I know what peak oil means, and the reason I say it’s bogus is because it doesn’t only apply to oil. The same very basic economic concept applies to almost all natural resources in the world. Supply, or in this case lack there of is simply a function of price. At X dollars there may be a shortage, but at X+n$ there isn’t. The same could be said of gold, copper, and kryptonite Then you have to add on technology. With today’s technology the price : supply line is here, and with tomorrows it’s pushed out.
Oil is 100$. It’s an affordable price, there’s no crisis, and there certainly isn’t an oil shortage. I don’t like when peak oil is used as an argument against non-environmentalists because of how easily it can be pushed aside as meaningless. I’d rather focus on the environmental reasons we should shift away from fossil fuels. If we try to scare people into thinking oh shit, there’s no oil left, guess what happens in 20 years when there is still plenty of very affordable oil? Nothing… Same debate, 20 years from now, and round and round we go.
Let’s shelf the peak oil argument and focus on the problem. Oil is bad regardless of price or supply. Oil bad, Tesla good
Brent, your reasoning before was based on people who are biased towards a certain viewpoint, and in fact the situation has changed very dramatically over the last three decades, with Brent Oil going from 15 USD/barrel to 100+ USD/barrel even in a time of great economic upheaval in the West. Didn’t you notice the price of almost all other commodities plummet recently? The oil price has held up through thick and thin. If this doesn’t indicate Peak Oil has not happened what does?
Peak oil has a massive effect, because energy cost is the biggest contribution to total costs worldwide. Literally everything depends on the relative price of energy with regards if something is an economic proposition or not. You can’t get away with saying that an abritrary number like oil at 100 USD/barrel is an affordable price. The effects are already obvious, from a huge switch to higher mileage efficiency vehicles worldwide, to Boeing and Airbus focusing on fuel efficient aircraft for future profits to shipping companies now running their container ships at slower speeds to save fuel. If peak oil had not occurred why are they running their ships more slowly now? You’ve got HP running trains from central China to Europe because they are not satisfied with the slow speeds of the ships that are now forced to run slowly and reduced average shipping time to 5 weeks from China to Europe.
Natural gas has come on stream and can help mitigate peak oil somewhat, but it simply does not have the energy content per volume that oil has. You need more of it to create the same amount of power, and you need to compress it by using energy. It does create less CO2 emissions though which is good.
With oil not becoming cheaper, and demand increasing, and alternative energies not plugging the gaps, we can conclude that fuel efficiency will be the major way for consumers and businesses to reduce their fixed costs. From what I can see only electric vehicles can offer a major cost reduction over the next few years (remember that battery cost will at least halve over the next ten years…the major impediment has simply been industrial scale) and the infrastructure , while not perfect and needing upgrading, largely exists already (as opposed to the massive costs involved in setting up a natural gas distribution network).
You’re certainly entitled to your opinion, but I honestly have no idea why people don’t consider inflation before forming views. They use the word every single day, they complain about it, they berate the government and the FED over it, they notice it when they go shopping, and yet completely ignore it when having debates.
The same people who are talking about the S&P 500 being at all time highs. Sorry to say, no it isn’t, 2050 is the all time high. It’s the same crowd that talks about how 1.2 trillion dollar deficits are completely new territory. Again, no they aren’t, we’ve been here before. The entire media complex has completely forgotten about the most simplistic thing in economics, inflation. I certainly would not have earned my Economics degree if I ever wrote papers and showed charts that were not inflation adjusted. That’s an automatic F
Oil prices were higher in 1980 and in 1860 than they are now. Oil is a very volatile commodity that is extremely susceptible to political events. Even the hint of future political unrest can send oil prices through the roof. The middle east is a large player in the world oil supply and they have in fact had a pretty tumultuous decade. Add to that the fact that oil cartels have figured out how to maximize profits by intentionally limiting supply at certain times. Then add to that the fact that the world financial markets are in turmoil just in the last 5 years as well.
There’s many reasons why the price of oil shot up near all time highs after 9/11, and I assure you peak oil isn’t the reason. If the world political stage doesn’t change we are going to see high oil prices for the foreseeable future. Remember when experts were predicting oil going to 150$ if the Straight of Hormuz was shut down? Was that peak oil or was that political? But if the middle east gets cleaned up in the next decade watch how fast oil prices plummet towards there long term average.
