Friday, May 23, 2008

Oil Price: Damned Lies and Government Predictions

Take a look at THIS. It's the offical government predictions for the level of oil prices in the years to come. Essentially, it boils down to this...

Central scenario - 2010 – $65/bbl – 2030 - $75/bbl

Low scenario -2010 - $45/bbl – 2030 - $45/bbl

High scenario – 2010 - $85/bbl – 2030 - $105/bbl

High high scenario – 2010 - $107/bbl – 2030 - $150/bbl


It appears to defy all logic. Obviously the impact on government forecasting, pricing for major projects, traffic projections (and road building) etc etc is significant to say the least. With oil at $135 a barrel today, you'd think this document needs radical updating.

54 comments:

Gallimaufry said...

"Past performance is no guarantee of future results" as the financial wallahs always say to cover their backs. The levels of demand and supply of crude oil are broadly similar to last year when prices were half as much. It would appear that the financial brains, having lost other people's money in the US property market collapse, are now charging headlong into the oil market like a herd of wildebeest as anyone can make money on rising prices. And then the pyramid collapses. Who remembers the dotcom bubble?

Anonymous said...

What utter nonsense.

There is no shortage of oil in the world. There is no energy source in the history of mankind that has ever run out before an even better resource has taken its place.

The supply of natural gas is almost unlimited and is stil burned off as a waste product of oil production in many parts of the world.

I well rememebr the oil crisis of the lat 1970s and by the time I started work in the oil industry in 1987 the oil price was well on its way to slumping back to $10 per barrel.

Commodities go up and down in price and oil is no exception. I suppose these ludicrous projections wil be used to justify all sorts of subsidised renewable nuclear build.

Our future is liquified natural gas (LNG) and we just need to get on with building the terminals to bring it ashore in the UK. Even as I write there are gigantic LNG tankers being built that will revolutionse the carriage of massive quatities of LNG over long distances to the Atlantic basin where it is already being bought and sold like oil. This ubiquitous fuel wil dispalce mauch of the oil/coal consumption we now see and there wil be a massive price war as a result.

HM Stanley said...

Iain:

Whatever happened to the "coming soon" function? Daily blog round-up? You're slacking off here!! And btw, where is Verity? I miss her!!

Anonymous said...

"It's the offical government predictions.."

NO ! NO ! NO ! I am getting so annoyed with the increasing rate of inaccurate use of "It's.." when people mean "These are.." or whatever .

Pack it in at once !! It is spreading like a virus and must be stopped at once !! It is annoying beyond belief.

tory boys never grow up said...

Perhaps it is the market that is not behaving rationally - prices have doubled this year despite underlying increased supply and stable demand for oil. Not that Tories would ever want to criticise the rationality of markets or heaven forbid seek to regulate them.

The increased oil prices are largely being driven by hedge funds wanting to find their next quick buck after sub prime and because speculators are pouring their funds into commodities rather than the US$ or stock markets. Perhaps when Goldmans start talking of oil price spikes - someone should ask who is benefiting from such talk.

The sooner something is done to regulate hedge funds and/or those who provide them with funding the better. Clearly, the time for some social democratic market management. Possibly worth dusting off Nicky Kaldor's old idea about using commodities as a reserve currency

And what is Dave proposing as a solution - playing around with fuel duty - well that will make a really big difference.

Shaun said...

Yes, I heard this on Radio 4 earlier this week. So shocking its funny.

But more seriously, think about this: aside from housing which is adjusting down anyway, the key movers of inflation are fuel prices and food prices (which are largely being driven up by the increased fuel costs in producing, growing and transporting food). Fuel duty accoutns for a majority of fuel prices, around, what, 60% with VAT on top. As prices have risen the treasury has benefited. Why not slash fuel duty to restore pump prices to the 90p ish level. It would lower fuel costs, strike hard at inflation and increase the amount of cash in the consumer economy. Even from a socialist perspective, its hard to envisage a more regressive form of taxation. Food, heat, light. You pay more.

What do you mean we can't afford to cut it because we squandered all the bonus revenue from high prices by spanking £100bn on Northern Rock?

