[jane]

There is a great article in The Economist, May 31st - June 6th edition. Pages 79-81 go into the specifics of economic changes that may or may not take place in the coming future, as well as current oil issues.
The article juxtaposes Peak Oilers with Oil Speculator theories. While Peak oilers believe production will decline, Speculators push up the price. Both believe something bad is happening with world oil markets.
Thus far, the article makes claim that increase of oil prices will reduce demand and increase supply. I would say this is a third theory that currently seems to be coming true.
But rising economies are subsidising oil prices, as the article says, and countries like China seem to be causing a greater oil depletion problem. It seems that economic growth is not such a good thing, and making more money means having less oil.

[MrBill]

If you give me the details of the article I will post a link from the online edition. Unfortunately, if you are refering to the print edition it is hard to know which article you are refering to as there are various print editions. Thanks.

[wisconsin_cur]

Maybe this one?

$this->bbcode_second_pass_quote('', 'A')s different as these theories are, they share a conviction that something has gone badly wrong with the market for oil. High prices are seen as proof of some sort of breakdown. Yet the evidence suggests that, to the contrary, the rising price is beginning to curb demand and increase supply, just as the textbooks say it should.

[MrBill]

$this->bbcode_second_pass_quote('', 'B')ut improving an existing refinery or building a new one is a slow and capital-intensive business. Firms tend to be very conservative in their investments, since refineries have decades-long life-spans, during which prices and profits can fluctuate wildly. It can also be difficult to find a site and obtain the right permits—one of the reasons why no new refineries have been built in America for over 30 years. Worse, new kit is becoming ever more expensive. Cambridge Energy Research Associates (CERA), a consultancy, calculates that capital costs for refineries and petrochemical plants have risen by 76% since 2000.

Much the same applies to the development of new oilfields. CERA reckons that the cost of developing them has risen even faster—by 110%. At the same time, oilmen remain scarred by the rapid expansion of output in the late 1970s, in response to previous spikes in prices, that led to a glut and so to a prolonged slump. Exxon Mobil claims that it still assesses the profitability of potential investments using the same assumptions about the long-term oil price as it did at the beginning of the decade, for fear that prices might tumble again. Environmental concerns are also an obstacle: America, for one, has banned oil production off most of its coastline.

Increasing nationalism on the part of oil-rich countries is adding to the difficulties. Geologists are convinced that there is still a lot of oil to be discovered in the Middle East and the former Soviet Union, but governments in both regions are reluctant to give outsiders access. Elsewhere, the most promising areas for exploration are also the most technically challenging: in deep water, or in the Arctic, or both. Although there have been big recent discoveries in such places, they will take longer to develop, and costs will be higher. The most expensive projects of all involve the extraction of oil from bitumen, shale and even coal, through elaborate processing. The potential for these is more or less unlimited, although analysts put the costs as high as $70 a barrel—more than the oil price this time last year.

Nonetheless, PFC Energy has examined projects that are already under way, and concluded that global oil production will grow by over 3m barrels a day (b/d) over the course of this year and next. In particular, it expects production outside OPEC to grow by about 500,000 b/d both years—a marked increase from the near stagnation of recent years.

Meanwhile, the high price is clearly beginning to crimp demand. The growth in global consumption last year was barely a quarter what it was in 2004 (see chart); this year, it is likely be even lower. In rich countries (or at least among the members of the Organisation for Economic Co-operation and Development (OECD), a rough proxy), the effect is even more pronounced. Consumption has been falling for the past two and a half years.

Poorer countries' demand for oil is still rising, albeit at a slowing pace. That is partly because their economies are growing faster, and partly because their consumers are shielded from the rising price through subsidies. But the increasing expense of such measures is forcing governments to water them down or scrap them altogether (see article). That, in turn, should further sap consumption.

