in Christchurch, how much they really need a CBD, now that business has had to go 'to the fringes' and elswhere !
Good points Nicholas. I wish I had a crystal ball but I am interested in what others do think the effect of a major rise in fuel would do both short-term and long-term to work patterns and property values. Some possibles:
- Greater 'teleworking' - for those lucky enough to be able to work from home or remote from office
- Relocation of some workplaces closer to the workforce - long term
- Polarisation of property prices as per my earlier comments
- Greater clustering of workforces around industry/factories
- Car pooling!
- Greater use of public transport
- More emphasis on cycle lanes
Am sure there will be many other possible scenarios, but as someone who is involved in investment property I am interested in the potential impact of fuel price increases. I recall a year or so ago when petrol first hit $2/litre, there was an article in the Southland Times reporting increased demand for city rentals as some workers who formerly commuted from the rural areas decided it was cheaper to pay higher rentals in town versus the cost of travelling. In other words, if you're all of a sudden faced with an extra $100 pwk fuel bill, then that 'expensive' apartment in Takapuna all of audden starrts to look quite attractive, especially when you balance out thje savings in travel time and extra convenience of being located close to cafes, gymnasium etc etc. - especially appealing to the 'DINKS' (Double income no kids).
Unfortunately this may exacerbate the gap between rich and poor, because those who are less well off will not be able to afford to buy or rent closer to the city. In fact, if they own a property then the 'double whammy' may be a decrease in value. However, this may not be such as issue if they already live close to where they work e.g. Factory in Pakuranga. What about the 'lifestylers' who commute an hour each way; will a doubling of their petrol bill all of a sudden make them rethink this "lifestyle choice"?
Personally I think it will be all of the above in varying degrees.
"skew of property price"s....the biggest thing to consider is past peak oil is somewhere we have not really gone on a global basis....
However the US has some great examples of extended suburbia that see's new houses that will never be occupied, have been abandoned or will be abandoned....
House values, well I think you need to step back and consider the much bigger picture, the biggst is we are in a credit bubble, when that bursts all housing will collapse in value...
For instance at present say we have a $400,000 house with an 80% mortgage as that is the cash the buyer has....thats $80k...in a credit collapse there is no credit or its very hard to get...so $440k houses would drop to the cash price, $80k.....that is potentially a huge loss and yes its the worst case I can see....
My personal opinon is all house prices will collapse just some more than others...it really depedns on how bad things get......and that I dont know.
regards
Plutocracy,
Please don’t conflate skepticism with biased opinion, ignorance, or stubbornness. Just because I’m skeptical of your worldview doesn’t make my facts or opinion any less credible. And to answer your questions from a skeptic’s point of view:
- Yes the law of big numbers dictates that there will be large finds in the future. We can argue want constitutes “large” at a later date.
- There is no way to know this as fact so I abstain from answering until more data is known.
- Somewhat. These can help relieve demand but the only real answer is depopulation.
- Yes. I do believed, rightly or wrongly, that some people are capable of using an issue to champion their world view.
Peak oil IS going to happen at some point. However, I believe there are other peaks that are much higher priority right now. Peak debt and peak water just to name two. And next big market mover in the next 4 years after silver will be “helium”.
Troy, I hadn't singled you out as you had justified your views in your posts stating that you acknowledged peak oil will occur, although at a date later then I am concerned about.
Gavin and Baz on the other hand have stated 'it's crap' without providing a shred of evidence or reason as to why/how they have formed their views.
All I wanted was to understand why they think this, and if they present a logical/rational/ coherent argument then I'm happy to accept their views as an alternative. However, if they're going to state 'its propaganda crap' then of course this isn't going to be enough to convince me or anyone else.
It actually seems to me we do agree on likely future events, it's just that we imagine they may play out at different time points and have different outcomes. Either way, neither of us know what will happen, although it doesn't hurt to have some foresight and start moving in the right direction i.e. become slightly more sustainable and less energy dependent.
Finally, I also agree with what you said about the immediate issues. IMO a finanicial meltdown is a much more acute threat right now. Interesting you mention helium, a colleague was discussing this the other day.
I do agree with them that the Oil market is suffering from short term propaganda. The Suppy/Demand argument has no basis in fact just yet. If I’m correct we should see a pop in later July.
