[Free]

The 'peak oil' deja vu - By Bob Hoye$this->bbcode_second_pass_quote('', 'F')rom Wall Street to Main Street, concerns over the phenomenon known as "peak oil" have reached a fever pitch. "Peak oil", of course, is the hypothesis that global crude-oil production has peaked, or will soon, and is destined to start a permanent decline thereafter - with frightful consequences, it is usually argued, for Industrial Civilization as We Know It.

Unfortunately, there are still some laggards who are not sufficiently impressed with the self-evident truth of this theory to be spurred into dramatic action. Consequently, a leading energy expert has slammed the skeptics and, at the same time, elevated the status of the true believers.

Although energy is mainly a secular matter, the expert writes: "This is a question of almost religious importance which needs the study and determination of every intelligent person." His key message is: "It is the material energy - the universal aid - the factor in everything we do. With petroleum almost any feat is possible or easy; without it we are thrown into the laborious poverty of early times."

Straight from today's editorial pages, except for two minor details: these quotations have been provided without a date, and with one key word changed.

The date was 1865; the important energy source was coal, not petroleum; and the writer was Stanley Jevons - a leading economist. His book, The Coal Question, was thoroughly researched and broadcast his personal concerns that the industrialized world was about to run out of coal and civilization would therefore collapse.

Now, of course, the concern is that we are running out of oil and great distress will follow. As with any such concerns both then and now, the intellectual speculation seems mainly driven by soaring prices. Commodity prices had been increasing for 20 years in 1865, and soared further with the American Civil War and the dollar depreciation that went with it.

However, the predicted collapse never materialized. Instead, the market soon attended to the price problem. To this day, there is no shortage of coal; in fact - ironically - plentiful coal supplies are periodically alluded to as an alternative to allegedly "peaking" oil.

... It is very likely that petroleum prices remain subject to the historical long-term trends, with the ups being provided by great asset inflations, and the downs provided by the lengthy post-bubble contractions.

Fluctuations caused by the four-to-five-year business cycle are also evident in the history of crude prices. On the most recent one, crude prices have rallied from $17.48 (spot West Texas intermediate) in November 2001 to the recent high of $75. However, it's important to peer through the distortions caused by policies of deliberate currency depreciation, and this can best be done by adjusting the price according to the PPI.

The "big" high with the 1980 Iranian crisis was $73. This sets the 2001 low at $21.82, from which it has soared to $75. In 1980, the prediction was that crude would get to $90, which compares to today's touts of $100. Obviously, conditions today are as speculative as at the 1980 high or, for that matter, at the 1920 high.

With such market compulsions evident again, it's natural to ask the question, "Are we there yet?" - meaning at the end of yet another speculative trip in energy prices. In answering this question, it is prudent to observe that every great mania in energy prices has occurred close to the peak of a business cycle. For many, the main prerequisite to a slump in crude prices would be a cessation of the troubles in the Middle East, which is unlikely. For the more disinterested, the best explanation would be just another post-bubble business contraction whereby prices for most commodities go down, including oil.

... Nonetheless, speculative excesses have captured the imagination of pundits, punters, policymakers, and intellectuals in a manner uncannily reminiscent of the similar excesses displayed by the same crowd in 1980 - or during any of the other great commodities bubbles in economic history.

[pea-jay]

Read the article. It is just another good example of an ECONOMIST trying to make sense of a geological problem.

[Free]

For me it's a classic example of the "it happened in the past, so it will happen in the future" fallacy.
Somehow this seems to be deeply wired into us humans...

[aahala]

"However, the predicted collapse never materialized. Instead, the market soon attended to the price problem. To this day, there is no shortage of coal; in fact - ironically - plentiful coal supplies are periodically alluded to as an alternative to allegedly "peaking" oil. "

Jevon was writing specifically about UK coal. In 2003 the UK
produced less than 10% what it did about 1900. In 1900, about
25% of production was exported; more than half of the country's
current consumption has to be imported.

You may be able to find new coal or oil deposits if you look in other
places. Eventually every place on earth that can be examined will
be, what happens then?

[Gazzatrone]

Deja Vu maybe, the difference this time is that back in 1865 what came along to appease the energy crisis of the day?

Oil.

What new energy source will save us this time?

Nuclear?

To environmentally dangerous. Remember that the Greenpeace Brigade have made us believe that all Nuclear powerstations are Chernobyl's waiting to happen.

Plus the added danger of all those nutcase lunatic fundementalists with handfuls of spent Uranium running around wanting to kill us all and destroy our way of life.

Coal?

Well if you want Global Warming tomorrow instead of 20 years time, go for it.

Natural Gas?

Read Oil Crisis and another feeling of Deja Vu.

Biofuel?

If you want to go hungry then its the smart move. Remember the Yuppie Moto.

"Eatings for wimps."

Also Read Oil Crisis when crops fail due to Earth Climate change brought on by Global Warming and price of sugar goes through the roof.

There's that Deja Vu again.

Renewables?

Nice idea but they just ain't oil are they!

As the writer fails to point out in his piece, at each energy crisis, there was a solution to the problem.

With regards to the 70's and 80's, post price increase and strife, there was still a plentiful supply of oil still in the ground. More importantly it was good oil.

To me his writing reads like those of an optimist, for me he reminds me of a quote by George Santayana.

"Those who do not remember the past are condemned to repeat it."