[jane]

Well, Mr. Bill, I am not sure if you mean to say that I am correct in my assumption or not. Of my understanding the article says the poorer countries are using more oil, because they are getting richer.
In any event this is looking somewhat positive, for oil consumption is going down. It begs the question, then, what are we afraid of? I think a lot of opponents against Peak Oil would argue this point. Although, we still have an oil depletion problem, whether it be now or 100 years from now. Maybe its a question answered more on the lines of- its preventative maintenance. If anything it "buys" us richer countries more time to search for reasonable replacements, without having to destroy the land. I believe in order to extract such energy sources such as coal, it literally tears the earth apart.

Growing economies as far as I know, unfortunately, are not concerned with finding alternatives. Which begs another question, as a world more connected, and where economies have become global, is it in the richer countries best interest to "school" the poorer ones. Of course, its no ones place to tell another what to do, but if we are all connected, maybe it is our right to at least work together?

Thanks wisconsin_cur, thats the article. I have the magazine itself so I never thought to look online.

[wisconsin_cur]

What is under Mr Bill's name is a quote from the same article that I linked to. By some computer magic I intended to add it to my earlier post, in fact I thought I had added it to my post. If Mr. B. comes and says he did not post it than I will edit it around so it is not under his name, if he did enter it than his and my mind think a lot a like... we both included the graph at the same place.

[jane]

OK, I knew we were on the same article, but that excerpt is better explained now that you say you wanted to quote it.
The article has an unbiased view point, taking no ones side really. But it definitely shows oil depletion in well defined, "whole picture", economic scope.

I am more partial to what The Economist says over CNN anyday, personal preference...

[MrBill]

Cur, I knew something was funny? I added the graph, but then it looked like I edited your post by mistake? So I tried to fix the error that I made. If by some mistake I did edit your post then please forgive me. It was not on purpose.

[MrBill]

Jane, there are several points. The most important point being the balance between total available supply and global demand. Demand in the OECD is growing more slowly than in the developing world, especially OPEC and non-OPEC oil producers as well as Asian manufacturers, but total world growth in demand is still positive.

The IEA thinks that two-thirds of new demand came from India and China alone in the past 7-years, but certainly demand for energy in oil exporting countries like the Gulf is growing quickly as well. That chart is for oil demand, but it is safe to say that the demand for all energy, including oil, is rising faster than increases in supply.

If high prices lead to (potential) demand destruction that is good. But also keep in mind that due to the mix of the economy between manufacturing and services, for example, lesser developed countries use more energy per unit of output or GDP growth. Therefore their higher headline growth rates use more energy, and their faster growth sucks in investment that leads to more energy use.

Were it not for finite resources like crude oil that growth would be lifting millions out of poverty, and be seen largely as a good thing because as a society becomes richer it demands a cleaner environment, etc. But unfortunately we are all competing for the same finite resources - rich and poor, north-south, developed versus lesser developed - so there is a natural competition for those remaining resources.

[MrBill]

$this->bbcode_second_pass_quote('', 'C')anada's top earners leave the largest ecological footprint, according to a study released Tuesday correlating income levels with consumption.

The study, conducted by the Canadian Centre for Policy Alternatives, evaluates consumption of food, housing, mobility, goods and services. Canada's top earners, those with a disposable household income of above $155,000, have an ecological footprint measuring 12.4 hectares per capita — 66 per cent larger than the average Canadian household.

"When we look at where the environmental impact of human activity comes from, we see that size really does matter," said CCPA researcher Hugh Mackenzie in a release.

The report noted that in all categories except for food, high-income Canadians had a larger ecological footprint. In the mobility category, consumption patterns were notably pronounced, with the footprint of top earners measuring almost nine times the size of the lowest-income households. The report said richer households relied more on private cars, vans, trucks and passenger air travel.

"At the low end of the income scale, motor vehicles are either not needed, not affordable or used sparingly," the report said. "At the high end of the income spectrum, there are not only more motor vehicles per capita, but also more expensive vehicles that require a larger footprint to produce, maintain and operate."

In terms of housing, the report noted richer households tend to have a higher footprint because they purchase larger, detached homes that consume substantial amounts of energy for heating, cooling and lighting.

The study said that Canada as a country produces a considerable ecological footprint at 7.6 hectares per capita — behind only the United States and the United Arab Emirates.