Can the Economy Survive $200-a-Barrel Oil?
It's an economic experiment I would rather not take part in: seeing how $200-a-barrel oil would affect the U.S. and global economy. "The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty'' is what Goldman Sachs economist Arjun Murti wrote earlier this week. (Note that Murti blames the weak dollar for a good part of the continuing rise in oil prices.)
Murti is hardly alone in such seemingly spectacular speculation. Analysts at Deutsche Bank and CIBC World Markets, investor Jimmy Rogers, and the current president of OPEC have all made such forecasts.
And what would such a price rise do to the economy? Market strategist Ed Yardeni thinks he has a pretty good idea (bold is mine):
A super-super spike would most likely put a stake in the heart of global economic growth. A global economic downturn would be the most likely outcome, led by a longer and deeper recession in the US. Then again, in this scenario, the price of oil would probably fall rapidly and sharply back down to $100 a barrel, or even lower, as demand weakened. Wouldn't the drop in oil prices then revive economic growth? Normally, it would, but if the super-super spike occurs, the resulting longer and deeper recession could trigger the dreaded "negative feedback loop" from the credit crisis.
My take: In addition to the economic impact, I think you would see political opposition to increased oil drilling and nuclear power—necessary to create a "hydrogen economy"—get a real beat-down from public opinion. Do Americans really want to spend a $1 trillion a year on gasoline?
Tags: economics | economy | global economy | gas prices | oil
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$ 2000 a barrel surely?
It's an auction where the highest bidder gets the oil! As supplies dwindle over the coming decades there will be more frantic bidding to secure a share and prices will rise and rise.
The argument that higher prices will spawn increased production only holds good for a little while. That's because oil production is to do with the laws of thermodynamics, rather than economics. The moment you start to use more oil to explore, develop, transport and refine the oil in a new discovery than you get back from production, i.e. there is a net energy loss, it becomes uneconomic to produce the oil, no matter how high the price rises. At that point, oil supply stops.
oil price
We're Dead!
1,000 barrels per second
Can we pump 2,000 barrels a second by mid century? We'll have to pump that much to keep up with India and China's voracious appetite. Considering conventional oil discoveries peaked in 1964, it's obvious that 1,000 barrels per second is quite a feet in it's own right, so let's move on. For me I am glad that oil is getting closer to what it actually should have always been at. It's a very valuable liquid: 1 Barrel =5,930,226,101 joules of energy, At 8 hours a day, it would take a human 2059 work days. More Price = Less Squandering.
Oil is great :)
Why stop at $200?
Here in the UK of what we pay for gas at the pump is 2/3 tax so effectively we already pay the equivalent of $300 a barrel for oil. The US consumer will have to get used to that sooner or later.
The Party's Over
We've (industrialized nations) devoured the cheap, easily recoverable, oil with no regard for future generations. And now it’s time to pay the piper! We could have invested our petroleum energy in developing realistic energy alternatives over the past few decades; however, we choose to squander away the petroleum instead.
People are more apt to react to crises than respond to warnings!
Hope everyone enjoyed the party while it lasted!
Peak Oil
Peak oil occurs when demand outstrips supply. As mentioned here, the “easy oil” has been tapped and is being consumed. Many of these fields show yearly declining production. New oil is getting harder find and harder to extract with lower production. Meanwhile, all the US dollars in China and India are propelling their 3% increase in use of oil. That's a lot of people demanding more at 3% per year. China last year outstripped the US in meat consumption. Oil is coming as an over-consumptive item.
The conversion of corn to ethanol is a disaster. The most favorable calculation is 3/4 units of (oil/gas) energy input to get 1 unit of ethanol output -- so our US breadbasket is becoming an ethanol depot. Just multiple by 4 this conversion: (3/4 units => 1 unit ethanol) to get 3 units => 4 units of ethanol output. Now use 3 of the 4 output units for energy input to this process so American can have energy independence. Wow! Ramp-up ethanol by 4 times to get 1 unit for your vehicle. It’s hopeless even with everyone’s lawn in corn. Some believe the conversion is even less efficient -- giving negative gain. It your tax dollars at work as that effort increases you food bill. The other biofuels are marginal even for sugarcane as the best choice.
