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Page added on February 2, 2015
The Transition Agony Aunt on how to talk about peak oil
“Dear Agony Aunt. Given that we are now seeing oil at below $50 a barrel, how is my Transition group meant to talk about ‘peak oil’? Peak oil has always been one of the foundations of Transition, but should we drop it now, or how else do we explain it? Does so much cheap oil mean peak oil as an argument is now over? In my group we can’t seem to agree, so Agony Aunt, what do you think?”
We had similar concerns in our group (Transition Reading), but we now explain the situation, in public, as follows. That, in fact, the low oil price is, in fact, a symptom of peak oil. Conventional oil production peaked around 2005-2008, and year on year it is declining by about 3.5 million barrels a day. So, to maintain the global oil supply, we need to bring on-stream the equivalent of a new Saudi Arabia every 3 years.
Most of the new oil is of the unconventional kind, meaning that it is produced offshore in deepwater, from tar sands and by fracking shale. Since these are expensive technologies, no one would have bothered with them, had the price of oil not risen to $100 a barrel and more, prior to the recent crash. Indeed, the high price urged new investment, resulting in a surge in production, while simultaneously, a weakened global economy means that demand has fallen.
The supply of oil has been enlarged by renewed output from Iraq and Libya, and by OPEC’s refusal to cut production, because they want to keep their market share. As a result of overproduction against demand, the price has plummeted from a high of $115 in June 2014, to under $50 now. Since this is less than it costs to produce much of the “new oil”, many scheduled production projects will not now go ahead. The consequence will be less oil being produced a year or more down the line. Accordingly, the oil glut will peter out, and the price will rise again.
While the return of a sufficiently high price may encourage new investment, it is unlikely that we can grow production of new oil to equal five Saudi Arabias within the next 15 years, especially from sources that are more expensive and more difficult to produce from than the oil they must serve to replace. Therefore, we can anticipate a contraction of the global oil supply within this timescale.
Today’s Transition Agony Aunt was Chris Rhodes, Chair of Transition Town Reading. What do you think? How would you advise our reader? Please comment below.
51 Comments on "The Transition Agony Aunt on how to talk about peak oil"
dave thompson on Mon, 2nd Feb 2015 12:53 pm
Good strait forward summery of our predicament.
Plantagenet on Mon, 2nd Feb 2015 1:31 pm
Low prices now are caused by the current oil glut. High prices are caused by demand exceeding supply.
Peak Oil is going to come, but you can’t explain every twitch of the oil price by referring to peak oil happening sometime in the future.
Davy on Mon, 2nd Feb 2015 1:37 pm
Planter, just like the majority of unexplained non violent deaths a hundred years ago were called consumption on the death certificate. That reminds me of your use of “oil glut”
Plantagenet on Mon, 2nd Feb 2015 1:45 pm
Daver
The term “oil glut” is used throughout the news media to describe the current oversupply of oil.
I don’t get why you and some other folks here are so hung up about it. We’re in an oil glut—why not just accept reality?
Northwest Resident on Mon, 2nd Feb 2015 1:49 pm
“you can’t explain every twitch of the oil price by referring to peak oil happening sometime in the future”
No, but someone can explain every twitch of the oil price by constantly repeating “oil glut, oil glut”.
Davy on Mon, 2nd Feb 2015 1:53 pm
Planter, your twitch reminds me of a dead rabbit the boys killed last week. It twitched a little bit too. Is that what you mean?
Plantagenet on Mon, 2nd Feb 2015 2:14 pm
Daver
Perhaps that was you twitching.
Nordent:
The current oil glut explains the current drop in oil prices. Why the hang-up about the term “oil glut”? Why not just accept reality?
GregT on Mon, 2nd Feb 2015 3:06 pm
The current ‘oil glut’ could be used to explain why Katy Perry didn’t have a wardrobe malfunction during the half-time show at the Super Bowl yesterday. That doesn’t make it anymore realistic.
steve on Mon, 2nd Feb 2015 3:07 pm
I tried to explain peak oil and resource collapse to my brother but he just thinks I am a crazy doomer because I have been predicting it since 2001. And here we are 14 years later and it has not happened. I can see where he is coming from; if you just turn off your computer for a week and only listen to MSM you will think holy shit everything is fine and we will find another planet to live on so all is well….were is my soma…I wish I could go out and drink the kool aide but unfortunately I have already seen too much.
