Key words :
A Mixed Bag of Oil Projections in the MSM
9 Jun, 2008 02:28 pm
Oil drives so much of the global economy, it's almost impossible to fully imagine the world of $200 oil. No question, the shock will force nations to go greener much faster than now, particularly by conserving energy and developing and adopting new non-fossil fuels.
A major acceleration in the transfer of wealth that has, in the past five years, shifted trillions of petrodollars from oil consumers to producers would alter the world balance of power—including a boost for the troublesome oil autocrats of Iran, Venezuela and Russia. At $200 a barrel the proven oil reserves of the six Gulf nations alone would rise in value to $95 trillion, about twice the size of public equity markets, according to Morgan Stanley managing director Stephen Jen. That would make the Sovereign Wealth Funds of oil states market kingmakers. Western efforts to press more openness on these funds, many controlled by royal courts, would surely grow.
As I browsed through recent energy headlines on my Sunday morning - which lately has been the only time slot that allows me to catch up - I saw two contrasting stories in the mainstream media. One is from CNN Money, warning of $6 gasoline if we have a bad hurricane season:
An ill wind for gas prices
NEW YORK (CNNMoney.com) -- Batten down the hatches: hurricane season starts on June 1. It's expected to be a rough one, threatening to upend refineries and disrupt pipelines in the southern United States.
"With the market the way it is now, a move in crude because of a hurricane could really be exacerbated," said MF Global energy analyst Don Luke.
Peter Beutel, oil analyst at Cameron Hanover Beutel, said if a Katrina-like hurricane were to hit in July, gas prices could go as high as $5 or even $6.
"The last thing this market needs at this time is a hurricane, because we can't afford to lose any of our refining capacity at this point," said Beutel. "If anything bullish happens with the market in this state, it would make it go absolutely crazy."
One thing that I haven't covered lately is that gasoline stocks have now slid to the lower end of the normal range, which you can see at the lastest version of This Week in Petroleum:
As was discussed at length last season (also note my warnings in those archives of rising gas prices), that does put the pieces into place for a huge run-up in case of a disruption. Last year, we didn't see any bad hurricanes than interrupted supplies, but we certainly take a risk in this situation.
The other MSM story comes from Newsweek:
What Goes Up Must Come DownThere are widespread signs that the surging oil price is leading to demand destruction in the largest consumer of oil—the United States. From reports of the sharpest ever year-over-year drop in miles driven, SUV sales falling off a cliff and cutbacks airlines are making to their flight operations, U.S. consumers are clearly coming under severe stress. Oil spending as a share of the global economy has risen to more than 7 percent, a level last seen in late 1979. What happened next is instructive: from 1980 to 1983, the consumption of oil fell by 10 percent, and it took another seven years for oil consumption to reach the 1979 peak level of consumption. The length of the cycles may vary, but in the end, oil, too, is a cyclical business.
Encouraging signs that we are reducing our consumption, but I think the author misses the mark with that last statement. Oil has historically been a cyclical business. This will change when supply growth can no longer outstrip demand. This is going to be the case when oil production peaks, and all signs indicate to me that the erosion of excess capacity is driving the current surge in prices. Unless we have enormous demand destruction (and how is that going to occur other than through very high prices?), or there are a couple of Saudi Arabia's hiding in the Arctic and soon to be discovered, I can't easily see supply getting far ahead of demand. That is what would be required to continue the cycles - an oversupply situation.All price setbacks in oil over the past three decades have been demand- and not supply-led. Still, the oil bulls are willing to ignore evidence of demand destruction and are instead obsessed with supply issues. While there may be some merit in the increasingly fashionable "peak oil" theory, which essentially postulates that the world will have consumed most of its oil within a 300-year period, there is no evidence that world oil production is peaking today. The crude-oil market is currently well supplied, and production is expected to grow by 1.5 to 2 percent this year.
Peak oil is now "fashionable." That's a relief. Now I am going to try to promote this idea I have called "Peak Money" theory. It goes like this. If I inherit a bank account, and I draw money out of it - yet I make no deposits - eventually I will run out of money. If my spending is increasing over time, then I will need to make some big adjustments when I start to run out of money. In truth, this is no more theory than peak oil is a theory. It puzzles me to hear people refer to "so-called peak oil theory" or some other term that indicates that it is anything other than an observation.
There is no question that global oil production will peak. We have country after country in which this has already taken place. The key questions are "When?" and "What are the impacts?" I believe the answer to the timing is that it is soon. Even the most optimistic predictions mean that my children will have to deal with it. The more pessimistic suggest that it is upon us now. Personally, I think >90% probability of a global peak within 5 years - which is why I spend so much time pondering the impacts.