We need to use food only as food to lower food-inflation. Then it will just inflate due to the cost of fuel. All electricity needs to use a combination of nuclear and coal. No oil and no gas (methane). Conservation is an essential. Dump SUVs and trucks except with a business license and use high tax. Set 55 MPH maximum speed. All vehicles need high economy and regenerative braking.
Type “peak energy” into your browser to search and read. We are getting closer every day! http://www.google.com/search?hl=en&q=peak+oil&btnG=Google+Search
Clearly the US has no energy policy yet. Time is already too short to wait.
Peak Oil
I find this situation alarming. The peak oil doomsday grim reapers may have actually been right. Forget recession, we are headed for the next great depression or far worse... think blackouts, shortages, scavenging, and total anarchy. I'll see you in the soup line.
Peak Oil Here?
Peak oil, why that ole subject got a lot of party laughs. But someday production will really max out and that's looking a bit closer these days with all the new users at higher price. In the last 10 years the cost for gas at the pump seems to going up faster than the oil production. Even if you use 2% inflation per year, it’s still very fast. Maybe we are running out of oil.
So let's go nuclear power along with wind and solar, when the wind & sun is there. Use batteries in cars for short distance travels. Cars can be small and light stay, be used on car roads kept away from big trucks. They could be placed on trains to travel longer distances, or people can swap public cars upon arrival at ones electric train destination. Life could become very electric. Use electrolysis to convert water to hydrogen and oxygen that becomes our portable fuel. Maybe there could be electric farming tractors. If all this fails, I’ll convert my 1935 home back to coal heat instead of nuclear/wind/solar electricity. Well there is always heat from firewood. Gosh, cutting wood without a chainsaw. There’s nothing like oil except a good challenge. This party joke is not all that funny.
Let us hope...
That the current oil price climb is rooted as much in the dollar weakness (and futures traders) as it is supply & refinery capacity. Anything that prompts us to use less of it is a good thing in the long run. We have enough oil right now to marshal the resources we need to come up with SOME sort of alternate energy infrastructure - But action needs to be taken by the next president IMMEDIATELY (It ought to be now, but Bush is not the man for innovation or change). We'll hit the end of our leash - and it may hurt a little bit, but we are an incredibly wasteful society right now. A collective trimming back will probably reduce demand by a million or more barrels a day! A surge in retrofitting appliances with more efficient consumption helps more. And then of course there is solar and wind - Which will be experiencing a huge growth surge in the next 3 years.
re: Nuclear
I think he means in general, not because of the oil prices.
Most people think environmentalists holds Peak Oil as a blessing but it is in fact the opposite. The reaction to our energy problems is likely to be the last trigger to runaway climate change. People who didn't want to listen to the alarmist is now the in charge of finding the solution to our energy scarcity. While wind and solar is mentioned by most they are financially not the best substitute and it's hard to imagine that we make less financially based decissions in a recession. Biofuels is allready causing havoc among the poor, next step I reckon will be expanding coal and nuclear plants. The people supporting these will be as interested in hearing about their problems as they were about oil (the author here seem to allready putting the lids on his ears). Sorry for not being uplifting but I'm getting a bit bored by the predictability of this game right now. At least I can say that I think that the alarmist has overrestimated the impact of peak oil. I don't believe it's a short term struggle to save the civilisation but something that will play out in the political sphere the next 50 years. To be honest, we don't need a lot of this crap and neither will our kids ask for it Also, peak oil is just a too long term scenario for the stock brokers and the economists to understand it.
Electricity-based transportation...
To switch transportation to electricity from oil using wind/solar/nuclear in the US alone would require approximately 4,556,619,120 MWh of electricity/year.
Expressed in terms of wind power; it would mean an extra 577,380 3MW turbines covering an area 55,732 square miles.
Solar would require only 14,058 square miles of panel arrays.
Or increase the current nuclear generating capacity by 5.