Again though I have to stress, I am in no way supporting further use of oil. I don’t want people to read my comments and think somehow i’m supporting the burning of fossil fuels. I’m an environmentalist and will support alternative energy at every opportunity. I’m simply stating that oil prices have tripled in the last 10 years and it’s not because of peak oil. No different than when oil prices spiked what 800% in the late 70’s? That wasn’t peak oil either
I don’t think you know enough about the world of energy to discuss it reasonably, your only answer is inflation and politics? Yes inflation and politics matter, no they are not the main reason why oil costs so much now. The issue had already been explained to you, the easy， cheap and high quality oil resources have almost all been accessed already. That coupled with a massive increase in demand means peak oil is a reality, it’s never going to get cheaper to extract because that cheap stuff is GONE and there is no easy replacement in sight. Oil is not something can be recycled or created cheaply from other sources and dirty oil requires refining which adds to cost. The extraction of oil from oil sands in Alberta was only economically feasible in the last few years with oil continuing to hover around 100 USD a barrel.
This all matters, for if oil could suddenly become much cheaper again electric cars would not have a real future, but I can’t see how this can happen with the supply situation along with ramping demand for energy worldwide.
If you’d like to continue with a spirited debate, that’ll be the last insult to either of our intelligence ok? I’ve been studying markets for over 20 years and it’s how I make my living. My parents have over 40 years of direct oil industry experience as business owners and half my friends are directly connected to one of the largest oil and gas industries in the world. Agree or disagree is totally fine with me, that’s why people debate and it’s fun to do so. But if you’re honestly going to suggest that I don’t know enough about the subject to even debate it, I’d rather just end it here. Believe me, I’ve discussed this topic a thousand times in my life as a guy who grew up in an oil industry family in Calgary, Alberta.
The fact is there are several major things that have effects on the price of oil, and extraction price is just one of those several reasons. Now I’m not for one second saying that oil is equally cheap as it was 50 years ago and there is absolutely no trend here. Of course oil, just like all natural resources gets more expensive to extract over time. Just like gold. It wasn’t that long ago that gold was just sitting in the rivers to be panned, or in mines that you could self extract with a simple rock hammer. Now it costs quite a bit to go get it. Unless technology makes a leap or there are new discoveries then the price trends higher over time. You’re not saying anything that everybody doesn’t already know. I didn’t feel the need to spell it out for you because I assumed it went without saying, but obviously I agree that oil extraction get’s more difficult and expensive over time.
Peak oil explains an upward trend, not a massive spike of which we’ve seen 2 of in the last 30 years. That’s not peak oil, that’s us. That’s governments, that’s war, that’s supply chains being broken or manipulated, that’s fear of an unknown future, that’s human nature, that’s the changing political landscape. So yes of course extraction price is somewhere in the equation as it will always be as we deplete our resources, but as far as why oil is so expensive right now, peak oil is hardly worth talking about in my opinion. Peak oil / gold / copper / iron / etc etc has been with us since industrialization and it will continue to be with us forever. Spiking oil prices is another animal altogether.
oh c’mon, brentgolf, I do think you’re being naive if you imagine people are ONLY looking at non-inflation-adjusted prices. Here’s a random chart off the internet:
Oil prices have increased, in real terms, on a steady upward slope. There have been no real “oil shocks” comparable to the 70’s - just some market jitters. Your rationalisation as “just inflation” doesn’t hold water, and I suggest that’s because oil is extracted in vastly larger quantities than (say) gold. And as HH2 pointed out, it can’t be recycled. Price increases reflect real increases in costs: not necessarily pure extraction costs, but also in terms of one-off expenses like geological surveys, site engineering, licensing etc., which are amortised over smaller and smaller amounts as oil companies chase smaller, less-viable deposits.
You may also be aware that the UK burned through it’s entire North Sea gas reserves in a few short decades. This stuff does run out - it’s not some hypothetical future. The UK is now dependent on Russia for energy supplies.
All that aside, the fact is that fossil fuels are now more expensive than (or at least on par with) solar. A barrel of oil at ~900kWh usable energy content would cost no more than US$90 if delivered using standard photovoltaics. Depending on where you collect it, how you measure it, and what you use it for, solar can sometimes be even cheaper than that; for example, if all you want is hot water (a common application for heating oil) solar thermal is about US$0.03/kWh ($27 per barrel equivalent). Yet, funnily enough, economists who will usually argue the toss over a matter of a few cents are keeping strangely quiet about this.
