With Oil Prices Poised To Jump As Much As 70%

[nickd]

http://www.lowtechmagazine.com/2007/09/sailing-ship-re.html

Interesting!

[dr ray]

Yes oil will jump 70% or more but that assumes we come out the depresion which won't be easy with taxes going balistic and oil prices going up.

I don't pretend to have a crystal ball but the masses will not stand for the price of oil being fiddled by traders again and that in itself will keep a cap on things and if BP makes a massive profit then goverment will tax them more to help pay off the dedt we now owe due to the banksters.

Does anyone know the price of silver today !

Yep. This is the big risk in investing in oil shares in the UK.

If they tank you've lost your money. If they prosper the government mug you and steal your income. Labour have done it before and came very close last year.

[nickd]

All good points.

Except that 6 billion + humans have not been on the planet for many centuries with a fraction of the oil consumption. Yes humankind will survive without oil. Just not all 6 billion of us.

What about the argument, that 6 billion+ humans can ONLY survive if we cut oil dependency?

We don't need to consume all this cr*p, we don't need to have just-in-time delivery from giant warehouses, of fruit and veg that has already sat around in refridgerators for months after being shipped from the southern hemisphere. Just eat whats in season, or perhaps potatoes and apples that your local farmer kept wrapped up in a barn for a few months.

People don't need a 15-hr flight to go on holiday, or to drive a 4x4. It doesn't even make them happier. A lot of it is keepig up with the Joneses.

It really bemuses me people talking about peak oil, when our consumption is dramatically more than it needs to be, is hugely wasteful, and most of us would just have to make adjustments rather than feel any hardship if we cut our use of oil.

People are talking about something running out, which they could easily stop using as much of.

[Confounded]

Actually, I would more or less agree with this analysis.

In terms of where the price of oil will be in five years, my view is that it will either be at historical highs or be well on the way to them. In other words, there is only one way for the price of oil to go over the coming decade.

However, right-here-and-now, the economic environment is so volatile that the short-term price could swing wildly in either direction.

Anyone investing in oil will need to have a strong stomach and nerves of steel, have as little leverage as possible (unless they have a bottomless pit of capital and can set their stops low enough), and be prepared to play the long-game.

If they can play the long game, then this will be the biggest one-way bet in history.

Unless we get a global conflict along the way, in which case all bets are off.....

I am in that camp at the moment but as I slipped from the hyperinflation camp to be on the fence I may revise this in a years time, I think this time next year will make things quite a bit clearer. I am afraid I am not brave enough to put my stake in the ground, even knowing the importance of oil and the supply destruction that has been going on. If we slip into a deflationary spiral (where we would naturally be going) it may even limit the supply destruction effects 5 years from now. Any attempt to "get back to normal" and we will have $150 + oil. Someone has to make the decisions (or be forced to by the markets), bust the bond markets and have high interest rates and a flight to commodities coupled with massive inflation leading to and even bigger mess or take it on the chin and go through a massive restructuring of our workforce and economies with the accompanied reducing of the west standard of living.

[youthoftoday]

What about the argument, that 6 billion+ humans can ONLY survive if we cut oil dependency?

We don't need to consume all this cr*p, we don't need to have just-in-time delivery from giant warehouses, of fruit and veg that has already sat around in refridgerators for months after being shipped from the southern hemisphere. Just eat whats in season, or perhaps potatoes and apples that your local farmer kept wrapped up in a barn for a few months.

People don't need a 15-hr flight to go on holiday, or to drive a 4x4. It doesn't even make them happier. A lot of it is keepig up with the Joneses.

It really bemuses me people talking about peak oil, when our consumption is dramatically more than it needs to be, is hugely wasteful, and most of us would just have to make adjustments rather than feel any hardship if we cut our use of oil.

People are talking about something running out, which they could easily stop using as much of.

True. We can drastically cut our consumption. I know I can reduce my petrol usage from 400 gallons per annum to less than 100 if needed. To do this I would have to cycle to work / work from home and take no holidays. The remaining 100 gallons are currently used to do the school run (often with 4-5 children), shopping, visiting relatives and so on. Even this level of consumption could be cut by walking / cycling more. To be honest, I'd love to do it.

It's the food production side of things where the difficulties arise. A barrel of oil contains energy equivalent to 5 labourers working 10 hour days for a year. If we are to survive without oil then a lot of people will have to go back to being peasant farmers. Are you up for that?

