26 Comments on "Peak oil explained with cartoons"

Plantagenet on Thu, 12th Mar 2015 9:23 pm 



Cartoons about how expensive oil is don’t make much sense in the middle of an oil glut when oil prices have fallen to near historic lows when adjusted for inflation.

GregT on Thu, 12th Mar 2015 10:35 pm 



Oil prices ajusted for inflation during non recessionary periods going back 130 years have hovered between 20 and 30 dollars a barrel. We are currently paying almost double those prices today. As usual planter, you are completely wrong.

http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp

Northwest Resident on Thu, 12th Mar 2015 11:09 pm 



The Teacher made a boo-boo.

BC on Fri, 13th Mar 2015 10:42 am 



GregT & NWRes: 1. Plant: nil.

The average CPI-adjusted (real) price of oil from after WW II to the onset of Peak Oil in 2004-05 was $32.

From the point at which US oil production peaked per capita in 1970 (down 45% per capita since 1970) to the onset of Peak Oil in 2004-05, the real price of oil averaged $38.

However, since Peak Oil, the real price of oil has averaged nearly $100, and the 3- and 5-year average real prices are $107 and $104.

Note also that historically the 5- and 10-year rate of growth of real GDP per capita has been well below 1% to 0% or negative (long-term average of 2.1%) with the average 5- and 10-year real price of oil above $40.

Not coincidentally, the average rate of growth of real GDP per capita since 2007 has been ~0.3% (~0% for real final sales per capita).

Therefore, from the perspective of real per capita growth of (un)economic activity, oil is far from cheap in real terms.

Moreover, from 2011-12 to date, in order to produce the additional 3-3.5Mbd, it required consuming 65-80% of the increase in oil production, i.e., 2-2.5Mbd. Thus, the “glut” of no more than 1Mbd that resulted was sufficient to cause a crash in the price of oil because the underlying demand was/is not there to support the surge in unprofitable supply.

IOW, the shale oil boom/bubble became its own number one costomer of the additional production that was not required by the rest of the US domestic economy.

Once the shale bubble bursts, it will be apparent in hindsight that $40-$50 (or lower) oil means US production of 5-6Mbd (not 9Mbd) and consumption of ~17Mbd. But the price of oil over $40 is still too high to sustain accelerating growth of real GDP per capita from the historically slow or no-growth rate since 2007-08.

We can’t afford to profitably produce the costlier, lower-quality crude oil substitutes at a price that we can afford to burn AND grow real GDP per capita over 5-10 years.

Now that the shale bubble is deflating, we will understand this Peak Oil-related dilemma as the incipient recession in the energy and energy-related transportation sectors spreads throughout the rest of the production (orders, production, hours, employment, etc.) sector, as well as housing, autos, and services spending in 2015.

BC on Fri, 13th Mar 2015 10:56 am 



BTW, the nominal and real prices of oil averaged $20-$22 and $30 respectively from the low in 1986 to 2002-04.

Not coincidentally, civilian employment per capita is back to the level of the mid- to late 1980s. Fewer than one-third of the adult population is employed full time in the private sector.

Plantagenet on Fri, 13th Mar 2015 11:31 am 



greater and nor dent

Your lack of reading comprehension skills is showing.

I didn’t say oil prices were below historic levels. I didn’t even say they were at historic lows. I said they had fallen to NEAR historic lows.

If you’ll do the math you’ll find that the oil price collapse from ca $100+ to $50 took oil 5/7th of the way to the lows.

get it now?

marmico on Fri, 13th Mar 2015 11:34 am 



Moreover, from 2011-12 to date, in order to produce the additional 3-3.5Mbd, it required consuming 65-80% of the increase in oil production, i.e., 2-2.5Mbd

That’s a ballsy call. The latest four week average petroleum supply rose 2.8% year on year as rig count is declining year on year. Net rising demand must be coming from the rest of the economy in the face of falling demand in the oil patch.

marmico on Fri, 13th Mar 2015 11:47 am 



Not coincidentally, civilian employment per capita is back to the level of the mid- to late 1980s

Try demographics instead of oil prices.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=143q

Davy on Fri, 13th Mar 2015 11:55 am 



Marmie, what the hell are going to do when the Feds fall on hard times and start charging to use their Freddy Fluff charts?

BobInget on Fri, 13th Mar 2015 11:57 am 



To be fair BC, oil was not the only living expense to rise in price from 1986.

Post several economic downturns in 30 years oil prices went lower many times.
(in 1987 a 50% drop)

The facts today really are different.

World population grew by Two Billion.

We burned, used up, squandered if you will
26 million barrels yearly (for 30 years)

If anything, we are consuming far more oil then is being acquired.
There Six Oil Wars currently in progress.

