Peak Oil is You
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Page added on January 20, 2016
How falling oil prices exposed the great green lie
Even though I have been reading about plunging oil prices for the past year, it still came as a pleasant surprise this week when I ordered 900 litres of heating oil.
It came to £264. Three years ago, it cost £609 to buy the same quantity.
I have already been saving money on road fuel. Over the past 18 months, the cost of filling my tank has fallen from around £70 to £53.
But for people with oil-fired central heating systems — which is most of us who live in the countryside, beyond the reach of a gas supply — the savings have been even more dramatic.
This is partly because tax makes up a smaller percentage of the retail cost of a litre of heating oil than it does of petrol and diesel.
Fracking: Thanks to fracking— the controversial technique that involves fracturing oil-bearing rocks by pumping in water and sand at high pressure — the U.S. overtook Saudi Arabia as the world’s largest oil producer
For me, the cost of heating my home has more than halved, putting an extra £700 a year in my pocket to be spent on other things. Multiply those kind of savings across the economy and consumers, especially those in rural areas, are enjoying a huge bonus from low oil prices.
We have American oil companies and the Saudis to thank for that. For the past 15 months they have been engaged in a fight to the economic death.
Until recently, Saudi Arabia wielded enormous power in the oil markets.
Not only was it responsible for 13 per cent of global oil production, but it headed OPEC, the Organisation of Petroleum-Exporting Countries (Opec), which accounted for 40 per cent of world oil production.
Opec is a cartel that exists for one reason alone: to try to fix world oil prices in order to maximise profits for its members, which are made up mostly of Middle Eastern countries.
If the oil price fell, Opec would meet and agree to cut production in order to push the price back up.
If prices rose, Opec members would agree that it was safe to open the oil taps a little so that they could have more oil to sell.
In most developed economies, cartels are illegal because they work against the interests of the consumer.
But for decades Opec has been allowed to operate with impunity, keeping the price of oil higher than it would otherwise be.
Two years ago, however, something remarkable happened. Thanks to fracking — the controversial technique that involves fracturing oil-bearing rocks by pumping in water and sand at high pressure — the U.S. overtook Saudi Arabia as the world’s largest oil producer.
Saudi Arabia felt threatened, so when the price of crude oil began to fall on world markets, Opec changed tack.
Instead of cutting production, it increased it, hoping to drive down the price of oil and force U.S. producers out of business.
Low: Oil prices dropped as Saudi Arabia tried to drive down the price of oil and force US producers out of business
Opec certainly succeeded in lowering crude oil prices. The price of a barrel of crude oil has collapsed from a peak of $115 in the summer of 2014 to just $31 this week.
But still neither U.S. nor Opec producers have cut oil production. They have locked horns in a price war they hope will damage the other more than themselves.
Moreover, on Friday export sanctions that have been imposed on Iran by the West since 2007 are due to be lifted.
The result could be yet more oil flooding onto world markets. That is why crude oil prices have fallen by another 20 per cent since January 1.
While the oil price war has put hundreds of pounds a year in my pocket, it could have been a very different story.
Three years ago, with the price of heating oil still surging, I nearly fell for the propaganda of the green lobby, thinking hard about taking out my oil-fired boiler to replace it with something called an air-source heat pump.
This is, in effect, a refrigerator or air-conditioning system in reverse. It would pump water through a circuit that included my radiators as well as a series of fan units in the garden.
By pressurising the water before it is pumped through the radiators, and depressurising it before the water gets outside, it is possible to pump heat from outdoors to indoors, even though the temperature is higher inside than out.
The heating system would have cost me £10,000 and sent my electricity bills soaring, but the company trying to sell it to me assured me that it would pay for itself in the longer run because oil prices were bound to rise much faster than electricity prices.
Green protest: Demonstrators protested a fracking test drilling site in Upton, near Chester in Britain earlier this month
The world had reached ‘peak oil’, according to the theory, with the result that prices would soar ever higher as supplies dwindled.
I got as far as speaking to a couple of friends who had installed a heat pump in their own property, which was a little larger, but was brand new and much better insulated than my home.