Anonymous said...

Iain, it's hard to predict the weather for Bank Holiday Monday, yet alone whether the oil price will be up or down in the future.

Clearly the figures need updating but anyone giving you a forecast is either trying to sell you something or deranged. No one can predict the future accurately...

Obviously I have oil puts said...

Iain,

Whatever else is true about oil.

The present price is a bubble.

Are you queueing for petrol, no you are not.

Iran has loads of tankers parked up 'cos they can't sell it.

Nick Drew said...

What's really wrong with those BERR scenarios is that the projected price-curves are FLAT.

"Economists set themselves too easy, too useless a task if in the tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat" - JM Keynes

As other have said above, and we've said consistently, there's no shortage of oil.

Scenarios are one thing, but price-forecasting is a mug's game.

"The only function of economic forecasting is to make astrology look respectable" - JK Galbraith

"Forecasting is not a respectable human activity and not worthwhile beyond the shortest of periods" - Peter Drucker

"The price of copper and the rate of interest twenty years hence .. about these matters there is no scientific basis on which to form any calculable probability whatever . We simply do not know" - Keynes again

Anonymous said...

look at the bright side - all these eejits who bought flash audis which do 20-30 mpg will be penilised hugely and have to consider downsizing to a Toyota Prius, or something friendlier to the environment. Like a bicycle...

And not before time in my opinion..

javelin said...

My predictions are that $140 is the point at which alot of companies economic models become unsustainable. That means once oil is over $140 for more than 3 months there will be sharp rise in bankruptcies.

Consequentially there will be another round of large spreads in the LIBOR rate as exposed [to company backed credit derivatives] banks credit ratings drop AND a reduction in the quantity of commerical loans.

Consequentially commerical loan rates will rise leading to more bankruptcies.

Oil will trigger a recession - but Gordon won't be able to lower the tax on oil because he has already shot his wad on the 10% tax fiasco.

according to the times said...

Article in 'The Times' bears out what other posters have to say. Financial speculation is a factor in oil prices doubling.

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3980797.ece

But don't expect Gordon to regulate this bubble any more than he did house price inflation. Fuel is the only tax cow he has left to milk.

Anonymous said...

You might think that if you have an e in a-level economics and a career in political chatter.

Anonymous said...

Ever heard of hedge funds, shorting, going long, on margin?

The oil price is speculation - the same speculation that sees house prices at 10x incomes, the same speculation that drives food prices to levels that mean starvation for the third world, the same speculation that saw Bear Stearns go bust in an orgy of leverage.

And that same speculation will see house prices back to 4x income, food prices at more realistic levels again, more banks go bust (try Lehmam Brothers for a start)and oil back at sane levels.

I've always been a capitalist but it is completely and utterly out of control. A massive failure of oversight and regulation.

Chris Paul said...

This is capitalists taking profits and taking the piss. Not party political in any way. Except that some of us have less time for free form capitalists than others.

But, tell us Iain, which state, run by right wingers, came up with better predictions?

What is your point exactly?

Benedict White said...

Iain: "It appears to defy all logic. Obviously the impact on government forecasting, pricing for major projects, traffic projections (and road building) etc etc is significant to say the least. With oil at $135 a barrel today, you'd think this document needs radical updating."

Not if you read this first:
http://aconservatives.blogspot.com/2008/05/oil-price-crash-imminent.html

Anonymous said...

Iain,

Can't we filter Chris Paul out?

Blogger should let users tag posts by people who's views they're utterly bored by so one doesn't have keep read the same old same old.

Yak40 said...

(a) The much ballyhooed Iranian oil parked in tankers is nasty sour crude, many refineries can't handle it for one thing.

(b) Some industry majors are forecasting $60-70/bbl by (this) year's end.

Anonymous said...

"look at the bright side - all these eejits who bought flash audis which do 20-30 mpg will be penilised hugely and have to consider downsizing to a Toyota Prius, or something friendlier to the environment. Like a bicycle...

And not before time in my opinion.."

Ah yes, the Toyota Pious - bought by those who want others to believe they are "green". In reality it is not really that efficient, less so than a BMW 520d. You might as well have a proper car.

