[Winstonm]

Here is an interesting observation from James Howard Kunstler:

Quote

Me, I'm keeping my eye on things like the production figures coming out of Mexico, the North Sea, and the Kingdom of Saudi Arabia. They're all sliding down. Mexico is especially interesting because it is our Number 3 source of oil imports and its production is crashing so hard that a couple of years from now it may not be able to send us a single drop of oil. What do you think of that? Maybe the Walton family will buy Iowa so they can keep Wal-Mart running on ethanol.

Currently there are approximately 84 million barrels of oil per day moving throughout the world - what would happen if that were reduced by 20%? How long do we have until demand outstrips supplies or supplies cannot sustain demand?

Currently U.S. oil refineries are running at 90% production capacity and with all the gigantic oil profits no capex is being placed into upgrading these structures or into new refinereis. It wouldn't take much to create a crippling blow to U.S. refinery capacities.

What then?

[Cascade]

The price goes up.

[Winstonm]

Cascade, on May 9 2007, 09:27 PM, said:

The price goes up.

Up, as in hyperinflation? Or up as in organized upward spike? What about the economy - does it go up, too?

[Gerben42]

Quote

Up, as in hyperinflation? Or up as in organized upward spike? What about the economy - does it go up, too?

No the price will just go up to the point where people start buying less of it. At the moment people just complain but still drive their car and leave on the lights as if it were for free.

BTW what are you panicky about? No point panicking about something you cannot control in the first place. Besides what does "the" economy do for you? If you are at the moment using less energy than your peers (as you should), you will be better off when prices rise.

[pbleighton]

Oil prices caused the 70s to be a poor decade for economic growth and inflation. It's possible that they could do the same again. I think the most likely scenario is a wide Middle East conflict, made vastly more probabale by the invasion of Iraq.

If we can dodge that bullet, we are still faced with falling off an oil cliff at some point, but that's probably 30-50 years in the future, and hopefully the world economy will react to the price signals, and make the necessary changes in energy practices.

We should be doing that now, but it appears that we are a very stupid and shortsighted species....

Peter

[helene_t]

I'm not too worried about the economy. Gazoline is four times as expensive in Europe as in the U.S. and still not high enough to have severe impact on the economy. As for house heating the story may be somewhat different. On the other hand, house heating relies on low quality energy sources, so there are more alternatives. If my heating bill triples I'll seriously consider investing in solar boilers, a heat pump, a house with a different room allocation so that I don't have to heat a large living room for me alone when I don't have visitors, etc.

I'm more worried about the political consequences of Middle East oil getting a near monopoly as the rest of the World's resources get depleted.

[mike777]

As oil and all those other natural resources go up 1000% we will finally notice all that free/cheap oil, oil shale, oilsands etc. and free/cheap refinery country sitting only a few miles away in Canada.
Forget the middle east, go North young man!

As all our resouces run out, I guess that means human brain power as a "natural resource" also, we can only hope AI can save us I guess. Can the oil last until 2050?

[FrancesHinden]

Winstonm, on May 10 2007, 03:09 AM, said:

Currently U.S. oil refineries are running at 90% production capacity and with all the gigantic oil profits no capex is being placed into upgrading these structures or into new refinereis.

That isn't true.

p.s. refineries are always run at 95%+ capacity or stopped; they have basically zero variable cost so it's never worthwhile running one at anything less than full tilt.

[Winstonm]

helene_t, on May 10 2007, 09:35 AM, said:

I'm not too worried about the economy. Gazoline is four times as expensive in Europe as in the U.S. and still not high enough to have severe impact on the economy. As for house heating the story may be somewhat different. On the other hand, house heating relies on low quality energy sources, so there are more alternatives. If my heating bill triples I'll seriously consider investing in solar boilers, a heat pump, a house with a different room allocation so that I don't have to heat a large living room for me alone when I don't have visitors, etc.

I'm more worried about the political consequences of Middle East oil getting a near monopoly as the rest of the World's resources get depleted.

We are not talking about price, here, but of lack of product. Obviously, when supplies dwindle price goes up - supply and demand.

But what happens when actual demand exceeds production capacity? What would happen, other than a leap in oil prices, if the world could only be furnished with 20% of current demand?