[Guest Steve Cook]

Here is a more balanced outlook for oil prices.

http://321energy.com/editorials/bibbings/bibbings052109.html

Slightly bullish immediate term - next few weeks (US summer driving season) Upper $60's.

Bearish short term - autumn (Economic realities) $40 - $55

Bearish medium term - 1 year (Demand destruction) $25

Bullish long term 2-3 years (economic recovery, resource depletion and capacity constraint) $100

These seem to me to be very plausible predictions

[nickd]

True. We can drastically cut our consumption. I know I can reduce my petrol usage from 400 gallons per annum to less than 100 if needed. To do this I would have to cycle to work / work from home and take no holidays. The remaining 100 gallons are currently used to do the school run (often with 4-5 children), shopping, visiting relatives and so on. Even this level of consumption could be cut by walking / cycling more. To be honest, I'd love to do it.

It's the food production side of things where the difficulties arise. A barrel of oil contains energy equivalent to 5 labourers working 10 hour days for a year. If we are to survive without oil then a lot of people will have to go back to being peasant farmers. Are you up for that?

I'm not arguing against using oil at all, or against mechanised farming. Just against the unnecessary movement of goods and people, which would cut oil consumption drastically.

Here's a challenge - can you get your kids to school and go shopping without a car? If you can't shop without a car where you live, I'd argue thats because of out-of-town supermarkets wiping out local shops, government lack of regulation (e.g allowing obscenely large stores and car parks), and people perpetuating it by participating in driving to their local supermarket (which to be fair a lot of them now have little alternative to). As for getting to school, everyone knows how empty the roads are in school holidays. A sensible government might do something to improve the economy by funding better ways for kids to get to school not in their parents car.

There are many places in the UK where you can do 90% of your shopping on foot, and much of the rest by bus with the occasional shop delivery of furniture for example. I do. A decent family holiday can be done travelling by train, although its harder with small kids. Ditto visiting geographically distant relatives.

Going back on topic. This site has a large contingent of people who hope for a house price crash to get their first home, upgrade to a decent size one or whatever. For many people motoring is either number 2, or sometimes number 1, total yearly expense on their household balance sheet, which IMHO is lunacy.The best thing one can do financially other than earning more money or hoping for a house price crash, is live without a car and save the difference towards one's next (/first) home.

[Guest Steve Cook]

I am in that camp at the moment but as I slipped from the hyperinflation camp to be on the fence I may revise this in a years time, I think this time next year will make things quite a bit clearer. I am afraid I am not brave enough to put my stake in the ground, even knowing the importance of oil and the supply destruction that has been going on. If we slip into a deflationary spiral (where we would naturally be going) it may even limit the supply destruction effects 5 years from now. Any attempt to "get back to normal" and we will have $150 + oil. Someone has to make the decisions (or be forced to by the markets), bust the bond markets and have high interest rates and a flight to commodities coupled with massive inflation leading to and even bigger mess or take it on the chin and go through a massive restructuring of our workforce and economies with the accompanied reducing of the west standard of living.

This is exactly where I stand on this.

Unfortunately, our governments don't seem to be willing to tell us that we are going to need to take it on the chin. Probably because the vast majority of us couldn't handle that truth.

Maybe we just get the politicians we (or at least the majority of us) deserve

Edited May 22, 2009 by Steve Cook

[aliveandkicking]

If the current economic doom and gloom continues governments might have to come up with novel ways of burying the oil underground in difficult to access place - for example under deep water - in order to stimulate economic activity in the down turn, and then issue licences to people to get access to recover the oil in the future.

[dr ray]

True. We can drastically cut our consumption. I know I can reduce my petrol usage from 400 gallons per annum to less than 100 if needed. To do this I would have to cycle to work / work from home and take no holidays. The remaining 100 gallons are currently used to do the school run (often with 4-5 children), shopping, visiting relatives and so on. Even this level of consumption could be cut by walking / cycling more. To be honest, I'd love to do it.

It's the food production side of things where the difficulties arise. A barrel of oil contains energy equivalent to 5 labourers working 10 hour days for a year. If we are to survive without oil then a lot of people will have to go back to being peasant farmers. Are you up for that?

I've heard this quote and ones like it before. Also I sometimes make a return trip by car right across the UK with 5 people in the car and all the stuff we need to carry for around £50 and it just reminds me how mind boggling cheap oil is and would be even at 10 x the price.