Anonymous said...

I would suspect that the Government forecasters know more about predicting the price of oil than Iain does.

You might as well say that the bookies are idiots because they are only currently predicting a Tory majority at the next election of 50-60, when we all know they're heading for a majority of 338.

Greg

javelin said...

Oil prices have some component of speculation, but it's not a bubble. The reason the price is high is level supply and demand is going up. India and China are each twice the size of the EU+US and have 7-11% growth. Do your sums.

Potato farmers in Idaho can't crate their crop because the Chinese have bought all the wood supplies at the price the farmers used to afford - so potatoes go up in price.

There is plenty of oil in the world but at a price, and that price may mean many company business models are uneconomic - and if that involves things like transport it means life-styles are uneconomic too.

Food prices are high because countries like India have banned rice exports to feed their own poor (to stop a communist revolution). Continuing that policy may prove to be an uneconomic model for those countries.

North Norfolk Blogger said...

anonumous @10:37 PM said

"What utter nonsense.

There is no shortage of oil in the world. There is no energy source in the history of mankind that has ever run out before an even better resource has taken its place."

What planet are you on?? We live in a closed system, we have finite resources and humanity is depleting those resources much faster than can be sustained. I am not what Jeremy Clarkson calls an "Ecomentalist", but everyone has to recognise that even if there is no shortage today, there will be within 50 years.

We extract oil from tiny holes in rock, as soon as the pressure goes we have to pump, that in itself takes energy, we have been very lucky to use what we have, and although I have (some) faith in mans ability to dream up new energy sources, unless we can bring this energy in from off planet, we will still be in a closed system where the Net energy and resources of the system cannot change

The Remittance Man said...

Not necessarily Iain. At $135 a barrel you can bet two things are happening:

Firstly fields and wells that were considered marginal are being brought out of mothballs. And wells that were in need of fixing/upgrading but had been closed instead are rapidly being brought back to productive status.

Secondly at the current price you can bet that every exploration rig is working flat out and is booked for years into the future.

A better future indicator than today's spot price (which is driven by sentiment, speculation and current opinion) would be to look at the activity levels of the manufacturers of oilfield equipment and exploration companies. My guess is they are working flat out and can't keep up with demand.

I don't keep an eye on oil companies myself, but a similar trend is being followed in the unobtainium market (as well as other minerals) where prices have also skyrocketed. My geological colleagues are going frantic trying to find exploration contractors just to keep up with our current, on mine, exploration workload. The problem is every man and his boss boy wants in on the new boom game and they are paying ridiculous sums to hire rigs and crews.

As for getting new equipment - lead times from the manufacturers are typically double what they were two years ago. And that's despite them ramping up production and moving factories from single to double or even triple shift operation.

Damn! I wish I'd bought CAT shares three years ago.

Shaun said...

"This is capitalists taking profits and taking the piss. Not party political in any way. Except that some of us have less time for free form capitalists than others." - Chris Paul

If capatalists are the bad guy, why is around 70% of the price you pay at the pump going to the state through fuel duty and VAT? How bad does that make them and how rich does it make the treasury? Not very on both counts I fear, as the treasury is still shovvelling money into the enormous national debt after Gordon bailed out his pet capitalists doing really risky finance at Northern Rock. Or are they good capitalists?

scott redding said...

I think you should have a pool to predict when Gordon Brown will first mention "peak oil".

judith said...

Just a proposition:

Whilst capitalism isn't perfect, perhaps the reason that it goes off the rails is government interference (leading to over-complex avoidance and evasion), and personal greed on the part of the punters, ie us.

Brown was a fool from the beginning, simply because of saying 'no more boom and bust'. No matter how perfect he thought his own methods were (ha ha), he should have factored in world-wide economic and trading cycles and problems.

The only economic forecast to be trusted is the one that says "one day there will be a rainy day - make some provision for it" (copyright - me).

Auntie Flo' said...

What else should we expect but lies from a Prime Minister who, having been hammered by the former Labour heartland electorate of Crewe & Nantwich , states:

"Voters have shown they wanted me to steer the UK through "difficult economic times"."