On aside
The rigged helium market is up in 2015. The price will skyrocket and you will NEVER see balloons at a birthday party anymore unless you’re a member of the uber rich. I predict a helium futures market soon and Long EFT trades in the next couple years. I’m super long helium and I am currently scouting ways to crack the market I might even look into physical delivery.
pop? as a "bubble" pop? yes indeed though its not if "you" are correct I see it as well as do others, really its a foregone conclusion so sorry no medal for that one...the only unknown is when....July might be a good guess, or lucky...I see no logic behind your pick of July.
regards
Large finds....try again...the numbers actually suggest there is a layout distribution of field sizes in a "family".....So the biggest 2 are by far the biggest....these are the kings, then we see queens, these are a scale smaller but more numerous, next size band down again same thing, and again.... So what we can say is find a group of fields of a certian size that there will probably be smaller or bigger ones generally to find in that "family'.
Now in terms of found....or will be found.....when you read up on various senior oil geologists seacrh pattens/countries/areas you pretty much find that effectively the entire globe has been searched 2 to 4 times and in some cases 8 times over....so no what we see is about it. Bear in mind that we need to find a Saudi every 4 to 6 years from now on....
So we have Saudi, Russia, USA (0ne other) as the 4 largest.....where do you suggest we look for a 5th? and a 6th? are you really suggesting that there are many 2~5mbpd oil fields out there to be found? that is plain silly.
De-populatin, indeed...2billion max....where we were in the 1920s...
No, peak oil will be the biggest, that and phospher....but its quite possible that the numerous peaks we see in most things are all damaging limiting....
regards
Good article Bernard
Of more importance, peak hydrocarbons will result is significantly higher food prices. Current food production and prices are based on cheap hydrocarbons, fertilisers and water. As these run out, food prices will sky rocket.
The planet is really struggling to support 7 billion people. The solution is controlled reduction in population, combined with investment in alternative energy sources.
It is absolute madness that NZ has population growth subsidies such as DPB and WFF.
On a global scale, the countries with the greatest population growth and those least capable of dealing with resource contraints (such as haiti, Bangladesh). In NZ, the social economic groups with the greatest population growth as those dependent on government support. So what happends when NZ hits the fiscal wasll and has to cease welfare payments, at the same time as energy and food prices sky rocket?
Two key points being missed which completely undoes the doom and gloom peak oil arguments.
- Firstly the only reason we all use oil is because it was the cheapest form of energy, if it goes much higher that will no longer be the case. The next large shift will be towards coal to oil conversion and the worlds coal reserves are massive and relatively untapped compared to oil (interestingly 22% exists in the US). This technology has existed since World War II and it converts 1.5 tons of even the lowest grade lignite coal (currently $20 a ton) into 1.5 barrels of oil. The cost to convert this has historically been an expensive process but new technology now exists to do this very economically. Once coal prices get too high the next major shift will be to electric with the source energy coming from fission reactors that are currently being developed. The point I'm trying to make is that although in the short term demand and supply is fairly inelastic which may produce price spikes in the longer term there are alternatives which will prevent energy costs remaining extremely elevated
- Secondly $200 barrel oil will drain a great deal of disposable income from kiwi's and have a similar effect on the economy as high interest rates. There will be price rises but not of the kind that will result in employers giving out large pay rises which is the kind the RBNZ is concerned with (and the only one it can influence). This will mean our interest rate path will be lower than it would otherwise be which effectively puts some of the money lost to higher energy bills back in our pockets.
We all use oil becasue its the cheapest....no in-correct.....its the best in terms of bang for the buck for transport fuels there is nothing better.
US coal reserves, about 80 years of usable...even if you accept 250 years at present usage what do we do in 250 years? great morals answer please. Coal to oil, very in-efficient, our economy needs a cheap energy source with a better than 10 to 1 return....conversions dont do that...
Nuclear...yeah right....20 years off for molten salts but the kicker is the level of tech to make them, so forget 20 yeasr away tech. The problem is we need to start finding systems that can provide oil at no more than $80USD a barrel and do it at a 10 to 1 ratio at worst and today, there is nothing in sight that does that. No there is nothing out there in the long term either except use a lot less.....bye bye lifestyle check out how your grandparents lived in the 1920s~30s.....maybe 1950s if we are lucky....ie significantly less.
$200 barrel oil, our economy wont survive that price today....at $147USD we had a GFC....how much worse would $200 be? Anyway we are far weaker today than 2008 so its probably not going to to take $147 this time around....months of this $125 and its hello Great Austerity akak Great Depression MK2.
regards
Good points and I agree about the resulting recession this current price spike will hasten, this will of course slow down growth and alleviate some of the demand side pressure.