Any way you look at it, we should have started to implement these energy options when President Carter put solar hot water heaters on the White House roof. Perhaps nano-solar will swoop in and save the day at the last minute. Until then I'll be weeding my vegetable garden and learning how to raise chickens.
non-conventional oil
Some of the comments talk about alternative energy and how peak oil will push these and nuclear power. We can assume greater use of the tar sands oil, as well as the heavy oils from places like Venezuela's. Of course this has a bigger carbon footprint and the case can be made that exploiting the oil sands is not worth all the water and natural gas required. So this peak oil thing will at least initially create a greater carbon output as these and other high carbon resources such as coal and coal to liquid resources are used. I am sure you all know this.
Reform
We need:
1) A new interstate transportation bill to do for the railroads what Eisenhower did for the highways, solving the capacity problems on freight and enabling passenger rail and good quality bus service to replace everything from single-person car journeys to regional airlines.
2) A national 60mph speed limit to save fuel (for today's overdrive-gear vehicles, 60 is a better match than 55)
3) massive investment in wind, solar, hydro, geothermal and tidal energy to generate the electricity that will be our dominant energy source in the future
4) Incentives for smaller vehicles -- Commercial classification for full-size pickups and SUVs, both in terms of taxation and driver licensing and continued toughening of fuel economy regulations
5) Massive expansion of public transit provision, and a push away from hub-and-spoke transit systems to point-to-point and grid systems so that people can actually make decent connections and get around quickly.
6) a moratorium on new airport development
7) an end to exclusionary zoning such as minimum lot size requirements and single-family restrictions in new house construction
8) incentives and regulations to encourage more energy-efficient housing, both new and existing/renovated housing.
9) infill and greater density in housing development, with measures to protect farmland from urban development and sprawl
10) a huge improvement in provisions for cyclists and walkers.
These are drastic measures, but these are drastic times we live in, and full implementation of these measures would absolutely slash our energy consumption.
Para los hispano parlantes
Podeis visitar mis paginas para despertar a la realidad de este y otros temas:
(You can visit my pages to wake up to truth about this and others...
http://despertaos.blogspot.com
http://worldtv.com/despierta/
http://worldtv.com/crisis_energetica.org/
http://despiertaya.wordpress.com
Gracias (Thanks)
Demand $2 a Gallon Gas
Oil hit a new high of $120 a barrel on May 5, 2008.
The cost of making a barrel of synthetic fuel from coal is estimated to be around $55, including the sizeable infrastructure investments and the labor force necessary to operate the plant.
Petroleum poor Germany fueled WWII with synfuel from coal. It is proven technology.
America is the Saudi Arabia of coal with 1/3rd of the deposits on planet. We can eliminate dependence on foreign oil.
Reducing America’s trade imbalance, keeps money, technology and jobs here in America.
It is estimated that every billion in trade deficit equals 13,000 American jobs lost. $400 billion for oil last year: do the math.
And we can quit sending those billions to countrys that sponsor terrorism.
Synfuels are cleaner burning than gasoline and carbon sequestration can remove the CO2 hot house gases.
Visit http://governor.mt.gov/hottopics/faqsynthetic.asp
Ethanol from corn is a windfall for farmers but is it good for motorists.
After 4 months Congress is already rethinking. Unintended consequences include higher food costs for wheat, chicken, beef, pork, less grain for export, reduced gas mileage and incompatibility with older cars.
Harness your anger at the pump. Call or write your US Senators and demand a Manhattan Project to create an American synfuel industry within the decade.
If you don’t raise your voice the international companies, lobbyist and politicians will assume you are fat dumb and happy and ready to pay even more.
Call you're US Senators and demand they break ground on America's energy independence.
Kentucky is breaking ground on two synfuel plants within 90 days.
No to "Nukular" and no to Synfuels!
Carbon sequestration is not going to be a working technology for years to come, probably will never apply economically to home and small-building interior space heating, and is will not apply at all to vehicles (untill they all become electric). Most coal mining -- especially the current "mountain top removal" process -- is dirty and potentially devistating to local ecologies and communities (largely in Appalachia where they often can't afford to say "no.").
Nuclear fuel is often found in ores that are far less than 1% usable. The energy to extract usable fuel, by some estimates, puts nuclear at about 30% as carbon intensive as oil for electric production. Even if storage technologies are found to be technically safe, we're still defering the costs of 24/7 security onto the next 1,000 generations (haven't we done enough of that kind of thing already?).