What is this man on?

Do we have the means to remove Brown from office on the grounds of his obvious mental illness?

If not, we damn well should have.

Auntie Flo' said...

Or perhaps Dizzy has the answer?


"Ever heard of a Skrull? No? Not a comic book fan then? Well, the Skrulls are a Marvel Comic invention. They're not very nice and they're shapeshifters.

More importantly, in the latest issue of Captain Britain and MI:13, there is a guest appearnce from Gordon Brown. Apparently, three of his Cabinet turn out to shapeshifters as well.

Feel free to speculate on which memebrs of the Cabinet you currently think might actually be secret aliens sent to infiltrate earth in preparation for invasion."

Anonymous said...

It is not a bubble Ian. Peak oil will be reached by 2013.

By 2011 the oil producing countries will be cutting back on oil exports to meet their own growing demands.

At the present time the global production of light low sulphur crude has peaked, this crude is the cheapest source of Jet Kerosene and Diesel.

Frightening eh?

Here is the BBC PM iplayer Link to "unchartered territory."

Gordon Brown may as well bark at the moon as give OPEC hard times, they can not produce this light low sulphur crude any faster. The cost of this type of Crude will NOT come down.



The "oil coverage" starts at about minute 5 and the peak oil explanation starts about 9min 45 secs. In a couple of years time you won't be able to even give away gas guzellers, cheap air travel is a thing of the past.

Shaun said...

"Feel free to speculate on which memebrs of the Cabinet you currently think might actually be secret aliens sent to infiltrate earth in preparation for invasion." - Auntie Flo

All I can say is if the aliens best men are in THIS cabinet, I think we can sleep safely at night. We're not going to need Will Smith's ID4 antics on this one! Mr Magoo could sort it!

Anonymous said...

Iain

Was absentmindedly reading this thread, not paying much attention, when I saw the utter drivel from North Norfolk Blogger.

Now I'm no energy expert, and only did O Level Physics, but even I can see that this statement he makes is plain stupid:

"unless we can bring this energy in from off planet, we will still be in a closed system where the Net energy and resources of the system cannot change"

To test his stupidity I have just gone and stood outside for two minutes and, guess what? Yup, I got warmer in the sunshine. I was bombarded with "off planet" energy which is otherside known as sunshine.

Where does he think energy originates from? Some big battery at the centre of the earth that has been there since big bang?

Whilst the heat energy stored at the centre of the earth is a factor in the energy balance of the planet, I suspect that oil came from tress that grew with the benefit of energy originiating 'off planet'.

Rant over and let's just hope to goodness that North Norfolk Blogger is not in any position to let his stupidity affect energy policy.

SP

Dave H. said...

Iain, there's no point in asking for an update in May 2008 on a document dated May 2008 and marked Update. Half way through the year and the current oil price is above their high end 'prediction'. These clowns are just wasting taxpayer's money.

Notice that a document produced by the Department for Business Enterprise & Regulatory Reform opens with a statement on CO2 emissions. Global warming is clearly central to their departmental remit. One suspects leaden political hands are coiled tightly round a department supposedly concerned with enterprise and reform.

If only we could prosecute Gordon and his ghastly gang. Their worst case outcome is merely to lose an election. It seems way too soft on on them.

Anonymous said...

,Anonymous said...

"Can't we filter Chris Paul out?

...so one doesn't have keep read the same old same old.2

That despicable Chris Paul compelling you to read his posts. These nulabbers have no shame. They should be put down.

Rohan said...

Prices will carry on rising. Its a classic asset bubble driven on by irrational calculation. All bubbles burst sooner or later. Prices will return to something approaching sanity. The problem is that oil is so central to our economy and way of life that it is causing pain, and building inflation into the world economy during the bubble inflation period. China which until late might have absorbed some of this inflation is actually pumping it out now. So the west will have to live with it. And this means higher interest rates to zap the inflation. Gordon's troubles are just beginning. And that's why I don't want the Labour party to ditch him. By the time this is over Mr Miracle Prudence will be seen for the fraud he is.