I have to disagree on a few points though, coal to oil technology is developing rapidly and no longer needs to be inefficient. If we go with 80 years worth that is ample time for coal to oil to carry us to the next nuclear age that you suggest is 20 years away. Also as battery life, weight and charge times continues to improve electric will play a much larger part in cars even if we use our 80 years of coal at the power plants rather than via oil conversion.
The all the peak oil advocates.
There is one major hole in your argument. Every market operates on the premises that as a commodity, product or service begins to run out and is increasingly more scarce THEN and only then does the price begins to rise. Barring market manipulation, the price never raises on the rumor of scarcity only on the actual scarcity. If you do, congratulations, you have founded an entirely new school of economics. You welcome to argue market manipulation; I know I do (i.e. diamonds, helium, USD, housing, etc). But you cannot argue that price dictates scarcity. Scarcity dictates price. In the case for oil we have a price dictating scarcity with it an artificial inversion and it will pop. I made this same exact argument on this web site in early 2008 and the market popped and I’m making the same call today. The fundamentals are just not there to justify these prices.
Troy
Interesting opinion but I disagree on several points.
Firstly, the more important issue is not scarcity of a resource but the means and ability to get that resource to the market. So, as an analogy, in NZ we have a huge amount of undeveloped land, so there is not a scarcity of land. But what we do have is a scarcity of practically developable land in and around our urban centres, for whatever reason (regulatory, economic etc). As a result, in the face of rising demand, we have rising prices.
Similarly with oil. There is still a lot of oil on this earth. But the means of extracting that oil is getting harder and costlier. THAT is the issue. Easily and economically retrievable oil is getting scarcer.
Surely price CAN dictate (or at least strongly influence) scarcity with oil (if we are talking about scarcity not in terms of absolute resource but rather easily and economically retrievable resource supplied ot the market ). Price gets to X level, at that point the economics of retrieving some of the "harder to get oil" improves. So then we have a counterbalancing effect of price rises leading to more supply which place limits on future price rises.
There is a lot of bi-directional counterbalancing in such markets, which means equilibriums will be reached. Its one of the reasons that I don't think we'll see anywhere near $4 per litre here in NZ ( I reckon we could get to $2.50 though which would be damaging enough)
Do you have any other examples of this new found economic hypothesis of price inversion other than oil? I have plenty of evidence of the opposite where when faux scarcity dictated price the bubble burst. Excluding major market manipulation, the idea or the anticipation of more expensive oil cannot trump actual oil in storage right now. There is more oil above ground, in storage, then any time in human history. If I told you that every grain silo on earth was maxed out would you continue to argue that corn should be $200 a copy? Your argument only has merit if the oil tankers are leaving port half full, storage facilities and shipping companies are filing bankruptcy en mass, and the US President is on camera every day talking about how the SOR is fine and there will be plenty that day. Then we can talk about $400/bbl oil.
Not a new found hypothesis at all - he's simply saying that price influences supply as well as demand. If the price goes up, supply will increase as well as demand reducing.
Peak oilers don't believe this, because they believe that we have reached the point where there is simply no more oil in the ground, which price cannot affect.
I'm agreeing with you. It's bizarre to argue that the price should be put up artificially (through tax) because the price is going to go up naturally (through scarcity). If there's going to be scarcity, then there's no need to put the price up - it will happen anyway.
Suggesting that the price should be put up because of the impact of fossil fuel use on the global climate is an argument that I've much more sympathy with, but it is a completely separate and different argument.
I suppose another argument in favour of increasing the price (tax) is that the increased tax could be invested by the government into improved future infrastructure, and/or lessening oil dependence.
Then again, on the flip side I guess people will also argue that the market will dictate alternatives when they become economically viable.
It's a tough choice, depends if you believe in easter bunny (government) or the tooth fairy (free market).
You sum up the case precisely. Should Government leave price, supply and demand to interact with each other and find their own balance through market mechanisms, or should they try to anticipate and manage future market outcomes by controlling one or more of supply, demand and/or price?
Well, there are not many successful examples of the latter approach to encourage my opinion in that direction.
The thing the tax potentially gives you is an extra 'buffer zone' to help smooth the transition from a society of more and more, to a society of less and less.
Being a rather important substance for my day to day life, I'd rather I knew as far in advance as possible, if fuel is becoming less abundent, how much fuel is going to go up in price, and when. This would let me decide where to live and where to work to name just two. Without this information I might go and choose a lifstyle that will later cause much grief when the 'great correction' arrives.
Raising fuel taxes is one way to get this point across to the public, in advance.
Of course the government would most likely squander the money foolishly, but at least we would be better prepared.
