Advocates of a smooth transition away from petroleum may be surprised by the consequences of huge swings in the cost of oil.
I first proposed a "head-fake" in the price of oil in 2008. My thesis was that the oil exporting nations had become so dependent on revenues from oil that even as prices plummeted in global recession, they would have no choice financially and politically to pumping every barrel they could. This would increase supply even as demand fell, causing prices to crash.
This dynamic would drive prices down to lows which are widely considered "impossible" in an era of looming Peak Oil. Oil: One Last Head-Fake? (May 9, 2008)
Since that entry was published in May 2008, oil shot up to $149/barrel and then sank to $40 a mere 18 months later--a nearly 75% decline in less than two years.My updated "head-fake" scenario explains why alternative energy will never "pencil out" financially until it's too late: wild price swings will always undermine the financial viability of alternative energy.
What advocates of a smooth, seamless transition from the era of near-total dependence on fossil fuels to an era which draws upon many energy sources (a.k.a. "alternative energy") fail to grasp is the pernicious consequences of open-market pricing being set on the margins.
That is, if oil supply drops 10% from 84 million barrels a day (MBD) to 76 MBD, the price of oil will not rise a corresponding 10%--it will very likely double as the competition for the last few million barrels a day--the supply on the margin-- becomes fierce.
The reason is basic: there is no alternative as yet for oil--not even natural gas. In classic economics, the world will magically switch to some other alternative if prices get too high. The flies in this classic ointment are what I call the FEW essentials: food, energy and water: there are no "easy" alternatives and thus no upper limits on price.
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Why Population Growth Must Stop
What a great article message. Thanks EA.
ReplyDeleteNow listen here, i.e. those with spare $$$. Don't wait until oil price gyrations go through the stratosphere and electric vehicle components become hard to get due to huge, panic demand. Plan and build your EV now (or get someone to do it for you), like me, while most of the sheople with $$$ are sound asleep.
Who knows? Maybe the only viable link between a life-saving farm and your community in an acute oil crunch is your EV pickup! (You can make $$$ delivering food to the starving. If the farmer has no viable transportation, you determine all the terms on both sides!)
When oil is $200.00 a barrel and pump prices exceed $6.00 a gallon, people will park their cars and find other ways to get around.
ReplyDeleteNaturally folks like my brother who drives an 18 wheeler will still have to drive it to keep the food supply moving, so you can expect $5.00 for a gallon of milk and $4.00 for a pound of pasta. Speaking of pasta, not long ago I could buy a one pound box for $.99 and $.79 on sale, now that very same box of pasta is $2.50.
Get ready for a wild ride.
Yes, there is a finite amount of fossil fuels left. The Gulf Oil Gusher is prime evidence. There is, by some estimates, the volume of Mt. Everest (+300 cubic miles) in oil and gas yet to come forth. To me it is entirely conceivable that 300 cubic miles worth of squished dinosaurs and ferns got cooked, turned into oil, under a mile of ocean and six miles of hard rock. People who think otherwise should be branded as idiots, like the abiotic oil crowd.
ReplyDelete"That is, if oil supply drops 10% from 84 million barrels a day (MBD) to 76 MBD, the price of oil will not rise a corresponding 10%--it will very likely double as the competition for the last few million barrels a day"
ReplyDeleteThats unlikely the estimate maxiumum sustainable price for oil is about $100 USD. Any more than that causes demand destruction. Already the US is consuming 2 mbd less than it did just a few years ago.
As oil production declines, expect a whip-saw effect as the price swings high and then crashs back down. over and over again.
"There is, by some estimates, the volume of Mt. Everest (+300 cubic miles) in oil and gas yet to come forth."
Much of which is not economically recoverable. Research Energy return on Energy invested (EROEI). You also also underestimable how much oil that is consumed every year, which is also measured in cubic miles. Current world production relies on the ten supergiant fields that produces about 40% of the global production. As these fields become depleted and watered-out, it will be devistating to the global economy. In the not to distance future, oil many not be a tangible commodity, as nations that have it and need it begin to hoard it.
The US gulf war was about secure the Middle East Oil fields for the US and its allies.
"Plan and build your EV now (or get someone to do it for you)"
1. where does the electricity come from? 25% is produced from Natural gas.
2. The Grid is already near capacity, any significant load from EVs will crush it.
3. I be much more worried about your food source if Oil becomes in short supply
4. No need to travel very far if there are no job to go to.
5. Planning on using Electricity to heat your home too?
If we have to reduce population, please let's start with everyone who owns a pick-up truck and doesn't wipe their ass. Ummmm...wait a second, that profile is one and the same. Those who own pick-up trucks don't wipe their asses. Okay, those who own pick-up trucks, and then all those who are overweight. Shit, they're still one and the same. Okay, those who own pick-up trucks and listen to Glenn Beck. Goddammit, still one and the same. Alright, just take all of the above and I think we will survive.