Most population growth took place in developing, African and Asian nations.
Most consumption increases take place in oil exporting countries.
(more consumption, less to export)

Militaries, around the world, are consuming
more oil (secretively) then ever. Most All in the name of ‘protecting’ claimed or historic oil resources.

Like it or not, militaries today, provide an inelastic (fixed) base for oil prices. On battlefields, no one asks fuels prices.

The US has been at war now for 13 years
(and counting.)
Each of those days in those 13 years the US military ALONE consumed no less then
450 thousand barrels per day.

Since most of that oil is NOT imported into the US it goes unreported weekly.

Davy on Fri, 13th Mar 2015 12:39 pm 



Bobby said – The US has been at war now for 13 years
(and counting.)
Each of those days in those 13 years the US military ALONE consumed no less then
450 thousand barrels per day.
Since most of that oil is NOT imported into the US it goes unreported weekly.

Great point!

Davy on Fri, 13th Mar 2015 1:22 pm 



Pretty cool:

http://www.bloomberg.com/graphics/2015-oil-rigs/

Perk Earl on Fri, 13th Mar 2015 1:38 pm 



I found this great post over at Ron’s site:

Schinzy says:
March 13, 2015 at 10:09 am
We are reaching what I (following Turchin and Nefedov) call the contraction phase of the economic cycle of oil. This economic cycle had a growth phase from 1859 to around 2005, a stagflation phase from 2005 to 2014, and we are headed for the contraction phase. The current low price of oil signals a paradigm shift. Peak oil is a low price problem, not a high price problem as many people thought. US oil production peaked 1965-1970. Oil prices where a local minimum during those years. US production reached a secondary peak in 1985. Soviet oil production peaked in 1986, oil prices started decreasing in 1985 and remained low throughout the 80’s. The feedback mechanisms that increased oil production till 2005 are going into reverse. Lower production will cause spikes in prices which will cause oil consumers to reduce consumption which will in turn drive prices below production costs. During the growth phase, aggressive production was rewarded. During the contraction phase, the successful strategy will be to wait for the aggressive players to go bankrupt and buy up their assets cheaply. The motor of economic growth that was oil is no more. I think it time for us to reevaluate our goals. Take advantage of low oil prices to invest in living without oil. Welcome to the 21st century.

Northwest Resident on Fri, 13th Mar 2015 1:55 pm 



Perk — I read that comment over on Ron’s site. I agree. Very good comment. There tend to be a lot of very good and intelligent comments on Ron’s posts, and I’d like to keep it that way, which is why I try not to write my own posts there… 🙂

I distinctly remember the day or two when we first saw the oil price plunge begin. And I felt the earth tremble, figuratively speaking. I posted on this forum something to the effect of “this is IT, guys, we all knew it was going to happen, we’ve been predicting it based on facts and logic all this time, now here it is, don’t question it”. Of course, from that point, we all stood by and watched with morbid fascination as the oil price plunged further and further, and it looks like it still has a (long) ways to go. The post by Schinzy sums up the reason why in a nutshell. Of course, shortonoil has constantly hammered away on the same basic point — oil has lost its ability to power the economy. So, suck it up boys, this IS IT, we are on the ride down and the sooner we all embrace the horror, the more ready we will be to meet the monumental challenges that we will be forced to face.

GregT on Fri, 13th Mar 2015 2:20 pm 



“Take advantage of low oil prices to invest in living without oil.”

Exactly. We’re on the way down now boys. Buckle up!

Perk Earl on Fri, 13th Mar 2015 4:26 pm 



“Perk — I read that comment over on Ron’s site. I agree. Very good comment. There tend to be a lot of very good and intelligent comments on Ron’s posts, and I’d like to keep it that way, which is why I try not to write my own posts there…”

I know what you mean, NR. It’s more technically oriented regarding data (which I don’t research or spend time seeking access to compile), so I open the door to get a gander on that site but don’t involve myself. They also play for keeps, i.e. better be right about whatever the heck you’re posting – lol!

Kind of fun to watch how things turn out with Ron’s prediction regarding when peak occurs. I don’t have the exact time period, but it’s within the next year and a half or so, then it shifts to decline. Gutsy of him to put out a bold prediction.

“…shortonoil has constantly hammered away on the same basic point — oil has lost its ability to power the economy.”

Yeah, the economy needs to be pampered, puffed up and have it’s hand held these days to maintain a drip bag form of BAU, whereas at one time it just got up and ran so to speak.

Meanwhile the days of $100 dollar oil, going after feasible non-conventional plays, has been replaced by oil E&P contraction.