Anonymous said...

Let's blame the Chinese, no not the takeaway, but those naughty people who want to better themselves rather than sitting around like some in Africa. Anyway don't panic the price will fall. We threw away the billions from North Sea oil. handing it out to scroungers instead of building a new infrastructure. Necessity is the Mother of invention and when the black stuff runs out we will use something else. The Greens and Libdems can kiss goodbye to any chance of power sharing. Roll on the next Industrial Revolution.
freedom to prosper

Auntie Flo' said...

Shaun said:
All I can say is if the aliens best men are in THIS cabinet, I think we can sleep safely at night...Mr Magoo could sort it!



Very true, Shaun, isn't the problem that Mr Magoo IS sorting it?

neil craig said...

There are 2 variables here & probably the more dodgy one is what the dollar will be worth. A £200 barrel might be cheap - to that extent speculating in oil if all you have is dollars makes sense.

The immediate problem is that there is no "give" in the market. The OPEC countries, except Saudi, are producing at full volume & our invasion of Iraq to get her oil has noticeably failesd. The other immediate problem is that the "eco" movement has prevented any new refineries being built in western countries for 2 decades which means they are all working flat out & any shortage works through the system immediately - this obviously makes speculation a lucrative bet.

The medium term scenario depends entirely on whether we let politics, particularly "green" politics impoverish us. Refineries can be built; the Alaskan North Slope reserves & others elsewhere can be used; we can stop pushing up prices by mandating all this bio-fuel which is merely a subsidy to greens & farmers.

In the longer term it would take real effort to keep prices up. The tar & shale reserves are enotmous & new technology is now making them useable; nuclear power can cheaply & easily provide almost all non-transport power: GM plants will, in the near future, be able to produce bio-oil with many times more efficieny than growing maize.

If we make the real effort to enforce Ludditism & prevent a technological solution we should at least be glad for humanity that the Chinese won't.

Shaun said...

2Very true, Shaun, isn't the problem that Mr Magoo IS sorting it?" - Auntie Flo

Sadly not; he had two eyes (albeit weak ones) and everything usually turned out for the best. As we all know, we've got Mr bean (thanks Vince!), a bumbling autist who causes more scrapes than he insufficiently muddles through. Bean, that is. But y'know, life imitates art. from time to time.

iCowboy said...

Anonymous said:

'There is no shortage of oil in the world. There is no energy source in the history of mankind that has ever run out before an even better resource has taken its place.'

That is not an inexorable law, so far our transitions from one energy source to another have been driven more by convenience and energy density. There's nothing on the horizon which has anything like the energy density or versatility of petroleum.

'The supply of natural gas is almost unlimited and is stil burned off as a waste product of oil production in many parts of the world.'

The supply of natural gas is anything but unlimited, production is still rising rapidly because its a less developed resource than petroleum.

Known world reserves are about 6000 trillion cubic feet which is about 50 - 60 years at current rates of production - HOWEVER demand is growing between 5 and 6% per year, which seriously eats into that number.

Another serious problem is that many of the traditional large producers such as Texas, Oklahoma and the North Sea are now peaking or in decline. Production is moving towards two regions - the former Soviet Union (dominated by Russian reserves) which has 38% of the world's total; and the Persian Gulf (dominated by Iranian fields) with another 35% of total reserves. After that, the reserves become much smaller and more widely spread. So if we do embrace natural gas, we only deepen our dependence on troubled parts of the World.

Almost nowhere is gas flared as a waste product. Until the 1960s it was burned as there was no market for natural gas. Today gas from oil wells, (the minority of production) is reinjected to bring more oil to the surface or it is liquified for refining. The flares you see at wells or on rigs are either burning a tiny amount of gas and are there as a safety device to prevent explosions in the event of a surge in gas pressure; or the rig is an exploration rig and has no way of sending its production to a refinery.

'I well rememebr the oil crisis of the lat 1970s and by the time I started work in the oil industry in 1987 the oil price was well on its way to slumping back to $10 per barrel.'