While they had eliminated their gas bill, they were spending £2,000 a year on electricity (compared with my bill of about £500). My friends will be paying even more than that now.
While the price of heating oil has more than halved since 2013, the price of electricity has risen by 13 per cent, according to the Office of National Statistics.
One of the reasons behind this rise is that electricity companies are being forced to buy a certain proportion of their energy from expensive renewable sources.
These so-called ‘environmental and social costs’ account for 8.4 per cent of domestic bills, according to Ofgem. In my 18th century house, which has solid walls, I hate to think how much I would be paying to keep it warm with a heat pump.
Three years on, the prediction that we had reached ‘peak oil’ and that prices could only rise as oil ran out now looks silly.
It was a case of seeing a trend line on a graph and assuming the trend would continue.
Former Climate Secretary Chris Huhne argued for cleaner energy sources to replace oil and gas
The concept of ‘peak oil’ was just wishful thinking on the part of the green lobby, which wanted us to be forced to stop burning fossil fuels. While I didn’t quite fall for the myth, the Government did. As a result, we’ve been left with a national energy policy that assumes fossil fuel prices can only rise.
Huge subsidies — running at £3.4 billion a year — have been paid to subsidise solar, wind and other renewable energy.
All along, we have been told that showering renewable energy firms with public money — paid for through taxes and levies on consumers’ bills — was a wise investment that would save us money in the long run because it would make us less dependent on ever more expensive fossil fuels.
For example, the Coalition’s climate change secretary, Chris Huhne — remember him? — said in 2011: ‘Sticking with yesterday’s fuels could be tomorrow’s headache.
With rising energy prices and finite supplies of fossil fuels, not many want to bet against low carbon.’
I wouldn’t mind betting against it now. Falling oil and gas prices mean that subsidies for green energy would have to rise to keep them competitive.
Last month, world leaders met in Paris to thrash out a deal to reduce carbon emissions. At the end of their marathon ten-day talks they all agreed that they were going to slash emissions.
With the exception of Britain, however, hardly any countries have legally committed themselves to reducing emissions.
When it comes to the crunch, does anyone really think they will do as we have done: force their industries to drop fossil fuels and buy much more expensive green energy, thus losing competitive advantage?
The world certainly isn’t showing any signs of reducing its reliance on oil so far. Global consumption — as well as production — has never been higher than it was in the final quarter of last year.
Ironically, the one large industrial nation that has succeeded in reducing carbon emissions — by 9 per cent over the past decade — is the U.S.
This isn’t down to green energy, however, so much as to fracking.
Cheap gas has consigned to closure much dirtier coal-fired power stations — which emit around twice as much carbon for every kilowatt-hour of electricity.
We, and the rest of the world, could be slashing carbon emissions, too, if we switched from coal to gas rather than trying to rely on expensive and intermittent wind and solar energy.
I doubt whether we have reached ‘peak oil’ or ‘peak gas’ just yet. But hopefully we might just be past the point of peak hubris from the green lobby.
72 Comments on "How falling oil prices exposed the great green lie"
practicalmaina on Wed, 20th Jan 2016 7:41 am
so he looked into the most expensive complicated type of heat pump, that is probably out of date by the time he wrote this article. I have been learning about air source heat pumps for the past week. The new models can deliver efficient heat down to -15. and cost a little over 1/5 the price he gave. Also makes a more efficient ac than a standard window unit. I am more a low tech kind of guy but these things are far superior to what I expected, they do have there problems but even a small unit can offset a huge amount of fossil fuel btus. (excluding the electricity production, depending on where you are.)
ghung on Wed, 20th Jan 2016 7:55 am
Yeah, his explanation of how a heat pump works is idiotic. Either that, or this dumbass was sold junk, so he writes an article attacking the ‘green’ movement. Too early in the morning to not call this guy an asshole.
sidzepp on Wed, 20th Jan 2016 8:58 am
The green lie? Let us continue to enjoy the prices falling at the pump, buy a bigger truck and of course by a better air conditioner to contend with the rising temperatures! Who the hell cares about tomorrow when you have five bucks (Or pounds, in your case) to spend today.
