Oil how high will it go?

E

Elphaba

Guest
It was inconceivable a few years ago that oil would reach $130 a barrel as it has done today. There is not enough oil to keep our world economy running. A small shortfall between demand and supply is enough to shatter oil dependent economies. Add to this market speculation, weak dollar, inflation, geopolitical tensions. As oil continues to rise, so will utilities, food etc. (which will have disastrous effects on poorer economies.) and our own economy with more job losses. Governments will have to intervene IMMEDIATELY by reducing tax, vat on fuel and banning completely all plastics used in packaging that are not essential. Or is it all too little too late. During the 1970s oil shocks (I remember my Dad queuing for oil) the 5% shortfall in the production of oil caused price of oil to nearly quadruple.Those price shocks were only temporary.The coming oil shocks wont be so short lived, Its the onset of a new permanent condition. Quote Dick Cheney 1999 speech -2% ANNUAL GROWTH in oil demand, 3% natural decline in production, by 2010 we will need additional 50 million barrells a day. So I wont be surprised if it hits 150 a barrel anytime soon.
(unless there is serious profit taking) Were all doomed!
 
Elphaba, in what way will cheapening the price of petrol and diesel by removing tax and VAT help conserve it?

Do you buy a coffee in the morning? How much does a cup cost? €3? How much is in it? 1/3 a litre? So when petrol is €9 a litre, maybe people will take seriously that there is a limited supply of it...

An alternative view to the one that says that we have reached peak oil is that there is another supply shock. OPEC are producing just enough to meet demand and keep prices high. Why would they let prices drop back to $20 a barrel? (Not that I don't think peak oil will happen, just that I don't think it's here yet).

The reason your dad had to queue for petrol in the seventies is that the dockers went on strike and so there were no deliveries. Same reason there wasn't a bag of coal to be had! I have fond memories of pushing the mini in the queue with my dad, coasting down hills, and pushing the car out of the driveway. I'm sure he doesn't remember it that fondly!

BY the way, research has shown that tin foil hats actually increase the intensity of the waves governments are firing at us.
 
PS. If you want doomed, read up on Credit Derivative Swaps (CDSs)...
 
In no way do I think that by cheapening price of petrol is going to conserve it.
I was indirectly referring to the high cost of transport, which affects my business since we export, and is a long term concern, not just for me.

We have reached PEAK OIL, it is a dirty word, in major financial companies,
as anyone loudly proclaiming PEAK OIL, would not be tolerated as it would be pretty tough to market other equity investments that rely on oil.
www.lifeaftertheoilcrash.net

Oil is at 130 a barrel, and you dont think we're on the downside of the curve?

Yes fond memories indeed of my Dads blue Cortina!

Don't get the joke about the tin foil hats?
 

Demand cannot be perfectly elastic even for something as essential as oil. People will reduce their consumption in the face of rising prices. Already people in the US are driving less and demand for "gas guzzling" cars is collapsing across the Western world.

Also Europe and the US are entering a recession, with consequent effects for employment and demand for oil-based consumables.

Elphaba said:
Governments will have to intervene IMMEDIATELY by reducing tax, vat on fuel and banning completely all plastics used in packaging that are not essential. Or is it all too little too late.
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So the problem is that the world is rapidly running out of an increasingly precious resource. Prices are rising to reflect this increased scarcity and your brainwave is to use taxpayer money to subsidise further reckless consumption?

Isn't that the macro-economic equivalent of lending your recently unemployed and badly indebted mate some money for a holiday so he can cope with the stress of it all?

yoganmahew said:
BY the way, research has shown that tin foil hats actually increase the intensity of the waves governments are firing at us.
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I suppose I should also add to my perception of peak oil is that it involves a huge change in the baseline price for oil extraction. It's not that the oil, per se, is running out, but the cheap to extract, easy to refine stuff is not flowing either as fast as it used to or as fast as demand is currently rising.

[broken link removed], apparently, has tankers full of their heavy crude sitting in dock waiting for refining capacity to come available to take it. Everyone wants the light sweet stuff, not the heavy sour stuff. A bit like men and women, really...
 
(I remember my Dad queuing for oil)
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At least this will create some employment opportunities....remember those resourceful guys who used to relieve you of you cash in exchange for a ticket so you could get your petrol & then the garage would have no idea what you were talking about (well my mum....I'm way too young!)

