free html hit counter Peak Oil Debunked: 363. PEAK DEMAND

Friday, June 20, 2008

363. PEAK DEMAND

Lots of recent signs that we are hitting peak demand (with a salute to our wise and prescient friend, Benny "peak demand" Cole ;-)...

The US Department of Transportation reports that vehicle miles traveled (VMT) has begun its terminal decline:
The FHWA's “Traffic Volume Trends” report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.Source
Here's the graph:

As you can see we're having a "Hubbert Peak" in demand.

Meanwhile CERA is reporting peak demand for gasoline:
Gasoline demand in the United States may have reached its peak, as rising prices lead consumers to make long-term decisions that will weaken demand in the years to come, according to a new analysis by Cambridge Energy Research Associates (CERA), an IHS Inc. (NYSE: IHS) company.

The report, Drivers Turn the Corner in the United States, conducted by CERA’s global oil service predicts that U.S. gasoline demand will likely decline in 2008 for the first time in 17 years. If petroleum prices stay at or near their current levels, 2007 could prove to have been the peak year for U.S. gasoline demand.

"Americans are now driving less and demanding greater fuel efficiency from their vehicles when they do drive," said Aaron Brady, CERA director, global oil. "Automakers are responding by accelerating the shift in their model mix. Both short- and long-term signals are all pointing toward decreasing future demand."Source
MasterCard reports a big drop in U.S. gas sales:
During the week leading up to the Memorial Day holiday, the traditional start of vacation season, Americans pumped 5.5 percent less gasoline than a year ago as average prices hit a peak $3.84 a gallon, MasterCard Advisors said in a report.Source
Demand in the UK is sagging:
Gasoline demand in Britain dropped 7 percent below year-ago levels in April, with diesel use down almost 2 percent, according to government figures released on Wednesday.Source
Gasoline demand in Japan has declined for the last two years:
Japan's Ministry of Economy, Trade and Industry reported on Thursday that gasoline demand declined for a second year in 2007 on rising oil prices, urging refiners to export record amounts of fuel.

Sales of gasoline slipped 1.7% to 59.8 million kiloliters in 2007, while exports of all refined oil-products climbed 27% to 28 million kiloliters, exceeding the prior record of 22.3 million kiloliters posted in 1975.Source
And the trend is continuing. The most recent May 13 Oil Market Report from the IEA reports (P. 6) gasoline demand for March 2008 down (year-on-year) by -8% in Germany, -4% in the UK, -14% in France, -10% in Italy, -9% in Spain and -14% in Japan. Similarly, diesel was down -4% in Germany, -6% in France, -4% in Italy, -10% in Spain and -10% in Japan. And those are the figures for March, before oil prices really went vertical.

Anyway, lots of good news. The fear factor of peak oil drops considerably if demand peaks before oil does.
-- by JD

93 Comments:

At Friday, June 20, 2008 at 6:24:00 PM PDT, Blogger JD said...

If you comment, please use the Name/URL option (you don't have to register, just enter a screen-name) or sign your anonymous post at the bottom. The conversation is better without multiple anons.
Thank you! JD

 
At Friday, June 20, 2008 at 7:18:00 PM PDT, Anonymous Jeff said...

JD,

Why didn't you include any countries where demand is still going up? Are you implying that demand is falling everywhere?

 
At Friday, June 20, 2008 at 7:22:00 PM PDT, Anonymous Zman said...

@Jeff

I didn't think he was implying that. He was implying that oil prices are going to have good effects in the U.S., starting with lowering our demand for oil and skyrocketing our demand for alternative fuels and more fuel-efficient vehicles (in addition to driving less). Demand for oil in China also fell when they finally increased their oil prices. Hopefully this will help to expedite making fuels like algae biofuel commercially available.

 
At Friday, June 20, 2008 at 11:44:00 PM PDT, Anonymous Freak said...

I am afraid I am going to have to one up you Mr. peak oil is here now!!!!yay!!!!

http://www.youtube.com/watch?v=vAPf9V3_li0

 
At Saturday, June 21, 2008 at 12:23:00 AM PDT, Blogger Brian said...

'Peak demand' is only a short term aberration. Population growth will naturally eradicate this decline on anything other than a per capita basis.

 
At Saturday, June 21, 2008 at 12:28:00 AM PDT, Blogger JD said...

Peak Oil is here now!!!!:

Beat it. Your comments are spam, and I will be deleting them.

 
At Saturday, June 21, 2008 at 12:58:00 AM PDT, Anonymous Freak said...

I was wondering how fuel subsidies in some countries play into this

 
At Saturday, June 21, 2008 at 1:19:00 AM PDT, Anonymous stuck in shizuoka said...

Any thoughts on Dr. Hirsch's latest pronouncement?

today on CNBC

He doesn't take demand destruction into account but does mention the economic destruction that would come with sky-high oil prices and make a sort of plea (at least I think that's the agenda here) to the consumer and, vis a vis the media, to government. Good that it's on CNBC but of course, much of the most populist MSM such as Bill O'Reilly are still saying bizarre things such as "OPEC is killing this economy by charging us nearly $140 a barrel". (America's two largest suppliers are Canada and Mexico, respectively). I suppose that this is what the average redneck hears--that and the "we gotta drill" mentality.

So, in the meantime, as nothing concrete seems to get done on this, and there is little, if any, political leadership on ADMITTING the problem (at least publically), could demand destruction through the current high prices, spread to China and India in enough of a way that this current plateau stretches out a little to bide time and give us a few more years to get some alternative liquid fuel sources (e.g. algae, CTL, GTL, LNG) into the supply chain?

 
At Saturday, June 21, 2008 at 1:47:00 AM PDT, Anonymous Patrick said...

As you can see we're having a "Hubbert Peak" in demand.

Its completely disingenuous to attribute this statement to a graph of a decrease in vehicle miles in the United States. Its going to take a lot more than marginal pullbacks in usage in the developed countries to make up for the increased domestic use in the oil exporting countries not to mention import demand in China and India.

Another major flaw in this analysis is that all of the European countries cited for their gasoline demand decrease have been steadily transitioning away from gasoline to diesel for years, and their diesel consumption has actually increased substantially, year over year, including into 2008 (obviously, this has a lot to do with diesel exports from Japan climbing 92% in 2007). This is a false indicator of "Peak Demand," and the author would do well to review his own source, Oil Market Report, which reveals this data.

Anyway, lots of good news.

While its good to know that Americans can reign in their gasoline consumption at the margins, it shouldn't go without saying that this is accompanied by a wide and likely prolonged economic recession. Its easy to understand how less miles will be driven if you were laid off, or your house lost 30% of its value.

- Patrick

 
At Saturday, June 21, 2008 at 3:10:00 AM PDT, Anonymous stuck in shizuoka said...

Greencar congress just published a study on this very topic. Apparently, according to the US DOT, their independent study shows that there will have to be a number of policies aimed at curbing consumption, including fuel tax (the horror, the horror).

reference

 
At Saturday, June 21, 2008 at 6:03:00 AM PDT, Blogger JD said...

Patrick,
It is completely disingenuous of you to brush off the U.S. as a minor player. The U.S is by far the largest consumer of petroleum, and the root of the problem. In fact, the amount of oil consumed by the U.S. is roughly equal to consumption in the rest of the OECD combined. And the numbers clearly indicate that U.S. demand is peaking. If it looks like a peak, and smells like a peak, I think we can call it a peak.

Your comment about diesel demand increasing in 2008 is incorrect. As I noted in the article, diesel demand in March 2008 was down (year-on-year) by -4% in Germany, -6% in France, -5% in Italy, -10% in Spain, -10% in Japan, -4% in Korea, -3% in OECD Europe and -6% in OECD Pacific. Oil product demand as a whole was down -3.1% in OECD America, -2.3% in OECD Europe, -2.8% in OECD Pacific, and -2.8% in the OECD as a whole. (See OMR, P. 6) Those are very large drops, and those are figures for March, when the price was $20-30 cheaper than it is now. Furthermore, oil demand in the OECD peaked in 2005 and has been dropping ever since. (See OMR, P. 51) It's a real phenomenon, Patrick, and "Peak Demand" is a good name for it.

Oil consumption in the Middle Eastern countries, and Chindia, is their problem, not ours. Our problem is how to dramatically reduce oil dependence, and transition, so we don't have to worry about oil anymore. Your objection is like saying: "Your quitting smoking isn't going to help you because that guy over there is still smoking."

The reality is that the U.S. and Japan, who account for 30% of world oil consumption, have massive, repulsive layers of oil consumption fat still left to be trimmed. The current drop in demand barely even scratches the surface. People are still at the level of quick-fixes like hypermiling and combining trips. When every vehicle is stuffed, and telecommuting is booming, and the last single-occupant vehicles are electric scooters... Then the fat will be gone. Until then, you're like a fat guy worrying about not enough twinkies.

it shouldn't go without saying that this is accompanied by a wide and likely prolonged economic recession.

What recession? No recession has been officially declared, and yesterday the IMF raised its growth forecast for the U.S.