Poordogabone on Mon, 2nd Feb 2015 3:15 pm
An “Oil glut” historically has nothing to do with what is happening now, all those new events are brought about by POD and are happening in uncharted water.
Oil production could drop by half in the next 10 years caused by recessions and low demand, we would have an excess of oil not finding markets so we would still be in an oil glut I guess according to Plant.
Plantagenet on Mon, 2nd Feb 2015 3:25 pm
@poordog
You can fantasize about possible market situations over the next 10 years all you like, but it doesn’t change anything about the current oil glut.
Look at whats happened: US shale oil boomed—-supply exceeded demand–Oil prices crashed—and now drilling rigs are being taken offline—inventories are rising—oil is being stored on tankers for a cotango trade—-
This is a classic oil glut.
Plantagenet on Mon, 2nd Feb 2015 3:26 pm
@GregT
I though Katey Perry did have a wardrobe malfunction—she wore a series of hideous wardrobes. You can’t get more dysfunctional than that.
gamilon on Mon, 2nd Feb 2015 3:28 pm
I wish I could do a find/replace on the internet to replace “demand has fallen” with “the rate of increase in demand has fallen”. The first is false, but has been repeated so often it is accepted as fact. Others have pointed this out, but it bears repeating, and it would be nice if articles posted by knowledgeable people on this site would at least state that correctly. IMO, it is a very important distinction.
penury on Mon, 2nd Feb 2015 3:30 pm
May be it is me or maybe it is you, but I think we live in different economic strata. In most of the world (outside the U.S.) the oil glut is being celebrated because consumption is tanking. Do a little research (very little) and tell e how much the purchase price for a liter of petrol has been reduced in Pisos,Reals, Yen, or Euros. Of course you must do a little research on FX, but well worth your while.
gamilon on Mon, 2nd Feb 2015 3:37 pm
I haven’t been able to find any data that shows an aggregate decrease in the global usage of oil. There are some local/regional decreases, but they are offset by increases in other regions.
GregT on Mon, 2nd Feb 2015 3:37 pm
@plant,
“I though Katey Perry did have a wardrobe malfunction”
I don’t find that surprising Plant, considering you also believe that the 55% collapse in oil prices was due to ‘an oil glut’.
Poordogabone on Mon, 2nd Feb 2015 3:40 pm
Plant the so called shale boom has not flooded the world with oil. before 2005 global oil production was increasing at faster rate than the present and all that new oil always found buyers.
ghung on Mon, 2nd Feb 2015 3:44 pm
I’ve never considered peak oil as a major motivator for the need to transition. Indeed, continued availability of plenty of oil to economies will ensure the continued exploitation and decline of other resources and the environment.
It’s a bit like we’re at or near the tip of a four-sided growth pyramid: Population; available energy; other resources; financialization. The base of the pyramid is climate/environment upon which the other four remain supported. If any of these four becomes out of balance; becomes too predominant or begins to decline, the pyramid becomes unstable. If the combination of the four grow beyond the capacity of the environmental base to support, collapse of all ensues.
It’s clear we’re exceeding the angle of repose that the system can support, while overwhelming the base. The higher we go, the more dramatic will be the eventual collapse. Transition is about getting out of the way and learning to live within the rubble that’s left.
Plantagenet on Mon, 2nd Feb 2015 3:44 pm
poordog
1. It doesn’t matter what what was happening before 2005.
The current oil glut is caused by market conditions NOW.
2. The world doesn’t have to be “flooded with oil” to have an oil glut. You just have to have more supply than demand, resulting in a large drop in the oil price—which is exactly what has occurred.
Cheers!
GregT on Mon, 2nd Feb 2015 3:49 pm
Penury said:
” Of course you must do a little research on FX, but well worth your while.”
The Canadian dollar has dropped to ~80 cents to the USD. My wages are still in Canadian dollars. FX has no effect on my current lifestyle unless I want to travel to, or buy stuff imported from, the US. If anything, a dropping Canadian dollar is actually good for the Canadian economy, and especially good for our export markets.
jjhman on Mon, 2nd Feb 2015 3:52 pm
Could we move on past the “oil glut, not an oil glut” sniping? This is a semantic distinction and not meaningfulor worth wasting internet electrons. You folks are letting past disagreements cloud your minds.
