Good editorial on the looming oil crisis....

[kalian]

http://custom.marketwatch.com/custom/earthlink-net/mw-news.asp?guid=%7B8A89E36B-0E79-44B0-A790-DFFCDBE4BA21%7D

HEALDSBURG, Calif. (CBS.MW) -- As the price of crude oil keeps rising toward $40 a barrel and beyond, it has become increasingly clear that the world is heading toward a major oil crisis -- in terms of both price and supply -- that will dwarf that of 1973.

For many of us who have been observers of global energy trends for what now amounts to decades, this has become not a matter of "if" but rather one of "when." We are facing a convergence of three forces that will have a potentially explosive effect on the market for crude oil.

They are:

1. A growing geopolitical crisis in the Middle East, which is now threatening to spread beyond Iraq to Saudi Arabia, the world's largest producer and exporter of crude oil.

2. A surge in global demand for energy and particularly crude oil and its derivatives, fueled by the recovery of both the American and Japanese economies and the unprecedented growth of China, which has just replaced Japan as the world's second largest consumer of crude oil.

3. A structural deterioration of the world's oil supply. What is involved here is nothing short of an imminent peaking out of production of crude oil on a global basis -- known by energy industry insiders as "Hubbert's Peak" -- which would turn a cyclical supply/demand crisis into a structural energy crisis of unprecedented proportions.

This is the first a series of articles dealing with this pending crisis and its potential impact on our economy and financial markets.

...more...

There is no doubt in my mind that we're entering a new phase in this
economic war. Whoever is attacking the oil centers is aiming to hit
the US where it hurts the most: energy prices.

Dark times ahead...very dark times...

[brokensymmetry]

1. This is the 800 pound gorilla.

It's sitting in the middle of the living room, and no one talks about it.

DU is about the only place where anyone even admits there might be a problem! And there are 10 times more comments about cute kitten pictures in the lounge than about something that will rock our economy - the whole world's economy - right down to the foundation.

I like the kitten threads as much as anyone, but the oil situation really, really needs some awareness.

[RC]

3. Can't really do much as long as the oily criminals are

occupying the peoples White House. We need to get them in a federal prison, ASAP. Then we can start cleaning up the mess they made.

What is needed is to wean ourselves off foreign oil and plow all that money we are wasting in Iraq into alternative energy sources.

[Petrodollar Warfare]

8. Economists & gov'ts refuse to accept the 800lb gorilla..

(below are my comments from the editorial section of the same article).

Please note Mr. Birol's comments in the article when asked if supply (3 million additional barrels of oil) can meet demand..."You are from the press? This is not for you. This is not for the press."

Denial of reality, and refusal to state the obvious. Therein lies the crux of this problem, no political leaders here or abroad will answer that question....so rather than face the truth, the US is sending young men off to fight and die in wars under the false guise of the next "war on terror." Here's the basic problem as I see it:

Peak Oil = the clashing of the immutable laws physics vs. the laws of economics (EROEI vs. laws of supply and demand when no readily substitute is readily avaliable for energy production at current levels = current economic output is limited by energy). Obvisouly, physics will prevail, as economics is simply a construct of man. (Those who think the "free market" will find a soluation have no understanding that the oil/gas market is not a free market at all, but rather a 50 year history of intelligence agency intervention to enforce a command economy, with the recent Iraq war moving us directly into an *overt military command economy.* There ain't no "invisble hand" of the market in this sector, and there hasn't been since at least 1953..)

Mr. Birol is just another example of why almost *no economist* will publically admit to the concept of global Peak Oil, as it implies an *intrinsic* limitation to econimic growth in our current global economy, and not even a Harvard educated PhD in economics can crack that dilemna....so, more men, women and children will die violent deaths in this decade and into the next.

Unless of course our humanity prevails...but I'm undecided on that one.

[section321]

9. One problem you get trying to discuss this is been said before..

One of my Economics professors was an expert in oil (B.S. & M.S. Petroleum Engineering, M.A. & PhD in Economics, J.D.) and he used to talk about how people have been predicting the exhaustion of the oil supply since the 1920's. Everytime someone predicts the end, better technology bought more oil within reach. Since these predictions have been proven wrong in the past, there are some who say this is just another case of chicken little saying the sky is falling.

I don't subscribe to that view. I've read about Hubert's peak and I agree that we are entering a new phase in the history of the industrialized world.

One more thought from my old professor...the modern world economy is based on cheap energy, and that cheap energy of oil. No other source of energy is as cheap to extract and transport. No other source of energy is as easy to handle and process as oil.

Maybe, in their own sick and twisted way, the Bushies are looking out for the future of America. I would rather they took a different approach.

[rfkrocks]

2. Great post

and the Chimp in chief feels the way to protect our energy supply is to drill in Alaska-not one conservation mention at all-when will we learn we need to stop using oil on the mass basis? It is a crisis and it will sink the economy-big oil can't call the shots anymore-its out of their control

[JohnyCanuck]

4. Wash. Post just ran an editorial on this too.

This was posted in the Editorials forum by GoreN4.