At 10 x the price there would be gradual social changes such as getting shopping delivered and living close to work. The real demand for oil is when the billions of people in India and China want (or can afford) at least a fraction of the oil we use to improve their own lives

[Miss Madam]

Going back on topic. This site has a large contingent of people who hope for a house price crash to get their first home, upgrade to a decent size one or whatever. For many people motoring is either number 2, or sometimes number 1, total yearly expense on their household balance sheet, which IMHO is lunacy.The best thing one can do financially other than earning more money or hoping for a house price crash, is live without a car and save the difference towards one's next (/first) home.

Brilliantly put. This is exactly what I am doing. I don't have a car, hence I'm saving half my monthly salary toward a deposit. A bike and a £40 monthly bus pass do me just fine. And I know lots of people will say 'but I don't live close to where I work / where the Mrs works / where the kids go to school / the shops etc / I live on a yurt on a remote Scottish island without a bus service etc' and I would have to say that despite the wheedling of petrol heads, some choices need to be reexamined for how sustainable they are in the long term. End of. You can live perfectly well without a car I've managed it for 30 years but it does mean limiting where you live into an area of search around work / schools or choosing jobs close to home / schools. And in the light of peak oil, it should be a priority for everyone over the next decade to reduce their commute.

[Bardon]

Its a one way bet up, reduced production, lag time of 3 years for new developments, increasing population, new markets, Jevons paradox, increased price.

One way that you could invest in the hydrocarbon sector is to work in it.

[youthoftoday]

Brilliantly put. This is exactly what I am doing. I don't have a car, hence I'm saving half my monthly salary toward a deposit. A bike and a £40 monthly bus pass do me just fine. And I know lots of people will say 'but I don't live close to where I work / where the Mrs works / where the kids go to school / the shops etc / I live on a yurt on a remote Scottish island without a bus service etc' and I would have to say that despite the wheedling of petrol heads, some choices need to be reexamined for how sustainable they are in the long term. End of. You can live perfectly well without a car I've managed it for 30 years but it does mean limiting where you live into an area of search around work / schools or choosing jobs close to home / schools. And in the light of peak oil, it should be a priority for everyone over the next decade to reduce their commute.

Agreed. I am looking to move house closer to the schools my children go to. Only problem is the premium price houses in that area command. I could also work from home every single day (if only they'd let me!) When the oil price goes sky high again then perhaps they will.

Carwise I've cut expenditure by buying a very efficient car (Citroen C1) which gets 57mpg and costs only £35 road tax.

Edited May 22, 2009 by youthoftoday

[Guest Steve Cook]

I've heard this quote and ones like it before. Also I sometimes make a return trip by car right across the UK with 5 people in the car and all the stuff we need to carry for around £50 and it just reminds me how mind boggling cheap oil is and would be even at 10 x the price.

At 10 x the price there would be gradual social changes such as getting shopping delivered and living close to work. The real demand for oil is when the billions of people in India and China want (or can afford) at least a fraction of the oil we use to improve their own lives

1 barrel of oil, in human energy terms is equivalent to 23,200 man hours of labour

http://www.lifeaftertheoilcrash.net/Research.html

We currently consume in excess of 80,000,000 barrels of crude oil per day

http://www.bloomberg.com/apps/news?pid=20601207&sid=aiSucgXE2muM&refer=energy

A very simple calculation tells us that the total number of virtual (crude oil) human slaves working 24 hours a day in the service of our industrial civilisation is:

77,333,333,333.3 (seventy seven billion, three hundred and thirty three million, three hundred and thirty three thousand, three hundred and thirty three)

Or, looking at it from another angle.

1 human is worth 0.1 horses in terms of power output. Thus, the above figure can be turned into horsepower. Which gives us the requisite number of horses (also working 24 hours per day) required as a substitute to oil:

7,733,333,333.3 (seven billion, seven hundred and thirty three million, three hundred and thirty three thousand, three hundred and thirty three)

Or, to put it another way, each and every human on the planet (based on a population of 7 billion) has, on average, in excess of the equivalent of 11 human slaves working 24 hours a day for them.

When the oil runs low, we're f*cked.

It's that simple.

Edited May 22, 2009 by Steve Cook

[gimble]

True. We can drastically cut our consumption. I know I can reduce my petrol usage from 400 gallons per annum to less than 100 if needed. To do this I would have to cycle to work / work from home and take no holidays. The remaining 100 gallons are currently used to do the school run (often with 4-5 children), shopping, visiting relatives and so on. Even this level of consumption could be cut by walking / cycling more. To be honest, I'd love to do it.