Some say that if fuel prices go up much we'll all just drive around in electric cars instead. Well, looking at the average age of cars on NZ roads, I don't see people making that transition over night; most people cannot afford it. Funny that, when you tell someone that fuel will go up in price, their answer to use an alternative is often seen as a solution, even though the alternative is more expensive than the original product. So it's a kind of acceptance in their part without actually saying it, that prices will increase.
That's not even touching on oil for heating/food/making stuff (plastics).
Of course the Peak Oil theory, which surely MUST happen, doesn't absolutely guarantee a change in direction of society. A viable substitute to oil may be found, which would render the peak irrelivant, but I'm not betting on it.
"Being a rather important substance for my day to day life, I'd rather I knew as far in advance as possible, if fuel is becoming less abundent, how much fuel is going to go up in price, and when."
Of course you would, but the point is that nobody does and nobody can tell you.
Yes, the Government could set a target price-path for petrol with a view to adjusting tax accordingly each time the supply/demand-dictated market price goes up (or down) to ensure that the actual price goes with the target path.
But there are risks in that. They might set a target price that turns out to be lower than the market price, in which case they'd have to subsidise the petrol price or abandon the target price. Or they might set a target price which turns out to be excessively higher than the market price, in which case they'd be needlessly inflicting damaging costs on the economy and eventually be forced by political pressure to cut the tax.
The thing is, I've spent a lot of time reasearching this whole subject, and so I have more than an unfounded opinion on how it's going to play out. That is, finite fossil fuels such as oil will become increasingly unaffordable, and the rate at which they increase in price will increase as well. The upshot is that the cost of living will increase in step. I wish I had done all this research earlier; I would have been better off for it, having more time to make plans accordingly.
So yes, I believe I have a better grasp on what's going to happen than the general public.
While it might be to my personal benefit (at least relative to others) if the masses incorrectly believe life as we know it is going to continue indefinitely, it doesn't seem nice to not at least tell people once. Kind of like watching a train that you think is most certainly going to crash, but not telling anyone, because those people were in some way just competition.
Troy - for a start, 'advocates' is the wrong word. This is a case of 'warning'. I'd even wear the 'Cassandra' label, but not 'advocate'.
Oil is not, however, a commodity. Think of it as blood to the body - nothing happens without it.
That Grantham article has the graph of discoveries - it's undisputed. - and discoveries world-wide clearly peaked in 1964. That's a pretty solid trend, and you can't produce what you haven't discovered, it's a physical fact.
I think that's where economics fails - at the top of the gaussian curve of supply of a finite resource, and in face of escalating demand. For a discretionary item - gold for instance, has probably already peaked - you may be right, at a price folk will drop out of the bidding.
Energy (read: fossil fuels), food, and water, are non-discretionary. Push inelastic demand upward, and at the peak of supply, you have a problem. The gap between the graphs widens rapidly (the IEA fudge it with an ever-widening wedge labelled "yet to be discovered' - they might as well say 'wishful thinking'.
Given that oil underpins all activity, which in turn is the source of all income, is 'price' the measure beyond this point? For some time, I've been of the persuasion that energy (say BOE - barrels of oil equivalent) should be the currency from here on - it makes more sense than gold, for instance. More relevant to core activity, by a mile.
BTW the USD has been back by oil since 1971, so your idea of energy as currency is already in motion but doesn’t seem to be working very well in practice. My point is you cannot anticipate a price increase if you have a glut of the resource lying around. People were making the same argument about Housing in the US circa 2003 and we all know how that turned out. Granted the day will come when oil will be $200/bbl and right so. But today is not that day and all the wishful thinking and sky is falling thinking isn’t going to make it happen.
Not so, as posted above coal to oil and electric (fission and fusion generated) are all viable alternatives currently on standby for when oil approaches $200 a barrel and makes them highly profitable. There may be short term pain during the transition but yes as with all markets higher prices will reduce demand.
MdM - go outside (I'm pretty sure you'll be city-based) and look around. What else drives the whole of our activity? What makes the pipework? Try and find a thing which wasn't made by, doesn't contain, and wasn't deliverd by, fossil fuel. You put up the list, I'll shoot it down.
The only thing we have going for us here, is hydro electricity, but we're already using all we produce, and we've cherry-picked the best sites.
The lead-time might have been there to morph, had we started about 1980. It's not there, when the very energy you need to replace, is the one you need to build the replacement, and it's already going full-noise, just fuelling BAU.