Right now there is more oil available than people are willing to buy at $60 or $70. There has, apparently, been some accumulation either on tankers or in someone’s swimming pool. Who cares?
What is clear is that the markets are unstable and that the rising and falling of price has potential consequences to the rest of the world’s economy and politics. That’s a lot more interesting than the meaning of the word “glut”.
GregT on Mon, 2nd Feb 2015 3:53 pm
Plant,
In case you haven’t been paying attention, oil prices have been rising. Does this mean that your ‘oil glut’ is over?
Poordogabone on Mon, 2nd Feb 2015 3:58 pm
So back to what I was saying before, historically, a glut was caused by over production, now we have thanks to POD an unusual glut caused by economies contraction and falling demand.
Plantagenet on Mon, 2nd Feb 2015 4:12 pm
GregT:
Oil inventories are still rising. The bump up in oil prices is probably due to the new IS offensive into oil-rich parts of Iraq. I think the oil glut continues, and prices may even fall to new lows.
Poordog:
Check the numbers—-there is no falling demand. Global Oil demand (i.e. consumption) has been slowly increasing ever year since 2009.
Anyway, even if falling demand was the cause of the oil glut, it would still be an glut. All the term “glut” means is that a commodity is oversupplied in the market to the point that the price drops dramatically.
Get it now?
Cheers!
ghung on Mon, 2nd Feb 2015 4:28 pm
You guys sure do argue over some stupid shit. You wouldn’t last long at my place. You’d have to get a room at the Dew Drop Inn or somewhere. It’s like roosters fighting over a June Bug the chickens just ate.
Plantagenet on Mon, 2nd Feb 2015 4:42 pm
The French have a saying…”Appeler un chat un chat”
Call a cat a cat.
To not call a cat a cat shows a lack of clarity in thought.
We are in an oil glut. People who want to pretend otherwise aren’t really thinking very clearly. Its like obama pretending that Islamic terrorists have nothing to do with Islam. Its self-indulgent mindless solipsism.
You’ve got to call a cat a cat, or get lost in fuzzy thinking.
We are in an oil glut right now. So lets call an oil glut an oil glut.
Cheers!
R1verat on Mon, 2nd Feb 2015 5:03 pm
jjhman-I’ll 2nd your emotion….too bad the conversation went right back to where it was before……
ghung on Mon, 2nd Feb 2015 5:07 pm
How many times do you have to call a cat a cat before you figure out that the cat doesn’t care if you call it dumbass, or anything else? It is what it is.
What is the French saying for ‘give it a rest’?
Poordogabone on Mon, 2nd Feb 2015 5:10 pm
ghung, I’ve been keeping quiet these last few month reading posts by plant that can’t write five words in a row without saying “glut” and today my mind started to rebel and I admit to lose self control. I apologize and hope that you will reconsider as I would be enthuse to stay in your place chicken and all.
Plantagenet on Mon, 2nd Feb 2015 5:16 pm
The cat is still a cat.
The oil glut is still an oil glut.
Why pretend otherwise?
GregT on Mon, 2nd Feb 2015 5:22 pm
I agree, I have also slipped and fallen under the bridge of the community troll. I will also do my best to stop feeding it.
Northwest Resident on Mon, 2nd Feb 2015 5:32 pm
Plant likes to bait people and see if he can lure them down into that slime hole that he operates in, all the better to bring them down to his level. We all get hooked by Plant’s slime tactics from time to time. It always starts with Plant making the same repeatedly idiotic statement or claim, somebody trying to talk a little sense to him, and that’s when Plant sets the hook and starts reeling his catch in. It is very difficult to overlook frequent repeated acts of stupidity. I made this point a long time ago, and here it is again. Plant is here because he enjoys being a troll. He wouldn’t last a second on a moderated website. This forum invites trolls like Plant to camp out and do his obnoxious thing. I go long periods of time successfully ignoring him then suddenly, I make the mistake of posting something he doesn’t like, he baits me with an insult, I respond and bam! Plant is here to disrupt and to play his idiot games. Good luck ignoring such a blatant fool — the best have tried and failed.