The collapse of oil prices in the 1980s was down to non OPEC countries entering the market such as the North Sea fields and the deep water fields in the Gulf of Mexico. There is no sign of significant new oil reserves entering the market any time soon. Even the new supergiant field discovered off of Brasil adds no more than 120 days of oil to global reserves. And the fact that made so many headlines shows that new giant fields are becoming something of a rarity.

This is not to say that oil prices can't fall back from their current levels, but the days of $10ppb are long behind us.

Travis Bickle said...

"Mr Miracle Prudence will be seen for the fraud he is."

Wrong tense, his complete lack of any economic acumen has already been well and truly rumbled.

Uncle Albert Trotter would be a safer hand on the tiller in stering us out of this one.

Travis Bickle said...

"Mr Miracle Prudence will be seen for the fraud he is."

Wrong tense, his complete lack of any economic acumen has already been well and truly rumbled.

Uncle Albert Trotter would be a safer hand on the tiller in stering us out of this one.

Confused of S. Yorks said...

Dave H

"Iain, there's no point in asking for an update in May 2008 on a document dated May 2008 and marked Update. Half way through the year and the current oil price is above their high end 'prediction'. These clowns are just wasting taxpayer's money."

And the call for evidence went out in January 2008. Given that the document calls for twice yearly reviews, the next call for evidence is probably going out now. As such, the second update this year will probably reflect current prices and include as factors the way the price has increased over the 6 month period.

But if the current price is a consequence of speculation and the bubble bursts between now and publication of the next update, then it'll look just as daft, but in the opposite way. And presumably you'll be slagging them off for being wildly pessimistic with their predictions.

With capitalism, the future is always uncertain. Don't blame the government for trying to plan in unpredictable times, especially when criticism can be better directed at more worthy targets in government.

Personally I wonder whether the solution isn't to take a hit in government revenues in the short-term. If I were Brown, I'd be tempted to announce a massive cut in fuel duty in order to stimulate the economy and restore confidence. It would cut the amount that government has to spend for a couple of years, but that would be ameliorated by increased tax revenues from business who might otherwise go bust.

Caveat; I'm not an economist.

North Norfolk Blogger said...

anonymous -- SP @ 11:03 AM

Yes, you did o level physics, I understand that, it shows.

Yes, energy does come from the sun, which is "Off planet", but that does not detract from the fact that the hydrocarbons we are using, which was my main point are not renewable in a short period of time.

The fossil fuels, gas, oil and coal are called that because they were laid down over hundreds of thousands or millions of years, we have used, close on 50% of the oil, in just over a hundred years.

Iain's original post was about oil, specifically that the government department forecasting it is somewhat out of touch. I may have pulled it in a different direction, but his point still stands, as does the point of Javelin @11:20 when extreme stress is placed on a system, it adapts or breaks, I worry that it will break, because my A level Physics and Chemistry Degree does not allow me me to devise an energy scenario that will support the numbers we have using the energy we do.

And believe me, I wish we could carry on as we do, because we have had more freedom, choice and money in the last 50 years than I think will be seen again in a long time

Anonymous said...

If and I stress "if" man made pollution is causing Global Warming then why not tax airline fuel at the same rate as car fuel? Scrap red diesel and ban motor sports.
freedom to prosper

Alex said...

Iain,

If civil servants knew the future price of oil they wouldn't be civil servants, they would be oil traders. They aren't, and the oil traders don't know the future price of oil either.


& @ North Norfolk Blogger.
In principle the world's energy problems can be solved by solar panels covering an Area the size of Austria, but located in the Sahara desert - quite feasible, but a little expensive at the moment. The nice thing about sunshine is its free but it gives about 1kW of power per square metre (when it is switched on).

Anonymous said...

I dont think oit defies logic. The High scenario in partivular seems very palusible to me as it would represent a reversion to the mean of the current speculative spike of $130. The mean being the trend upwards that started in 2001- however any trend will have peaks and troughs.

As for the 2030 forecasts obviously this is fairy tale territory where noone can have much idea. Nonetheless it is worth considering the possibility that by then we will either have or, more likely, have the firm prospect of a viable alternative energy source. In which case the oil price will plumett.

