[allenwrench]

$this->bbcode_second_pass_quote('Economix', 'T')he rise in living costs, supported by high oil prices, supported by market fundamentals, may have been a contributing factor to the financial mess we're in now. No-one will even consider that, of course. Peak oil, and unsustainable behaviour generally, remains an ever present problem. Why would you deny that?

[IslandCrow]

When I came to look at the issue of PO most of the charts etc covered a range of history. In the financial crisis we seem to have lost the long term picture (as Starvid said on another thread). We are still well up in oil prices on a two-three year perspective, by a high enough perspective that makes me feel that even at this price it will hurt many firms financially. For me a 50+% rise over two years is a steep price rise, so present prices still give me cause for concern.

Yes there was a bubble and many of us wanted to believe that that was a justification of our PO position.

NO ONE IS GOING TO EAT IslandCrow [smilie=qleft1.gif]

[allenwrench]

$this->bbcode_second_pass_quote('Bas', '
')People, like JD saying eat crow now that oil prices have come down in this extreme financial crisis, and only for the last month or two are not in their right mind it seems. But then again it may be their last and only good "opportunity" to "prove" they're right while they're still able to delude themselves.

[Pops]

Corn and beans and copper and aluminum are off 40% - 50% from their highs this year; cattle, milk, hogs cotton, sugar, lumber, wheat and ethanol are likewise down.

So what to make of all that?

The one thing I haven't seen mentioned in this thread (aside from those mentioned above) is there are huge amounts of money out there looking for a place to go. Pension funds, hedge-funds, petro-dollars, etc. had been in .coms, then went into mortgages, then in commodities - each time they burnt one bridge they simply went to the next.

Looks like they ran out of bridges.

So to answer the question, there is no crow to eat regarding PO, this was just a taste, just one feather's worth of what is to come when when geologic peak or EROEI peak happens, or simply when desire exceeds ability to pay regardless of production.

[JustaGirl]

$this->bbcode_second_pass_quote('allenwrench', 'I') am waiting for living costs to go back down in line with crude.
They say the US has boosted its NG reserves by 50% by new methods of measuring reserves. Yet my gas bill just went up 30% in September.
Something wrong with that equation? A 50% rise in reserves yet my gas bill goes up 30%??

[kublikhan]

As a couple posters pointer out, commodity prices(including oil) got bid up by speculators beyond their fundamentals. When posters like myself try to point this out back in July, we were ridiculed. Now look what happened to commodities:
Commodities

So for all those claiming fundamentals supported those prices, have a nice plate of crow.

If on the other hand you are suggesting peak oil can now be dismissed because oil prices have dropped, no. Peak oil is an unavoidable reality we must deal with. Some people get a little ahead of themselves and start seeing peak oil effects everywhere they look. Or making wild predictions about the immediate future. It starts sounding like the boy who cried wolf when those predictions don't materialize. That doesn't mean we still don't have a problem however. Adequate transitions to alternatives are not happening on a large enough scale to deliver a smooth transition to a post oil world.

So if you were one of those people making wild claims about the immediate future, go ahead and admit you were wrong. But don't dismiss the reality of peak oil because a few wild predictions were wrong, or at least premature.

[allenwrench]

$this->bbcode_second_pass_quote('kublikhan', 'A')s a couple posters pointer out, commodity prices(including oil) got bid up by speculators beyond their fundamentals. When posters like myself try to point this out back in July, we were ridiculed. Now look what happened to commodities:
Commodities

So for all those claiming fundamentals supported those prices, have a nice plate of crow.

If on the other hand you are suggesting peak oil can now be dismissed because oil prices have dropped, no. Peak oil is an unavoidable reality we must deal with. Some people get a little ahead of themselves and start seeing peak oil effects everywhere they look. Or making wild predictions about the immediate future. It starts sounding like the boy who cried wolf when those predictions don't materialize. That doesn't mean we still don't have a problem however. Adequate transitions to alternatives are not happening on a large enough scale to deliver a smooth transition to a post oil world.

So if you were one of those people making wild claims about the immediate future, go ahead and admit you were wrong. But don't dismiss the reality of peak oil because a few wild predictions were wrong, or at least premature.

[kublikhan]

$this->bbcode_second_pass_quote('allenwrench', 'I') try to look at the subject from all sides. But have to choose a stance. I have to look at what is and not what I wish it to be.
And 'what is'...is that crude is running out and there is no replacement for crude.
Renewable are not a seamless and fungible replicant for fossil fuels.
Renewables do not replace the petrochemical uses of crude oil.
Renewables do not replace the specialized uses of natural gas in industry or food production.

[TonyPrep]

$this->bbcode_second_pass_quote('IslandCrow', 'Y')es there was a bubble and many of us wanted to believe that that was a justification of our PO position.

[shakespear1]

The game is not over. New discovery trends have not changed in a fundamental way, we find less and in smaller pools each year. The elephants have been hunted out.