Its easy to understand how less miles will be driven if you were laid off, or your house lost 30% of its value.

That's a completely unsubstantiated theory of what is happening. Where's your proof? I personally subscribe to the mainstream economics theory -- that people are driving less because gas costs more.

 
At Saturday, June 21, 2008 at 6:36:00 AM PDT, Blogger JD said...

Any thoughts on Dr. Hirsch's latest pronouncement?

I've never thought much of Dr. Hirsch's approach. I think his head is still stuck in the 20th century, and he has a hard time thinking outside the "oil" box.

First of all, his much-vaunted 10 to 20 year mitigation plan has no demand side component, and no electrification. I find that ridiculous. The most obvious solution is to reduce oil demand by (for example) slashing vehicle size and weight, a la Amory Lovins, and telecommuting. But Hirsch totally ignores that dynamic, and reaches straight for the GTL and CTL -- the most expensive, wasteful, braindead, oldthink, business-as-usual solutions on the shelf. Furthermore, the centerpiece of his "mitigation" plan for America is to have Venezuela (of all places) ramp up heavy oil production by 5.5mbd in 10 years (See 187. FISHY HIRSCH WEDGES). That should go over well with Chavez, who hates the US's guts, as well as the NIMBYs blocking refinery expansion in the U.S. Not to mention the fact that, even without a shortage of rigs and experienced personnel, it would still be near impossible to raise any country by 5.5mbd in 10 years.

Honestly, I think Hirsch's Venezuelan "solution" is -- bar none -- the stupidest PO mitigation plan that has ever been put into words. Read it yourself in the Hirsch report. It's shocking how much credence people still give to the man after drafting such an inane, retarded plan.

The reality which Hirsch doesn't grasp is that the ICE (Internal Combustion Engine) is dying. It's far more efficient to burn the gas or coal, or even crude oil, in an ordinary power plant, use the waste heat to heat homes, and use the electricity to drive EVs. Liquid fuels will always be necessary and valuable niche products. But the mainstream will be electric.

 
At Saturday, June 21, 2008 at 7:32:00 AM PDT, Anonymous Brother Cadfan said...

One major problem we have in Britain with the train system is lack of electrification - very reliant on diesel. People are whinging on about possible 30% increases in air fares when some train fares have surged by 125%!!

On a related note, just throwing this out there (I am worried about peak oil but am trying to analyse all angles!) It seems oil prices are developing into a 'tail wagging the dog' situation. I noticed Boone Pickens was at it again yesterday. The question is, to what extent are oil prices being affected by self fulfilling prophecies? It would not surprise me in the least to learn that websites like TOD have been infiltrated by people who have an interest in skyrocketing prices. Before you think this is a whacked out consipiracy theory, just consider that things like this have happened recently in other areas e.g. campaign group Plane Stupid being infiltrated a security firm with possible links to BA.

 
At Saturday, June 21, 2008 at 8:04:00 AM PDT, Blogger JD said...

"Global oil demand is likely to contract 0.6% in 2008 for the first time in 15 years, said J.P. Morgan Chase late Friday. Analysts led by Joseph Lupton forecast global oil demand will fall another 0.2% in 2009 as demand dampens in emerging markets, whose appetite offset declines in developed markets' oil consumption in 2006 and 2007. Higher prices and weaker global economic growth are likely to temper demand growth in the emerging countries while developed countries' consumption continues to fall. "As impressive as [emerging markets] demand has been, the tide of global oil demand is set to turn," said the J.P. Morgan analysts in a note."
Link

 
At Saturday, June 21, 2008 at 8:49:00 AM PDT, Anonymous jd was right said...

good job jd. in the midst of doomer blathering about peak something supply is stressed yet demand is totally ignored. we need to think about demand. we need to think about the areas of the economy that will expand because of peak oil.

 
At Saturday, June 21, 2008 at 9:35:00 AM PDT, Blogger al fin said...

Both India and China are scaling back subsidies, so expect to see the slope of the demand curves there easing down also.

Industry needs energy, and $140 a barrel oil is too high even for China. Merchants are beginning to look closer to home for manufactured goods--as shipping costs zoom up and China loses its other advantages one by one.

 
At Saturday, June 21, 2008 at 10:20:00 AM PDT, Anonymous diemos said...

How stunningly disingenuous JD. Increasing demand from the third world is having to be offset by decreased consumption from the first world. You try to paint this as a voluntary reduction in demand when it's not. The third world is just using it's increasing economic power to secure a greater share of the available oil.

This will not lead to ever rising standards of living in the first world.

 
At Saturday, June 21, 2008 at 10:35:00 AM PDT, Blogger bc said...

I think the concept of "Peak Demand" is nonsense, but clearly high prices are having an effect on demand. This is straightforward supply/demand theory, and is entirely expected.

It's been several years since arch-doomer Ruppert claimed "the US will collapse in two weeks", but finally we are seeing some impact of PO.

The much derided market system is kicking into gear. SUV sales are down, Prius and other efficient models are booming. We get an electric vehicle announced every week.

The doomers next piece is that once Peak is reached there will be a rapid decline. So far we have had a bumpy plateau.

The doomers scorecard is looking pretty empty, while the market appears to be responding correctly to changing conditions (with a few missteps). Meanwhile politicians run round like headless chickens. All pretty much as expected.

 
At Saturday, June 21, 2008 at 10:59:00 AM PDT, Anonymous Anonymous said...

"The doomers next piece is that once Peak is reached there will be a rapid decline."

yep. I've heard about a "cliff" event a few times with oil and natural gas. they also invoke the dreaded export land model. the newest one is something called a catabolic collapse. whatever the hell that is?

basically whenever a practical solution that will help mitigate it's always too late for the doomers and they'll just invent a new and even bigger disaster. they'll go from peak oil to peak food and etc.

 
At Saturday, June 21, 2008 at 11:49:00 AM PDT, Anonymous benny "peak demand" cole said...

Well! I am red-faced at this recognition, but glad the idea is being bruited about.
I expect global peak demand for oil this year. The last two years saw global demand up just one percent or less. Oil prices have doubled since last year. It figures the peak has been reached.
In the USA, peak demand was reached in 2006, and as our fleet of cars turns over, we will see declines for as long as oil prices stay up. in addition, people will migrate closer to work, and ride transit, and carppol.
The introduction of the Volt-GM could be a game-changer. Imagine 40-mile commutes without using any gasoline. None. Cleaner air, and quieter streets, less imported oil, more U.S. jobs. Where is the gloom in this? (And, there is plenty of lithium, and the DOE says even if every car in the USA was a Volt, our electrical grid would have to be only boosted by 17 percent)
The doomsters have it all ways: Prices go way up, but so does demand, and we have a horrible global depression. All at once. And the Cubs win the World Series, on the strength of an all-midget team. Of women. Who wear spikey high heels as they want to look taller for potential husbands.
Back to reality, after the 1980 oil price spike, global demand fell by 11 percent, and USA demand by even more. It only recovred inthe later 1980s, when oil was cheap again.
If demand falls by 10 percent this time, you find an extra 8 mbd on the market with no home.
Indeed, a very serious question going forward will be should we depress oil demand through taxation?
I think so, but no Presidential candidate dares says so.
If there is a reason to be gloomy, it might be that a gathering glut will result in a huge price break, and we all go back to our gluttonous ways. That will set us up to be even more vulnerable to a another shakedown in another generation.
Thanks to JD for noticing my little "Peak Demand" moniker!

 
At Saturday, June 21, 2008 at 12:04:00 PM PDT, Anonymous unclebenscheapdollars said...

"IMF raised its growth forecast for the U.S."

Some poor sucker is going to make the mistake of buying stocks on the DJ index after listening to this tripe. As Jimmy Rogers once said, trust the World Bank (or IMF) and its economic forecasts and you'll lose all your money.

The US is already in recession and, accordingly to many (including George Soros - the most successful speculator in history), it will be the worst recession since WWII. The US is in recession because the government distorts inflation statistics. If you misreport inflation massively (say it is 4 percent as opposed to 10 percent), then you can paint a picture of growth in nominal and "real" terms. The public as usual gets fooled trusting government statistics - which are always fudged to serve vested interests. Wall Street plays along because it allows them to sell more junk to another group of suckers.

The US is actually sitting on top of a giant long term economic crisis and there is no real political will or sound policy to solve it. If you need better info on that, check http://www.itulip.com.

Short term falling demand won't necessarily mean lower prices at the pump (in US Dollars). Prices are also determined by the money supply - which is now increasing at a rate of about 30 percent annually. These dollars won't prop up home prices (which is what the fed is trying to do) but it will continue to fuel inflation in food and fuel. So brace yourselves.

 
At Saturday, June 21, 2008 at 12:29:00 PM PDT, Anonymous jstanley01 said...

Now hold on just one minute. You're telling me that the price of gasoline went up, and at the same time, the consumption of gasoline went down? Without the government mandating anything? Or taxing anything?

What in the world could have caused that?