North Norfolk Blogger said...

Alex@ 2:42 PM

You may be right, and if you are that's one hell of a lot of infrastructure. My concern there is the delivery after generation


anonymous @2:28 PM
who said anything about Global Warming? Climate change --NOT --global warming has always happened and there are some very good reasons why the planet is as warm as it is at the moment, although man MAY be having an effect, As for banning motor sports, pointless, there is more in improvement in econy come out of racing than has ever been used.

Air fuel tax -- the reason why this isn't taxed is that not all governments would want to tax it. Please do not get me wrong, I like flying as much as anyone and I probably fly more than most. The airlines are business' they will get their fuel from the cheapest source, taxing the fuel would not work.and would kill the airlnes

Anonymous said...

SP from 11.03 here again responding to North Norfolk Blogger.

Despite your clearly superior academic credentials I still suggest that what you said was stupid, namely:

"We live in a closed system, we have finite resources..."

We don't live in a closed system and to suggest so is very sloppy science. By all means try to correct yourself by saying you were referring to hydrocarbons. And I'd agree that some forms of hydrocarbon are being depleted at a faster rate than they can be replaced.

But certainly not all; what do you think all that yellow stuff in the fields is? And why do you think research is going on into the cultivation of of new bio-fuel crops that can be irrigated with sea water and so grown in vast quantities on formerly arid land?

I'm sorry, but treating people as idiots doesn't contribute to any sensible debate. The market will deal with any fuel crisis - as prices go up it will become attractive to invest in new technolgies at marginally higher costs of production, simple as.

And guess what, until the sun burns out there'll be a ready source of energy on this planet and ways of converting it into usable energy that we haven't even dreamt of yet.

SP

Madasafish said...

I study oil cos I trade oil shares.
Proven reserves are falling. Period.
There are few major finds which will be in production before 2015.

The world's biggest unexploited reserves are neutralised - in Iraq.
Chia is building 5 million new cars a year and growing that industry 35% pa.

Yes there is lots of unexploited oil. Yes there is lots of exploration. Approximately 1 in 7 new wells are successful. And mostly they are small fields.

Meanwhile the biggest oilfield in the world in Saudi is 50 years old.....
And coal prices have trebled for long term contracts this year..

Anonymous said...

Definitely not a Bubble Ian.

Light sweet crude production has peaked, to make matters worse refining capacity hard pressed to meet demand

North Norfolk Blogger said...

SP from 11.03

Ahh yes, all the yellow stuff in the fields, the wonderful Oil seed rape taht will solve all our problems -- NOT.

You have just a few choices, everyone live a simpler, that is less energy intensive life, OR reduce the number of people on the planet by 50-60%.

If you are still blogging in 15 years time, you can apologise to me then

neil craig said...

Madasafish much of the stuff about oil running out has always been confusion between reseves & resources. Reserves are what we are currently tapping into & are Always about 10 years supply since it makes no accountancy sense to invest interest bearing money in developing filed which will not be used for 10 years. Resources are what we are pretty sure are there & can be exploited commercially with current technology. Since current technology is now making shale oil useable & the commercial price is so high there is no shortage of resources for decades ahead.

Fair point about Iraq though. We invaded to get oil flowing& WMDs & to impose democracy. Perhaps we should leave to get the oil flowing.

Anonymous said...

SP here once again, responding to North Norfolk Bogger....

... now we can see the difference in our positions. I expect that the market will continue to allocate scarce (in the correct, economic sense) energy resources effectively and efficiently. This may end when the sun runs out of fuel but even then I would be surprised if the ingenuity of man hasn't ensured its own survival.

You, on the other hand, expect that the only way forward is to adopt a simple lifestyle. Otherwise many billions are going to die! In the next 15 years!

Now, I'm not sure what you mean by a simple lifestyle but given that the rest of your analysis has been littered with error and illogicality I'm not going to worry too much.

SP

Janus said...

I covered this first! http://ajanusface.blogspot.com/2008/05/oil-think-twice-governments-latest-oil.html
(If this comment is admitted to the board, credit is due).