Your only margin to operate the morph from the peak supply point, comes if you can set aside a proportion to do so, and it would appear that the demand is somewhat inelastic. That gets worse, as you go down the backside of the gaussian.
Sorry, econ 101 was deficient in it's teaching, and unfortunately the gospel got taken for.....just that. It only worked on the upside.
Other sources?
Nuclear (current tech) is a finite resource - if it took over from oil/coal, maybe 40 years (at current rates of consumption, note).
Hydrogen is a vector, not a source. Big handling issues, re Hindenburg.
Solar - unlimitedly available, bit of a problem with day/night but could be done. It's my pick because it is essentially forever. Bit hard to make it do heavy transport.
Wind, hydro I regard as secondary solar. Tidal won't ever get much past yet another PhD (they pretty much all come to a negative conclusion).
That's about it. Synthetic fuels never measure up, bio's take up too much land, coal-to-oil takes too much EROEI.
If you wish to grow exponentially, unfortunately that will be true, at some point.
It is socially criminal to advocate leaving a coming generation a pile of shyte, no options, and excuse youself on the basis that 'something will always turn up'.
I doubt a bank manager of the old school would extend you a loan on that basis.....why should our kids?
We have scarcity and the price is rising....funny that. Popped in 2008 because demand collapsed...sure this wasnt a totally empty bubble, what happened was the contenst fell away leaving a vacuum and it burst, funny that. Now im sure there was speculation, sure but thats based on an opportunity which was and is scarcity.
regards
We have scarcity and the price is rising....funny that. Popped in 2008 because demand collapsed...sure this wasnt a totally empty bubble, what happened was the contents (demand) fell away leaving a vacuum and it burst, funny that. Now im sure there was speculation, sure but thats based on an opportunity which was and is scarcity.
regards
In the meantime, since the last increases at the fuel pump I believe crude oil prices have remained relatively stable/flat and our dollar has risen considerably. Shouldn't we be due a reduction in the pump price or is it just further proof that oil prices don't work the same way as normal consumer goods given the cartels/monopolies/duopolies/quadopolies/price collusion/lack of competition/speculators etc, etc can rig the real cost/price knowing how much the population relies on the product even though demand hasn't exceeded supply yet?
I'm ready...I'm ready...Big B.................I sold the Launch...bought a jet ski.(fishing of course).i sh*t you not..! ..got rid of all my fake fwends...a bit colder but running lean and a lot happier....I wish I could run it on Steven...but that bulk source gas is not being efficiently tapped at the moment ...far too unstable.
My wife even traded down to a Mazda.....oooooh yep I'm ready...but my mail order camel is way overdue from that crappy site PDK sent me.
Problem is of course as oil prices rise it will cost you more to produce that biofuel and make it less profitable. Also if others like you also stop producing food to make biofuel then food cost will go up. At some point you will see profit from biofuel shrinking just as prices for the food you used to make going up and you will probably move back to food production...
great to see this informed and passionate debate! And as rider of large motocycle I have to say that Govt levies etc mitigate against this sensible , economical and easy to park method of commuting. The other side to peak oil, however you view it, is that it should (and has for us) steer your selection of rental property - close to schools, shops and public transport is even more important now!
Here is a real world example of Supply and Scam.
I have lived through several supply and scam faux crisis and I can assure you that the supply/scam oil argument doesn’t’ pass the smell test. In 2000 California was suddenly running out of electricity. There was a pre-hyperbolic price rise. I saw many “experts” citing that this is a paradigm shift and the California will now have to deal with rolling blackouts on a daily basis from this point on. I read article after article how the price rise was justified and that it was a supply/demand issue. Like one day California ran out of gas and nobody was watching the gauge. It was surreal. It took me several weeks and $400/month USD power bills to sort out what was going on and at the end of the day it was Supply and scam. I personally lobbied then Governor Gray Davis to stop negotiation ridiculous pricing contracts that amounted to extortion and just announce an investigation. If he just announced an investigation the shenanigans would have stopped the next day and Davis wouldn’t have been recalled. I lived through this and saw it firsthand. It was a tough lesson that cost me thousands of dollars with no redress.
http://en.wikipedia.org/wiki/California_electricity_crisis
There are only two explanations for the current hyperbolic price rise in oil outside the depreciating USD.
- Speculators and investment banks are sitting on vast amounts of physical crude
- Speculators are buying and selling futures and ETF’s amongst themselves like baseball cards inflating the price.
- A combination or 1 and 2
Also, anytime there is a banking crisis there seems to be a shift to commodities to make up the losses. It is the classic investment bank double down. They lost their shirts on housing and still trying to make up for it by taxing the world.
