[Graeme]

Peak Oil: The Next 5 Years

$this->bbcode_second_pass_quote('', 'I') suppose this post should be titled, "Why you want to own long term oil futures." The following graph of "all liquids" supply and demand going forward five years gives us an basis to compare recent observations on peak oil by Matt Simmons, Charlie Maxwell and Chris Skrebowski, three very astute oil observers, and draw some conclusions.

The HoweStreet piece features an extremely worthwhile interview with Simmons that is in three parts. In it, Simmons maintains that the difference between peak oil believers and peak oil optimists is that the former focus on flow rates and the latter on hydrocarbons in the ground. Industry people tend to believe that there are plenty of hydrocarbons around and increasing flow rates is a relatively straightforward matter of applying sufficient capital to get the hydrocarbons into production and that higher oil prices will do the trick.

The clear implications of the graph of IEA projected flows and the actually less optimistic graph by Sadad Al-Husseini - neither of which are thought of as peak oil adherents - is that there will be a serious supply problem by 2011.

Moreover, if one modifies the IEA graph to adjust for what appears to be significant over-optimism in regard to non-OPEC production, it seems clear that the ability of global oil flows to satisfy demand will become quite problematic in 2009. Furthermore, unless Iraq and Nigeria begin increasing production soon, flows may not be sufficient in 2008.

If Al-Husseini is correct, and the growth in oil supply is fairly minimal during the period we have now entered, we can much better understand why the price of oil now seems stuck near $100 despite reduced driving and an economic slowdown in the U.S. that could expand to other parts of the OECD.

[Tanada]

My prediction for the next five years. Once the new US President gets in office and is faced with PO they will cast about for a solution so that they can get re-elected in 2012. Opening new areas for oil exploration won't help on that time scale. What can they do? World War Three seems unlikely to work if you exam the results of the Iraqi invasion.

Then someone will point at Oil Shale, Tar Sand and Coal To Liquids. Despite the ecological horrors these sources pose money will be created and the government will either grant funds outright or 'garuntee loans'. Either way you will see massive Coal to Liquids, Tar Sand (yes the USA has those too) and Shale Oil recovery plants built. By 2012 the price of oil will stabilize because enough demand will be offset by the USA.

Oh yeah, and Global Warming will flip over into the higher temperature band and everyone will point fingers at each other and refuse to accept their share of the blame for it.

[retiredguy]

And after they drain the Great Lakes to provide the steam needed to cook the tar sands in western Colorado, we'll have a land route to Michigan that won't involve going through Chicago.

Hey, I'm trying to look on the bright side!

[evilgenius]

I wonder if the solar and wind bubble that so many people are predicting will materialize? If, because the world will try to achieve so much in such a short time, in a timeframe which is too short to be realized, they will essentially wilt under the pressure.

I've been saying for some time that the stage has been set for further intrigue in Iraq. I believe that the US will (at least mostly) withdraw. The problem will be that the Sunnis and Shias will engage in civil war and the next president will have to send the troops back in. This is where what Bush and Co. have done will emerge as far as dictating the destiny of the US during the next administration. In a world resolved to at least try to maintain energy balance going back in won't seem so bad, neither will siding with the Sunnis.

I think this will be the most dangerous time for the US. Their resources will be strained. They will really be sticking their necks out militarily. Big powers don't usually expose themselves in this way, they usually try to expose proxies. The Bush people made the mistake of not making this a proxy fight when they could. Of course, the seeming obvious proxy of the Shia would not have jived with the Saudi regime. The Bush people decided not to make the Iraq endeavor more complicated. They made a mistake when they made that decision. It isn't good to engage in an expedition as a world power yourself when losing means everything. At least if they had employed a proxy they would be in the position of still having a strong bargaining position if went wrong.

If I can, and I see this scenario taking place, that is when I will load up heavy on gold. If the US loses somehow after going back in then gold will be the only thing worth any kind of value. If they win then I will lose a little but the risk won't be as heavy as it would for inaction the other way. If they lose then the despression talk will become a lot more than just talk. the paradigm will be over and a new one will emerge, one not dominated by the Empire's new world order.

[BigTex]

$this->bbcode_second_pass_quote('evilgenius', 'I')'ve been saying for some time that the stage has been set for further intrigue in Iraq. I believe that the US will (at least mostly) withdraw.

[evilgenius]

$this->bbcode_second_pass_quote('BigTex', '')$this->bbcode_second_pass_quote('evilgenius', 'I')'ve been saying for some time that the stage has been set for further intrigue in Iraq. I believe that the US will (at least mostly) withdraw.