The one percenters really love people like you around.
Dredd on Wed, 20th Jan 2016 9:19 am
Thanks to king of all liars, Oil-Qaeda, “There will be more plastic than fish in the sea by 2050” (World Economic Forum)”
sensato on Wed, 20th Jan 2016 9:21 am
Beyond the strawman statement that peak oilers predicted a trend of increasing costs, he recommends following a trend line of his own picking, the one currently going down. And affordability is the real issue, rather than cost.
Go Speed Racer on Wed, 20th Jan 2016 9:32 am
With all the money he is saving on heating oil, he can buy a new F-350 truck, and drive around in it empty.
Kenz300 on Wed, 20th Jan 2016 9:37 am
The top 1% want it all…..
Koch Brothers EXPOSED: 2014 • FULL DOCUMENTARY FILM • BRAVE NEW FILMS
https://www.youtube.com/watch?v=2N8y2SVerW8&spfreload=10
dubya on Wed, 20th Jan 2016 9:39 am
“It was a case of seeing a trend line on a graph and assuming the trend would continue”.
population up
oil down
these lines will now continue forever, so in 10,000 years humanity will be a solid sphere out to the oort cloud & we will all be driving Hummers for free.
eugene on Wed, 20th Jan 2016 10:15 am
My personal emissions are way down. I burn all the bullshit I read.
Apneaman on Wed, 20th Jan 2016 10:21 am
It would be good if you assholes who own this site showed a bit of respect to the readers and stopped posting this type of moronic babbling. Seriously, smarten up or I’m out of here and your readership will drop like the price of oil.
ghung on Wed, 20th Jan 2016 10:28 am
$26.85 @ 11:28 EST. Yikes!
jesusofsuburbia on Wed, 20th Jan 2016 10:32 am
“It would be good if you assholes who own this site showed a bit of respect to the readers and stopped posting this type of moronic babbling. Seriously, smarten up or I’m out of here and your readership will drop like the price of oil.”
Don’t let the door hit you on the ass.
Tatonka82 on Wed, 20th Jan 2016 10:36 am
The article does portray the challenges that going green have during a low price environment. Solar and wind are still a joke as I see it, as having payback periods of 25 years indicates that the costs of these products are still too high. As far the as accuracy of this article. The US shale production peaked in April 2015 at 9.6 MMBOPD, versus current production of 9.2 MMBOPD, so to say that production has not decreased is not accurate at all.
WJ on Wed, 20th Jan 2016 10:40 am
So many hateful greenies here. The fact is that there are trillions and trillions of BTUs still in the ground , that will be “harvested” long before renewable sources become cost effective. Wind and solar are a joke from an engineering perspective and if the are to be our major power sources then the earth will have to de-populate quite a bit.
“Peak oilers were predicting increasing costs” – is a strawman argument??? Are you kidding me? All peak oilers predict increasing costs. It’s what they do.
sidzepp on Wed, 20th Jan 2016 10:42 am
Hope you say Apneaman, you provide many good links. As to the article, this is the line of thought I listen to on a daily basis here in the panhandle and if any positive change might occur then it is learning how these pie-in-the-sky optimists think (or at least react) and develop strategies to open their minds, if that is possible.
twocats on Wed, 20th Jan 2016 10:42 am
apman – marketing analysis I’ve read on the subject strongly suggests that “rage-porn”, posting articles on subjects that your core audience DISAGREES with often attracts way more views than articles that are in the breadbasket.
doomintheuk on Wed, 20th Jan 2016 10:47 am
It’s not known as the Daily Fail for nothing.
Journalism at it’s most pitiful.
ghung on Wed, 20th Jan 2016 10:54 am
Tatonka said; “Solar and wind are still a joke as I see it, as having payback periods of 25 years indicates that the costs of these products are still too high.”
Citations? Any at all? What is the payback period of the costs of burning giga-tons of coal and gas every year? Be sure you don’t ignore the external costs, as you guys typically do. Get back to us when you can support your statements.
moosedog86 on Wed, 20th Jan 2016 10:58 am
If wind and solar are an “Engineering joke” , how is it that new commercial scale power is bid at less than 4 cents per kwh in Texas and Nevada?
