[Tanada]

$this->bbcode_second_pass_quote('Ibon', '')$this->bbcode_second_pass_quote('ROCKMAN', ' ')I’m sure I won’t be around if/when this day comes. But if China and other economies are recognizing this aspect and are beginning to prepare for it in an increasing significant manner it could add another significant driver to the POD. Little bits and pieces coming together: the Falklands back in the news, China increasing in-your-face attitude with Japan over territorial waters, Russian/Chinese pipeline deals, China’s first and little noticed air craft carrier, some terse discussions about offshore mineral rights of Greenland.. China planning their own Strategic Petroleum Reserve, etc. No one big red flag but a lot of little pieces.

[SeaGypsy]

$this->bbcode_second_pass_quote('Ibon', '')$this->bbcode_second_pass_quote('Pops', '
')
My premise is more about utility and not just ability to pay - maybe even how utility actually trumps wealth. Imagine that a barrel might power a pump to provide a whole village with clean drinking water and even though they are a fraction as wealthy as I am individually, they might still outbid me for the barrel because driving my 4x to the store for Evian just ain't worth as much as preventing cholera is for them.

[Pops]

The reason I think this is important is that the big mistake peakers made early on was thinking that oil price could somehow go to astronomical levels overnight and stay there causing the economy to collapse. I'm not saying that is impossible, some steep "artificial" shortage like war, embargo, widespread terrorist action could impact supplies to such an extent that the price rises abruptly.

But after I drew those intersecting lines on the oil price chart; increasing extraction cost on the bottom and the economical ceiling on prices at the top, I couldn't figure out what would happen next. The price couldn't break out above the economic ceiling without killing demand, which meant the price would fall and at some point impact replacement drilling and the price would rise... but it couldn't rise because the economy couldn't afford it...

Then it finally dawned on me that only conservation will allow oil prices to continue to rise allowing extraction of increasingly difficult oil.

.

[ROCKMAN]

Pops – I think I get what you’re saying. “Then it finally dawned on me that only conservation will allow oil prices to continue to rise allowing extraction of increasingly difficult oil.” But that also sounds a bit like letting 2 of your children starve so the other 4 can eat well. Very conservation minded. LOL.

But seriously, that’s sort of what I’ve been trying to describe. You have the resources to buy enough food for all 6 of your kids but the market only has enough to feed 4 of them enough to keep them alive. How do you decide who gets to eat? The market can’t lower the price they pay to the farmers because they wouldn’t grow the crops for that price. And you can’t pay for what isn’t available even though you have the money.

And that brings us back to supply balancing demand via pricing. So the market raises its prices. But now you can’t buy any food for any of your children because price has destroyed your “demand”. But if the store raise prices to where there aren’t enough buyers who can afford the food the market can’t sell and they go under. So whose kids get to eat?

That’s easy: the farmers kids because they have access to the food. Which, as silly as that analogy might sound, may also explain why some countries, like China, are not only buying oil in the ground in other countries but also farm land. Like you I find it difficult to describe the end game in such a dynamic. But there will be one regardless.

And lastly Tanada: “Don't forget women in every culture who have the choice generally find men who are economically secure more attractive for marriage while those who engage in risky behaviour attract those seeking the bad boy vibe.” Given what do for a living many would consider me falling into both categories: successful oil man engaged in risky business endangering the entire earth. Can’t get more bad boy vibe than that in the eyes of many.

But I gotta tell you, darlin’…it ain’t working for me. I’m lucky to have just this one woman who’ll deal with my broken down old self. LOL

[Pops]

Yeah, there's a continuum of utility and as the price rises we'll choose the most utilitarian use and in so doing we'll conserve.

But, and this is the whole point, since we'll be getting more value we'll also be able to pay more while using less.

And that is the way out of the "wedge". Obviously it isn't a "solution" to PO, just to the conundrum in my head of what will happen to the price.

It'll go up!

An artist's conception...

Utility.jpg

[Keith_McClary]

$this->bbcode_second_pass_quote('Tanada', 'I')f those happen to be the ones working over seas from the PRC then they will have little difficulty finding wives no matter where they are.

[ROCKMAN]

Pops – Great chart. I can get into that concept: a graphic representation of a concept as opposed to hard numbers which are often difficult to nail down without arguments ensuing.

“…since we'll be getting more value we'll also be able to pay more while using less.” ” Yep but it’s the collateral damage of the process that concerns me. Society can afford to allocate more energy to, let’s say, a petroleum geologist because the payback on the energy investment is worth it. Kinda like taking that old gas guzzler and sending it to the scrap yard and using your new 40 mpg ride. But that coffee slinger at SB can’t provide a return that can justify the high cost of their energy requirements. So how many millions of barista types do we send to the scrapyard? Oh…wait…we do have that problem with euthanasia. Damn.

It just seems so dog gone unavoidable: increasing energy efficiency, and thus being able to afford higher priced energy, means reducing inefficient aspects of our economy which means eliminating inefficient jobs. Works well for us efficient types, eh? Not so much for many others.

[Pops]

That's right, I'm not making a cornucopian argument, merely trying to understand how anyone will be able to afford the higher prices the oil biz will need in order to keep producing an ever smaller amount of more expensive oil.

You and newfie and others are of course right in the broader sense, which is why I mentioned the septic sucker's motto earlier. One persons "waste" is another's "bread and butter" so eliminating "waste" in the economy will eliminate jobs causing the overall economy to shrink.

But the price can't go all hockey-stick-like and collapse the economy overnight because few could afford to consume the same amount of oil at a much higher price so the price would fall. Rather it is a step & repeat process with "little" recessions along the way. Exactly like the failure of spare capacity during the 05-08 oil price run-up led to demand falling and eventually tanking in 09 which I see no reason to believe didn't contribute to the recession. Elimination of some "waste" initiated the so called "recovery" – under the higher oil price regime.