After the Oil Runs Out

By James Jordan and James R. Powell
Sunday, June 6, 2004; Page B07


If you're wondering about the direction of gasoline prices over the long term, forget for a moment about OPEC quotas and drilling in the Arctic National Wildlife Refuge and consider instead the matter of Hubbert's Peak. That's not a place, it's a concept developed a half-century ago by a geologist named M. King Hubbert, and it explains a lot about what's going on today at the gas pump. Hubbert argued that at a certain point oil production peaks, and thereafter it steadily declines regardless of demand. In 1956 he predicted that U.S. oil production would peak about 1970 and decline thereafter. Skeptics scoffed, but he was right.

It now appears that world oil production, about 80 million barrels a day, will soon peak. In fact, conventional oil production has already peaked and is declining. For every 10 barrels of conventional oil consumed, only four new barrels are discovered. Without the unconventional oil from tar sands, liquefied natural gas and other deposits, world production would have peaked several years ago.

Oil experts agree that hitting Hubbert's Peak is inevitable. The oil laid down by nature is finite, and almost half of it has already been extracted. The only uncertainty is when we hit the peak. Pessimists predict by 2010. Optimists say not for 30 to 40 years. Most experts expect it in 10 to 20 years. Lost in the debate are three much bigger issues: the impact of declining oil production on society, the ways to minimize its effects and when we should act. Unfortunately, politicians and policymakers have ignored Hubbert's Peak and have no plans to deal with it: If it's beyond the next election, forget it.

To appreciate how vital oil is, imagine it suddenly vanished. Virtually all transport -- autos, trucks, airplanes, ships and trains -- would stop. Without the fertilizers and insecticide made from oil, food output would plunge. Manufacturing output would also drop. Millions in colder regions would freeze.

www.washingtonpost.com/ac2/wp-dyn/A17039-2004Jun4?language=printer


It looks like Peak Oil is finally hitting the mainstream. Better late than never I guess.

[JohnyCanuck]

5. And the BBC weighs in with a report from a Peak Oil conference

Is the world's oil running out fast?
By Adam Porter
at the Peak Oil conference in Berlin

If you think oil prices are high at $40 a barrel then wait till they are four times that much.

How will you pay to run your car? How will you get the children to school? How will you heat your house? How much will transported food go up in price?

How will we pay for plastics, metals, rubber, cheap flights, Simpson's DVDs, 3G phones and everlasting economic growth?

The basic answer is, we won't.

This is the message from the Association for the Study of Peak Oil (ASPO).

The group of oil executives, geologists, investment bankers, academics and others has been warning the world of high oil prices, and the ensuing fallout, for some years now.


BBC News Report on Peak Oil conference

This conference reported on by the BBC was sponsored by the Association for the study of Peak Oil (ASPO). Their web site is www.peakoil.net

[ramapo]

6. When will the wakeup call come?

This editorial does not jive well with the Reagan-remembrance love-fest now in progress, complete with a redux of his eternal vision of a sunny tomorrow for our society.

In my rationally realistic thinking, 1980 was when America left the road of reality and began its' descent through Fantasy World, a place where reduced revenue through taxes can lead to more money to run the government, a missile shield can be put in place to protect the country from attack, and nobody has to worry about the environment or sustainable resources. In fact waste is celebrated as a great American value.

Despite the recent "bump" in prices, gas is still relatively inexpensive as adjusted for inflation. I see startling examples of fuel waste on an almost daily basis. People here love to go to the park at lunchtime and sit in their cars/trucks with the windows rolled up and the motor running, even when the weather is clear and comfortable. Many, if not most, people will opt to drive the car a block instead of walk the short distance, even on a sunny day. At home the A/C must go on as soon as the temp rises much above the 75 degree mark.

We are all guilty. Our children have little clue as to the waste that goes on because it is a staple of their lives. Those of us a bit older, who actually survived living without A/C as well as have seen a little bit about an energy shortage, have some idea.

The fact that we've spent 30 years on an energy binge instead of on development of sustainable systems is criminal. Now China and India are starting their own party with little indication that they've learned anything about smart growth.

One day the wakeup call will come and it will be jarring. As unbelievable as it is, there will be shock and utter surprise throughout the land when it becomes obvious that the party is over.

Until that metaphorical day, I expect little real change or progress.

[phantom power]

7. psychological thresholds

people respond to psychological thresholds, that are often somewhat arbitrary. When gasoline passed $2.00/gal, it caused a reaction, and I think it will continue to hold people's attention when they realize it's not coming back down (so I predict).

When it hits $3.00/gallon, it will be another quantum leap in national consciousness.

When the price of fuel starts to impact the price of everything else, people might notice, if anyone connects the dots for them.