Or is that some Greenie propaganda?
adamc18 on Wed, 20th Jan 2016 11:01 am
apman- absolutely correct about this being garbage. The Daily Mail is an extremist political rag owned by Lord Rothermere who lives in a tax hideout (sorry, haven). and is known in Queen’s English as a ‘rag’. His grandfather was very friendly with a certain Adolf somethingorother.
practicalmaina on Wed, 20th Jan 2016 11:05 am
Yeah alternatives are just stupid from an engineering point of view. Thats why windmills have been with us for hundreds if not thousands of years, and are being improved on daily. The first solar hot water heater was built over 100 years ago in the US, and it worked just as good as whatever carbon spewing shit system you are currently using for your DHW heating needs. Also WJ, the largest solar system is currently being used to extract some of those trillions of BTUs. In other words it had a better ROI than natural gas in an oil rich country, the engineers who worked on it when asked about their engineering feet said “It’s stupid”
Lewis on Wed, 20th Jan 2016 11:05 am
@ghung
Clearly you are a bitter person; the “external” costs MEAN NOTHING to someone buying green energy. NOTHING at all. Those costs are just things you use to gum up the argument. Those savings will never be passed on to the consumer.
Grow up. Become an adult. The financial picture is real and it impacts peoples lives everyday. You on the other hand are an embittered person who cannot be counted on to think rationally.
practicalmaina on Wed, 20th Jan 2016 11:10 am
Get off GHungs back, he knows what the hell hes talking about. I get the feeling a lot of people don’t want alternatives to work. Financial motives are very real, that’s why coal mines are closing everywhere. I know new hires in the green energy field, even as the bottom falls out on carbon energy. I also know for a fact that many people buying alt energy will source there project from the most environmentally friendly producer they can afford.
Apneaman on Wed, 20th Jan 2016 11:11 am
2015 Was Hottest Year in Recorded History, NASA and NOAA Say
http://www.nytimes.com/2016/01/21/science/earth/2015-hottest-year-global-warming.html?smid=tw-nytimesscience&smtyp=cur
ghung on Wed, 20th Jan 2016 11:20 am
Lewis;………………………………………(just so it doesn’t appear on the front page): Fuck you.
PS: “Growing up” is taking a financial hit for the better good, long-term, like I have for the last 20 years. Again, fuck off, and stop dumping your shit in my atmosphere.
Woody Welch on Wed, 20th Jan 2016 11:35 am
You mentioned nothing of the high cost that fossil fueled pollution is causing to our health. Are you really so short sighted and only interested in your current well being, not at all concerned that seemingly everyone we know has cancer or some other chronic disease related to the fossil fuel industry. I live in Texas and we are fast becoming the toxic toilet bowl of the united states as a direct result of our las a faire government oversight. Our food supply is tainted, our waters contaminated and our farmers are being forced off their lands and the abandoned well syndrome is just beginning. It’s to bad that your good writing skills are so journalistically short sighted. Or maybe you are bought and paid for like the rest of the business owned media outlets? It’s ok you will pay for it eventually!
Davy on Wed, 20th Jan 2016 11:37 am
Speaking of financial hits…..
“World Enters Bear Market – Global Equity “Dead Cat Bubble” Bursts”
http://www.zerohedge.com/news/2016-01-20/global-equity-dead-cat-bubble-bursts
“History repeats, if you’re just willing to listen. The “Dead-Cat-Bubble” is dead as global stocks enter a bear market (down 20% from May 2015 highs) and US equities catch down to the rest of the world.
*MSCI’S ALL-COUNTRY WORLD INDEX EXTENDS DROP TO 20% FROM RECORD
It would appear the business cycle trumps central planning after all…”
All indices down 3 plus percent and VIX is up to 30!!! The hammer has swung.
ghung on Wed, 20th Jan 2016 11:37 am
Then Lewis goes on to say; “The financial picture is real and it impacts peoples lives everyday. You on the other hand are an embittered person who cannot be counted on to think rationally.”