Troy - there may well be speculation atop the supply issue, but ultimate scarcity is no scam.
If you really think ultimate scarcity doesn't happen, go for a drive. Ignore the E and the wee light that comes on. Give us a bell if you car is still going a few hundred k's later. Maybe then Ill buy your argument.
The only diffo is scale.
Real or imaginary scarcity? Right now there is no real scarcity. You can make an argument that there might be future scarcity based on pretty charts but that doesn't make all the oversupply siting in tanks right now go away. You’re shifting the time domain of your argument forward too far too fast. Your projecting a fictitious crisis based on future supply and demand scenarios. We don’t have enough cars, wars, etc make the current oversupply disappear anytime soon. And we certainly do not have the demand strong enough to justify $200/bbl let alone $110/bbl.
Troy - with respect, no.
http://news.nationalgeographic.com/news/energy/2010/11/101109-peak-oil-…
and there's a few like that - google IEA, Peak oil 2006.
Every day, we use 85 million barrels a day all liquids) and about 72 mbpd of that (or a little more) is 'light sweet crude'. Either way, they're gone forever, each day.
Never before, have we used at that rate.
Too far, too fast? How much lead-time do we need for this kind of paradigm:
20 years, working with focus? We don't, even by optimistic appraisal, have that.
Too much inertia, of both kinds.
A pity, because frugal/efficient use of energy is no great imposition.
Powerdownkiwi,
Peak anything doesn’t not equal hyperbolic price increases. Even if we both agree that peak oil was1996 that doesn’t mean the spot price will shoot up 3 fold. You do understand there is physical disconnect between the announcement and real supply glut right? Peak oil could have occurred in1955 but as long as supply is meeting demand the price will only increase at the pace of inflation. Just because we know we are in a peak does make the spot price go ballistic. To justify the ridiculous price gouging going on right now I would need to see the following: (not necessarily in any particular order).
- Empty oil tankers sitting in Singapore
- The lack of oil in the SOR a daily issue in the press
- Long lines at the oil pump and rationing
- Oil companies actually setting up the world’s largest oil spar in the artic.
- Consumers buy and selling oil amongst themselves
- The cost of extraction in Saudi Arabia increase to $20/bbl
- The US starting up their cast amount of dormant independent pumps.
- Major arrest and scams taking place in the general public on fictitious oil sales.
- Oil and Gas layoffs en mass.
- Exxon is knocked off the largest company list to 25th place
- The US announces plans to refit the existing fleet of oil spars in the gulf and repurpose them to solar collectors or wind farms.
None of the above has transpired yet. Now the simplest explanation is usually the right one. What is going on in the Oil market right now is what is called “Date Rape”. There is a great explanation of Date Rape here: http://www.nakedcapitalism.com/2007/02/how-big-traders-can-extract-excessive.html
Troy - no, it's plain physics.
Energy required for work to be done.
No exceptions.
Less energy, less work done.
I don't give a flying .......... about GDP, work done is the only measure.
The only way more can be done with less energy is via efficiencies.
Sorry if I sound dogmatic, but I sort of had this debate about 1980. :)
I'm an Engineer, Physics, and Anthropologist so I underside thermodynamics just fine. I’ve heard the argument, ad nauseum, that when the price of extraction equals the market price we’re all doomed. I just feel you have vastly underestimating just how cheap oil still is to extract and ship.
BTW i forgot one:
12. Black water, oops sorry I mean “Xe”, starts to provide armed escorts for oil trucks and tankers worldwide, including domestically in the US starting the ever expanding Oil-Industrial complex.
Troy
So the Libyan civil war taking out 1 mill/day, A tsunami destroying refining capacity in one of the worlds largest economies and the US central hub filling up with sour heavy crude are going to happen with little or no consequence?
Did you notice that despite statements by the Saudis that they are going to up production to compensate for Libya it hasn't happened, The tide may be going out on them
Methinks you need to justify the statement that we are awash in crude
Neven
There was scarcity in 2008 and there is or will be scarcity now, the problem is the price is what is making fuel scarce or un-obtainable for some in the developing world...we have not seen it directly yet.
Demand is easily strong enough to justify the run up past $80USD...at $110USd I odnt know what % is specualtion....but 1.6mbpd is off the market and Saudi cant compensate...and neither can anyone else...so its hard to argue we dont have a genuine scarity....hence the price.
regards
meh,
If you want to know where $123/bbl comes from read my comment above on "Date Rape". BTW my calculation on the fair market value is closer to $50/bbl. That is mostly based on the unsustainable foreign wars happening. If the world was conflict free the price would probably be closer to $30-40/bbl. The fair market value of $70/bbl is when you add in the debasing of the USD.
