[Viper]

Of course, all of this does pose an interesting question. I wonder how much demand we price out of existence at $80 oil. $100? $120?

The number of people who we'd be competing with for crude would come down at the higher prices. It's the same story with gas. I know that I would cringe at $8 a gallon gas, but I bet it would be available to me since many people would be forced to adopt "other means" at that price.

I'm not to worried. Even if the amount of crude available dropped by 30% over the next 10 years, I think we will do just fine. (And I don't see a 30% drop over the next 10 years as realistic.)

What I see is a slow degradation of our crude lasting maybe 80 years or so. At the same time, I think people will start thinking up things like using the heat from a nuclear reactor directly to melt the oil in tar sands.(Less conversion steps than producing electricity.) All the while we keep improving solar and making its use more widespread.

In 50 years or so, the machines take over, the nanobots turn the earth to gray mush, or a super virus makes the human race extinct, but hay, it was fun while it lasted.

-Viper

Think peak oil is bad? Read Bill Joy's column on what the future holds for us: Why the future doesn't need us. http://www.wired.com/wired/archive/8.04/joy.html

[Aaron]

The US currently subsidizes 30%+ in fuel costs to our domestic trucking industry. That's today...

Just how much do we imagine the Fed's can subsidize domestic transportation? 50%? 100%? And what happens when Washington has to choose between Social programs and subsidized energy in budgets?

The Bush camp is behind the Federal highway bill which would provide billions in Federal funding to meet growing traffic challenges. McCain is on ABC right now saying that future budget cuts in critical programs will be a hard, but unavoidable set of decisions for our future...

Forget about some future collapse... seems we may all have a long and painful period of economic implosion before we see any doomsday.

[The Ducker]

"Forget about some future collapse... seems we may all have a long and painful period of economic implosion before we see any doomsday."

Ahh, right there, don't you see. Falling energy is the root cause of the economic implosion. As many great minds have stated: it's all built on cheap energy (oil). No cheap oil, no expansion; no expansion, then contraction and eventual implosion.

I have a hypothesis that what really happened in '73 and especially '79, if you believe Hubbert's curve, is that the projected curve at those points was so perfectly situated on the normal that it scared the hell out of the powers that be (look at it), coming right after they realized Hubbert was right about the U.S. peak. Complete, sustained, sharp demand destruction by way of high prices occured, following by a severe global recession (early '80's), and attendent falling production. We could and would recover, of course, from that, because we had additional capacity. Now, of course it was "geopolitics" as the "cause' but that means it was a conscious decision to do it. Was OPEC dumb enough to let demand start to outstrip supply then? No. They had to destroy demand.

Fast forward to 2004 (or 2005, or 20008 or what have you). Sharp, severe, sustained demand destruction followed by a severe global recession. But get this, at some point, we cannot produce our way out of it. There's no more upswing. Shock after shock after shock. Implosion.

[Guest]

$this->bbcode_second_pass_quote('Aaron', 'T')he US currently subsidizes 30%+ in fuel costs to our domestic trucking industry. That's today...
Just how much do we imagine the Fed's can subsidize domestic transportation? 50%? 100%? And what happens when Washington has to choose between Social programs and subsidized energy in budgets?

[The Ducker]

"But of course there is no greater force in government than the drive to maintain the status quo."

How true you are!!

They only react. TRY to come up with one major piece of legislation that was truly pro-active, not reactive. I couldn't:

FDR's New Deal? Nope. Reacted to Great Depression

Patriot Act? Nope. Reacted to 9/11.

Civil Rights Act? Nope. Reacted to civil rights movement.

Apollo Program? Nope. Reacted to the possibility of the Russians beating us.

Oh, I got it.

Teddy Roosevelt's National Park System. That was wise, pro-active, and planned. Amazingly prescient.

[Guest]

It's true, the government will only do something if people bitch and moan enough. If people aren't bitching and moaning and the government tries to spend vast amounts, they will complain that the government is spending tax dollars on useless programs.

Also, you forget Truman's containment policy on communism that bore fruit during the Reagan administration as a classic example of government foresight and pro-action in the absense of public outcry.

[The_Virginian]

$this->bbcode_second_pass_quote('', 'T')eddy Roosevelt's National Park System.

[Sedona]

Being able to afford $10 a gallon gas is not the issue really, nor is transport costs. We have to look at the big picture. Currently the US dollar is the oil currency in the world. Iraq went to the euro and got invaded. Iran has moved to the euro as well, along with N.Korea. Where have I heard those names before?? Ah! the "axis of evil" speech!

We are running a $520 billion dollar federal deficit and a $600 billion dollar trade deficit wich is over 5% of GDP. The last time we hit 5% of GDP in 1987, the market crashed. In June 2004, we had a one month 20% increase in the trade deficit to $55 billion dollars. If it keeps growing due to oil import prices, we will see a market crash for sure. We just pumped a huge tax cut into the economy and have the lowest interest rates in 40 years, but we still cannot get the economy to grow even enough to create new jobs for those entering the job market. If 1.5 trillion dollars of tax cuts and deficit spending won't revive this economy, nothing will.