If you think your short-term financial situation trumping the long-term viability of your childrens’ biosphere is rational, I rest my case. Our children will hate your guts. It’s really a moot point anyway. Thinking like yours has screwed our grandkids, but some of us have chosen to no be entirely complicit in crimes against future humanity. It’s called “growing up”.
ghung on Wed, 20th Jan 2016 11:37 am
Then Lewis goes on to say; “The financial picture is real and it impacts peoples lives everyday. You on the other hand are an embittered person who cannot be counted on to think rationally.”
If you think your short-term financial situation trumping the long-term viability of your childrens’ biosphere is rational, I rest my case. Our children will hate your guts. It’s really a moot point anyway. Thinking like yours has screwed our grandkids, but some of us have chosen to not be entirely complicit in crimes against future humanity. It’s called “growing up”.
Revi on Wed, 20th Jan 2016 11:37 am
This guy is a dummy. Sorry.
DavidF on Wed, 20th Jan 2016 11:54 am
Heat pump for my size home and installed would cost 15,000 Canadian, cost me about 120 $ per month in the cold months effectively washing the savings, which there are none. The savings would be approximately 22 $ a month we figured out, so to break even it would take me whatever 15 k divided by 22 $ savings per month is, so no, not feasible where I am.
FatBoy on Wed, 20th Jan 2016 12:04 pm
If the whining tree huggers had their way, Petro would cost $20 a gallon and we would all be walking and unemployed.
The uneducated and misinformed, will always have their opinion, for what it is worth (just like anti-frackers)
ghung on Wed, 20th Jan 2016 12:08 pm
DavidF; As anyone here with common sense will tell you, there’s not much sense in people in Florida buying swamp coolers or snow blowers. That doesn’t mean swamp coolers and snow blowers are useless.
Darrell Beitel on Wed, 20th Jan 2016 12:10 pm
“If wind and solar are an “Engineering joke” , how is it that new commercial scale power is bid at less than 4 cents per kwh in Texas and Nevada?
Or is that some Greenie propaganda?”
That is propaganda. There is no full life cycle with maintenance and replacement factors or even close to parity costs at 4 cents per kwh.
ghung on Wed, 20th Jan 2016 12:11 pm
FatBoy said; “The uneducated and misinformed, will always have their opinion, for what it is worth (just like anti-frackers)”
…as your comment so aptly proves.
ghung on Wed, 20th Jan 2016 12:15 pm
Gosh, Darrell, maybe you can explain why one of the most oil-rich conservative states in the US has more installed wind power than any other state, by far. Enquiring minds want to know.
practicalMaina on Wed, 20th Jan 2016 12:18 pm
David, not sure what part of Canada you are from, but that sounds like an over-priced or massive system. Are you talking geothermal or air source? air to air or air to water? Small mini-splits work good in Maine, and are not overly complex or expensive. You are more than 3X the price ballpark as a small air source system in Maine. It is good to have a wood stove backup for power outage or extreme cold, but any fossil fuel boiler is also gonna need power.
simonr on Wed, 20th Jan 2016 12:25 pm
“The financial picture is real and it impacts peoples lives everyday. You on the other hand are an embittered person who cannot be counted on to think rationally.”
I am a bit confused, you seem to have made two statements, one about the reality of finance, and the other about poor old ghung, I am not sure these are related, maybe you could explain rationally in a non bitter manner how they are related.
On a different subject the Daily Mail is the second most widely read newspapers in the UK, topped only by the sun. It touts a certain Mr Farage, the English Donald Trump, so either the UK caught stupid from the US or Infected it, or ….. we are all equally stooopid
practicalMaina on Wed, 20th Jan 2016 12:29 pm
YAy equal!
Dismayed on Wed, 20th Jan 2016 12:34 pm
This idiot doesn’t understand green technology or market externalities.
twocats on Wed, 20th Jan 2016 12:35 pm
apman – i rest my case. If marmico weren’t singlehandedly blowing up the Gail Tverberg Yawner, it would have almost no postings.