I keep hoping the old "necessity being the mother of invention" will kick in & an alternative renewable sources of energy will be discovered or made more efficient - is that just wishful thinking?

The reality is that as more & more Chinese and Indian workers want what the Western world have (& they are just as entitled), the resources will deplete even faster and the prices will go up rapidly.

Everyone wants the light sweet stuff, not the heavy sour stuff. A bit like men and women, really...
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Panic! This post reminds me of some comedy where everyone in the room starts running about in circles throwing stuff into the air and shouting.
The current high price of oil is driven by speculation, not supply and demand. hedge and investment funds have been piling money into oil because they know the markets (property and stock) are fecked for the next few years.
As for peak oil - Iraq is sitting on an estimated 350billion barrels. We are not going to run out of oil for a long time yet. And the handy thing about this particular spike in oil prices is that it will force people to be more efficient with their oil use, and perhaps increase investment in nuclear energy (as is happening all over Europe) thus helping deal with the problem of global warming.
So it isn't as bad as some would have us believe. Oil may remain at these high prices in the short term, but they will come down once the current recession ends.
 
Elphaba said:
It was inconceivable a few years ago that oil would reach $130 a barrel as it has done today.
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It wasn't inconceivable at all, certainly not to anyone who's been Peak Oil aware. Been PO aware for several years now, devoured much literature on the topic, have had many a sleepless night.

However, I'm still unsure as to whether the rise seen in the last 12 months is a result of all this cash washing around the financial markets looking for the next bubble to invest in or whether the price contango is the markets finally accepting PO as happening/near and hedging theirs bets accordingly, or maybe it's a bit of both. I think it's more the former and prices will drop back later in the year, but certainly the long-term is up, up and away with the odd down in between.

I have no problem of conceiving of a day when a barrel is $/€ 1,000 and that when PO can been seen in the rearview window we will only then realise the full implications of the situation.

Elphaba said:
We're all doomed!
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We are certainly heading for uncharted waters and everybody is going to get wet and many will fall overboard and drown. But this is not going to happen overnight but instead will be a long and difficult road. What comes out the other end I'm not sure but it will be very different from the world we know today.
 
yoganmahew said:
Do you buy a coffee in the morning? How much does a cup cost? €3? How much is in it? 1/3 a litre? So when petrol is €9 a litre, maybe people will take seriously that there is a limited supply of it...
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You're absolutely correct, when a litre of the black gold is roughly equivalent to a litre of fizzy coke or a cup of coffee then one of them is priced way out of kilter from its intrinsic value. Oil's been too cheap for too long, but unfortunately we've built a civilisation on top of the concept of it being at least affordable. That was our mistake and a heavy price is going to be paid.
 
shnaek said:
As for peak oil - Iraq is sitting on an estimated 350billion barrels.
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That figure is 200bbl more than even the more optimistic estimates of Iraq's reserves from bodies such as Oil & Gas Journal and BP Statistical Review. It's a big leap to think that this amount of conventional ME oil has just been missed in Iraq or anywhere in the ME. Certainly there is scope for more discoveries in Iraq but anything like 200bbl more than is known about would be a very big surprise.

shnaek said:
We are not going to run out of oil for a long time yet.
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It's nothing to do with running out per se, it's having less and less every year once decline sets in.

shnaek said:
and perhaps increase investment in nuclear energy
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I'm with you on that one. We really need to get the finger out in this country especially have a serious nuclear debate.
 
I think oil is long due a severe correction, there is enormous amount of speculation now, any small bit of news is having an exagerated effect on price, future contracts are mostly short term but they seem to be using the long term trends which have been there for decades and suddenly putting that into a short term futures contract prices. The supply/demand situation is not that much different from a year ago and wont be enormously different in a years time, yet the price of oil is 60% greater than a year ago, that does not make sense, an awful lot of money is going to be lost on the gamble that the price is just going to keep rising without regard to fundamental supply/demand situation,
 
There is a lot of doomsday comment about what will happen after peak oil happens. Famines, recessions, mass unemployment, economies crashing, the end of the world almost.

What people are forgetting is that there is capacity to produce enough Nuclear power for the human race for thousands of years.

The answer is Nuclear; in the future it'll indirectly power our cars, our tractors, our industry, our economy, our lives.

Solar and Wind and alternative power sources will play it's part too, but nothing produces Megawatts as efficiently as Nuclear.

Our economies will have to adjust to prepare for the change, but it will happen, because there is no alternative.
It's amazing how quickly economies adjust when there is no choice.