But they bottom line for both of these energy sources is that, just like oil and natural gas, they are finite -- re: non-renewable -- resources (haven't we done enough of THAT kind of thing already?).
We should be focusing heavily on active solar, passive solar, small and large wind, hydro, tidal, wave, geothermal (the real thing AND ground-sourced heat pumps), not on energy sources that produce carbon and/or will run out (whether in 10 years or 200). With a "Manhattan Project"- (or Apollo Moon Landing -- another popular choice) -scale investment of capital and human resources, we could meet most of our energy needs with truly renewable forms of energy, and meet the rest with conservation and efficiency efforts (as a state senator from Delaware put it, "energy conservation is the cleanest, cheapest source there is).
Solar Power is the Future
You folks need to take a closer look at solar. It's already competitive with oil at $200 a barrel and by the end of this year may well be competitive at market price. Solar electric panels, being made of the silicon as are computer chips, are simulating Moore's Law and declining in cost at geometric rates, while oil is only going to get more scarce and thereby more expensive.
As for the argument that solar only works on sunny days -- well, batteries are getting cheaper too. I don't see Middle Eastern oil wars getting any cheaper.
the term is up
Since this country booted Jimmy Carter for wearing a cardigan and being too "gloomy", we've been optimistically focused on the short-term. Guess what? The short-term is over.
"and learning how to raise chickens" You might want to throw in a few lessons on how to shoot a pistol, too.
Peak oil is a myth!
I really hate to break it to all of you doomsayers,but peak oil is a myth.There is billions of barrels of oil in texas alone,but the oil companies have turned down the pumps to almost nothing.How do i know this my family has many oil wells with lots of oil blame exxon and shell for not pumping.There is also enough oil in the colorado shale to run this country for many decades its alot cheaper than $120 oil we're paying now.
Myth or not....
Whether or not "peak oil" is a myth or not, several facts cannot be ignored:
1) Oil will EVENTUALLY run out.
2) Any energy source with a significant carbon output (i.e.-petrouleum) is bad for our environment. Further development and consumption should be avoided.
3) Pumping more oil (likely lowering the price) will only inspire more consumption, NOT conservation.
4) Ethonal is a HOAX! Ethonal gets lower mileage per gallon than gas (around 20% less), has much shorter shelf -life and so is unusuable if it sits in your tank (or the fuel depot / gas station) for too long and uses more energy to produce, so it ultimately has a higher carbon footprint than gasoline. Also, to mortgage our food supply in order to run our cars-STUPID! However, it does represent a HUGE windafll for ADM & Cargill.
5) We cannot continue to trade with nations that support terrorism that threatens our national sucurity.
6) The sun is always shining somewhere. The wind is always blowing somewhere, the Earth will (for at least the next billion year or so) continue to generate heat and the tides are always flowing. None of these sources of energy directly produces carbon.
7) We will more than likely all have to give up our SUVs, outdoor lighting (who does that impress...really?), power tools, 24/7 air conditioning, television & PC use.
8) Governements can never be counted on to act. But WE must.
9) Like it or not, if we do not change our course, life as we have known it will change....dramatically!
Get used to it.
This is what we asked for and are still asking for
That's just my opinion in a few words. Even a child could know that the way we are living can't last forever. We even have a lot of examples from the past: every nation or civilization that thought that the sky was the limit went down sooner or later. That's just a fact and now it looks like it may happen again, but this time it affects the whole world.
And it's not that we haven't been warned by many scientists, geologists, etc... We actualy are still beeing warned more and more these days but we still keep on going. Yes, many people complain that fuel is getting expensive these days. But we still can afford it so why change our way of life? Soon 'driving season' begins again in America and I'm pretty sure every American will put his SUV, pick up or truck out of his garage and start driving around because it's their way of life in those days. When needed they will rather eat some hamburgers less to pay the fuel instead of staying home...
But hey I don't only blame the Amercans. Here in Europe you start to see more and more people driving SUV's and stuff although we are known to be more concerned about the problem...
i may be a bit naive but, what is wrong with increasing domestic drilling to keep our prices reasonable while other fuel alternatives are being ivestigated. i mean everyone talks about stop using oil.....ok, then what there are no other options awaiting us. i'm so sick of watching my bank account disappear witha trip to a gas pump. and all everyone is concerned with is the environment, what about your fellow man. you'd really rather he go broke just paying for gas to get to work and put food on the table. cause, let me tell you with everything being as high as it is you can't afford to do anything else. and that's driving a 4 cyl. stick maybe 10 miles a day. so, where's the love and not to mention loyalty
CERN
This summer they are turning on the Hadron collider at Cern. Maybe a new form of energy will be found. With science there is hope.