Peak oil is reached when demand continues to expand and supply (in terms of cheaper resources to extract) contracts. The balance quickly weights to the bulls because of the tight supply situation, there is nothing there to bring the cost down again when these two powerful trends intersect. In fact as soon as you get over the peak oil hump the trend accelerates to a new medium, that medium now seems to be around 100 USD is a stable supply situation worldwide. If economic growth returns strongly in he US or India demand will create another higher base.
You can’t compare the current situation with the 1970s because then the supply part of the equation was naturally far ahead of demand, this cannot be the case now. There are no massive reservoirs of cheap Middle East oil waiting to be put into the worlds markets. Instead oil companies are looking in the deep ocean, in shake deposits and even in the Artic (-and Antartic if they could), all difficult to access and high cost sources. Speculators know this tight supply situation creates an ideal target.
Contrast the situation of oil to natural gas, gas supply is far in excess of demand and there is no easy way to dominate or manipulate the market. The demand does not exist, yet.
Oil prices won’t come down until someone efficient ways of producing and storing energy are found. Perhaps solar will make a dent in oil demand if combined with some efficient hydrogen/ammonia synthesis system or if electric cars really take off demand may taper. None of these are around the corner. Maybe 10 years later…
Finley I don’t disagree with anything you said. This is not an inflation problem and I never intended to make it sound like it was. That was just one small part of the things I said in order to properly frame the debate. Believe me when people talk about how the stock market is at all time highs and what that all means, i’m right there to tell them, no it isn’t. The same goes for oil. I have heard countless times how 100$ oil is unheard of and how it’s absurdly high. I was simply pointing out that in fact we’ve been here before over 30 years ago. So when he said 15$ to 100$ and used it to show a peak oil argument, I naturally came back with, 15$ may very well be the same as 100$ if you simply adjust for inflation. But I certainly didn’t say those things to imply that the worlds diminishing oil supply can be explained by inflation as you seem to think I was saying. Maybe I didn’t word it correctly, so as long as we’re always talking inflation adjusted prices there’s no need to bring up inflation anymore
Peak oil is not a concept people should believe in or not believe in, it’s simply true. But i’d really prefer not to call it peak oil because it’s been here since industrialization. As I said, oil along with most other natural resources has an upward sloping extraction price line. There is nothing profound about this and certainly nothing special about oil. We don’t need to invent some scary term “peak oil” and talk about it as if it’s the great debate of our time. It’s been here since we first discovered oil.
As far as why oil is hovering around it’s all time high price, in my opinion is far less to do with literal supply and far more to do with what’s happened on the world stage in the last 10 years. Honestly, if prices have tripled in 10 years because of peak oil, then you’d have to be of the opinion that we are on the very brink of absolute disaster would you not? If it’s truly due to supply shortages, then what the hell is going to happen over the next 10 years? I cringe to imagine…
Personally I believe oil prices have at least doubled if not more simply due to instability in the middle east coupled with a massive financial crisis. Things always look a lot different in the midst of a crisis. My guess is 10-20 years from now when we look back on this time, oil prices will look a lot more stable than they currently do.
If i’m right, oil will most likely be the same inflation adjusted 100$ or there a bouts 20 years from now. If you’re right, man I can’t even venture a guess as to what that would mean for the world. Can you? If you really believe the price has tripled because of peak oil, can you give us a prediction of what’s going to happen over the next 10 years?
Brent isn’t the oil price supposed to go down in a crisis? Demand destruction? In fact oil use was already decreasing in the West before the crisis but it is of no real consequence when compared to rapid demand increase in the rest of the world. I’m no expert but I have read discussions of experts in this field. The latest story is that fracking is giving a quick juice to oil supplies in the US but its only viable at high prices and they will frack the sweet spots first. Fracked wells run out at a rate of 60% per year and average fields have 15 years of oil in them. That is keeping a lid on things for the moment.
The real story is energy demand increase from the Middle East, China and India and then Africa. They have burgeoning populations with firm expectations of motorised vehicles and air conditioning and are consuming more food and resources and trading more. Something like 70% of the worlds oil is used for motorised propulsion, so the real influence on oil price will be if other energy sources like gas or electricity (coal/nuclear) can fill the gap?