It's the food production side of things where the difficulties arise. A barrel of oil contains energy equivalent to 5 labourers working 10 hour days for a year. If we are to survive without oil then a lot of people will have to go back to being peasant farmers. Are you up for that?

A quick scanning of this table tells me that the agricultural sector accounts for only a tiny fraction (<2%) of the UK's total energy consumption. In other words, if peak oil does hit us in the chops we should still have enough fuel to run our tractors and fertiliser factories for a long long time, we'll just have to stop all the discretionary activities as nickd says, like flying and driving to the shops. You could argue that this is already happening - agricultural production has actually grown slightly over the last year, whereas air travel for example has fallen 10%. We're slowly reprioritising our resources via the mechanism of a big bad recession.

[bagsos]

Brilliantly put. This is exactly what I am doing. I don't have a car, hence I'm saving half my monthly salary toward a deposit. A bike and a £40 monthly bus pass do me just fine. And I know lots of people will say 'but I don't live close to where I work / where the Mrs works / where the kids go to school / the shops etc / I live on a yurt on a remote Scottish island without a bus service etc' and I would have to say that despite the wheedling of petrol heads, some choices need to be reexamined for how sustainable they are in the long term. End of. You can live perfectly well without a car I've managed it for 30 years but it does mean limiting where you live into an area of search around work / schools or choosing jobs close to home / schools. And in the light of peak oil, it should be a priority for everyone over the next decade to reduce their commute.

Half their income on a car? Madness.

Another way - buy something old and cheap and keep it for a long time. Our car - £1500, owned for 6 years, will keep for another 5-10 before scrapping. So depreciation £150 p.a. 5000 miles a year mostly at weekends, so £600/year in petrol plus £150 in road tax and £50 on a street parking permit, and usually £200 on repairs. Total running costs £1150, or 23p/mile. Cheaper and more convenient than any public transport (in London anyway).

[Confounded]

Its a one way bet up, reduced production, lag time of 3 years for new developments, increasing population, new markets, Jevons paradox, increased price.

One way that you could invest in the hydrocarbon sector is to work in it.

Your missing some of the more nasty scenarios in your big picture view. Straight line interpolations is what frustrated me in my previous jobs. Extrapolations of credit bubble sales volumes into the future was insane. Same with population, we have too many people on this planet and it is not a given that we will keep growing at this rate. We may get an event that not only stops this growth but also reverses this trend.

However what you are predicting will ultimately lead to the correction if this is not it now. Agriculture is hugely dependant on oil and high oil prices mean high food prices and we got a taste of that is the last year where unfortunately the poor felt the brunt of it. The last oil spike was a taster, if we get the big one (which I am not saying we wont) then people will starve on a scale never seen before. If we get the deflationary spiral possible as a result of the World financial crisis then this will also have it impact on the poor in an unfair and negative way.

I am not saying that these population event are a given, but we face immense challenges ahead with the current population level let alone one that is increasing.

[InternationalRockSuperstar]

It's not just the debased nominal value of an inflated dollar supply that will push the price up, though I agree that this will play a significant part.

the Reichmark finished up being a trillionth of its original value.

the destruction of the dollar will be THE major part of rising oil prices.

if you'd titled this thread "With Oil Values Poised To Jump As Much As 70%", then that would be more worrying.

edit gram

Edited May 22, 2009 by InternationalRockSuperstar

[youthoftoday]

The last oil spike was a taster, if we get the big one (which I am not saying we wont) then people will starve on a scale never seen before. If we get the deflationary spiral possible as a result of the World financial crisis then this will also have it impact on the poor in an unfair and negative way.

The incredible and increasing complexity of our society is a very dangerous thing if we get the big one. In a feudal society, lose a peasant and it's not a big deal - one less producer but also one less consumer. In our society losing a farmer, scientist, engineer etc and the consequences are a bit more severe.

[nickd]

Agreed. I am looking to move house closer to the schools my children go to. Only problem is the premium price houses in that area command. I could also work from home every single day (if only they'd let me!) When the oil price goes sky high again then perhaps they will.

Maybe that would be good for your kids too as they'd be nearer their friends?

Thats an important point about the premium housing price. Often an area with better public transport has higher house prices. The question is, what's the disparity? If you read posts on here by Dr Bubb he reckons being close to public transport will command a gradually higher premium as oil gets scarcer, which makes sense to me.

Maybe you should calculate your fuel costs etc, versus extra mortgage costs for living where you really want to?