The BIG Picture
This has been interesting reading. A lot of good ideas. Some seem really futuristic, but keep in mind the guy that invented the cell phone got the idea from Star Trek. So I am cautiously optimistic.
We can change. No matter what anyone says though, it can't and won't happen overnight.
Two things that have to have a positive effect on gas prices is a stron dollar and winding down the war in Iraq. I beleive both can and will happen after Jan 20 next year.
One big baby step would be making public transit more viable. I still don't understand why I should want to spend more than twice the time to get to where I need to go just to be green and save some gas/dollars. The US will turn Iraq over to the Iraqis eventually-hopefully sooner than later, and we will have a strong dollar again. It just won't happen right now
What if we could almost eliminate regional city-to-city air and car traffic with bullet trains?
What if we could diversify, over time, our power resources?
What if we could hold our elected officials as accountable for their energy policies as much as we care about things like economic, crime, education, etc.
What if we could keep an open mind about what might work and trying it instead of being argumentative bean counters?
Just a few thoughts.
By the yard--it's hard.
By the inch--it's a cinch.
CERN / Biking
I used to bike, until I got run over by a car. It is not safe. I also can't get to work on time, and don't want to be at work all sweaty and nasty. The 5 hours of commute, sweaty smelly get run over feeling of riding a bike just won't cut it. I will concede that a simple electric scooter running of solar power with a 80 mile range would be able to resolve that issue. As for CERN, maybe they will, maybe they won't. We live in one Galaxy out of Quadrillions (I know its at billions right now, but who knows). There are stars bigger than our solar system with enough energy to power this planet for a quadrillion trillion billion years with everyone driving semi's. Energy is not a problem in this universe of ours it is "usable" "obtainable" "portable" energy. The real way to resolve our problems without lowering quality of life or being extreme are the following.
1. Tidal Power
2. Solar Power
3. Algae Biodiesel (Trucks must roll)
4. Nuclear
5. Wind
6. Hydroelectric
7. Geothermal
8. Power Generating satalites beaming us power via microwaves (maybe)
9. Solar Stirling (heat engine)
10. New drilling and discovery / coal usage to keep this ship affloat in the meantime
11. Acknowledgment that population control = increase quality of life, more energy per person, more land per person, more air per person, etc.
12. Solient Green is People (Think about it, watch the movie. )
trotting out tired arguments about biking
Realist of UT trots out the same old tired arguments about why riding a bike to work is not realistic. Dude, you slam riding a bike as dangerous (run over by car) but then suggest a scooter? Crash statistics show that while cycling is not far off walking in injuries per km., motor scooters/cycles are 8x higher risk than cycling. Given adequate training on how to ride in traffic, the vast majority of people, any age, could ride for a lifetime and not get hit by a car. Put someone on a bike in traffic with no training and I agree with you, Mr. Realist. The UK and now NZ have level 1,2,3 cycle skills training programmes for children and adults that are very effective in minimising risk. Sweaty? Either slow down, be patient (you will get fitter, rapidly!) or wear appropriate clothes and change at work. No locker room at work? Petition the employer. It really isn't hard, but you have to be willing to make a lifestyle change.
And I still have a car for high value trips
PS. while I ride a bike most of the time, even picking up groceries with the capacious panniers, I DO have a sweet Alfa Romeo for those trips where the bike isn't practical. But my fuel costs are very minimal compared to most of my neighbours. I fill the tank ($80) about once every 3 weeks thanks to cycling. Being outside the metal and glass box that is the office and the car and humming along on two wheels is awakening and refreshing...I get to see the stars, feel the wind and yes even the rain on my face. Don't like a challenge? Harden up.
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Nuclear
Why in the world would $200 a barrel oil create opposition to nuclear power?
May 07, 2008 14:38:45 PM [permalink] [report comment]