Coal is complicated because it is cheap and abundant but can be expensive if air pollution controls are applied, China and the US have already committed to this. I see gas and electric coming up quickly as oil gets relatively expensive.
Electric vehicles should act synergistically with massive ramp up of solar and wind worldwide and rapidly decreasing battery costs, this will eventually put a cap on oil prices. Overall energy costs across the board should continue to increase , I don’t see any magic bullet to increase supply of cheap energy versus demand. The West has been reducing oil use but it looks like the East and South will not anytime soon! So we should see price spikes of up to 150-200 USD if anything kicked off in The Middle East. However the geopolitical tension may drop significantly now with Iran electing a moderate government, so oil could drop back a little if Iran can sell on the open market, but I expect only a little and for a short while as demand keeps climbing globally.
So I would say until alternative sources of energy become viable on a large scale (some breakthrough synthesis or grid storage system along with massive implementation of electric vehicles), or demand for travel can be reduced by some technological innovation like reality like virtual reality, oil price should stay in line with or well above inflation.
Surely this must be at least 10 years out?
Sorry I have no idea why you’d think that. Clearly it would depend on the type of crisis we were talking about would it not? I would consider the closure of the Strait of Hormuz an oil crisis and I guarantee you the price would go up, not down in that case. There are dozens of examples of crisis that would cause the price of oil to go up, down, and stay unchanged.
I stand by my original statement. People like you who are trying to wean the world off of burning fossil fuels by using arguments about economics and supply and demand ( i.e. peak oil ) are simply approaching the argument in the wrong way. The world has plenty of oil left and we can push this thing many decades into the future if we want to. You’re not going to accomplish anything with this line of argument because the extraction price curve is only upward sloping, it’s not nearly the parabolic curve that you are representing it is. Prices of oil will ebb and flow around that upward sloping curve.
It’s no different than inflation and all the weirdo’s who think that we are on the brink of currency collapse and Weimar Republic hyperinflation. No we’re not. Inflation is just simply upward sloping, it’s not parabolic. We can push this fiat currency experiment 50 years into the future if we want to with little problems.
If you try to use your current line of argument in this case, what you’ll find is that oil will only stop being consumed when it is literally too uneconomic and burdensome to extract. When alternative energy becomes cheaper than oil, and not just domestically but around the entire world. At that point the shift away from oil will happen on it’s own. I’m sorry to say to all you peak oil people, we are not nearly at that stage yet. New and better technology and new deep water discoveries will keep our supply of oil primed and ready to burn for many decades to come.
However, the world NEEDS us to stop burning fossil fuels TODAY ! We can’t wait 30-50 years for the price of oil to become too uneconomic and be replaced by alternative energy. We need to change NOW ! The only argument that is useful at this point is the environmental one. Oil use is disastrous to our planet. Who gives a shit about price, supply and demand, and peak oil? I don’t. All I care about is people recognizing and understanding that this is a human survival problem, not a price problem.
This is why I’m supporting Tesla and cheering for it to succeed. And not only succeed, but radically change the way we see transportation. We need this to happen, regardless of how long it takes Tesla and the competitors to build a car that’s cheaper in both manufacturing and operating than an internal combustion engine, which may be a long while.
Of course you should have an idea, I’m referring to the financial crisis the world and in particular the West has gone through over the last 6 years. Through this crisis the oil price has hovered mostly around 4 TIMES what it was in 2003. This is with record low car sales in Europe and a big shift to better gas mileage vehicles in the US. This is NOT MONETARY INFLATION. This is not a linear progression, this is a PARADIGM SHIFT and it has not been seen before. There was no geopolitical instability to blame for this. This massive jump in oil price has already affected many industries in a fundamental way, I have provided the examples above.
There was supposed to be demand destruction, and there was in the West, but the East just kept on eating up more oil. Hello 20 million cars a year sold in China now, that’s AN EXTRA US CAR MARKET OF DEMAND added in 10 years!!! That’s insane. Demand has continued to ramp up, supply has not.