The doomsday people are presenting a very unbalanced argument and forgetting that there is an excellent alternative to oil which will keep us going for several millenia.
 

Actually longer term futures contracts are rising as well. 2016 delivery contracts are over $140 a barrel.
 

I would argue that there isn't enough capacity to produce nuclear power for the present population of 6.6 billion for a 100 year time period.
 
ivuernis said:
I would argue that there isn't enough capacity to produce nuclear power for the present population of 6.6 billion for a 100 year time period.
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And what would you base this arguement on? Or were you just stating an anecdotal opinion?

Here's an article you might be interested in reading:
http://www.nea.fr/html/pub/newsletter/2002/20-2-Nuclear_fuel_resources.pdf
This suggests we have enough nuclear fuel resources to last for millenia.

According to a 2007 story broadcast on 60 Minutes, nuclear power gives France the cleanest air of any industrialized country, and the cheapest electricity in all of Europe.

What a shame we never built one.
 
shnaek said:
And what would you base this arguement on? Or were you just stating an anecdotal opinion?
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Well, there are currently 439 active reactors in the world producing 6% of global primary energy output. 86% of global primary energy output comes from fossil fuels, to replace this with nuclear energy would require over 6,000 new reactors to be built. Ok, this is a simple back-of-the-envelope calculation and with newer efficient reactors this number may not have to be so big. Lets assume with new modern reactors we would require 3,000~4,000 new reactors to replace the energy we get from fossil fuels. Considering the time and money involved in building reactors this would be both a mammoth engineering and financial commitment and I haven't even taken into account the effect this sort of nuclear expansion would have on uranium supplies, the fact that these reactors would have a limited lifespan and would have to be replaced again within 100 years or the waste issues, ergo I can't see nuclear (fission) energy powering civilization for 6.6+ billion people for longer than a 100 year time period.


shnaek said:
Here's an article you might be interested in reading:
[broken link removed]
This suggests we have enough nuclear fuel resources to last for millenia.
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I'm sorry, but if you breakdown some of these figures you will quickly see what pie-in-the-sky they really are for any practical purposes.

Estimated total uranium reserves: 4,039,110tt [tt = 1000 tonnes]
Unconventional resources in seawater: 4,000,000tt

Granted, there is in total more uranium in the world's oceans than everywhere else, way way more, BUT, and it's a really BIG BUT, what is the abundance of uranium in seawater compared to what we currently mine? I'll tell you:

High grade ore contains 2% uranium, in other words 20,000 ppm (parts per million)
Low grade ore contains 0.1% uranium, in other words 1,000 ppm

Any guess as to the uranium content of seawater? 0.0000003% or just 0.003 ppm.

That means the abundance of uranium in seawater is 6.7 million times LESS than in high grade ore! Think about that for a minute and try to imagine how it could be extracted from seawater in any manner that is remotely possible. Have you seen a picture of an open-pit uranium mine? That is what is required to mine uranium in the 20,000ppm ~ 1,000ppm range. How would this done in the oceans where the content is a mere 0.003 ppm (or 6.7 million ~ 0.34 million times LESS abundant!).

It would be easier to mine uranium from GRANITE where the abundance of uranium in granite is 4 ppm. Still way below ore grade but massively better than
seawater.

Of the remaining known and estimated reserves of 39,110tt much of that also includes 22,000tt of unconventional reserves in phosphates and almost 10,000tt of speculative unproven reserves in conventional forms.


shnaek said:
According to a 2007 story broadcast on 60 Minutes, nuclear power gives France the cleanest air of any industrialized country, and the cheapest electricity in all of Europe. What a shame we never built one.
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Yes, France does and it is a shame we have not built one (or four as was planned on the 70s). As I said earlier we need to get the finger out and have a nuclear debate in this country. Time is of the essence.
 
room305 said:
Actually longer term futures contracts are rising as well. 2016 delivery contracts are over $140 a barrel.
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well 2016 is still 8 years away so anyone brave enough to forecast that far is still only prepared to bet to $140 not even $200, with the short term price being so high it has probably pushed up the long term price alot higher aswell because some of the speculators are actually believing their own hype, a wall of speculative money has pushed the price above $100 as soon as the first signs of a falter in the price there will be a rush for the exits, if the "prices can only keep going up is so convincing" then why are more speculators not piling into the long term market, surely $140 is a steal in 2016 if all is going to be so scarce
 
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