 
At Saturday, June 21, 2008 at 1:20:00 PM PDT, Anonymous unclebenscheapdollars said...

Zimbabwe has gone from being a prosperous agricultural economy to a basket case where people are starving. So there has been plenty of demand destruction, yes? But then why is inflation running at 20,000 percent per year?

As John Meynard Keynes once wrote, when inflation hits, not one man in a thousand really understands what is happening.

 
At Saturday, June 21, 2008 at 1:26:00 PM PDT, Anonymous Anonymous said...

JD, if you think there's no recession, then you also think inflation is 2.7%. The GDP deflator is at 2.7%. Had they used the CPI numbers (which incidentally are also flawed) of around 4%, it would show the US would be in a recession right now. Of course, most of us in the real world, know that inflation is far above 4%, except the government which actually had gas prices dropping last month.

 
At Saturday, June 21, 2008 at 2:18:00 PM PDT, Blogger Jeffrey said...

"Anonymous jstanley01 said...

Now hold on just one minute. You're telling me that the price of gasoline went up, and at the same time, the consumption of gasoline went down? Without the government mandating anything? Or taxing anything?

What in the world could have caused that?"


I've been saying it for a long time. Its a conspiracy.

Has JD ever addressed that? Or Lindsey Williams for that matter? Interesting stuff.

 
At Saturday, June 21, 2008 at 3:01:00 PM PDT, Anonymous jt said...

JD stop lifting stories straight from theoildrum.com.

 
At Saturday, June 21, 2008 at 3:32:00 PM PDT, Blogger Anaconda said...

Demand dropping, a natural result of the increase in price.

It does point to the fact that a "break point" in demand has finally been reached in America.

Gas demand has been considered inelastic to price signals -- that has apparently changed, possibly signaling a price plateau for oil on the world market.

To suggest the gasoline price increase isn't lowering standards of living in America, where folks depend on their car for travel is ludicrous.

That's a statement from somebody, who, well, doesn't live in America.

And the evidence maybe mixed on whether America is in recession, but the weight of the evidence, regrettably points to current recession.

Again, if you live in America you know that -- not even the Bulls on Wall Street are beating that horse anymore.

High oil prices definitely add to both recessionary woes and inflationary woes.

but there are other forces at work, as pointed out above.

Budgetary deficits, monetary inflation, and trade imbalances all are contributing to a falling Dollar, which impacts the price of oil as much as the demand increase (outside the U.S.) and FALSE notions of "Peak" oil.

The FALSE notion of "Peak" oil has caused a "psychology of expectation" of increasing oil prices, inspite of market fundamentals, which in another climate would stabilize prices in the world oil markets.

If not outright drop oil prices.

Still waiting on a rebuttal to continental shelf and margin oil from the hard core "peakers."

Oil Is Mastery

 
At Saturday, June 21, 2008 at 6:14:00 PM PDT, Anonymous benny "peak demand" cole said...

Brother Cadfan--
I have also wondered if TOD gets funding from from hedge funds and oil traders. Why do most TOD contributors cloak their identity?
When I asked that question on their website, I was booted out.
I think anyone who cannot run a website using their own identity is inherently suspect (other than a few, specialized cases, perhaps involving repressive government and the like).
We have a situation in which oil thug states with huge sovereign funds can invest in directly in commodities futures markets or in hedge or commodity funds which are playing the oil market. Would anyone be surprised if something untoward were going on? Indeed, wouldn't you EXPECT an oil-exporting nation to try to push oil prices higher by any means possible? It is in their national interest to do so.
Now, we have falling oil demand (according to Morgan) while oil and condensate production hits all-time records. And oil soars toward $140 a barrel?
Really, it stains credulity that this is not a speculative bubble, and that some have profited mightily from it, and that some have tried to keep the bubble growing.
I think the string has played out, as we are now seeing immediate and daily demand destruction -- but production hitting new records, and the serious production and conservation methods are still coming.
This may be one of the best times in history to buy puts on oil.

 
At Saturday, June 21, 2008 at 7:08:00 PM PDT, Anonymous diemos said...

"Now, we have falling oil demand (according to Morgan) while oil and condensate production hits all-time records. And oil soars toward $140 a barrel?"

Yikes.

We do NOT have falling demand.

We have falling consumption in the first world coupled with rising consumption in the third world.

Every barrel of oil pumped to the surface is being bought and burned by someone. Many someones in fact. Each of them willing to pay $130 buck US for the priviledge.

The consumers in the US would be DELIGHTED to burn more oil. If only it was available for less than $130.

 
At Saturday, June 21, 2008 at 10:58:00 PM PDT, Blogger Anaconda said...

Who has the most ability to pay for oil?

The first world, but demand destruction has happened in the first world.

Is it likely that 2nd world oil consumers will also start to decline in demand?

Possibly not, as enough people are entering middle class -- and willing to pay for gasoline to fuel middle class car driving.

Also, China, if not India, subsidizes gasoline, and China definitley has the bucks in the bank to subsidize oil consumption.

On the other hand, subsidizing gasoline over time empties the state coffers, so there are limits.

Rumor holds that China will subsidize gas through the Olympics, but then ease off allowing gas prices to rise, which will cool demand in red hot China.

If oil prices stay at current levels, expect demand to drop in 2nd world countries, too.

And that might just be the "pin" that finally bursts the oil bubble -- but don't expect oil to drop below $100 a barrel because the U.S. Dollar is so weak.

(In other words, instead of a bubble popping, a "correction" to the price of oil may occur.)

A strong Dollar equals lower oil prices (not likely to happen, wish it would).

Oil Is Mastery

 
At Saturday, June 21, 2008 at 11:00:00 PM PDT, Anonymous Ex-doomer said...

JT, the only difference is that when JD covers demand destruction, versus The Oil Drum, people aren't saying "WE'RE STILL DOOOOOOMED!"

Seriously, no matter what, we're doomed, according to The Oil Drum. DOOOOOOOOOOOOOOOOOOOOOMMMMMMMMMMMMMM!

Where's Hannibal Lechter's cookbook? If we're DOOOOOOMED as they say, I don't intend to go hungry. I shall become one of the hungry zombies they discuss so frequently there. I bet money that human tastes like pork. But I hope I never have to find out.

By the way, weren't we already supposed to be doomed by now? I warned all my friends we'd be in collapse by now, and they pretty well disowned me as a crackpot back in November. Now, with oil at $13- per barrel, things are still chugging along and I'm doing just fine. I had to concede tonight, that I was a dumbass in wasting my time with that doomer crap, in order to win back a friend.

 
At Sunday, June 22, 2008 at 12:21:00 AM PDT, Anonymous ryan said...

Awesome post JD. OPEC and their oil bretheren are clearly worried about the impact of peak oil demand.

The amount of investment and money into alternative energy and non-ICE transportation systems is amazing.

The world seems poised to fight a war against oil use b/c of its environmental, financial, and political problems.

I'm not sure which one of electric cars, algae oil, cellulosic ethanol, PHEVs, etc., will wind up becoming the dominant transportation fuel, but I think it's safe to say that the status quo will not remain.

As for peak oil supply, one of the major tenants of the Simmons' argument is that even if we had enough oil resources, we don't have enough oil rigs. Well, when the price goes up by 6.5x in 7 years and the price to develop a new oil field goes up by 2-3x, new oil service companies join the scene and all of the sudden rigs get built like there's no tomorrow (it's already starting to happen btw).

This is why oil, like housing, is cyclical. High prices=less demand and more production. The resources are definitely there to keep using oil. However, I think we've hit a turning point given new technological developments that occured between 1980 (the last oil crisis) and today.

Since the last oil crisis, humans have managed to invent the following items (hint: many of these things were thought to be impossible in the 1970s):

laptop computer that are many times faster than the giant room sized serves that existed back in the day. Today's servers have processing capacity in the terrahertz and memory storage capacity in the thousands of terrahertz. My state of the art Packard Bell Computer in 1985 had a 35 megabite hard drive and a 3 megahertz processor.

GPS Satelitte tracking systems

The internet (during the last oil crisis, we wouldn't be even having this discussion)

Cellphones that take pictures, write emails, play music, and are the size of your hand.

LCD TVs

and so on and so forth.

Human ingenuity will resolve this problem...it might not be painful, but it will be resolved.

 
At Sunday, June 22, 2008 at 1:07:00 AM PDT, Blogger Ari said...

diemos,

I wouldn't hold your breath for increased demand after countries like China pull subsidies. Nobody, including the CCP itself, believes that China can subsidize the cost of oil indefinitely. You don't think that demand for oil will decrease once the subsidies are ended?

http://www.iht.com/articles/ap/2008/06/19/business/NA-FIN-MKT-Oil-Prices.php

What none of the doomers seem to understand is that demand for oil in the Third World is almost invariably tied to large subsidies. These growing states can't subsidize oil forever, and demand will certainly shift left once they run out of excess funds to hand out cash to gas stations.