If we assume that the average car lasts ten years, the demand for oil jumps what, almost 10% a year, all things considered until the market matures or oil price forces demand destruction (car ownership levels in China are still very low compared to the US…and will never reach that level due to energy cost increase). So on one side you’ve got a depleting cheap resource and on the other you have demand increasing…it’s not hard to figure out a crunch will happen and that crunch is the 4 TIMES increase in price observed.
India is rapidly industrialising too. I told you need to keep up the numbers instead of talking to cowboys in Calgary right? It’s all about developing country demand eating up limited resources. The same thing is beginning to happen with water.
There was no buffer, because peak oil is here (yes I know some people don’t like the term but it is a handy term to explain that the cheap oil is gone).
You claim to know this area well following discussions with people in the Calgary oil business, sorry the world has changed a lot over the last couple of decades, you need to keep with the times and the numbers, especially in terms of global demand .
[quote=“BrentGolf”]
However, the world NEEDS us to stop burning fossil fuels TODAY ! We can’t wait 30-50 years for the price of oil to become too uneconomic and be replaced by alternative energy. We need to change NOW ! The only argument that is useful at this point is the environmental one. Oil use is disastrous to our planet. Who gives a shit about price, supply and demand, and peak oil? I don’t. All I care about is people recognizing and understanding that this is a human survival problem, not a price problem.
This is why I’m supporting Tesla and cheering for it to succeed. And not only succeed, but radically change the way we see transportation. We need this to happen, regardless of how long it takes Tesla and the competitors to build a car that’s cheaper in both manufacturing and operating than an internal combustion engine, which may be a long while.[/quote]
We need to stop burning fossil fuels today but it won’t happen. What will make it happen is oil becoming so expensive by scarcity of cheaply drilled reservoirs, that other sources of energy naturally will become ascendendant. The best the West can do is help to more rapidly develop mass technologies that are cost efficient and which can use less harmful energy sources. They can also help by being a model in terms of energy reduction and sustainable building etc, but it seems Asia and other countries are not interested in these concepts at the moment.
The developing world doesn’t share our mindset about CO2 emissions, and why should they, when they have more to worry about, particularly air pollution and water and food scarcity. They need to worry about survival NOW rather than survival LATER.
They will use oil and coal to develop their economies and their food sources and there is not a whole lot we can do about it. I have seen educated Indians, on this very discussion board, claiming that it is the West that is trying to shove our views down their throat. That’s not true, we are all in the same boat, but the way they see it is that the West developed with scant regard for the environment so why should they care?
So the best we can hope for is that peak oil forces their hand more quickly to move to alternative energy sources, and hopefully that is not coal! China has made a massive move forward with new air pollution regulations, but as far as I am aware they still need to build huge numbers of coal power plants, unless their economy stalls out,which it may well soon.
OK, I understand where you’re coming from now, and unfortunately, I think you’re right. I disagree that the curve is linear (I’m pretty certain it’ll turn into a clear exponential within the next 20 years), but cultures do have a certain amount of inertia or inductance: once they’ve started doing something, they find it hard to stop. It was not uncommon to see a horse and cart well into the 50’s and 60’s in the UK. Steam trains too, which remained in use for decades after the invention of the diesel-electric configuration (1920s) and catenary systems (1890s). Better technology does not instantly displace obsolete technology, and using economic arguments doesn’t really work. You need to appeal to people’s feelings rather than logic: the oil companies are doing exactly that with their latest PR, which is all touchy-feely bullshit about how they’re “working towards” sustainable solutions (as yet unspecified).
Show me the numbers. Five years ago I would have agreed with you. Not today. You’re right that we need to start doing things differently for its own sake, but the conservative economists who argue that oil is still cheaper are, frankly, talking out their collective ass: even the economic argument no longer holds water, which was the one remaining excuse for not progressing to 21st-century technology.
[quote]The developing world doesn’t share our mindset about CO2 emissions, and why should they, when they have more to worry about, particularly air pollution and water and food scarcity. They need to worry about survival NOW rather than survival LATER.
They will use oil and coal to develop their economies and their food sources and there is not a whole lot we can do about it. I have seen educated Indians, on this very discussion board, claiming that it is the West that is trying to shove our views down their throat. That’s not true, we are all in the same boat, but the way they see it is that the West developed with scant regard for the environment so why should they care?[/quote]
This is the most distressing thing about the whole sorry mess. Third-world countries are convinced that there’s some grand western conspiracy to keep them down. They don’t seem to appreciate that their best hope for development - including various resource issues - is to start using the best, cheapest, and most efficient technology today, instead of saddling themselves with outdated shit from the start of the industrial revolution. If they continue with the latter, they’ll dig themselves into the exact same hole we’re in now, and end up spending all their hard-earned cash (which they’ve paid for with their water, air, and environment) on getting rid of it and starting again.