Speculators have driven the price up, but the major driver in this price escalation has been supply/demand. The Global Finance Crisis will pare the demand down but will have no effect on the decline rates of fields. Production rates will continue to go down with each passing year unless compensated by new discoveries/production enhancement methods.

I say we have a "time out" and not a fundamental change in the PO game.

[mididoctors]

$this->bbcode_second_pass_quote('shakespear1', 'I') say we have a "time out" and not a fundamental change in the PO game.

[Economix]

Thanks, everyone, for your contributions. It's been fascinating to read the various takes on the recent crash in oil prices.

Here are my conclusions:
-- Oil will never exist in a vacuum, be it Peak Oil of 2008 or plentiful oil of 1958. It's inevitably part of a hugely complex socio-economic system that often acts in unpredictable ways. As global capital chases higher ROI around the world, oil will sometimes be the star of the show, and sometimes not.
-- The geological reality of finite oil does not have a direct one-to-one correspondence to the economic experience of those finite limits.
-- The sky is not falling. There are ways to replace a substantial percentage of oil demand with other forms of energy. Will it be enough? Can it happen fast enough? Who knows....
-- Those of us (including myself) who over-react to temporary oil price swings have much to learn about intellectual humility. (Scripture says: "Humility cometh before wisdom." I sometimes forget that.)

We've got a lot of smart people in this forum. Let's keep our minds open.

[AirlinePilot]

Here is the way I would answer this question. Some of this is slightly complicated and it's where you lose the denialists.

Lets look at the facts:
1. World Crude production has not grown in any significant fashion for almost 4 years. Most, including me, would point to the graphs and say we are on a production plateau. This plateau results from what appears to most of us here to be a flat out effort in resources and money to maintain or grow the yearly crude oil number. As of this moment it's likely we will never move very measurably above where we are now.

2. Worldwide demand has not cratered. It may even be near zero growth, but most agencies still call for low rates of growth in world oil consumption year over year.

3. World Oil discoveries continue to decline each year.

4. Peak oil is not disputed as a concept except amongst cornucopians.

5. Crude oil prices were bid too high earlier this year due to fear.

6. Crude prices have been bid too low this fall due to fear.

As someone else already pointed out you cant watch the price of crude in a vacuum. There are too many moving targets at the moment to pick which reason fits the pricing du jour.

My current take on the falling price of crude is not technically due to demand destruction. It may be, but so far the real cause appears to be massive de-leveraging of the global economy. That wont go on a whole lot longer. We'll move into another phase due to economic contraction and the policies put in place by governments to attempt to prop up an unsustainable system. We either get a depression, or a long and deep recession, but in the end it doesn't matter. It's appearing that long term we are experiencing what may be a paradigm shift in global commerce and banking. This has impacts on what the effects of peak oil bring.

What scares me more than anything else at the moment is the problems which come if this is truly due to real demand destruction. A global systemic collapse means everything will be affected. There will be no sectors which are immune to it's effects. Oil production could easily crater rapidly with this scenario. Price could rise faster than any decline in demand as oil is just to necessary to the global engine, even if it's very ill.

This is where it gets even uglier. As the price begins to climb again for oil and energy resources (EROEI writ large!) any hope of recovery becomes stifled by the unavailability of cheap energy with which to grow out of the downturn. This is mirrored in the EIA global scenario for demand and price as a series of stairsteps in demand and cost. Even though it becomes more expensive over time we still need more for any recovery, hence a continuingly climbing price punctuated by very high volatility.

Lets say than that we don't come crashing down this year and next (the global economy) and the mess can be contained. When things begin to "get better" your going to need more and more energy to sustain the patterns of growth and economic activity to grow out of the slowdown. We all know where that leads with demand.

Enjoy this short period of lower crude prices and fuel. I doubt it will last for any real length of time. We're just likely in the trough of the first real "swing" in price due to still being on the plateau.

At some point we wont maintain the plateau, I'm pretty convinced of this now. That's where the whole shooting match gets even worse and long term economic recovery becomes virtually impossible. I don't think we are there yet. I doubt we have long to wait though. Maybe a few more years of volatile markets and energy costs. After that we go down the Olduvai path IMHO.

Unless some miraculous form of new energy can be found, and found soon(or another few Ghawars), there really is no stopping it.
Predicting outcomes is folly, but I believe that due to PO we never really get much farther down the road doing things the way we do now. It's just not sustainable and we are learning our first and very painful lesson in the school of energy depletion.

[ROCKMAN]

Allen and Justagirl -- I'll offer some explanations. Above all else, NG prices are not now nor will they ever be priced based upon reserves. This is true whether those reserves numbers are for proven producing reserves or speculation of recoveries from new trends/technology. The E&P companies sell to the pipeline companies who then sell to local distribution companies for the maximum price competition will allow. Your utility (LDC) then sells it to based upon your local regulations. Your utility is allowed to raise it prices for several reasons: increased NG prices (often shown as a “fuel surcharge” on your bill), to increase profitability of your LDC and to recover increasing operating expenses by your LDC

As far as commercial NG wells being capped that's total BS. There have been some areas where pipelines were at capacity or the market had reached it max demand level. In such cases some NG wells might be shut-in or at least have their flow rates reduced. This is a common occurrence in the Rockies where there is insufficient pipeline capacity during the winter and too little demand during the summer. Capping a well means abandoning it which usually means the lease is forfeited. Not likely a company would voluntarily give up a money-making well.