[Winstonm]

mike777, on May 10 2007, 11:27 AM, said:

As oil and all those other natural resources go up 1000% we will finally notice all that free/cheap oil, oil shale, oilsands etc. and free/cheap refinery country sitting only a few miles away in Canada.
Forget the middle east, go North young man!

As all our resouces run out, I guess that means human brain power as a "natural resource" also, we can only hope AI can save us I guess. Can the oil last until 2050?

Makes one wonder what the consequences might be from an inability to supply the demand.

[Gerben42]

I think if prices go up enough, demand WILL be met. Even if the oil has to be shipped in from Mars.

[Al_U_Card]

Apparently, the crossover point where demand outstrips supply was to occur in 2012 or so with the eventual exhaustion coming sometime between 2050 and 2100. There is some question as to the "veracity" of the "proven" reserves etc. as revealed by the big oil companies.

Car emissions came down in California due to legislation more than from public pressure or market forces or special interests.....we have to take action soon....

[mike777]

Winstonm, on May 10 2007, 01:57 PM, said:

mike777, on May 10 2007, 11:27 AM, said:

As oil and all those other natural resources go up 1000% we will finally notice all that free/cheap oil, oil shale, oilsands etc. and free/cheap refinery country sitting only a few miles away in Canada.
Forget the middle east, go North young man!

As all our resouces run out, I guess that means human brain power as a "natural resource" also, we can only hope AI can save us I guess. Can the oil last until 2050?

Makes one wonder what the consequences might be from an inability to supply the demand.

Winston this is the function price serves. Of course if the Government as in the seventies controls the price you got a huge problem. Otherwise price throttles back demand for old fashion oil and in fact pushes the demand for old fashion fossil oil to alternatives. Running out of oil fast is a good thing, not a bad thing. We should use more old fashion fossil fuel oil, faster, much faster. We should push incentives to use more oil faster, not slower which drags supplies out longer.

These government mandated programs to make the oil last longer or to discourage fossil fuel usage is exactly the opposite of what government should do.

[jtfanclub]

Winstonm, on May 10 2007, 01:54 PM, said:

But what happens when actual demand exceeds production capacity?

China has infinite oil demand.

I'm serious. If there's excess oil, anywhere, China will buy it. We could quadruple production today and the Chinese would suck it up. I'm not sure what they're doing with it (creating their own Strategic Petroleum Reserve, I'd guess. Maybe they're just doing it for the profit).

I also don't buy that actual demand will exceed capacity for some time. There are giant untapped fields everywhere, being held back either because they're unprofitable at this oil price (like Pennsylvania) or for environmental reasons (like the Gulf of Mexico and Alaska). Should the price get too high, we'll start using those.

Besides, 20 years ago, we were running out of oil. Then we discovered that Mexico and Venezuela had big oil reserves. It wouldn't shock me at all if we discovered huge oil reserves in, say, East Africa, or or off the West coast of India.

40 years from now, when the easy-to-get portion of the Saudi oil reserves run out? I have no idea. In 40 years, we may have switched fuels and fertilizers and we won't care. It's too far in the future and the technology is moving too fast for us to tell.

But China will be screwed.

[Al_U_Card]

Yes, of course, that's it! Think of the extra billions that would fill the coffers of the oil companies.....

Be serious. A limited resource that tracks a price unrelated to cost but only demand (cheap oil is still cheap but oilsand oil is aroung $40 a bbl to produce).

If all oil profits were obliged to go 50% into new source and supply development (solar, fuel cell, hell, fusion power, why not?!) the only difficulty would be having to keep the oil companies from "mysteriously" having MUCH smaller profits to declare in order to reduce the amount of investment they would have to make.....lets see, building refineries....that would free up supply....and reduce profit....snakes and oil.....sounds like a snake oil salesman to me....

[mike777]

"Yes, of course, that's it! Think of the extra billions that would fill the coffers of the oil companies....."

Yes and fills the pockets of all those Canadians, Brits, Ausies and Hollanders who own the companies directly or through some kind of pension/retirement account.

If we can just make those guys save energy and send those profits to me it can help us poor Americans.