Even with Short dropping this kind of shark chum into the water,
“By our calculation world petroleum production will decline by 11 mb/d within 36 months. That will wipe out 4.4% of the world’s economy. The world is now in a deflationary spiral from which there can be no escape. At what point the world’s integrated global economy comes unglued is the now the real question? We will know when some people find food on the shelves, and others don’t.”
We’ve had 18 months of low oil prices and not even 1 mb/d drop. Tii-ii-ii-iime Ain’t On Our Side, No it Aint.
kevin on Wed, 20th Jan 2016 1:17 pm
considering what oil is made up of we should never actually run out of oil forever. oil is just crushed organic matter, things are constantly dying and being buried under other things and this allows them to get pushed down as they get further and further down they eventually get crushed into oil. however this is a long process and we could use all our current supply before the earth can make more. but as long as organic matter is dying and being crushed under the crust we will have oil somewhere.
davenichols on Wed, 20th Jan 2016 2:22 pm
ghung 12:15pm Wind power (and solar power) is being installed in the US is because of these two reasons:
1) Federal and state money subsidies of about 50% of a project installed cost.
Taxpayers pay out those subsidies,
2)Regulations force electric utilities to pay wind and solar producers 3 times the utilities cost of electricity generation. Just another form of subsidy.
You can argue the merits of forcing wind and solar into the marketplace, but it’s an all-political argument, there is no cost advantage over fossil. And the argument over “peak oil” is no longer debatable. Facts have proven inconvenient.
practicalMaina on Wed, 20th Jan 2016 2:38 pm
I find most of what you said davenichols to be bullshit but I will only address the end because you dont seem like someone who listens to reason. There is no cost advantage over solar? Oil company’s are large users of alternative energy, are they doing this to subsidies the competition? Also no cost savings with renewables? I live in a state with huge rates of asthma and cancer, much of which can be directly linked to being upwind of coal electricity production. How long of a hospital stay would it take to offset the cost of PV for a family? Not fucking long!
practicalMaina on Wed, 20th Jan 2016 2:39 pm
*there is no cost advantage over fossil.
simonr on Wed, 20th Jan 2016 2:41 pm
You are saying that renewables are subsidised.
Would you not agree that nuclear is also subsidised (pre agreed over the odds price per MwH, insurance deals that limit liability).
With tax breaks (uk) for fraking, isn’t that (gas/oil) also subsidised.
Not sure about coal, I would need to ask.
Ralph griffin on Wed, 20th Jan 2016 2:42 pm
ghung, “Go back to bed”
jjhman on Wed, 20th Jan 2016 2:44 pm
“but as long as organic matter is dying and being crushed under the crust we will have oil somewhere.” by Kevin
Kevin my boy, think about it this way:
The oil we are consuming today took some several millions of years to be created. We hve consumed probably half of it in about 100 years. You are correct, though, that there will always be oil. The problem we are dealing with here is that the amount of oil available per person in the world has been decreasing for a long time. That situation simply won’t get better no matter how many tropical rain forests full of dinosaurs or protein rich sediments are sinking under inland seas each year.
james fisher on Wed, 20th Jan 2016 2:45 pm
Here in Texas the amount of road damage caused by oil trucks greatly exceeds the profits of the shale oil companies. Furthermore there is a Forbes article that states that the 30 largest shale oil companies lost 4 billion dollars in 2014 when we had much higher oil prices. So yes peak oil has arrived the shale resource is not economic to produce at less than 100 a barrel. That means that we indeed have arrived at peak oil, the surplus at the moment is caused by a worldwide economic recession reducing the need for energy.
Apneaman on Wed, 20th Jan 2016 2:46 pm
davenichols, like you, I’m a true capitalist and believe ALL subsidies should be ended.
Fossil fuels get global $5.3 trillion ‘subsidy’: IMF report
Governments fail to factor in the cost of global warming, pollution, impact on human health
http://www.cbc.ca/news/business/fossil-fuels-get-global-5-3-trillion-subsidy-imf-report-1.3079451
Global Agricultural Subsidies Near $500b, Favoring Large-Scale Producers
http://www.mintpressnews.com/global-agricultural-subsidies-near-500b-favoring-large-scale-producers/187275/