 
At Sunday, June 22, 2008 at 5:10:00 AM PDT, Blogger bc said...

laptop computer that are many times faster than the giant room sized serves that existed back in the day. Today's servers have processing capacity in the terrahertz and memory storage capacity in the thousands of terrahertz. My state of the art Packard Bell Computer in 1985 had a 35 megabite hard drive and a 3 megahertz processor.

GPS Satelitte tracking systems

The internet (during the last oil crisis, we wouldn't be even having this discussion)

Cellphones that take pictures, write emails, play music, and are the size of your hand.

LCD TVs


These are all example of digital electronics, which are unique because they process information. Information processing can be miniaturized, which beings benefits in size, cost, power consumption. But you can't miniaturize transport, people are the size they are. So examples of advances in electronics are quite misleading.

Advances in materials science are more promising, e.g. in things like battery technology, solar panels. Incremental progress is being made, but we are still waiting for breakthroughs.

 
At Sunday, June 22, 2008 at 5:58:00 AM PDT, Anonymous stuck in shizuoka said...

speaking of breakthroughs, this is the one I have anticipated the most, as I have been keeping my eye on the very rapid development of cheaper, more dependable and (most critically) more scalable battery technology.

two points; here in Japan, according to the Nikkei weekly, a nationwide shopping complex company called Aeon has started to develop BEV and PHEV recharging stations at its malls. From next year, the major Japanese companies are set to produce some nice electric vehicles, all of which may be produced in the same numbers in which their regular ICE cars are as the battery factories in Japan are being scaled up now and the materials for lithion Ion become more available. Good News but lets hope this catches on VERY fast in Detroit. One model by Chevy isn't going to be "a game changer" as Benny puts it.

But, check out this link--this is what gives me pause for optimism. This development, which admittedly is rather forseeable given the advances in battery technology and the rapid scaling up in production, COULD be a "game changer" if there could be some tax rebates AND some impetus on the part of US government bodies to speed up the process--part of a huge conservation push perhaps.

conversion kits

As a 19 year old, I spent $5000 tricking up my old Volvo and another two grand on the paint job. Tell me you haven't heard more than a few similar stories like that in your life. So, if a million North Americans can switch to plug-in hybrid conversions rather than tweaking up cars with pipes, hot cam shafts, and boosted compression ratios, (or simply setting their priorities straight and doing this rather than buying an RV or some useless water toy), AND Phevs and BEVs take the world by storm in the next 3-4 years...well, could we see some better demand destruction.

How will such critical mass come though--PO needs to hit Americans over the head with a 2x4 and I'm afraid that the MSM or prices just won't do it--the hope of lower prices and some sort of continuation of BAU seem to be the order of the day, rather than a sort of War Footing on Energy Conservation and awareness of the severity of the issue that is needed.

Anyway, the link encouraged me somewhat...

 
At Sunday, June 22, 2008 at 6:21:00 AM PDT, Anonymous mordred said...

But you can't miniaturize transport, people are the size they are.

Irrelevent. We dont need to miniaturise. We need to lighten. Carbon fibre anyone?

 
At Sunday, June 22, 2008 at 6:40:00 AM PDT, Anonymous Shiner said...

I made predictions about China a few weeks ago and got several replies that I can't possibly know the future. I guess you guys have no problem with precogs that you agree with.
Hey Benny I agree with you that blog admins should use ther real name but do you think the "D" family named their baby "J"

Shiner

 
At Sunday, June 22, 2008 at 7:14:00 AM PDT, Blogger David Grenier said...

Benny - Hey, I grew up thinking the Sox could never win the series again (even if I started every April saying, "This will be the year. I can feel it.") and we reveresed that curse in 2004. So there is hope for the Cubs and their all-midget team.

A bit off-topic here, but you're right in that the demand peak is likely related to price and that it will be short-lived if the oil saved drives the price back down. Heck, even dropping gas down to $3/gal will make everyone who said $3/gal was the end of the world suddenly think $3/gal is cheap.

But we will never have an increased gas tax. I mean, look at the precentage of people who bought into the Clinton/McCain "gas tax holiday" idea. Not only can no Presidential candidate say they want to raise taxes, but no Senator of Representative can vote for such a thing if they want to get reelected.

The idea of a gas tax to artifically keep the price high and discourage demand is crap anyway. Increased regulation on auto manufacturers is a better plan. A conservation/alternative energy plan involving direct investment in mass transit, building wind, wave, and nuc power, research into advanced batteries, improvements in the grid, insulation of old buildings and the like can be FUNDED by a gas tax increase, if its proposed as such, but the simple "keep the price high" mantra is just unfeasible paternalism.

 
At Sunday, June 22, 2008 at 8:31:00 AM PDT, Anonymous diemos said...

Hi Ari,

"Nobody, including the CCP itself, believes that China can subsidize the cost of oil indefinitely."

China imports .8B barrels of oil a year and runs a $262B trade surplus. If they decided to use the trade surplus to subsidize oil instead of recycling it into US Treasuries they could provide a $327/barrel subsidy for oil. With the added benefit that UST rates would rise, which would crush the american consumer leading to even lower oil consumption in the US and more left over for the chinese to import.

 
At Sunday, June 22, 2008 at 8:34:00 AM PDT, Blogger bc said...

Irrelevent. We dont need to miniaturise. We need to lighten. Carbon fibre anyone?

Irrelevant. I didn't say we did.

I also said materials science was a promising area, so you are just stealing my point.

 
At Sunday, June 22, 2008 at 12:29:00 PM PDT, Anonymous benny "peak demand" cole said...

David Granier and Stuck in Shiz:
I think we need a gasoline tax, or preferably an imported crude oil tax. We can shift wealth from Oil Thug States to the US Treasury. From the Treasury it can be directed to mass transit and nuke/solar/wind/geothermal plants (built by private industry). In short. we can create a jobs-tech boom here in the U.S.
I 100 percent agree we greenie-weenies have to sell energy smartness and environmentalism as goals which result in prosperity -- not sacrifices. Jimmy Carter found that out. I embrace the Volt and higher energy taxes as a pathway to a US jobs boom, and higher living standards. Not because I want to suffer.
On the Volt, of course, by itself it is not a game-changer. What I mean is that if the car type is embraced, and if in 10 years the US fleet is 50 percent battery cars, that is a game changer. That will happen if gasoline is kept at $5 a gallon or more. Oddly enough, if the fleet becomes, say, 10 percent Volts, oil prices might collapse, and people will laugh at the greenie-weenies in their battery cars, which will have all the appeal of broad lapels on suits and men's fedoras.
On the Cubs, they whomped my Dodgers recently. It is getting to two decades since the Dodgers even got into the WS, let alone won one. Still, at nearly 100 yearsand no rings, the Cubbies...well, and i don't think Zell will improve matters. Maybe next year.

 
At Sunday, June 22, 2008 at 3:20:00 PM PDT, Anonymous mordred said...

I also said materials science was a promising area, so you are just stealing my point.


Im sorry...here have it back *hands*

 
At Sunday, June 22, 2008 at 4:16:00 PM PDT, Anonymous juan said...

Demand which is subsidy-driven or supported tends to push overall rate of inflation up. Subsidy affordability need take more than fiscal condition into account. China, e.g., can afford to subsidize but cannot afford progressively higher inflation rate and the distortions this helps exacerbate between rural and urban, between different industrial sectors, et cet.
Removing the subsidies may, after a spike, help bring inflation under control.

 
At Sunday, June 22, 2008 at 9:34:00 PM PDT, Blogger pgtl100 said...

I agree with just about everything Benny Peak Demand says except his characterization oil countries as thug states. I believe the West is as thuggish as any oil exporting country. Afterall many countries nationalized their oil assets to gain independence from the West's oil companies that controlled most of the country's assets.

Other than that Benny is right on the money.

 
At Sunday, June 22, 2008 at 9:46:00 PM PDT, Anonymous Jake L. said...

Here is some more good news as more and more Americnas will begin to do this to save in the long term.

With more and more folks doing things like this and more and more opting for small cars that get 40mpg and upwards.
Will have an impact on the demand for Oil here in the U.S. Which i s a good thing. If the price for Oil were to go to $150 a barrel. This would make even more Americans do things like this and purchase a better car.

 
At Sunday, June 22, 2008 at 9:46:00 PM PDT, Anonymous Jake L. said...

Oh, damn I fogot to add the link ;)

http://promo.realestate.yahoo.com/one-way-to-handle-gas-prices:-move.html

 
At Sunday, June 22, 2008 at 10:06:00 PM PDT, Anonymous Ryan said...

My point in listing those innovations was to show everyone that we clearly are not living in 1980 and that our global society is far more advanced and capable that we give it credit for.

In Los Angeles (where I live), in the last 6-12 months, at least 25% of the older apartment stock has installed solar panels on the roofs (which would not even be cost affective btw without advances in digital robotics and computer systems that produce pure silicon). Innovation is occuring whether Matt Simmons and Savinar like it or not. Big and small companies, institutional investors, venture capitalists, governments, and hundreds of entrepeneurs/scientists who are far more sophisticated than the peak oil doomers are working on this problem. I don't expect perfection, but I definitely expect significant improvements to the problem.