Originally published on : R-Squared Energy Blog
Key words :
Â“Peak OilÂ” is NonsenseÂ… Because ThereÂ’s Enough Gas to Last 250 Years.
Threat of Population Surge to "10 Billion" Espoused in London Theatre.
Current Commentary: Energy from Nuclear Fusion Â– Realities, Prospects and Fantasies?
The Oil Industry's Deceitful Promise of American Energy Independence
Shaky Foundations for Offshore Wind Farms
Well, the chicken has come home to roost. Free markets and renewables will not fix this mess. No combination of alternatives will allow us to continue to do things the way we do them today. The sooner people realize this the better chance we'll have at implementing real solutions such as: Living in walkable communities, Improving our decrepit rail network, Reallocating land for agricultural purposes, Cease building suburban sprawl, Build new nuclear power plants, to name a few.
This is the reality we face. We still have a chance to dodge some of the bullets peak oil will send our way, but we must not squander the opportunity we have to get some of this right. The spotlight must be put on real solutions, and we must stop collectively "wishing" that this problem would just go away. Because it won't.
With the exception of building new nuclear power plants (because a renewable method exists that is much cheaper, as I've stated in this forum before), I agree with the suggestions you propose.
To your list I would add "rationalization" of the way we consume and recycle water. For example, the following is from a European study:
"Urine accounts for only one percent of the volume of wastewater, but 50-80% of its nutrients, which require more energy intensive processing to eliminate."
"In Switzerland, nutrients from human urine could serve as substitutes for at least 37% of the nitrogen and 20% of the phosphorus demand that is currently met by imported artificial fertilizers."
The phosphorous was recovered in a simple process involving co-precipitation with magnesium.
The important point is that urine should be collected and treated separately. This would eliminate about 2/3 of the "flushes" that make up the flow into a municipal treatment system. The production of nitrogen based fertilizer involves the consumption of clean natural gas, the supply of which will be peaking soon after oil. Phosphorous deposits are also limited in extent and to certain locations in the world.
Your suggestion about separate treatment of urine is interesting and somewhat tangential in nature. I trust your science on the matter, but practically speaking, taking a piss is not always convenient, planned or organized. The infrastructure required to implement the type of system that I believe you're envisioning would be both massive and revolutionary (similar to that of a hydrogen "re-fueling" system).
The larger point is: When matters of energy are discussed, there is no such thing as a free lunch; at least in the context of how we currently use energy. Modern civilization needs to figure out a new (actually old) way of getting things done. I believe that technology and efficiencies will play a certain role. However, I foresee a future in which most people will have to sacrifice many conveniencies and substantially alter the manner in which we conduct commerce, and even feed ourselves.
The solutions we need will be necessarily much more local in nature. They will take into account energy demand, local fuel supplys, geography, and consumer acceptance/tolerance. Conservation and efficiency will take center stage as well.
Current energy consumption models cannot scale on a workable basis, and are not sustainable. Societies (Americans in particular) are going to have to get used to a very different way of life. Unfortunately, much of the knowledge needed to survive in a low-energy civilization died generations ago. I believe that there will be much turmoil and suffering if the necessary transitions are not executed swiftly and competently. In summation, this crisis will be endured rather than solved.
The urine example was only a small instance of how we use water in "irrational ways" just as we use gasoline in "irrational ways. My more general point was that our attitudes toward food-water-soil-energy-housing-"waste-disposal" are based on a history of plenty. We cannot continue our current practices and pretend to be surprised when the population is reduced by 90% or more.
We know that humanity cannot simply "retrace its steps" back to a hunter gatherer existence. We have "appropriate technology" that needs to be applied (in many cases simple tools, the wheel, and fire), which gives us great advantages over those who existed at the dawn of civilization.
Most people will have to remain the cities--we cannot possibly build enough housing to put them elsewhere. They will have to grow some of the food they eat in an urban setting and will therefore need plenty of fertilizer, some of which they could provide themselves.
I would envision the urine being stored where it is generated for 24 hours, and then carried or pumped several blocks to a "community garden", where it could be utilized directly or processed for use later on.
At the very least, they urine could be "flushed" into the existing system, using but a single flush once a day, saving a lot of water in the process.
For the record, I am totally against centralized systems such as those required for hydrogen generation and distribution, as well as those required for nuclear energy generation. Nuclear energy depends on the cooperation of a small number of high-tech specialists, who, like those with knowledge of GMOs, could hold the rest of humanity hostage.