For those with the glass half full are saying these low prices are temporary and $100 dollar prices will return when needed so we will always have more oil,

And us peak oil, aware of depletion’s effect on net energy, knowing the glass is half or less than half full, are saying the whole shebang is squeezing down.

It’s a slow motion train wreck on a global scale. I was reading about an apartment in Sacramento, CA that for whatever reason didn’t have water for four days. The superintendent said people turned into animals. That gives us a tiny window into what it will be like once shtf. It went further to say when there is a flood, people pull together, but when there is a shortage, they turn on one another. Big surprise there – lol! Just a preview of the re-emergence of the reptilian brain.

Perk Earl on Fri, 13th Mar 2015 4:35 pm 



Here’s that article. It has info. on Sao Paulo’s drought situation with info. on Sac. apartment experience.

http://www.theguardian.com/cities/2015/feb/25/sao-paulo-brazil-failing-megacity-water-crisis-rationing

Davy on Fri, 13th Mar 2015 4:36 pm 



Perk, not everyplace is a mad-maxathon in the making. People around here and many other locals will pull together in a crisis at least until it gets really nasty. Some urban areas are just lost causes that is why I preach location as the primary foundational prep. Don’t build your Doomstead on sand.

Perk Earl on Fri, 13th Mar 2015 4:37 pm 



All right, I guess her last name is Sacramento. It’s all about Sao Paulo.

Davy on Fri, 13th Mar 2015 4:49 pm 



Perk how’s the water up your holler there north of Sacramento? Is that pretty lake holdin water?

Northwest Resident on Fri, 13th Mar 2015 5:15 pm 



Perk, I think the way it works is, as long as there is hope, then people can find a way to cooperate and strive toward a common goal — especially if that commonly shared goal is survival. But at the point where all hope is lost (which may come at different points for different people), that’s when the whole concept of “working together” gets overruled by the primordial and beastly survival instinct. Something that none of us ever want to be exposed to, for sure.

GregT on Fri, 13th Mar 2015 5:34 pm 



If people could have found a way to cooperate and strive towards a common goal, none of this would be happening.

The bottom tiers of our societies have already gone into survival mode, and they are already keeping our police forces and criminal justice systems busy. As this unravels, I suspect that more and more will find themselves out of work, homes, and food. When the point is reached that security can no longer be upheld, that is when all hell will break loose.

ghung on Fri, 13th Mar 2015 5:45 pm 



“Take advantage of low oil prices to invest in living without oil.”

I stopped trying to convince people of this 10 or so years ago. Most didn’t grok our society’s utter dependence on oil, and still don’t understand that the oil doesn’t have to run out for things to get dicey.

“We’ll adjust” they say, never considering what that adjustment is going to look and feel like, especially for those who never utilized plentiful cheap oil to make other arrangements that dramatically reduce their dependence before oil’s utility is diminished into negative-return-land for most. The very process of wrapping one’s head around what some here call ‘peak oil dynamics’ means avoiding the rush that will likely unfold after Plant’s glut runs its course.

“Gosh! Have you heard about peak oil?”…

Davy on Fri, 13th Mar 2015 6:15 pm 



G-man, you know how many times I have heard people nonchalantly say “we’ll adjust”. That’s when you know they don’t get it. People are going to be dazed and confused when the bottom falls out. It will be a Katrina moment. These people say “we’ll adjust” with a tone like “we went to the moon so we can get through this”. So any of you that think peak oil is just about driving less get a grip this is about much more.

Perk Earl on Fri, 13th Mar 2015 6:26 pm 



“Perk how’s the water up your holler there north of Sacramento? Is that pretty lake holdin water?”

There’s this same answer at the bottom of the next peak oil dot com article, so you may see this twice.

Thanks for the concern, Davy. It all depends of course on what water district one lives in. We got a lot of rain here that filled our reservoirs, so no worries for us. What is troublesome for us and the rest of those eating CA grown foods, is the central valley is the worst hit by the drought. Farmers there are digging water wells, tapping into the water table which keeps dropping. For now they have legacy water, but at some point there needs to be enough to percolate down and fill them up again.

The long term problem is it doesn’t rain like it use to. It use to rain fairly regularly throughout winter, and now it is more sporadic, random. Too many long periods of several weeks without rain in the winter. So the long term prognosis is not good for CA or Sao Paulo.

Plantagenet on Fri, 13th Mar 2015 8:02 pm 



Too bad about the drop in the water table in California. Still there is kind of a poetic justice about it—-California practically invented the car culture for the world and now they are getting slammed by global warming.

And don’t expect help from the Feds—Obama promised to stop the seas from ring but he never said a thing about stopping the water tables from falling.