$this->bbcode_second_pass_quote('lorenzo', '')$this->bbcode_second_pass_quote('OilFinder2', 'O')nly $8 more to go!

[Cog]

I voted by the end of the year. A month ago I would not have even considered this a remote possibility. The current global meltdown must be a lot more severe then even Helicopter Ben has been letting on.

[Polemic]

You ought to come back to Austin, emerson. I wouldn't want to ride out teh d00m in Dallas.

Dallas is considered the 'financial capital' of the U.S. Southwest. Well, that's all down the drain now.

Oil price:

My hunch is that the dollar will tank and send oil prices soaring in USD.

[KevO]

it wont allow votes now

[seahorse]

Lorenzo,

This economic crisis may continue to crash oil to who knows where, but I disagree with this statement by you:

$this->bbcode_second_pass_quote('', 'T')ake into account a spreading recession and massive demand destruction, Iraq's recent revelation (bigger reserves than SA), Brazil's huge finds, and America's new investments in drill, drill, drill baby, drill.

[threadbear]

It's all about the US dollar now. Gold is signalling expectations of a sling shot effect.

[yesplease]

$this->bbcode_second_pass_quote('seahorse', 'C')rashing oil prices is really terrible for everyone, and probably mean will will hit "PO" sooner, rather than later, for several reasons.

[seahorse]

Yesplease,

If I were convinced that our "demand destruction" was the result of our people and economy being more efficient at all levels, like driving less for unneeded trips, then I would welcome the drop in price due to demand destruction.

The problem I see is our demand destruction isn't the result of people and businesses becoming more efficient, but simply, businesses going under. My suspicion is that most of the demand destruction is simply reflecting businesses going under, meaning, people don't have jobs and no money to drive. For example, when housing stops, that saves a lot of fuel bc a lot of fuel is burned cutting logs to make the lumber for a building, delivering those cut logs to sawmills, delivering that lumber to places like Lowes, Lowes then delivering those materials to the jobsite, framers and other subs driving to the jobsite. It takes a lot of fuel to build anything. So, when housing and commerical building go bust, it saves a lot of fuel, but this demand destruction does not mean we are more efficient, it just means we are now broke and a lot of people are out of work.

So, if this demand destruction reflected greater efficiency, I would welcome it, but I'm not convinced it does.

Now, most unfortunately, this "100 year" financial catastrophe hits just as we approach the end of the oil age and need the money and financial wherewithall to meet that challenge. No matter what we call this financial situation we are now in, a recession, depression, a "100 year" event, it comes at a most unfortunate time, when the world no longer has "cheap easy to access oil" left to find and burn, and when a peak in world oil production is, by most accounts, in the foreseeable future. So, whatever we call it, with lots of unemployed people and bankrupt companies, including our banks being effectively bankrupt, we have no money to rebuild and transition into a "new" more efficient society of nuclear, hybrid cars, solar, etc., that are necessary to employ and continue sustaining the six billion people that we have living in the world today.

In the past, societies could simply put their unemployed masses to work with picks and shovels to rebuild, but that won't work anymore. It takes a lot of oil to build nuclear plants, CTL plants, and all the other stuff to transition. Rebuilding takes lots of energy that the US and most of the world doesn't have. That means the US and others that need the oil to rebuild must have a means of exchange, money, that others are willing to accept in return for oil. The problem now is that, assuming the US can raise the money to transition, the dollar itself is coming under pressure. There are serious questions as to how long it can retain its strength, just when we need it to be strong.

It seems some countries in Africa already suffer from terminally
broken systems. My fear is our "system" may break to the point that it becomes irreversible as well, and we become more like the nations of Africa, unable to rebuild anything.

I hope I'm wrong. I long ago lost faith that gov't could solve problems, because history proves otherwise. We only need to look at our broken social security system in the US to know that gov't is quite incapable of solving problems far easier to solve than transitioning to other energy sources.

So, if governments are incapable of solving problems like peak oil, my last hope, our collective last hope, was the the "optimists" were right and that the "invisible hand" of the market, through price signals, would effectuate the change in our society that gov't could not.

This unfortunate credit crisis removes that last hope for me, that somehow market "price signals" will transition us off of oil. I'm probably more pessimistic than ever for this reason - according to the IEA report, we desparately need to find and produce more oil just to stand still, let alone grow our economy. But, just when we need market "price signals" to effectuate a transition, the price of oil sends the wrong signal.

I hope I'm wrong. And, I'm willing to listen to other views of how this will all shake out.

If there is any glimmer of hope it is this, that lots of Americans are losing jobs, which will create a political opportunity for our new President to do something about this energy transition. Just today Obama said he will employ people by rebuilding infrastructure. He did happen to throw "energy" in there at the last minute. So, there is some hope that he will employ people by building this to transition while we still have some credit and time to do so, and not simply build more roads for more cars.

[rockdoc123]

As someone who has lived inside the industry for 30+ years, through a couple of downturns I can say that Seahorse's fears are bang on. At $60 a barrel currently nothing new works, heavy oil which has been the great savior is now completely uneconomic except for the mining bits which are still struggling with marginal returns. There are a lot of people out there who think low oil prices are our savior.....they aren't, in fact I think they spell doom. We need oil prices to be high enough to keep the business going while we try to see if alternatives can help out.
At this price there is absolutely no way the Brazil supergiant discovery will come on stream....can't happen, they need at least $80 a barrel. I've seen the numbers so all the propaganda in the press to the contrary is BS.