Speculawyer on Mon, 2nd Feb 2015 5:52 pm
“Consumption” was a common name for the disease known today as “Tuberculosis”.
Plantagenet on Mon, 2nd Feb 2015 5:56 pm
A cat is a cat.
An oil glut is an oil glut.
Or, as George Orwell put it:
“Telling the truth is …. a revolutionary act”
Apneaman on Mon, 2nd Feb 2015 6:03 pm
A Cock Sucker(Plant)
is a Cock Sucker (Plant)
penury on Mon, 2nd Feb 2015 6:12 pm
GregT, so the CD dropped to 80 cents to the USD and that is good news for you. Good. However, most Canadian oil is sold to the U.S. in USD, hows that working out for Canada. How much does Canada import from U.S? Remember, the economy is sales and purchases income vs outgo. If export prices drop by 20 per cent and imports prices increase by 20 per cent it must be good for your economy. Right?
yoananda on Mon, 2nd Feb 2015 6:13 pm
it’s not an oil glut.
It’s oil demand shortage.
Let’s call the cat a cat !
Craig Ruchman on Mon, 2nd Feb 2015 6:20 pm
Someday soon, we will find out if the world can afford $150 – $200 barrel oil. If it can’t, then this could be the year of Peak Oil. Just a hunch…
ghung on Mon, 2nd Feb 2015 6:21 pm
Being able to have your say, make your point clear, then not being able to move on whether or not people agree with you, meets the urban definition of insanity. I don’t think it’s even about whether a it’s a ‘glut’ at this point.
I consider it yet another cycle of market over-supply as the result of multiple factors, but what do I know? Oil was stuck around $100 for years and there was a scramble to cash in, as always. Whether or not this is some sort of transitional event will only be known in hindsight. Doesn’t matter what you call it now. Nice time to have a refinery strike though, eh?
Winners and losers on the downslope.
yoananda on Mon, 2nd Feb 2015 6:22 pm
Why ?
Because oil and GDP are co-variants, with a time cycle of 3 year.
We are witnessing the consequences of oil prices in the last 3 years, and not the “abundance” of shale oil (LTO cannot be used to make gasoil BTW it I’m not wrong, that means it doesn’t change much anything).
We are in a deflation cycle, and now, the next victim is the oil companies themselves.
That why oil glut is just a way to paint situation for cornucopists.
Plantagenet on Mon, 2nd Feb 2015 6:28 pm
@Apneaman
Your potty mouth is overflowing.
Please flush quickly.
Kenz300 on Mon, 2nd Feb 2015 6:29 pm
Fossil fuels are finite….
Fossil fuels are poisoning the planet……….
Time to look for a way out…. the fossil fuel companies and the top 1% hate that….
Higher fuel economy standards double the range…..
Ethanol at 10% of fuel supply and growing ………
Electric car sales growing around the world…..
Hybrid car sales growing around the world………
Young people opting for walking, bicycling or mass transit…..
Disinvestment in fossil fuel companies on many college campuses……
Electric bicycles and motorcycles are becoming more common….
Many reasons for the drop in demand for oil as a transportation fuel……
Save energy….save money….save the planet……..
Pope Francis On Climate Change: Man Has ‘Slapped Nature In The Face’
http://www.huffingtonpost.com/2015/01/15/pope-francis-climate-change_n_6477388.html?utm_hp_ref=generation-change
GregT on Mon, 2nd Feb 2015 6:29 pm
penury,
The recent collapse in oil prices is not good for the Canadian economy overall. Mainly due to investments in the energy sector and the economy of Alberta. A dropping CAD against the USD is good for Canadians selling oil to the US. One USD buys 1.26 CAD today. If the price of that oil drops in USD it is one thing, if the CAD drops in USD it is an entirely different animal.
