Blunderov
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"We think in generalities, we live in details"
  
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$225 Per Barrel Oil Seen By 2012
« on: 2008-04-29 13:06:29 » |
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[Blunderov] Johannesburg can sometimes be a charmingly anachronistic city; the sight of fresh horse droppings on a busy city street is perhaps something that most modern urban dwellers do not usually see in the normal course of their busy lives. The race is, after all, one that is run by rats rather than equines. The source of these droppings is an enterprising outfit that disposes of garden refuse by means of horse and cart instead of motorised transport. The business appears to be gaining ground. I'm seeing more carts, sometimes with one horse, sometimes with two. I'm seeing lots more droppings too. Apparently the invisible hand is at work in a good way for once.
At first I had my doubts I admit. I was sorry for the horses. I questioned the propriety of horse drawn traffic in a modern metropolis. As a sometimes cyclist I also questioned the desirability of the presence of copious amounts of horse shit on my normal routes and byways. But all things considered it seems best that these skills are kept alive. It seems we may all need them soon.
http://www.futurepundit.com/archives/005159.html
April 24, 2008
$225 Per Barrel Oil Seen By 2012
Jeff Rubin of investment and merchant bank CIBC World Markets says a continuing world oil production plateau combined with growth in demand will double the price of oil in the next 4 years. Ouch.
Increasingly tight oil supplies will continue to push the price of oil higher with the cost of crude hitting US$150 a barrel by 2010 and soaring to US$225 a barrel by 2012, forecasts a new energy report from CIBC World Markets.
This will result in skyrocketing consumer gas prices in the U.S. with the national average price easily topping $4.00 this summer, reaching $5.50 in the summer of 2010 and hitting close to $7.00 by 2012.
Mexico has joined the list of states with declining oil production and Russia may soon. I think Rubin might be optimistic to see a world oil production plateau lasting all the way to 2012.
Rubin claims that the International Energy Agency has been overstating the production of oil because they've counted natural gas liquids that are not useful for all the purposes (e.g. making gasoline) that regular oil gets used for.
The report finds that current oil production estimates produced by the International Energy Agency (IEA) overstate supply by about nine per cent since it counts natural gas liquids in its numbers. The report notes that natural gas liquids, while valuable hydrocarbons, are not a viable substitute for oil and cannot be economically used as a feedstock for gasoline, diesel or jet fuel.
"While natural gas liquids only account for 10 per cent of total supply, they account for virtually all of the increase in petroleum liquids production since 2005," says Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets. "Stripping out natural gas liquids, oil production has not grown for over two years, which certainly goes a long way to explaining why oil prices have doubled over that period.
Oil consumption in the developed nations will decline due to increased competition coming from developing nations. A smaller fraction of the limited supplies will flow to the US, European countries, and other OECD members.
The report also notes that while production increases are at a virtual standstill, global demand continues to grow. While higher prices and a weak economy have seen demand drop in the U.S. - as it has in other OECD nations - this has been more than offset by demand growth outside the OECD.
"Car purchases in Russia, for example, are exploding as U.S. sales stagnate," says Mr. Rubin. "While in India the advent of the TATA, a car that will sell for as little as US$2,500, will allow millions of households in the developing world to own automobiles when they otherwise could not. Millions of new households will suddenly have straws to start sucking at the world's rapidly shrinking oil reserves."
I agree with Rubin's analysis unfortunately. Also, I do not see development of substitutes happening fast enough. So the 2010s look to be a period of declining living standards in Western countries. We'll eventually turn the corner as new energy and materials technologies mature. But the transition period will impose hardships on many. My advice: Buy a hybrid or diesel or very small gasoline car or a combination thereof. Also, choose jobs and residence addresses to minimize the need to travel. Also, try walking and bicycling. Most of all, mentally prepare yourself for the need to restructure your life as oil prices keep going up.
US oil consumption probably has already peaked. More new cars in other countries mean fewer miles traveled in the United States.
"In order to accommodate more drivers on the road in Russia, China and India, there must be fewer drivers in the U.S. and the rest of the OECD. And so there will be. U.S. oil consumption is likely to fall by over two million barrels a day over the next five years as retail gasoline prices rise from their current US$3.60 a gallon mark to almost US$7 a gallon.
Here is the full report (PDF).
By Randall Parker at 2008 April 24 11:04 PM Energy Fossil Fuels
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