But there may be times when a company may voluntarily reduce flow rate if they are not satisfied with the price. But this is a doubled edged sword for most operators. On the one hand, it’s tempting to reserve NG so it can be sold at a higher price later. Same reason car manufacturers don’t build more cars then they think they can sell. On the other hand, most companies depend upon sustained cash flows to keep operations running. During my 33 years as a petroleum geologist I’ve seen many companies sell NG below their actual finding cost because they needed the cash flow to stay alive. Shutting in production so it will be worth more after you’ve gone bankrupt doesn’t help much.

[ROCKMAN]

And for those who think we in the oil patch are all depressed right now I'll repeat myself: we are happier then a puppy with two peckers. This excludes, of course, any clever management that lost its dumb ass on future gambles. I'm talking about the E&P side of the biz...the folks that actual find and produce oil/NG.

This link does as good a job as any to describe the current feelings in the oil patch right now. It's a bit on the fluffy side but still a valid view of life for us as we see it now: RigZone

[JoeW]

Lively discussion here. Based on my reading of the weekly inventory reports provided by the U. S. DOE, I will state the following things, which may be in disagreement with what others have said:
1) The high oil prices were supported by the fundamentals right up until the very first week that year-over-year consumption actually fell. Even then, you could have made the argument that if year-over-year supply fell more than year-over-year consumption, then a higher price was still justified. Either way you look at it, I believe the defining event was sometime in the spring. I would have to go through about 20 inventory reports to be sure, and I am not going to do that. So the "bubble" was as justified one. There was no way to be sure how high the price had to go to evoke a demand-side response. Running out of inventory is not an option.

2) Peak oilers eat crow? The "fathers" of the theory (Hubbert, Campbell) predicted price volatility with an overall upward trend over time. We have seen these wild swings in the price over the last year. This happens because both producers and consumers are slow to respond to price changes due to lack of readily available substitutes. (i.e. you can't say, "Fill up my fuel oil tank with peanut butter instead. Darned oil's too pricy." You can, however, make plans to buy a pellet stove in the fall and use your fuel oil furnace sparingly. Or better insulate the house. Or install programmable thermostats. Etc.)

3. I rather doubt that anyone could have predicted the timing of this recession and the financial crisis. Its effects are far-reaching.

4. The latest weekly petro inventory report showed consumption down bigtime. That is the reason for the falling price. Year-over-year supply is also down.

[ROCKMAN]

All very good points Joe. I still think we have another 6 or 8 months before we see the inflationary effects of $100 oil. Based upon watching global DD back in the early 80's it seemed to take a good 18 months for the price spike to knock down demand. And knocked down it did go: 15% reduction in global consumption leading to $10 oil in 1986. But, then agian, this isn't 1986 given PO being here or just around the corner.

But with all the additional financial uproar I can't guess if that time table has been acclerated or delayed.

[AirlinePilot]

I'd agree it went too high on the up side, I always thought that while watching the rapid rise over 115-120. We are just over correcting for the completely wrong reasons right now.

Price may stay low for a bit, but ultimately it will trend higher sooner than later. Basically as soon as we manage how to get out of this latest financial mess high prices will come screaming right back.

That is unless you believe in the supply fairy like CERA.

I think a stable 110-120 would be far better than these wild swings for a lot of reasons.

Either way this means bad things down the road.

Peak Oil is alive and well.

[ROCKMAN]

From your lips to god's ear AP. I can promise you the oil patch would be thrilled if they could be assured prices would stay at &80/bbl and $7.50/mcf for the next 10 years. Such certainty would take much risk out of the economic analysis of projects. We also hate to see the up spikes because we know they'll be followed by the down spikes as certain as the sun will rise tomorrow.

[kublikhan]

$this->bbcode_second_pass_quote('ROCKMAN', 'A')s far as commercial NG wells being capped that's total BS. There have been some areas where pipelines were at capacity or the market had reached it max demand level. In such cases some NG wells might be shut-in or at least have their flow rates reduced. This is a common occurrence in the Rockies where there is insufficient pipeline capacity during the winter and too little demand during the summer. Capping a well means abandoning it which usually means the lease is forfeited. Not likely a company would voluntarily give up a money-making well.
But there may be times when a company may voluntarily reduce flow rate if they are not satisfied with the price. But this is a doubled edged sword for most operators. On the one hand, it’s tempting to reserve NG so it can be sold at a higher price later. Same reason car manufacturers don’t build more cars then they think they can sell. On the other hand, most companies depend upon sustained cash flows to keep operations running. During my 33 years as a petroleum geologist I’ve seen many companies sell NG below their actual finding cost because they needed the cash flow to stay alive. Shutting in production so it will be worth more after you’ve gone bankrupt doesn’t help much.