I’m not sure how much we now import from the US, but I do know that 90% of our consumer goods come from China. The Yuan is also dropping so that probably evens out for the most part.
steve on Mon, 2nd Feb 2015 7:52 pm
do you consider food “consuming goods”? because you import a hell of a lot of that from the U.S and mexico
GregT on Mon, 2nd Feb 2015 8:22 pm
Yes Steve,
A lot of our produce in the winter months comes from California, Mexico, Central and South America, and even from China now. We are seeing less from California most likely to do with the rising USD and continuing drought. Again the Peso has also dropped along with the CAD, so not a big difference. I know that some SA currencies are doing well as of late, but buyers tend to look for the best prices to pass on to the consumer. Rising currencies are not generally good for exporters.
steve on Mon, 2nd Feb 2015 10:09 pm
Just curious I can’t find how much comes from Canada in the summer. I know you have good soil there but don’t know….I know that freakecnomics had a show that basically said that buying local was not a good thing ie…it is better to buy a tomato grown in a warmer climate and ship it up there rather than grow in a cold climate using heated greenhouses etc…I take it all with a grain of salt…I had a university economics professor that drilled there is no free lunch in our heads…had us read “How to lie with Statistics”
GregT on Tue, 3rd Feb 2015 12:05 am
We do have large greenhouse operations in the Fraser Valley that grow tomatoes, cucumbers and bell peppers. I would guess around nine months of the year. I’m not sure how far south into the States that they export, but I have regularly seen BC Hothouse produce for sale in grocery stores in Washington State. There are plenty of small local farms that grow seasonal vegetables; carrots, radishes, turnips, squash, lettuce, celery, potatoes etc. We grow corn locally as well, and it is also exported. Most of our grain comes from the prairie provinces, Alberta, Saskatchewan, and Manitoba. Much of our meat also comes from the prairies as well. Chickens are raised locally, as are eggs and dairy products.
The Okanagan area in BC is our fruit producing region. It is much more of an arid region during the summer months than the coast. They grow apples, pears, peaches, apricots, plums, dates, grapes etc. It is also BC’s wine producing region. We export wine globally.
I lived on a farm in Alberta growing up. We grew barley, oats, canola, rye, wheat, corn, and alfalfa. Things have changed a lot since then though. NAFTA, and American farmers’ subsidies really threw a wrench into our export markets. A lot of small farmers went out of business. The ones that remain mostly grow Monsanto GMO stuff now. Rapeseed or Canola are popularly grown crops.
Davy on Tue, 3rd Feb 2015 4:43 am
Greg, back in 02 we had a family powwow at Lake Louis, Alberta. Every year a family member would choose a location. It was my year. I was tired of the typical Caribbean destination so I picked Banf/Lake Louis. I took some extra days before the meeting to drive around and see the area. I flew into Calgary and drove down to Glacier Park. This was June there had been a freak spring snow storm so I only got to the edge of the park. The part I loved was all the cattle farms of southern Alberta.
I am an aficionado of farms especially ranches. You all have some nice ones in that area. Really well built barns impressed me. These barns were built to handle snow loads unlike we see here in MO. For the most part they are wood. Many barns anymore in MO are metal. Anyway, some significant cattle production in the southern prairie parts of Canada. I could definitely live in that area.
Head-Smashed-In Buffalo Jump World Heritage Site was an exceptional location of Native American history in Alberta:
http://history.alberta.ca/headsmashedin/
I bring this up because of the natural biomass of the buffalo in these prairie areas for a food source. It will be the future because this area has the potential to produce vast herds again that have no need of BAU & FF.
GregT on Tue, 3rd Feb 2015 9:44 am
Davy,
My great grandfather homesteaded in Alberta on the Little Red River north-east of Sundre. He got my great-grandmother pregnant in Scotland. Her father and three brothers were all policemen. They were going to kill him so he jumped on a boat to Canada. She followed the next spring.
He cleared the land that they were given by hand, and built a one room sod roofed cabin that they spent the next several winters in. Back in those days temperatures during the winter routinely dropped to forty below zero. The nearest small town was thirty miles away. How they survived still amazes me. He died at 96 years of age when I was 13.
There was a buffalo jump on the edge of his property. My father and his friends collected arrowheads there when they were kids. If I remember correctly they were paid 5c a piece for them. By the time I came on the scene, the area had been turned into a park. No arrowheads left but you could clearly see where the buffalo had been herded over the cliff.
Davy on Tue, 3rd Feb 2015 9:53 am
Great story to be proud of Greg. It shows you have some great DNA somewhere inside that will guide you through this coming shit storm. Return to your roots for sure.