Just look how much those guys own of Oil stocks in their retirement accounts.
Just who owns BP and Shell and Repsol and those chinese/russian/indian oil companies. Who owns/controls all those oil fields, shale fields, tar sands etc up in Canada?

We need to start telling all these retired and future retired folks to stop being so selfish.

[helene_t]

Winstonm, on May 10 2007, 08:54 PM, said:

We are not talking about price, here, but of lack of product. Obviously, when supplies dwindle price goes up - supply and demand.

But what happens when actual demand exceeds production capacity? What would happen, other than a leap in oil prices, if the world could only be furnished with 20% of current demand?

On a market, demand will always equal supply. What you feel as a consumer (or even as a country, except that I don't believe countries have feelings) is that prices go up.

If production decreases by 20%, prices will rice enough to make the World's consumers as a whole reduce their demand by 20%. That doesn't mean that you or I have to use 20% less. It doesn't even mean that the Dutch or the U.S. population as a whole has to use 20% less. Some will choose to reduce demand by more than 20%, some will reduce their demand less or even not to reduce it at all.

My guess is that U.S., Canada and Australia will reduce demand the most since they have the most excessive consumption at present. Zimbabwe and Bangladesh may also save more than 20% since they cannot afford the higher prices. China will probably continue to expand their demand even in the face of rising prices, albeit less than they would have if prices had been stable.

[Winstonm]

helene_t, on May 10 2007, 04:19 PM, said:

Winstonm, on May 10 2007, 08:54 PM, said:

We are not talking about price, here, but of lack of product.  Obviously, when supplies dwindle price goes up - supply and demand.

But what happens when actual demand exceeds production capacity?  What would happen, other than a leap in oil prices, if the world could only be furnished with 20% of current demand?

On a market, demand will always equal supply. What you feel as a consumer (or even as a country, except that I don't believe countries have feelings) is that prices go up.

If production decreases by 20%, prices will rice enough to make the World's consumers as a whole reduce their demand by 20%. That doesn't mean that you or I have to use 20% less. It doesn't even mean that the Dutch or the U.S. population as a whole has to use 20% less. Some will choose to reduce demand by more than 20%, some will reduce their demand less or even not to reduce it at all.

My guess is that U.S., Canada and Australia will reduce demand the most since they have the most excessive consumption at present. Zimbabwe and Bangladesh may also save more than 20% since they cannot afford the higher prices. China will probably continue to expand their demand even in the face of rising prices, albeit less than they would have if prices had been stable.

This is exactly the point - it is economics, the law of supply and demand.

As supply dwindles but demand remains constant, prices rise; in order to reduce further rise while supplies dwindle further, demand must reduce.

Current production is estimated worldwide at 84M barrels a day - but suppose that the total could only be 64M maximum - who is willing to voluntarily cut demand in order to stabilize the markets? The ones who cannot afford the higher prices.

It would cause a reinvention of the U.S. culture - a shock not easily absorbed nor to which there would be quick adaption.

Which companies that make plastics will voluntarily close their doors because there isn't enough oil for all plastic makers - what would the further lack of competition do to plastic products?

How much of available national supply would the government get to support their wars?

The list is virtually limitless as to the ramifications and it is mindboggling if you really think of all the ripples.

[mike777]

"It would cause a reinvention of the U.S. culture - a shock not easily absorbed nor to which there would be quick adaption."

Yes we will undergo a reinvention of our economy. Yes our culture will continue to change as it has for 200 years.

Keep in mind 40 years ago, African Americans in many parts of the country could not stay in many hotels or eat in restaurants. Ten/twelve years almost all of us never used the internet.

look at the shortage of buggy whips, horseshoes etc.

[mike777]

Winston keep in mind the term "Creative Destruction"

Baring all of us getting killed by nukes or germwarfare the World econonmy can take huge hits and bounce back fast. Keep in mind, 2 nukes were dropped on Japan. Germany was destroyed. Yet in one or two generations, 20-40 years I would say they bounced back. In fact can we agree they bounced back alot faster than that?

What do you fear with all this oil talk really? Do you expect you and your family to be back in caves and without fire or the wheel?