Today's global economy is truly remarkable in its ability to share information globally to create large scale solutions.

 
At Sunday, June 22, 2008 at 11:55:00 PM PDT, Anonymous Ryan said...

http://www.cnbc.com/id/25266682

Some interesting tidbits (btw...this is CNBC, the oil apologist network):

1. With current margin requirements, it takes approximately $24 billion dollars to control the entire US oil futures market. Goldman Sachs market cap as of 6/20 was approximately $74 billion dollars. That means that (theoretically) if GS invested 1/3 of their common stock in oil futures, they could control the ENTIRE oil futures market.

2. There is NO transparency in the market. Stock traders are required to report what they hold. Commodity futures traders are not. In other words, nobody knows who controls what contract except those entered into the contract.

I'll let you all draw the conclusions as to what this means. Clearly, people smarter than me are demonstrating this with market data.

 
At Monday, June 23, 2008 at 1:33:00 AM PDT, Anonymous Martti Grönfors said...

The fact that global oil production declined 0,2% in 2007 (with net oil exports more) wouldnt happen to have any impact on "demand" figure?

C'mon - demand is there but supply isnt, small wonder we see decline in usage...

 
At Monday, June 23, 2008 at 2:43:00 AM PDT, Anonymous Jake L. said...

Supply is there in excess of 2mbd-3mbd.
Not ideal, but there.

So will this be the new argument from those who think we'll fail.

"Demand is there make no mistake about it, just not enough supply"

No, the demand isn't there. People can't openly afford it anymore for the most part.

I don't think we've reached a total peak in demand, not yet.
But sure as peak oil will come so will peak demand. People will shun oil because they can't afford it.
We are seeing quite a bit of demand destruction though. As prices climb more, more demand destruction takes place. So maybe China's demand isn't cutting at the very moment. BY the U.S. and Europe alone cutting more and more demand will only delay the peak of oil more and more, buying the world more time to mitigate. It won't be easy far from it. There will be hardships for nearly everyone on the globe.


I'm sorry but I don't buy this "China is the main cause of high oil prices"
That's a bunch of BS. China isn't increasing that quickly to be the only cause. Everyone is the main cause. Actually it is us (Americans) who are the main cause. We consume way too much oil everyday.

The winds are in change.

 
At Monday, June 23, 2008 at 4:17:00 AM PDT, Anonymous Martti Grönfors said...

"Jake L. said...

Supply is there in excess of 2mbd-3mbd. Not ideal, but there.

So will this be the new argument from those who think we'll fail.

"Demand is there make no mistake about it, just not enough supply"

No, the demand isn't there. People can't openly afford it anymore for the most part." ---------


Is there really that 2-3mb excess spare capacity (sustainable)? Saudis claim they have, but in my view this is somewhat dubious as their announcements have lately been in odds with reality. In the past few years they have made several announcements that they will ramp up production of crude, but if you look at the graph its evident that in reality the production has flatlined and as their internal consumption increases their exports are down quite a bit.

About the demand/supply equation : You say that demand is down because of high price induced demand destruction. Yes, it is. But what then caused the price hikes? Figures plainly state that net exports are down for the past few years - wouldnt that cause the importing countries to bid the price up until demand destruction results? (as would seem has happened?).

For me the crucial figure is the available net oil exports for the non-producing countries, as it seems that their bidding for available crude is what sets the market price.

Decline in net exports in the face of record prices does sound ominous.

 
At Monday, June 23, 2008 at 4:58:00 AM PDT, Blogger JD said...

For me the crucial figure is the available net oil exports for the non-producing countries, as it seems that their bidding for available crude is what sets the market price.

martti,
The world oil market is not an auction where non-producing countries bid on export oil as it comes on the block.
Most oil is sold with long-term contracts, and the prices in those contracts are set by "formula pricing". This means that the price is set at a premium or discount to one of the so-called "benchmark" or "marker" crudes (WTI, Brent or Dubai-Oman). The benchmark prices are in turn set by futures markets, such as the NYMEX, and this process is called "price discovery". This is the mechanism whereby futures prices directly determine the market price of physical oil. See Section 2 of this pdf for more detail on the history and current state oil pricing.

 
At Monday, June 23, 2008 at 5:11:00 AM PDT, Anonymous Jake L. said...

Actually. it wasn't just the Saudis who said this, it was Bodman as well. He says 2 mbd, the Saudis have said 3mbd.

And really while you claim that the Saudis are out of touch with reality, perhaps it is you. What I am saying here is that you don't know exactly how tight oil supply is. No one really does.

I don't know where this 85mbd is still coming from. The EIA has already reported that production is up to 86mbd.
So were really not flatlining are we?

Demand Destruction is Demand Destruction no matter how you slice it. This is a good thing. We need to cut demand more and more and more, until one day we don't really even need oil.

I am not a market expert so pardon me if some of your post I did not understand. I'm only interested in Oil, even then I don't dig too deep. I just read around and form my own opinion from it all.

 
At Monday, June 23, 2008 at 5:17:00 AM PDT, Anonymous Martti Grönfors said...

"jd said...

The world oil market is not an auction where non-producing countries bid on export oil as it comes on the block."

Yes, I oversimplified this but still, in the end it is importers that do bid for the oil that exporters are kind enough to share. And as this "surplus" declines? I doubt our appetite for oil has lessened on its own behalf but only in the face of rising prices. That would seem to be because there is less of crude to divide between importers = free market and demand/supply in action.

What say you about this evident decline in net exports? (1,10% in 2006. 2,24% in 2007, as per EIA).

 
At Monday, June 23, 2008 at 5:31:00 AM PDT, Anonymous Martti Grönfors said...

"jake I said...

Actually. it wasn't just the Saudis who said this, it was Bodman as well. He says 2 mbd, the Saudis have said 3mbd.

And really while you claim that the Saudis are out of touch with reality, perhaps it is you. What I am saying here is that you don't know exactly how tight oil supply is. No one really does.

I don't know where this 85mbd is still coming from. The EIA has already reported that production is up to 86mbd.
So were really not flatlining are we?"

According to BP:s just out report, yes we are :

LONDON (Reuters) - World oil production fell by 0.2 percent in 2007, the first decline since 2002, and proven oil reserves were flat, BP said in an annual review released on Wednesday.

http://uk.reuters.com/article/allBreakingNews/idUKL112256120080611

----------------------

And yes, it is possible that I'm out of touch with reality, but if you care to read todays TOD article on saudis claims and reality you might atleast give a hint about how is it in error?

http://europe.theoildrum.com/node/4202

-----------------------

About demand destruction, I think there is a difference whether it is caused by physical shortage of resource or "just" rising prices (which might be because of shortage or some other factor like speculation).

 
At Monday, June 23, 2008 at 5:54:00 AM PDT, Blogger JD said...

What say you about this evident decline in net exports? (1,10% in 2006. 2,24% in 2007, as per EIA).

It's definitely real. I agree with you that demand in importing countries is being reduced by high prices. I disagree that this is an ominous problem. Eliminating huge amounts of transport fuel consumption in 1st world countries is pretty straightforward. In the worst case, it's a lifestyle problem, not a technical problem. Switching to a scooter (preferably electric), moving to greater density, carpooling, getting an EV, riding the bus, bicycling etc. These are all very minor modifications if you think about it. So I don't put a lot of stock in the "horror" of peak oil. The horror story hinges on the idea that we really need the oil we are consuming in first world countries, and that using less is horribly punishing. Carpooling or scootering may take a little getting used to, but it's really not that bad.

In the longer run, EV's will grow into the niche vacated by the dying ICE (Internal Combustion Engine) species. I view peak oil according to the biological model of succession rather than collapse.

 
At Monday, June 23, 2008 at 7:04:00 AM PDT, Anonymous Martti Grönfors said...

"jd said...

It's definitely real. I agree with you that demand in importing countries is being reduced by high prices. I disagree that this is an ominous problem."----------------

There we wholeheartedly disagree, yes.

The way I see it is that we will be able to conserve a lot and still make do, but if we dont come up with replacement energy + new infrastructure within the timeframe that depletion and Export Land Model provide, there will be serious consequenses.

Life will not end and sun will rise, but I fear (well, for some part, hope) that our present model of monetary system and lifestyle will come to an end and how much war and famine this era of adjustment will have is anyones quess.

I belong to the "doomer" camp, yes, but so far the events have come to pass as I imagined they would and I fear they will continue to do so.

Good thing is that within our time we'll see who quessed right - hopefully you, but I dont think so.

 
At Monday, June 23, 2008 at 8:39:00 AM PDT, Blogger JD said...

but if we dont come up with replacement energy + new infrastructure

You haven't quantified how deeply we can conserve, or clearly explained what you need the replacement energy and new infrastructure for. Even today, with off the shelf technology you can buy in the store, on June 24, 2008, you can move a person 20km on 1kwh, using no oil, for only US$0.10. That's deep conservation, and it's possible today.