I think this article is uninformed and scaremongering. Using the US EIA forecast of a rise to $200 per barrel in 20 years gives an increase of 77% in 20 years (current world prices are over US $113 per barrel). This works out at around 2.9% compound increase over the next 20 years. With NZ inflation at 2 - 3%, this means there will be little change in real terms. Hardly the scary outlook that Bernard presents!
And if the $NZ does appreciate to parity with the US$, the increase in NZ$ terms will be even less.
And when you take into account the increases in exploration and developments of previously uneconomic oil reserves (which become profitable as prices rise), plus the growing development of new oil extraction techniques (deep sea oil, oil shale), plus the switch away from oil to other forms of energy as prices rise over the 20 years (ie electric cars, greater use of gas, the growing development of "green" energy projects), then even the 20 year projection is questionable.
As for the suggestion that "Some economists are forecasting an oil price well over US$200 a barrel within 5 years", that suggestion is laughable and should not have been included in any serious analysis of the situation. The word "some" implies that most economists don't agree so why mention it! Any price rise that fast would quickly slow down the world economy, resulting in a quickly depressed demand for oil and a consequent rapid drop in oil prices - as happened in 2008.
some say $200, some say $400 some say the economy implodes before that so we'll see $35 again....most economists dont understand engineering or geology....Im goign with the latter...simple.
If of course you are un-employed the petrol price could be $50, $100 or $200 the thing is you cant buy any of it....you are broke...simple.
regards
Steve Keen funny,
US RECESSIONThe recession has hit everybody really hard…
- My neighbour got a pre-declined credit card in the mail.
- Wives are having sex with their husbands because they can’t afford batteries.
- CEO’s are now playing miniature golf.
- Exxon-Mobil laid off 25 Congressmen.
- A stripper was killed when her audience showered her with rolls of pennies while she danced.
- I saw a Mormon with only one wife.
- If the bank returns your check marked “Insufficient Funds,” you call them and ask if they meant you or them.
- McDonald’s is selling the 1/4 ouncer.
- Angelina Jolie adopted a child from America.
- Parents in Beverly Hills fired their nannies and learned their children’s names.
- My cousin had an exorcism but couldn’t afford to pay for it, and they re-possessed her!
- A truckload of Americans was caught sneaking into Mexico.
- A picture is now only worth 200 words.
- When Bill and Hillary travel together, they now have to share a room.
- The Treasure Island casino in Las Vegas is now managed by Somali pirates.
- And, finally….
- I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Hotline. I got a call centre in Pakistan, and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.
No problems.
Last week we had a South African Helicopter pilot stay with us. He does a lot of work with oil companies on the East coast of Africa. Already they have found loads of oil but are capping them. The oil companies are saying that that part of the world is one giant oil well.
No, as I said he does a lot of flying in that part of the world, I dont mean ferry rides to rigs but top people. He was De Clerks pilot at the time of the ending of the troubles in SA. He told me of some amazing things that are happening in that part of the world.
Signs of gas, yes,
http://www.time.com/time/business/article/0,8599,1970726,00.html
Oil is small,
2 billion bbl. of oil in landlocked Uganda over the past four years, but its a start...
I thought exploration on the east coast hadnt done to well.....but I suppose when there isnt much hope elsewhere re-visit...
regards...
2 billion barrels! That's huge! Oh, wait... at present rate of consumption of say 85 million barrels a day, that's less than 24 days of oil. Not that it can be extracted at that rate...
It's interesting that in approximately the lifespan of a human being, approximately half of the entire supply of oil in the entire world has been consumed.
I wonder what future generations will think when they look back on this era.
On top of that no one is able to extract all the oil from a reserve. In most cases if you get 25% you are doing very well. So your 2 billion barrel find will yield maybe 500 million barrels and the flow rate will plunge as it goes over the down side of the Hubberts curve
Here's an idea.
Set taxes to generate a pump price of $4/litre immediately and keep that price constant, absorbing any price increases until the buffer is gone.
Commerce Commission monitors oil companies' pricing to allow them to mainatain the current profit margin. (Benchmark barrel price and NZD:USD exchange rate - easy enough)
Use the increased tax take for specific public transport infrastructure projects.
um....well that would kill NZ industrial and urban economy....besides which even $3 is political suicide...hell ppl are "liking" the 1.5cents not going on, thats a joke....