We have another "peak" on the way as well. 80 million baby boomers will soon start retiring in 2008. The shortfall currently projected to meet "contractual" obligations for Social Security, Medicare, Veteran benefits, and govt pensions is 44 trillion dollars!

55% of our federal debt is held by foreign banks, primarily China and Japan. We have to have 1.7 billion dollars a day from them to fund our deficit spending. 10 more members joined the European Union in June making it the largest GNP and oil consumer in the world. There is great pressure for OPEC to move to the euro for oil sales. If the foreign banks dumped America dollars on the market or had to switch to euros, the dollar would collapse. But so would the foreign bank economies. Right now, we have financial terrorism at work on them to keep things afloat. The last time they tried to support the dollar in 1988-89 their banking systems collapsed.

Couple all this with $10 gas and you would light an inferno.

[Sedona]

Correction to my last post. I meant 1998-99 not 88-89 at the end of my post.

[TheDucker]

Great post, Sedona. You have given me much to think about.
I think your postulates are essentially correct, however, much more than this is at play, I think.
Someone else posted a quote from the movie "Network" you'd get a kick about. Do a search for it. It talks about petro-dollars.

[Permanently_Baffled]

Sedona your comment about the new EU being the biggest consumer of oil is not correct according to BP. Even if add all of the EU, Russia and all of the ex soviet states , consumption is still less than that of the US(19m barrels per day against 20m)

Second to this , the US figure is growing faster than the EU. The US figure grew between 1990 and 2003 by 3 million barrels per day where as the EU, Russia, and ex soviet area figure dropped by 4 million barrels per day.

Don't mean to be picky , just thought this might effect your theory.

Cheers

PB

[Viper]

$this->bbcode_second_pass_quote('', '5')5% of our federal debt is held by foreign banks, primarily China and Japan. We have to have 1.7 billion dollars a day from them to fund our deficit spending. 10 more members joined the European Union in June making it the largest GNP and oil consumer in the world. There is great pressure for OPEC to move to the euro for oil sales.

[Guest]

This is astounding. How does the IEA think the demand can be met?

[Permanently_Baffled]

I think the IEA have mad a mistake on your top graph, the figure on the vertical axis is not barrels per day , it is $ price per barrel!!!

[Soft_Landing]

You may end up being right about that PB... :D

The thing that most concerns me is that if you look at 4th quarter demand, it's always at lot higher than third quarter. This is the most significant seasonal variation... But hang on... We're in the 3rd quarter right now... And the market is already extremely tight...

On the bright side, the market might be tight now because the 4th quarter demand is so large. That means specuators can be pretty sure prices wont do down too far. Yet there's significant upside potential. It's the perfect speculatory place to stash your cash. The record prices we are seeing now might be preemptive strikes, in a sense, as is the flavour of the season.

OPEC has been harping on about how the market is so oversupplied, but price wont come down. Well, it doesn't take a genius to look at that graph and say, if the market is over supplied by 1.5 mb/d now, then come december, oversupply is going to be approximately zippo.

[MonteQuest]

Here's another quote off their website. Are we missing something here? How can anyone keep a straight face and make these kind of projections?


$this->bbcode_second_pass_quote('', 'W')orldwide crude oil distillation capacity was 81.9 million barrels per day at the end of 2002. To meet the growth in international oil demand in the reference case, worldwide refining capacity is expected to increase by about 53 percent—to more than 125 million barrels per day—by 2025. Substantial growth in distillation capacity is expected in the Middle East, Central and South America, and the Asia/Pacific region

[Guest]

Catch this?$this->bbcode_second_pass_quote('', '"')Of course OPEC is one of the players in the game but today's prices are very much in line with our own findings,'' Claude Mandil, executive director of the International Energy Agency said in an interview in Sydney yesterday. ``The market is over-supplied and market prices should not be as high as they are. That's not the case in the last quarter when we expect an increase in demand.''

[Soft_Landing]

It's great to have such wonderful guests, popping up with good info all the time... I'm not sure if it's the same 'guest' who keeps posting about the world energy conference, but if it is, are you at the conference? You seem to be first on the ball when it comes to conference proceedings...

[Guest]

There are multiple, multiple guests posting here on occassion. For instance, that last post (mine) was not the same poster as the initial thread post. This site seems to be a very large collaborative effort indeed.

I'm not at the conference, no, just very observant. I have a search filter running on Google News with certain keywords. It's picks up lots of things.

[seb]

Original article is here here.

OPEC offer is up 710000bd for a total of 29.9 millions bd. This new offer comes mainly from Iraq after sabotage damage had been fixed.

SA offer is flat at 9.5 millions bd while other OPEC members are at full capacity.

The interesting point of this article is that it is claimed that non OPEC members saw their offer down due to local problems (hurricane, maintenance work on platforms in North Sea...) and it is expected that until december non OPEC offer will be up 1.4 millions bd!

I am waiting for this good piece of news becoming reality.