If you’d like to be an asshole and disrespect people simply for shock value or because they disagree with you, you’re talking to the wrong person. I have no time or patience for that type of nonsense. My dad’s a Geologist with 40 years of oil industry experience, he’s no cowboy. Neither are the hundreds of industry experts I’ve had the privilege of getting to know personally over the years due to my background in golf. As far as the “numbers” comment, I have a math degree, I think I can manage to keep up so drop the attitude ok?
Things always look different in the midst of a rapid rise in price. The same can be said for any asset class that experiences an extreme level on either side, high or low. It’s my job to manage the averages and analyze volatility during the move. I don’t see a whole lot that tells me this is the big one. It’s certainly part of my daily job to keep an open mind and absorb all the information I can on the subject, but so far I don’t find it very difficult to put into perspective.
If you’re of the opinion that oil has gone up this fast in price due to peak oil, and extraction prices really are significantly exponential, then it won’t be long before you are proved exactly right. In that world in 1-2 years oil should easily hit 200$, and in 10 years who knows, on that exponential scale maybe 1000$? Believe me I sure as hell hope you’re right, because that would make it incredibly easy for alternative energy sources to come in cheaper and easier and we can finally start focusing all of our industrial efforts on making the switch to renewable energy. But as is my experience with all asset classes, this is most likely just another blip in the long term upward trend. Time will tell, but I don’t think oil is going anywhere anytime soon. Neither does the entire oil industry by the way. If we are literally just a few years away from exorbitant oil prices, that would already be reflected in the business practices of the powers that be. Don’t think for one second these billionaires won’t be 2 steps ahead of everyone else in the energy game. The same rule applies for oil that applies to stocks, bonds, precious metals and real estate. Watch what big money is doing, and act accordingly.
BTW: Tesla had a great quarter, over 5100 deliveries !
Ok sorry for being a bit of an ass.
I just think that the whole situation has changed fundamentally with the ‘rise of the rest’. Its hard for people who are used to ‘America first’ to really appreciate that. And things change quickly, the Alberta oil sands were unviable until a few years ago, and fracking was something that was thought of as something that wasn’t really important or realistically profitable. Similarly electric vehicles will come on stream in mass once costs come downs
We see this with China going from selling 3 million vehicles to 20 million vehicles in a little over a decade!
I don’t think many things would show an exponential price , instead it seems to be more step ladder like. At a price of 200 USD/barrel in todays money other energy sources start to become extremely attractive and demand destruction will force serious changes worldwide. That’s good in a way, but it could also cause famine, poverty and massive unrest as oil prices underpin the current system of food production and sales.
Obviously none of us have a crystal ball but in the short to medium term I don’t see a widespread replacement for oil that will be utilized by these emerging economies. We have already had 10 years at these prices, it doesn’t look like a blip but the new reality. However within the next 10 years pure electric cars should have made their presence felt in a strong way (halving battery price vs higher oil cost), even in developing countries.
I’m Canadian, but have lived in about 7 different US cities in my life. I don’t much care for the US to be honest and will probably never go back, but that doesn’t change the fact that they have the strongest Economy in the world both in size and influence. It’s not like their strangle hold is going anywhere. With Europe past the point of no return and China clearly facing some short to medium term problems, if you don’t have a US centric attitude that’s going to be an issue. Just ask anybody who’s been investing in the last 5 years how it worked out for them to write off the US as past it’s prime
You made it very clear that going from 30$ to 100$ was almost entirely due to peak oil. I was the one saying there’s 3 or 4 factors involved and extraction price increases is just one of those several issues. You took STRONG objection to my line of reasoning. Don’t back down now, you’re on a roll. So if peak oil caused a price rise of 300% in 10 years, and the extraction price curve is exponential, we are in for a serious shit storm in the VERY near future. I mean within 1-2 years we should easily see oil prices over 200$. In your world, electric cars literally have 4 quarters before we need to roll those bad boys out en masse…
You certainly talk and take offense to alternative positions as if you do have a crystal ball. You’re so certain of what the future holds for us that you won’t even consider the possibility that I’m at least partially right in that this is a peak in a longer term mean reversion game that is ALL asset prices. Yes the curve is upward sloping, we’ve known that since the industrial revolution, but it is just a mean reversion game. You strongly disagreed. So certainly you’re going to be able to take this knowledge that you possess, that not even the oil industy is aware of, and turn it into substantial private wealth for yourself. If what you’re saying is even remotely close to the truth, put your money where your mouth is and life is just about to get very good indeed for you and your family
If you look at the chart I posted earlier, it’s really impossible to say one way or the other. You could curve-fit practically anything onto the future and it would look plausible. However, the fact remains oil has now been well above it’s long-term average (in real terms, and relative to other asset prices) for at least two decades. I would say there is very little chance of reversion to the mean because there is no obvious short-term driver behind this other than resource scarcity.
