ASPO-USA Conference Report: Thursday Morning Notes

Here's my brief summary:

ASPO-USA has gone from a pure technical study of Peak Oil to emphasizing the economic impact and moving towards policy recommendations.
Chris Skrebowski had the best presentation and he's expecting a tightening supply situation (falling spare capacity) up to the 2014-2015 Peak. No change from last year. He also brought a lot of data showing that rising oil prices impact economic growth. 
Congressman Roscoe Bartlett really gets it. He claims there's been a oil production plateau for five years and expects a conflict with China over energy in the future.
Jeff Rubin seems to really have an edge having correctly predicted over 100$ oil at last year's conference. His message this year is that Peak Oil is going to prevent 3% US GDP growth going forward.
The litmus test for determining whether a speaker is actually concerned with Peak Oil or is a Environmental Climate Change activist trying to coop Peak Oil is whether they distinguish between a liquid fuels problem or just talk about an energy problem and renewable energy.
 What follows is my raw notes from each speaker.

Roscoe Bartlett, US congressman really gets it – We have been stuck at 84 million barrels per day (mbpd) for over five years despite earlier EIA predictions (from 2005 and 2008 and 2010) calling for higher production. Meanwhile China is building more cars than the USA, 13 million per year. Bartlett expects a conflict over energy with China.
 
Bartlett supported the Ryan budget. It takes 25 years to close the budget, but it depends on 2.6% GDP growth. Bartlett doesn't think any substantial GDP growth is going to occur because of Peak Oil.
 
Chris Skrebowski – A Physical And Economic Challenge To Economic Growth
 
Oil consumption has been growth at 1.6% / year since the early 80s. We left trend around 2007. The growth in demand is coming from the developing countries while developed country consumption is falling slowly.
 
Has a graph showing prices started rising in 03 after a century of reasonably consistent sub-30$ prices. There was a bubble at the end of 07 with overcorrection. The 03 rate price rise resumed in 2009 from the bust, but in 2011 it got bubbly again. So, what's next? Brent has completely diverged from WTI because cushing is oversupplied right now. Key conclusion there is a price which causes a economic contraction. Recent US economic growth may be due to falling WTI oil price.
 
Crude oil production has been flat for 5 years. All liquids has had a little bit of growth. Its bio-fuels and natural gas liquids.
 
EIA 2009 graph shows peak (apart from unidentified projects) in 2012. Roughly half of all production by 2030 is from unidentified projects.
 
Chris thinks there is only 1 mbpd OPEC spare capacity and no extra global stocks. The situation it tightening up rapidly. He estimates that supply / demand tightens until 2014 which is the Peak. He claims there is a ceiling on prices which reduces economic activity to match supply.
 
The economic debate is whether its the rate of oil price change that limits economic growth or whether its the absolute real price that affects economic activity. There is a correlation that whenever the oil price goes up, US economic growth goes down.
 
Oil companies are making increasingly higher assumptions when deciding whether to invest in a project. They are investing in projects where the price is high enough to put the US into recession. They must be assuming that the developing world (China) can keep growing with these prices.
 
Well worth looking at the graphs when they become available.
 
Professor Catton
 
American oil production actually went up the last couple of years, but its just a blip.e
 
Catton argues that economic stimulus does not work because we are in resource depletion (especially USA oil depletion).
 
We used to classify countries (people) as rich vs poor. We should think about this in terms of high energy consumption (homo colossus) vs low energy consumption (homo sapiens. All of the modern wonders are based on tapping fossil fuels.
 
Each one of use in the room consumes as much energy as a 40-tonne dinosaur. With a 300,000,000 x multiplier this is a big deal. Homo colossus crowds out homo sapiens.
 
Human carrying capacity – the maximum human population that an environment can support indefinitely. The Peak will hit Homo Colossus much harder than homo sapiens.
There will be resource wars. WW2 was a resource war. Oil was a key thing that Japan was after.
 
The people of the revolutionary war were homo sapiens and yet were quite admirable.
 
Catton ends with the idea that our dependence on non-renewable resources is a ponzi scheme.
 
Jeff Rubin
 
Soaring oil prices affect the speed at which the US economy grow. Its bad enough when folks buy SUVs for daily commutes, but its a lot worse when the government doesn't get it. The government doesn't get it because they are listening to economists (who don't get it).
 
If your GDP is growing slower than its potential (e.g. 3%) then you have a lot of slack. When its growing faster you get inflation. You can step on the gas (QE3) and get results only when you have rightly estimated potential growth.
 
Jobless rates indicate that there's slack. So, they think they can step on the gas. But they don't consider the price of oil. $100 oil gives you an economy flat as a pancake even with historic stimulus. Economists don't include the price of oil when calculating potential growth, but they should. All the stimulus does is rack up debt (like Greece).
 
China's problem is that of every rapidly industrializing economy: inflation. They may want a stronger currency to keep oil cheap.
 
In the 1970s the US gave the Japenese bond-holders a 40% hair-cut by depreciating its currency. The lower the US dollar goes the higher the price of oil goes as oil is priced in dollars.
 
Our economy cannot grow at the rate it used to grow because of higher priced oil. The most important thing the US congress can do is recognized that 3% economic growth is no longer possible.

Word Of Wall St