[yesplease]

seahorse, that businesses are going under isn't a bad thing per say, I'm not a fan of GDP for it's own sake. Ultimately it's which businesses go under, and while we'll see cuts across the board, watching SUVs sit on lots, etc... for the most part the frivolous is what takes the biggest hit. American's can stand to save a bit. In terms of oil and the economy you've got it backwards for the most part based on the available info I've seen. We need the economy to grow oil consumption, not oil consumption to grow the economy, for the most part.

[Novus]

I have moved into the deflation camp now. I think we will see sub $40 oil by the end of the year. The CDO markets and virtual CDO markets are too complex to be inflated Wiemar style. It is all computer controlled and far beyond human comprehension. We are not going into a depression. We are going into a dark age where people won't be able to afford oil at any price no matter how cheap it is because no one will have any money. The producers will go under and so will the utility companies and everything else under the sun. Then you can kiss your own arse goodbye as Industrial Civilization ENDS.

[seahorse]

$this->bbcode_second_pass_quote('', 'W')e need the economy to grow oil consumption, not oil consumption to grow the economy, for the most part.

[yesplease]

$this->bbcode_second_pass_quote('seahorse', 'W')hy do I say I'm talking about the survival of our system, because our system, no system, can survive a 4%-6% yearly decline in oil global oil production (Cera says 4%, IEA says 6%). The IEA says the obvious, that to offset those declines, we have to drill, find and produce lots more oil just to maintain what we have.

[dohboi]

Yesplease, I want to thank you for trying to cheer us up. I mean it.

Indeed in the 70s and early 80s a lot of segments of American industry that had relied on oil weened themselves from that source. But the fact that they weened themselves from it then does not mean that they can ween themselves again. It means that those savings have already been realized, so they are no longer available.

Now it is certainly true that the transportation and building infrastructure could be rebuilt to be much more efficient. But doing so requires huge energy inputs in the first place, and we are running out of both the energy and the capital to purchase it, even if our often hapless government could get its act together enough to organize such a massive undertaking.

As bad as 6-9% decline rates in oil production are for our economic system's survival, they at least move in the right direction for what the environment needs, which is basically a full stop in any new un-sequestering of safely sequestered carbon, along with a massive re-sequestration effort.

We still haven't begun to come to grips with the enormity of these challenges.

[Dezakin]

Is it just me or are the people that are now claiming oil will drop below 40 have much in common with those claiming it will shoot up above 200 and that civilization will end shortly.

[seahorse]

Well,

I sure hope this "system" can survivie a 4-6% drops in oil production without a price signal to invest more in new production. Any comparison to a world 100 years ago that lived without oil is simply ludicrous. Is that what we want? In fact, returning to a state of civilization capable of surviving without oil would require a die-off. Its also not factually correct to say we survived the 70s oil crisis and will survive this one. Its kind of like trying to compare the 1930s Great Depression to now, there are just too many difference. In the 70s, the world wasn't facing the prospect of Peak Oil and wasn't nearly as complex as it is now, for example, the US produced about twice as much oil as it does now and the US used a lot less oil than it does now. So, all those historical analogies don't cut it.

I have learned to trust what the experts here say, namely, Rockdoc and Rockman, both of whom work in the idustry and were working in the industry in the 70s. Both of them seem to share the same concern, that this price decline is sending the wrong signal at the wrong time. This is an unprecedented challange, since we are facing the prospect of peak oil. But, there is always hope. I have no doubt that the extremely weathly in the world will survive, but since I'm not one of them, that's why I'm worried.

[seahorse]

Yesplease,

It also occured to me your not taking into consideration the Rule of 72. For example, you state that in the 70's oil crisis the US system didn't collapse and demand shrank about 4% for 4 years. This isn't the same as yearly production dropping by 6% each year for four years. If production drops by 6% each year for 4 years, would oil production would drop by about a third in four years, which is far different than demand dropping by 4% for a 4 year period. This means demand for oil will have to drop with oil production, which means, demand for oil will also have to drop by a third in those 4 years - not a mere 4%.

The world has never had to deal with a 6% yearly drop in world oil production. I do not see how the world global economic system could withstand such a shock.

[yesplease]

$this->bbcode_second_pass_quote('Dezakin', 'I')s it just me or are the people that are now claiming oil will drop below 40 have much in common with those claiming it will shoot up above 200 and that civilization will end shortly.

[yesplease]

$this->bbcode_second_pass_quote('dohboi', 'Y')esplease, I want to thank you for trying to cheer us up. I mean it.

[yesplease]

$this->bbcode_second_pass_quote('seahorse', 'W')ell,

I sure hope this "system" can survivie a 4-6% drops in oil production without a price signal to invest more in new production. Any comparison to a world 100 years ago that lived without oil is simply ludicrous. Is that what we want? In fact, returning to a state of civilization capable of surviving without oil would require a die-off. Its also not factually correct to say we survived the 70s oil crisis and will survive this one. Its kind of like trying to compare the 1930s Great Depression to now, there are just too many difference. In the 70s, the world wasn't facing the prospect of Peak Oil and wasn't nearly as complex as it is now, for example, the US produced about twice as much oil as it does now and the US used a lot less oil than it does now. So, all those historical analogies don't cut it.