You also haven’t adequately addressed the idea that oil is not like any other commodity. It’s probably the most-consumed product on the planet (next to water) and everything else depends upon it. Demand is also growing, on a distinctly non-linear upswing. What we’re seeing, I suggest, is simply a case of demand increasing faster than new capacity can come online. Again, I don’t see any particular reason why this situation could be considered a short-term thing.
Anyway, it’s not just about the rising cost of oil, but the falling cost of renewables. There was a crossover sometime around 2009. I posted elsewhere that PV solar is now about $0.85/W, which is one-fifth of what it was ten years ago. Thermal solar is slightly less (~0.50/W). Bear in mind we need fossil fuels to roll this stuff out on any significant scale, so it would be doubly disastrous if we fail to do it soon: the infrastructure cost will increase the longer we delay.
I dunno. Big money is usually after short-term profits. Most investors look to exit their position within 7 years. You can understand the rationale: they can take their profits and invest in something else. However, that leaves a huge class of highly profitable long-term investments, such as agroforestry or high-tech transport infrastructure - that no VC would touch with a bargepole. That’s simply because the profits are 30 years out, maybe more. They want their yachts and expensive callgirls now, not when they’re too old to enjoy them.
However, the winds of change are certainly starting to blow. The Gates’ fund is looking at stuff like this, and intending to profit from it. I’ve met several people with business ideas similar to my own, and historically when several people start independently producing the same ideas, that’s when things start happening. Personally I think third-world countries are going to become the driving force behind the next wave of technology. The West is going to be left floundering. The roadblock is the deep suspicion of Western ideas in those countries; there a very strong Not Invented Here syndrome going on. They could - if they wanted to - get state-of-the-art electric transport and renewable power systems for one-tenth of what the West has been spending on non-renewable equivalents, but they’re dismissing it all out of hand because they want what we’ve got: pollution, road accidents, and smog. The marketing challenge is to convince them that these things are a bit passe.
Nope, I’m certainly not certain of what the future holds, but I can look at the pieces and make some educated guesses. Rising demand on one side (due to burdgeoning populations and economic development) along with a costlier supply base on the other. Doesn’t take too much to figure out that when demand exceeds supply prices can accelerate upwards quickly, and that the supply chain becomes a nice speculative target and even more susceptible to any ‘fears’ that are out there.
I have never mentioned exponential price increases, that was Finley. Don’t get us confused.
I predict oil will float between 100-200 USD/barrel in todays money for the foreseeable future…10 years out…because it simply CANNOT go above a certain point without demand destruction along with the clear cost advantage other energy sources would have. Peak oil is not about running out of oil, few are dumb enough to believe in that… There will always be oil in the ground, the question is only whether is there is an economic incentive to extract it or not (and in the future perhaps an environmental incentive).
I’ve missed the boat a bit in not investing more in Tesla, there are very few pure play electric vehicles or electric component supplier that I can think of that I could invest in. I had previously thought about putting money in A321 batteries…lucky I didn’t.
I don’t like to invest money in a company that doesn’t have a certain amount of proven success under it’s belt, the best bets are those that have launched something commercial and working through the kinks and not much loved or noticed by the analysts and the Goldmans yet. I don’t know the other ways I could play this.
Then you have to add on technology. With today’s technology the price : supply line is here, and with tomorrows it’s pushed out.