[Tanada]

$this->bbcode_second_pass_quote('Pops', 'T')hat's right, I'm not making a cornucopian argument, merely trying to understand how anyone will be able to afford the higher prices the oil biz will need in order to keep producing an ever smaller amount of more expensive oil.

You and newfie and others are of course right in the broader sense, which is why I mentioned the septic sucker's motto earlier. One persons "waste" is another's "bread and butter" so eliminating "waste" in the economy will eliminate jobs causing the overall economy to shrink.

But the price can't go all hockey-stick-like and collapse the economy overnight because few could afford to consume the same amount of oil at a much higher price so the price would fall. Rather it is a step & repeat process with "little" recessions along the way. Exactly like the failure of spare capacity during the 05-08 oil price run-up led to demand falling and eventually tanking in 09 which I see no reason to believe didn't contribute to the recession. Elimination of some "waste" initiated the so called "recovery" – under the higher oil price regime.

[ROCKMAN]

Tanada – Yep…better in Texas than most places. But the rise in energy costs still has it victims here. I think I mentioned to you about some folks who were selling their old cloths and kids’ toys at a garage sale to help pay for the work commute fuel. That’s why talks of conservation and decreasing energy demand, especially as a result of higher prices, doesn’t fill me with unbounding joy. Such efforts would certainly provide benefits…for some of us. Just like the point-man technique: very beneficial when TSHTF…except for the point man, of course. LOL. But that’s why you put your least useful grunt on point. I grew up in that “throw-away” segment of our society but fortunately escaped. But I never forget those hopeless feelings. The system is self-correcting. And luckily for some of us we have a lot of economic point men to feed to the system.

[Pops]

$this->bbcode_second_pass_quote('', 'A')greed, but the reason the 'recovery' has never been strong is all that eliminated waste was a big chunk of the GDP of the country.

[Duende]

Pops wrote:
$this->bbcode_second_pass_quote('', 'Y')eah, there's a continuum of utility and as the price rises we'll choose the most utilitarian use and in so doing we'll conserve.

[ROCKMAN]

D – I suspect there’s a bit of semantic disconnect. For me (and maybe Pops) “utility” isn’t subject to judgment. The utility of an energy expenditure is subject to what that energy consumer considers worthwhile to them…not me or you. That could be buying a $5 million sailboat or building a new store and hiring a bunch of folks. You and I may see a greater benefit in expanding the business but we don’t get to make that call. As we stumble down the PO path those decisions on what constitutes utility are going to be made by the folks who can afford that energy. The folks on the bottom of that pyramid that will be driven to being more “efficient” to the benefit of the upper pyramid.

And yes: the utility of NASCAR is very important...to the folks who are paying the bill for it. Maybe not to you and me but that's not a determining factor in the utiltity of that energy consumption. I'm sure many NASCAR fans would consider the energy we use on this site is of poor utility. LOL.

[Tanada]

$this->bbcode_second_pass_quote('ROCKMAN', 'D') – I suspect there’s a bit of semantic disconnect. For me (and maybe Pops) “utility” isn’t subject to judgment. The utility of an energy expenditure is subject to what that energy consumer considers worthwhile to them…not me or you. That could be buying a $5 million sailboat or building a new store and hiring a bunch of folks. You and I may see a greater benefit in expanding the business but we don’t get to make that call. As we stumble down the PO path those decisions on what constitutes utility are going to be made by the folks who can afford that energy. The folks on the bottom of that pyramid that will be driven to being more “efficient” to the benefit of the upper pyramid.

And yes: the utility of NASCAR is very important...to the folks who are paying the bill for it. Maybe not to you and me but that's not a determining factor in the utiltity of that energy consumption. I'm sure many NASCAR fans would consider the energy we use on this site is of poor utility. LOL.

[Ibon]

$this->bbcode_second_pass_quote('Duende', '
')
The wealthy will keep playing musical chairs as demand destruction claims the rest as supply is constrained. Same as it ever was.

[Ibon]

$this->bbcode_second_pass_quote('Pops', 'T')hat's right, I'm not making a cornucopian argument, merely trying to understand how anyone will be able to afford the higher prices the oil biz will need in order to keep producing an ever smaller amount of more expensive oil.

[Newfie]

I'm reminded of Dennis Meadows talking about his computer curves from th Limits To Growth. While the computer piloted out curves way down the slope, Meadows cautioned that the downward curves had no validity past the point where the first one broke negative. At that point we would be entering a new paradigm for which we have no good models. His curves are unreliable after the peak.

Pops, I think you are, at some point, trying to plot those curves.

[Keith_McClary]

$this->bbcode_second_pass_quote('ROCKMAN', '�')��…since we'll be getting more value we'll also be able to pay more while using less.” ” Yep but it’s the collateral damage of the process that concerns me. Society can afford to allocate more energy to, let’s say, a petroleum geologist because the payback on the energy investment is worth it ... But that coffee slinger at SB can’t provide a return that can justify the high cost of their energy requirements. So how many millions of barista types do we send to the scrapyard?
It just seems so dog gone unavoidable: increasing energy efficiency, and thus being able to afford higher priced energy, means reducing inefficient aspects of our economy which means eliminating inefficient jobs. Works well for us efficient types, eh? Not so much for many others.

[SeaGypsy]

Taking it to conclusion, robots will do ALL the work, everyone will be on the dole; might be nice if the population is low enough. The only way to get rich will be through art.

[Shaved Monkey]

Why would you need to be rich ?
Im going to be like the Mexican fisherman

http://www.inspirationpeak.com/shortsto ... erman.html