I believe that (perhaps due to your "hopes for a new system") you are underestimating the resilence and resources of first world countries, and the speed with which simple substitutes like electric scooters can be rolled out. An electric scooter is a little more complicated than an i-pod, but not much. Plus, I'm sure they can be marketed in a range of exciting colors.

 
At Monday, June 23, 2008 at 1:45:00 PM PDT, Blogger bc said...

Today's global economy is truly remarkable in its ability to share information globally to create large scale solutions.

Ok, that is a good point. Not just information, but also capital is more rapidly mobilised than ever before.

If it's true that modern society is crucially dependent on oil, the plus side is there has never been a society more technically able to address this challenge.

 
At Monday, June 23, 2008 at 2:41:00 PM PDT, Anonymous Jake L. said...

Martti

So, if the way you see things plays out.

Life will carry on?
This is the one major flaw in the "doomers" view of things they've adopted.
Yet it is those of us who are not in touch with reality.

You realize that if this were to happen. That we weren't able to mitigate. There would be no farm age or partying down like it's 1839.
Chemical leaks galore.
Nuclear exchanges.
Wars.
Riots, murders galore.
And life can go on?? How?
One other thing something called "nuclear winter". Nasty stuff. Bound to happen if the way you view things comes to pass. Which means that growing your own food and all that won't save you.
I am sorry if I come off as rude.
But you and the other doomsters don't understand what will most certainly happen if the view of you fella's comes true. The fact how you all seem to think that you'll survive just isn't true. Cock Roaches will susrvive though.

I'm interested in knowing what events have passed that you forseen?
Perhaps some of the things you imagined have passed. But I doubt the grand of it will pass.
Humanity is bent on survival, bent on continuing our way of life as much as possible. Human will and inguenuity should not be underestimated. As it is all too often.

 
At Monday, June 23, 2008 at 3:13:00 PM PDT, Anonymous Martti Grönfors said...

Jake,

Do I get this right or are you implying that only one of the two extremes can happen in doomer mindset?

It is certainly possible that the problems that you list happen but thenagain, maybe not all.

All I am thinking is that things will be difficult during this long transition and I try to prepare in what small way I can if for nothing else than curiosity and dare I say... common sense?

And of the things "I" visioned (well of course I parrot a lot of other people here, but those that made sense to me at the time) - I have read about peak oil for some 6 years now and since then much has happened as I feared PO would bring forth, for example :

Food prices skyrocketing
Airliners failing
Trucking industry reeling
War
And many others.

About human ingenuity, I grant that we might be able to reform our system to something else, not bound by its present shackle of energydemand. I just sincerely think that we are too late to begin it with and atleast _some_ level of fallout is inevitable - with sky literally being the limit.

But if something is to be learned from the history, we really really suck at trying to predict future.

 
At Monday, June 23, 2008 at 3:34:00 PM PDT, Blogger Ari said...

diemos,

You said: "China imports .8B barrels of oil a year and runs a $262B trade surplus. If they decided to use the trade surplus to subsidize oil instead of recycling it into US Treasuries they could provide a $327/barrel subsidy for oil. With the added benefit that UST rates would rise, which would crush the american consumer leading to even lower oil consumption in the US and more left over for the chinese to import."

This is a fine argument... except that you're assuming that China will continue to run a trade surplus indefinitely.

That's the problem with doomers: they all make ceteris parabus arguments without bothering to figure out which assumptions actually make for a good model in the long-run.

 
At Monday, June 23, 2008 at 3:46:00 PM PDT, Anonymous Juan said...

Since someone mentioned the KSA and, i think, data...and since Simmons book was referenced by TOD:

Another Day in the Desert:
A Response to the Book, "Twilight in the Desert"


"We have reviewed Twilight in the Desert: The Coming Saudi Oil Shock and the World
Economy, written by Matthew Simmons, CEO of Simmons & Company International, a Houston-
based investment bank that specializes in the energy industry. As independent petroleum engineers, we disagree with the primary conclusion of this book that Saudi Arabia’s oil production is teetering on the brink of steep, irrevocable production decline. We believe the process used by the author to arrive at the conclusion was impaired by incorrect interpretation of reservoir engineering concepts
and common oilfield operations. The book posits a crisis where in our opinion none exists."

Complete @
http://www.ceri.ca/Publications/
documents/GoE_Oct05.pdf

 
At Monday, June 23, 2008 at 4:56:00 PM PDT, Anonymous Jake l. said...

Marrtti

I agree we are horrible for predictions

I do hope that you're wrong about what could lie ahead of us in that pessimistic way.

I'm new to this stuff and it's just so overwhelming. Sometimes I can't breath and because I am new to it and scared I lash out rudely at other folks because of it.
I am sorry, as I know that my behavior wasn't called for.

I am confused about all of this as I'm sure everyone else is, yet it seems that those who are pessimistic are so calm in the fact that they alreays know, even though they can't possibly know.

Due tp the fact that we're in a recession could be the cause of these things.
War has always been adn always will be.
The only ting that really concerns me and that isn't normal for a recession per se, would be that the trucking industry is taking some heavy hits.
But there is some good news. Trains are making quite the comeback. While this isn't a solution for everything. It will help with some of the costs of food and other good. How much, no one really know yet.

See I'm very young actually 20 to be exact. I fear that perhaps I'll never be able to have a family or to attend college and live a decent peaceful life. I'm panic stricken at times as if the walls are closing in and nothing and no one can help.
However at the saem time I refuse to accept that we'll collapse. I try to hold onto in 10 years I'll be able to turn on whatever Xbox is of current then and play some games! While my wife makes dinner and I've got this nice job and we've got a kid....so on and so on.

Last thing (hopefully noone here will insult me for it) I believe in God. And I know in the Bible it says that the world can change all of a sudden, but it does not mean that God has left.
If anything I think that if things do get really, really, really bad for all of us, perhaps he'll come back. Maybe not, for a while.

I hope I don't sound crazy or anything. It's just been too much info all at once. This whole peak oil mess we face.

 
At Monday, June 23, 2008 at 7:40:00 PM PDT, Anonymous 40below said...

There are so many relatively easy changes and I'm watching and helping with the demand destruction. For my neck of the woods, transportation is a difficult one to change, but my family is planning on using 500 gallons *less* of heating oil this winter by installing a wood stove and by adding even more insulation to our garage. We'll still need some 600 gallons, but we're working on those, too. And everywhere around me - my neighbors are doing the same things. I don't know a single person who hasn't changed his/her winter heating plans for this upcoming winter. We're making plans, not falling apart.

 
At Monday, June 23, 2008 at 10:19:00 PM PDT, OpenID snazzykhakis said...

All doomers (plus everyone else) need to watch this video about Lindsey Williams in Pruneau Bay, Alaska saying there is enough oil there to supply the US and its GROWING oil demand for the next 200 years, making the find the biggest in the US and one of the largest ever discovered in the world:
http://kenkelsey.vox.com/library/post/energy-non-crisis.html

This video helps clarify what's happening in the world sooooooo well.


BSDFW

 
At Monday, June 23, 2008 at 10:21:00 PM PDT, Anonymous Anonymous said...

http://kenkelsey.vox.com/
library/post/
energy-non-crisis.html


Oops. Link got cut off in that last post.


BSDFW

 
At Monday, June 23, 2008 at 11:14:00 PM PDT, Anonymous Tator said...

That video is some kind of a joke right?
It is a known fact that Alaska is in decline. Conspiracy Theory's don't hold up. If Alaska was SO big and FULL of OIL. Everyone would know about and the Saudis wouldn't be selling Oil to us.

WAKE UP! the peak has come and gone. This is the beginning, can't you grasp any of this? Civilization will collapse sooner than we think. Deal with it. Learn how to survive in stead of holding on to your addiction.

Alaska Oil= Non Event. *yawns*

 
At Monday, June 23, 2008 at 11:14:00 PM PDT, Anonymous Ryan said...

For the last couple of months, I've been racking my brain about how exactly the Enron loophole has created a large part of this mess. Today, on my morning run, I think I figured it out (and how to solve the problem too).

The oil futures markets are inherently flawed b/c the contracts themselves do not have any specific performance clauses requiring any party to take delivery. As a result, investors on either side of the transaction can cancel contracts with zero recourse. In plain English, oil futures contracts are non-binding pieces of paper.

In the consumer world, if I put down a deposit to buy a house, and then 30 days later walk away from the transaction, the seller keeps my deposit as an inconvience fee. However, in the oil market this does not happen.


What does this mean in English? If I was Goldman Sachs and I knew that I was going to sell a contract to a hedge fund who can't take delivery of the end product, I can sell him a contract at X price, knowing full well that he/she will roll it forward. These paper contracts based on essentially nothing can be rolled forward to infinity (Goldman makes their margin on this transaction by lending the money to the hedge fund to sign the contract).