ReplyDelete10:09 wow, when you frame it like that it's everyone else in the world who are idiots, not the abiotic cornucopians who think energy is endless and the economy should just keep growing. That one russian scientist was right and all the other ones are wrong. Oil and gas does not result from the decomposition of organic matter over millions of years into the soil. And on top of that all those oil wells that have already been tapped, the United States already peaking in oil along with the rest of the world now or soon, and the steadily decreasing number of new finds is all a lie and every geologist and petroleum engineer to ever work in the field is in on that lie. Thanks for figuring that one out, detective...
ReplyDeleteIndustrial Hemp is magic.
ReplyDelete?? didn't some Coast to Coast caller post something here about oil being made naturally by the earth, smirks, why would we run out, mirks.
ReplyDeleteI guess its the same individual that spends time with big foot and gets alien abducted several times a month, smirks.
If and when things get to that point, a FEMA camp won't look so bad I guess. At least if your too old or too young to put all the survival plans into action.
11:37,
ReplyDeleteRegarding EVs, it depends where you reside. In my locale, we are blessed with hydro-electricity (don't live in the States).
Much of the energy produced by large utilities is wasted during the evening, when people are sleeping. They are operated at peak output all the time. That mean there is plenty of energy available to recharge the batteries of scores of electric vehicles without strain on the system. At the rate EVs are being added, there is no danger of over-loading the grid.
If you live in an area where the local utility obtains it's electricity from oil and/or natural gas, you seriously need to consider solar power or some other form of renewable energy.
Regardless of the foregoing, it is quite obvious that a large percentage of the present, personal ground fleet will have to be retired for good. It takes money, time and a willingness to extend credit to make changeover possible.
As I've already stated, we cannot save everyone. That, however, doesn't mean all people. Clearly there will be those that have and those that don't. And sadly, there will be die off; there is not enough time. And when I speak of die off, I do include the United States of America.
To: 10:09 and others scoffing at the Abiotic Oil Theory
ReplyDelete1) Can you name the scientist or laboratory that was able to reproduce decaying and cooking dead animal and vegetable matter and turning it into oil? Class? Bueller? Anyone???? No, you can't. It hasn't been done.
2) Can you name the scientist or laboratory that was able to pressurize and heat methane and produce oil? Nikolai Alexandrovitch Kudryavtsev. Confirmed by Gold in the US. Wonder why there's so much methane in the Gulf? Wonder why BP and Exxon are buying back all those old wells thought to be 'dry'? They've refilled.
Wonder how Russia became the world's second leading oil producer when throughout the 70s and 80s nobody thought they had any? Ultradeep wells.
Now tell me.....
How you going to get solar power from Arizona to Tennessee? Have you seen how much environmental damage from mining minerals to build wire and towers?
How you going to clean the dust off the panels each month (it is the desert, you know)? It will take more water than is already consumed throughout the southwest, including California.
Typical- you were educated in the post-Department of Education schools and you can't string two facts together to a useful idea.
Something wrong with my comment about abiotic oil, EA?
ReplyDeleteYour information is wrong 7:30.
ReplyDeleteIts called formulating theories around your own opinions rather than the facts of the world.
Can you name which wells have magically refilled?
Have you been down in them to look?
Actually Russia always had large reserves. They have been restructuring and bringing on more oil in recent times again. The price in oil has helped that drive. The drilling for "ultra deep wells" is the result of dwindling new finds.
Organic material decomopses over time. Remember the movie Gasland? The methane found in that house was actually a result of bacteria.
7:30,
ReplyDeleteRegarding long distance transmission of electricity, ever heard of step-up transformers, high power transmission lines, and step-down transformers? That's how Hydro Quebec transmits electricity from James Bay to NYC.
As for removing dust on solar panels, give me a break.
On another note, I agree oil is abiotic. However, can you provide the refill time line? Somehow, I don't think it's nearly fast enough to solve our short term energy challenges.
Now take a deep breath and relax. :-)
11:57, don't worry about the overweight Glen Beck group driving pick-ups- they will come through this just fine. That extra cushion will give their bodies extra time over the skinnies before starvation sets in. (& then they'll make jerky out of them)
ReplyDeleteAs for the "west" and it's population growth, that grow is coming from immigrants of other countries.