Also rural NZ is gagging....like ouch....public transport cant carry food, need bio-fuels as well...a mix really...I'd rather see something that turns ppl away from large petrol engined vehicles.
What it would achieve is turn some farmers etc into ACT voters....cunning plan eh....
regards
This may be the best appraisal of the whole thing I've ever seen.
http://questioneverything.typepad.com/question_everything/2011/04/net-e…
There it all goes - energy, money, EROEI, flows.......
A long but rewarding read.
What kind of petrol station is that in the photo? Wouldn't be BP would it? Some may not know but British Petroleum became "Beyond Petroleum" in 2001. :-)
The Wikipedia link is interesting: http://en.wikipedia.org/wiki/Bp
... BP's tagline, "Beyond Petroleum", according to the company represents their focus on meeting the growing demand for fossil fuels, manufacturing and delivering more advanced products, and enabling the material transition to a lower carbon future.
Just how does one combine growing deman for fossil fuels with transition to a lower carbon future?
FYI from an emailer:
Hey Bernard,
Interesting article on oil prices and I completely support your conclusions. In case you wanted to do a follow-up article, you may be interested in this report that I wrote way back in 2008 for the NZTA called "Managing Transport Challenges when Oil Prices Rise." In this report we forecast the risk of sustained high oil prices (around $120 USD/barrel) with potential spikes up to $300 depending on how the demand/supply curves worked out in the future. We also made a number of recommendations on what could be done to reduce NZ's use of oil for transport, most of which would also provide economic benefits. I'd like to draw your attention to our recommendation on minimum parking requirements - which seems to fall beneath everyone's radar but actually plays a crucial role in supporting our car dependent transport system and reducing the country's resilience to high oil prices. At the moment, all local councils in New Zealand are forcing new developments to provide large amounts of free parking. That's right, every development has to dedicate half of their site to provide free parking. There's usually no scope for businesses to say "no thanks, I'd rather buy everyone a bus ticket so we don't need parking." No scope for alternatives, little scope for more compact and resilient development patterns.The result is that free parking is available almost whenever and wherever people drive. And it's fairly clear that the ease and cost of parking has a major impact on travel choices. Surveys done by the ARC show that most people using public transport are doing so because of the cost of parking. The main reason I bring this up is because the Joyce/English brigade pretend that make the choice to drive, and are not influenced by subsidies etc. The reality is far from what they think - council policies are actively reinforcing subsidies for drivers, and undermining our resilience to high oil prices. I am currently living in Amsterdam, where people view minimums parking requirements as the most stupidest policy they have ever heard. Anyway - just let me know if you are interested and when can jump on Skype to discuss.
Kind Regards,
Stuart
Absolutely Stuart – using/ supporting public transport in Europe is far more advanced. Most people are open for cycle/ bus lanes and restricted parking. Even people driving/ commuting into cities with petrol guzzlers is a hot topic and building more roads is often strongly opposed.
Here in New Zealand it seems only high petrol prices will bring changes. The public isn't willing, pushing for public transport/ work & living communities/ sustainable town planning - which will lead into severe financial consequences for our economy/ society.
More roads minister Joyce - called investing into infrastructure - what an economy !!
I've lived in a couple of European capitals and I do not particularly recognise this as a description of European attitudes to car use and public transport. Parking restrictions are more necessary there because they have far less space/far greater population density in towns and cities, but they are still bitterly resented by many. And London's congestion charge has proved a great revenue raiser, but it has achieved nothing in terms of reducing congestion.
Of course building more roads is opposed, building everything and anything is always opposed by somebody. People never want anything built near where they live, and they don't want it built in open country and spoiling the view either - but that doesn't stop them driving on new roads, moving into new houses and using the output from new power stations when they are built. In any case building more roads is opposed here as well, witness the ongoing stoush about the Kapiti proposal.
In any case, what says that the way they do things in Europe is by definition the way things should be done?
Shall we adopt their policies on agriculture and fishing, then?
Yes, significantly and permanently higher petrol prices will bring changes if and when they come. People will change their behaviours, at different price levels and to a greater or lesser extent in accordance with their own needs, priorities and preferences.
A point that escapes many is that the crude oil prices that could give rise to $4 a litre at the pumps are a proxy for the divergence between supply and demand. At $4 the divergence in the market is large; there just wont be enough oil to go around.
So what "$4 a litre" could very well mean for a miserably small importer like New Zealand is that the fight for oil supplies between those with the ability to pay as much as it takes will leave us with simply no oil at all.
It could be very sudden, and no body else will care.
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