The wife and I hope one day to upgrade to a family size home. Where we live now, we're on several bus routes, with 20-25 mins journey into town, and train station and many shops walkable including cheap local greengrocers.

A family home can be got for 20-30% cheaper in various different areas than what we'd have to pay here. But that would mean being on less bus routes, with longer journey times and/or higher fares, maybe not walkable to trains and even if so, maybe less trains stop there per day or fares are higher, and/or , some areas only shop is Tesco Extra, again, maybe not walkable.

Overall, we're not convinced we'd save anything by buying a cheaper house elsewhere.

A bigger mortgage may be less financial risk than committing ourselves to pretty much requiring a car.

At the moment I'm actually surpised the disparity in house price isn't more. However, this area is quite sought after and may ultimately fall more slowly than others. (so far, surprising to me, they all seem to be falling at the same rate)

I guess my argument is, everyone, and particularly those who have to stretch to buy a house, should compromise on car ownership first.

I'm glad not everyone thinks like this or they'd all want to live where I want to live.

[R K]

We've been here a couple of hundred thousand years perhaps.

A few decades of industrialisation, which still hasn't even hit most of the world's population, is hardly the norm.

We're not f*cked at all. We just won't be industrialised for ever. We're all dying anyway, it's hardly news.

[Guest Steve Cook]

We've been here a couple of hundred thousand years perhaps.

A few decades of industrialisation, which still hasn't even hit most of the world's population, is hardly the norm.

We're not f*cked at all. We just won't be industrialised for ever. We're all dying anyway, it's hardly news.

Most of the world's population (in terms of population size) were not here prior to the widespread industrial use of hydrocarbons). So, in truth, either directly or indirectly, hydrocarbon based industrialisation has indeed "hit" the majority of the worlds population when compared to the population size that could be supported prior to that industrialisation

Please take a look at the numbers from my previous post and have along hard think about them. I am more than happy to have those numbers questioned.

1 barrel of oil, in human energy terms is equivalent to 23,200 man hours of labour

http://www.lifeaftertheoilcrash.net/Research.html

We currently consume in excess of 80,000,000 barrels of crude oil per day

http://www.bloomberg.com/apps/news?pid=20601207&sid=aiSucgXE2muM&refer=energy

A very simple calculation tells us that the total number of virtual (crude oil) human slaves working 24 hours a day in the service of our industrial civilisation is:

77,333,333,333.3 (seventy seven billion, three hundred and thirty three million, three hundred and thirty three thousand, three hundred and thirty three)

Or, looking at it from another angle.

1 human is worth 0.1 horses in terms of power output. Thus, the above figure can be turned into horsepower. Which gives us the requisite number of horses (also working 24 hours per day) required as a substitute to oil:

7,733,333,333.3 (seven billion, seven hundred and thirty three million, three hundred and thirty three thousand, three hundred and thirty three)

Or, to put it another way, each and every human on the planet (based on a population of 7 billion) has, on average, in excess of the equivalent of 11 human slaves working 24 hours a day for them.

Edited May 22, 2009 by Steve Cook

[R K]

Most of the world's population (in terms of population size) were not here prior to the widespread industrial use of hydrocarbons). So, in truth, either directly or indirectly, hydrocarbon based industrialisation has indeed "hit" the majority of the worlds population when compared to the population that could be supported prior to that industrialisation

Yes but my point was on average we individually only live, well I don't know the average global lifespan, but say somewhere between 40-70 years perhaps. No point at all worrying what happens 100 years from now we'll all be dead. If industrialisation only lasts another 50 years then that's how it is. Who cares if it means that in a couple of generations there are only 500m people left? You ain't gonna change it.

[Methinkshe]

If markets are allowed to operate freely instead of being directed by subsidies (e.g. wind power) then the money will go where ingenuity, technology and enterprise lead, and I have no doubt that alternative energy sources to oil will be found a long before there is a crisis.

However, if governments keep on intervening in the markets, then who knows what such bias will throw up or, more accurately, what potential alternatives will be stifled?

[Guest Steve Cook]

Yes but my point was on average we individually only live, well I don't know the average global lifespan, but say somewhere between 40-70 years perhaps. No point at all worrying what happens 100 years from now we'll all be dead. If industrialisation only lasts another 50 years then that's how it is. Who cares if it means that in a couple of generations there are only 500m people left? You ain't gonna change it.

Dead right, unfortunately

However, what such knowledge does do is perhaps allow individuals to prepare themselves and/or their families to weather the coming century

There will always be winners and losers

Edited May 22, 2009 by Steve Cook