In order to fix the problem that exists in the oil futures market, penalties need to be imposed for rolling forward or cancelling a contract (in American law, this is called specific performance). If the margin requirement was non-refundable and an additional deposit was required (say 5-7% of the total contract to the other side of the agreement)to roll the contract forward from the front month, speculative interests would massively decline. Additionally, investors who cancel contracts should be obligated to pay a significant cancellation fee because in principle, they purchased the oil from a producer who based their cash flows off of that transaction. The deposit and a cancellation fee (5% of the contract, for arguments sake) would be an inconvienence fee.

The problem in the oil market is that pricing is now based upon millions of cancelled contracts for crude oil. This is the part of the market that needs to be resolved.

 
At Tuesday, June 24, 2008 at 12:07:00 AM PDT, Anonymous Tator said...

No the problem wit the market is that we've reached peak. Demand is outstripping supply by about 1 mbd. This is only the whipped cream on the top too. Get ready for a long emergency.

 
At Tuesday, June 24, 2008 at 2:20:00 AM PDT, Blogger Barba Rija said...

"The problem in the oil market is that pricing is now based upon millions of cancelled contracts for crude oil. This is the part of the market that needs to be resolved."

You dolt! Can't you see that the real problem is always that we're doomed? Can't you see that the world is coming to an end? Boy, aren't the people that try to give answers and correct mistakes in this world an annoyance to my wishful doom and gloom fantasies...

"Last thing (hopefully noone here will insult me for it) I believe in God."

Believe in anything you want. Just don't sit up waiting for it.

 
At Tuesday, June 24, 2008 at 5:11:00 AM PDT, Anonymous stuck in shizuoka said...

This writer took a page right out of JD's book. Someone's been reading Peak Oil Debunked.


link

Jake I., you have a lot of advantages now, in that you ARE young, with energy and vitality and without children. You may have to really roll with the punches in the coming years, and be prepared to be awfully humbled and resilient. But, think about how the waiting for something you perceive to be awful may be worse than the reality. No one really KNOWS what is going to happen. So much will depend on your family situation, your income and, most of all, just exactly where you are. Some places will be much better off than others, obviously. This may mean you will have to move but, hey, if you believe in Christianity, you may find some solace and support in whatever church you go to--and that's a lot more than most have. So..hang in there, hope and pray, and stay positive...the link above might buoy you up a little.

If its any consolation, when I was 20, I worked in the northern boreal forests, 10 hours a day, sometimes 10-12 days in a row, for months on end, showering once a week or so, and living out of a van. I did that for 3 years. Now, we were NEVER hungry, and were getting paid well, so, that may be the single hole in this story, but the bottom line is that I walked away from those years just fine. So, if PO means you may have to go to the land and become some sort of laborer, there is still much joy to be had in daily life. Live for now and stay positive. Read Mathew every night if it helps (the part about not worrying where your food and lodging will come from, much like the birds--I forget, after becoming agnostic)

 
At Tuesday, June 24, 2008 at 5:31:00 AM PDT, Anonymous Luis Dias said...

JD, check out this idea, a parking lot with sun shaders... that are PVs.

Imagine Kunstlers reaction to the notion of suburban sprawl saved by... parking lots!

BWAHAHAHA!

 
At Tuesday, June 24, 2008 at 7:57:00 AM PDT, Blogger horoth said...

You know, after reading all these many blog posts in this section I have to laugh at these doomers focusing on peak oil and all as the end of humanity. Look at all the things in history or even the future that can wipe us out! In the 1350's the black death nearly wiped out all humans in europe, NA natives were nearly wiped out by European diseases, the Spanish flu of 1919 killed upto 100 million people, SARS in the early 2000's came out of no where. Yet today we could have a new flu, or new disease that could appear out of no where and wipe out a huge amount of population. Look at the 1950's/1960's the Cold War height, in the Cuban missile crisis we were seconds from wiping out everyone, and we still are with our technology. In earths past we had huge meteors from outerspace hit the earth and cause massive destruction and extinctions, look at the dinsosaurs, look 100 years ago Tunguska in Russia event. We still have many of these bolides unaccounted for and yet could hit the earth without warning and do us in, and no one is prepared man!!! There was a thunderstorm here the other day and a person was struck with lightening and they died. Did they live their life cowering in a hole, fidgiting, anxiety laden not living life based on the fact that one day they would be stuck down by lightening? Did they even believe that morning they woke up they would be stuck down dead? No I don't think so.
My point to all this is, it is human nature to take hold of something fearful anxiety laden and magnify it. To take all the evidence, regardless of counter claim and magnify it, to enhance the fear, to enhance the anxiety to the point it becomes a way of life, debilitating. Sometimes humans are not rational, we are emotional first. So this idea of peak oil being the end of everything, human society, nothing can be done etc. etc. Well I am not going to dwell on it. I am not going to go into hiding, I am not going to hoard supplies, I am not going to spread the gospel to everyone, I am not going to shiver and say what if, what if. Cause just as this is probable there are many other things as well, I will however hopefully get up every morning and live my life, with health and happiness and live with my fellow man in society as it is. And one day I will wake up and it will be my last day and well, that is just how life goes....have a nice day.

 
At Tuesday, June 24, 2008 at 9:46:00 AM PDT, Blogger Barba Rija said...

horoth,

In an addition to your comment, I always laugh when a doomer regurgitates the obvious reality that "billions of people are gonna diie!"

I suspect that at least 7 billion people is going to die in this century. And that is if there isn't much many more people giving birth since today.

 
At Tuesday, June 24, 2008 at 11:12:00 AM PDT, Anonymous benny "peak demand" cole said...

You know, there may be even more good news in the declining crude demand figs we are seeing. By that I mean that oil demand tends to be inelastic in the short-term, a little bit eleastic in the medium-run, and elastic in the long-run.
The demand declines we are seeing now are largely in response to oil prices of a couple years back. The demand declines to today's price spikes are still largely shead.
People cannot buy news cars and scooters overnight, and Detroit cannot get a EV out like a new crop of corn. These things take time.
I suspect we are wildly overestimating global demand in 2010. I suspect it could be down 10percent from today. Demand fell by 11 percnt following the 1978-80 price hike, so this is not an unrealstic expectation. That will leave 8 mbd unclaimed on the market. Probably a huge price correction coming. Short oil 2010 and retire to Tahiti with a boatload of pretty island women (or men)!

 
At Tuesday, June 24, 2008 at 2:44:00 PM PDT, Blogger regeya said...

Diemos:

"The consumers in the US would be DELIGHTED to burn more oil. If only it was available for less than $130."

Agreed, but I'll qualify that: Most of us really don't give a rip about burning more oil. We would like to travel freely as possible, and we like to be able to flip a switch and have the lights turn on. I don't think most of us (other than maybe hotrodders) give a rip about whether it's gasoline or butanol or nanowire lithium-ion batteries powering the thing.

ryan: The Oil Scam Driving Crude Over $80 If I'm understanding you right, it sounds like that's what Philip Davis was suggesting several months ago. Of course he was shouted down.

everyone: I know I saw a U.S. Census Bureau blurb in which they believe the world population may be in decline now, yet I can't find anything about it. Anyone else seen that?

 
At Tuesday, June 24, 2008 at 5:36:00 PM PDT, Anonymous Ryan said...

regeya: I think Davis has half of the picture correct. However, he's a bit off when it comes to the concept of oil futures.

The whole point of oil futures, like options, is to allow for producers and consumers to come together and trade oil.

In a contract in any other industry, when you enter into a contract, one person buys oil, the other person sells. If one party defaults on the agreement (which is basically what rolling the contract forward is), then they owe the other side of the transaction their entire deposit. If the producer defaults on the deal, then they are responsible for paying recourse to the buyer. End of story.

This is how real estate, buying a car off of a factory line, major purchases by industrial users, and conceptually how a futures contract should work. If there is no recourse (penalties for breaching a contract), the entire market is a complete fraud because both sides of the transaction could be lying through their teeth.

The game is completely disconnected from economic reality. It's basically like me selling you a 5 star hotel I don't own that you won't buy, and then the entire hotel industry uses that pricing as a basis to set the rents on their buildings. This game would work for awhile until all of the sudden supply and demand catch up to you. Sound familiar?

The Enron loophole allowed parties to enter into bilateral agreements between parties that don't have any crude oil between them which have then been used as market comparables for the pricing services(Platts, etc.).

These issues are easily regulated without really impacting the "free market", margin requirements, position limits, etc.:

1. Recourse for the other party in a cancelled future contract. If buyer rolls the contract, seller gets his margin. If the seller cancels out of their deal to sell oil, buyer gets a recourse fee.


2. Any publicly traded company that clears OTC trade swaps on a non-approved market will face fines of several millions of dollars/transaction per dayl.


3. The buyer and seller must use an independent clearing house for oil futures transactions. This would stop the conflicts of interest where goldman acts as the seller, takes a fee for clearing the contract, and then loans the money to the buyer for the contract.

4. The independent clearing house can not loan money to either party to complete the transaction.

These are pretty simple benign changes, but it would fix the issues of non-recourse contracts.

 
At Tuesday, June 24, 2008 at 7:30:00 PM PDT, Anonymous Tator said...

Wow you managed to think about something that has nothing to do with why Oil is so high whatsoever.
I would suggest you wake up and use your thinking to see that we have in fact peaked. We peaked last year.
You would do well to learn such things as gardening because you're going to need it. Quite soon I should say.
Like I said this is the whipped topping on top of an Ice Cream meltdown.
Only the strong will survive.
btw, Barba Rija. You are correct however I think 7 billion is a bit optimisitc. In this century total more 8.5 billion even then that's being generous!

 
At Tuesday, June 24, 2008 at 7:56:00 PM PDT, Anonymous Ryan said...

"I would suggest you wake up and use your thinking to see that we have in fact peaked. We peaked last year. "

http://www.eia.doe.gov/emeu/steo/pub/contents.html

Figure 3a: International Supply & Consumption

Supply in May was 86.11 million/day. Last year, supply was 84.5. That equates to a 1.5 million barrel/day increase in supply from last year.

I'm not a genius but that doesn't look like a peak to me. Also, spare capacity has risen in the last 3 years to approx. 2.5 million/day (average of IEA & OPEC).

The IEA data shows supply in the 87million/day range.

"Like I said this is the whipped topping on top of an Ice Cream meltdown.
Only the strong will survive."

Ok bigshot...go off into the woods into a commune that isn't in touch with the rest of the world. No oil in Savinar's world means NO INTERNET. So if you really were living a post-peak oil lifestyle, we wouldnt be even having this conversation.

But, on the more fun side, I'm glad I get to bitchslap your crapass argument. You made my day. :-)


BTW...I think high gas prices are good b/c it ensures that we as a global society will innovate and transform our energy infrastructure and that we will all eventually live a cleaner, safer, and more prosperous lifestyle. The reason I bring up the problem with oil futures is that the price could crash and the global society will repeat this type of economic malaise again in 20 years.

 
At Tuesday, June 24, 2008 at 8:09:00 PM PDT, Anonymous Juan said...

The cult of doom fits a period during which national societies have been undermined by the processes of economic globalization, to which can be added hegemonic decay and movement into a multi-polar world.

Transitional epochs tend to give rise to forms of millenariansms. Caught in the twixt and tween of unknows and uncontrollabilities, a sad fearfulness gains adherents.

 
At Wednesday, June 25, 2008 at 12:42:00 AM PDT, OpenID blowsuperior2000 said...

"The consumers in the US would be DELIGHTED to burn more oil. If only it was available for less than $130."

Yeah, and I'd eat nothing but filet mignon for breakfast, lunch and dinner if it were ten cents a pound.

But it ain't, so I don't.

 
At Wednesday, June 25, 2008 at 3:29:00 AM PDT, Anonymous Fred said...

Nicely put :)

Yes I've found that those who believe that we're doomed forget to add this in.
They always seem to think that demand will keep going up, when in reality it will go down.
Another thing I find to be quite funny is that many a doomer uses this analogy
"What goes up must come down"
Yet they disregard the fact that this applies to not only oil supplies but to oil demand as well. Hence what goes up must come down.

Although I do keep an open mind and realize that there is a possibility that everything could go tits up.

 
At Wednesday, June 25, 2008 at 3:43:00 AM PDT, Blogger Barba Rija said...

juan, it's only a kid. Tator must be between 6 and 12 years old. Cut some slack :)

"btw, Barba Rija. You are correct however I think 7 billion is a bit optimisitc. In this century total more 8.5 billion even then that's being generous!"

Hey kid, I know this can be a blow for your mind, but there is only one thing required for you to die, which is to be born. So, I'd say with all the confidence of the world that you are going to die, and so am I and all the rest of the people you and I know. I was making a joke on you and you didn't even understand it. Of course billions will die, because billions have been born, you dolt!

 
At Wednesday, June 25, 2008 at 4:53:00 AM PDT, Anonymous Tator said...

Barba

I noticed you had a blog on the purpose that you were going to debunk LATOC.

Yet I've seen no such debunking. Could it be that you're incapable and conform to Matt Savinar's view on things?

I am curious as to why you never did any debunking? Hmm.....

 
At Wednesday, June 25, 2008 at 5:32:00 AM PDT, Blogger FR said...

This is a good post, JD. It looks like it really is all downhill from here -- at least for the petrol economy.

 
At Wednesday, June 25, 2008 at 11:46:00 AM PDT, Anonymous Greenneck said...

The only way this can be peak demand is for those high prices to stay. But they won't. JD has gone to great lengths to prove the current high prices are a speculative bubble. Unless we are indeed at Peak supply (and I don't think we are), demand will go right back up as soon as the bubble bursts.

A couple more points:

Electric vehicles are not a 'clean' alternative. Electricity is not an energy source, only an energy transport. You need to produced it from something: nuclear, hydro, coal, oil, PV and wind. Which is cheapest? Coal. I say by 2050 most of our economy will be powered by coal. So much for clean.

Anaconda:
What is your point about 'continental shelf'? We've been using that resource for decades. Norway, the UK, GOM, ...

 
At Wednesday, June 25, 2008 at 12:07:00 PM PDT, Blogger Ari said...

greanneck,

While it's true that it's not "clean" per se to drive around EVs, coal-fired electricity has much better sequestration methods possible than the typical automobile, reducing the per capita emissions.

Also, even assuming that it's partially due to speculation, the price is not likely to go back down below triple digits anytime soon. People aren't going to rush out tomorrow and dump their Priuses, either.

 
At Wednesday, June 25, 2008 at 1:52:00 PM PDT, Anonymous juan said...

Barba,

It was not directed towards anyone but a general comment meant to provide some small amount of social context.

 
At Wednesday, June 25, 2008 at 2:03:00 PM PDT, Blogger regeya said...

"This is a fine argument... except that you're assuming that China will continue to run a trade surplus indefinitely."

Indeed. All the Doomers have to do is look for the clues. It's been estimated that the economic gains they've made have been offset by the environmental impact. Further, with oil prices rising (don't buy the argument that it's only the U.S. because of the dollar, that's only part of the story) companies are starting to realize that, hm, building things in China, shipping 'em hundreds of miles to a port town and hauling them in cargo ships that can go tens of feet on a gallon of diesel is no longer cost effective! American companies have been quietly moving operations back to the United States for a couple of years; it's being grossly underreported, though.

If anything, Peak Oil will be offset by the failure of globalization.

 
At Wednesday, June 25, 2008 at 4:58:00 PM PDT, Blogger Ari said...

regeya,

Thing is, I don't even think that globalization is going to end, per se. Just that it will change. The notion that globalization is only cheap labor in Asia is incomplete. I believe that globalization will truck on, but that it will change into a more "international company with national production" model. Instead of Toyota building cars in Aichi and shipping them to America, they'll build them in America and sell them in America.

But it will still be Toyota, a Japanese company, operating internationally. So is it the end of globalization? Hardly. Teleconferencing will take the place of physical meetings, but we'll still live in a globally connected world with tons of trade. It's just that trade will be much more in the form of IP rights and things like that than before.

 
At Thursday, June 26, 2008 at 2:04:00 AM PDT, Blogger Barba Rija said...

"Yet I've seen no such debunking. Could it be that you're incapable and conform to Matt Savinar's view on things?"

No. It was a very good project, but I am afraid that I work hard everyday and I have a child to take care in the evenings, I only have spare time to make small comments on other people's blogs.

Even in the other blogs that I have, long time since I've posted in any one of them.

I'd love to write the debunking of savinar, for there is so much bullshit material on it! By only reading the first page I had some 8 or 9 posts already aligned with the general ideas.

The other reason why I didn't was because JD was at it again, so that was the final blow to it.

 
At Wednesday, July 2, 2008 at 12:04:00 PM PDT, Anonymous aram said...

Tator-

No the problem wit the market is that we've reached peak. Demand is outstripping supply by about 1 mbd. This is only the whipped cream on the top too. Get ready for a long emergency.

Are you really Luis Diaz in disguise?

Touting this "1 million bpd" lie over and over again will NOT make it true.

First off, there is not a 1 million bpd shortfall. If there were NO RESERVE GROWTH COULD HAPPEN.

You understand what that means, right?

That phenomenal growth to nearly 360,000,000 barrels of supply that happened in the 2nd quarter of 2007 COULD NOT HAVE HAPPENED WITH A DEFICIT OF 1 MILLION BARRELS PER DAY!

Read that again, if you don't get it and read it as many times as necessary until you understand it. No one could grow reserves anywhere if the world was actually using a million bpd more than it was producing.

The small shortfall of supply relative to demand in 2007 was due to OPEC's production cuts, first of 500,000 bpd in late 2006 and later of 1,200,000 bpd in early 2007. And there were good reasons for those cuts. As I mentioned earlier, US stocks were nearly 360,000,000 barrels around this time last year. And in early 2007 the price of oil dipped briefly below $50.00/barrel and was threatening to collapse. That's why OPEC cut production and that's why there was a small shortfall of supply over demand in 2007 overall.

Please think before you go around screaming your lie about a million barrel per day shortfall which just a little thinking proves is impossible.

 

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