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Economist Blames Downturn On Oil Price

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http://thechronicleherald.ca/NovaScotian/1123674.html

WHEN JEFF RUBIN said that oil was going to $50 a barrel, other economists thought he was on drugs. But it did. They scoffed again when he said it would go beyond $100. It went to $147 before dropping to $50. Don’t be suckered, says Rubin. As the recession ends, oil will go far higher — $200, $400, who knows?

For 20 years, Rubin was chief economist at CIBC World Markets. His newly published book Why Your World Is About To Get a Whole Lot Smaller (Random House, $29.95) rests on a simple argument. Our entire globalized economy depends on cheap oil, but we have already burned most of the easily obtained free-flowing oil. That’s why we’re now spending vast amounts to wring the difficult oil from the deep sea and the tar sands, because that’s all that’s left.

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oils heading down near term methinks

That's because the global economy is heading south. As soon as there's an upturn, the price will go up, which will trigger a downturn . . .

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oils heading down near term methinks

You could be right given the huge quantity that has been stockpiled, medium term though I'd agree with the implication in 1929's post; it's going stratospheric.

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As a Kunstlerite I'll be intrigued to see how this plays out.

I'm of the belief that oil is (was) the big difference between a 19th century lifestyle and a 20th century lifestyle.

If you know how to shoe a horse, prepare to earn a very good living.....

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$200 barrel oil would pretty much shut down this country and put a lot of us back into the dark ages.

Good job then that we are using this cheap oil opportunity to build up a nuclear - renewables alternative ;)

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You could be right given the huge quantity that has been stockpiled, medium term though I'd agree with the implication in 1929's post; it's going stratospheric.

How many millions of barrels are stockpiled at the minute then?

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Good job then that we are using this cheap oil opportunity to build up a nuclear - renewables alternative ;)

You know very well that nuclear isn't going to save the day.

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How many millions of barrels are stockpiled at the minute then?

Here's a site with alot of information on this topic:

http://europe.theoildrum.com/node/5416#more

OECD oil stocks - Industrial inventories of crude oil in the OECD in March 2009 increased to a level of 1021 million barrels from 1009 million barrels in February 2009 according to latest IEA statistics. Total industrial product stocks in the OECD were 1432 million barrels in March 2009, remaining stable from February levels. Total product stocks are significantly higher than the five year average of 1383 million barrels

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How many millions of barrels are stockpiled at the minute then?

About 3 days worth. Joy.

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Two facts that merit repetition:

  • Discovery of oil reserves peaked in the 1960s
  • Since the 1980s we've been burning more oil than we've been discovering.

It doesn't take a genius to work out where we're headed. Peak oil isn't a theory, it's a geological fact; it's a finite world and at some point we're going to reach the tipping point.

One could convincingly argue we're there already - it's unlikely that we'll produce more than the 85m barrels per day we're going through at the moment. It's also possible that Saudi's super giant Ghawar field has already peaked.

Treat with caution tales of vast reserves in Canadian tar sands and deep offshore off the coast of Brazil. It takes a huge effort to get these reserves - when the energy return on energy invested heads southwards it's not worth the effort getting this oil out of the ground.

Also hydrogen isn't a silver bullet that's going to save us all. It's an energy store not a source - we still have to separate hydrogen from the other elements it likes to cling to and store and transport it. (And it's very tricky to store and transport hydrogen.)

These issues may solved by technology, but at the moment there's nothing to touch oil as a compact store of energy. And production is peaking…

Edited by funinhounslow

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You know very well that nuclear isn't going to save the day.

It might have had our nuclear programme sustained any momentum after the completion of Sizewell B (1995). We should have commissioned more PWR's in 2000 - 'Bradwell B' and 'Oldbury B' in 2005. At least this way we would have retained a core workforce to expand when the crunch comes.

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Guest Steve Cook
That's because the global economy is heading south. As soon as there's an upturn, the price will go up, which will trigger a downturn . . .

Medium to long term, the northward direction of the price of oil is going to be the biggest one way bet in history. The only problem is that for the average low-level investor, you either get only indirect exposure via drilling companies or you get more direct exposure via futures contracts, but they are highly leveraged. Being highly leveraged, you either have to have a tiny amount on the line so you can have very low stop-losses required to cope with the violent near to medium term volatility. Or, you need to be sufficiently rich to have a bottomless pit of capital to both lay a significant amount on the line and also have the necessarily very low stop-losses, if any at all.

So, as ever, the elites of this world will profit on the back of declining reserves while the rest of us, in the developed West, will pay higher prices for our fuel and food at best and, in the developing world, will starve at worst.

Edited by Steve Cook

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How many millions of barrels are stockpiled at the minute then?

The extra recently stored in oil tankers etc. is little more than one day's global consumption

the last I heard.

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The extra recently stored in oil tankers etc. is little more than one day's global consumption

the last I heard.

US Strategic reserve is about 700 million barrels which is a bit more than one days global consumption at 85 millions barrels per day (not that the Americans intend to share it with anyone else or to use it for everyday consumption).

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

Edited by rembrandt

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Guest Steve Cook
I don't think I'm going to worry about the end of oil for a while.

I'm more worried about Oxygen.

You'll never need to worry about the end of oil. What you do need to worry about is the end of cheap oil. That era has already drawn to a close circa 2005/2007. Given our current economic system requires perpetual economic growth for reasons that are well trodden on this forum, the very least we can expect is an ongoing collapse of our economies. At worst, given that this economic system has fuelled an unprecedented population explosion over the last two centuries such that we are now painted into a corner in the sense that we simply cannot sustain that population without continued access to cheap oil (largely for the production of fertilizer and transportation of food around the world), we get mass starvation. Starting, of course, in the less developed parts of the world as we progressively price them out of the energy market. However, this wave of starvation will inexorably march northwards until, eventually, it will be knocking on the doors of southern Europe.

Will this catastrophe hit Europe in my lifetime (I'm 46)? I used to think not. Now I am not so sure. What I am sure of is that it will hit within my children's lifetime.

Edited by Steve Cook

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US Strategic reserve is about 700 million barrels which is a bit more than one days global consumption at 85 millions barrels per day (not that the Americans intend to share it with anyone else or to use it for everyday consumption).

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

I said the EXTRA recently stored on the fly, e.g. sitting in oil tankers.

Compared to global consumption this EXTRA is not such a lot. About 90 odd million barrels I heard a few weeks ago.

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$200 barrel oil would pretty much shut down this country and put a lot of us back into the dark ages.

The dark ages were so called because of the loss of knowledge. The high costs imposed by oil won't remove that knowledge.

Take a land area the size of the UK, 60 million workers and all the human knowledge of the 21st century and life will go on, oil or no oil.

It will be a very different life, but life will go on.

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You'll never need to worry about the end of oil. What you do need to worry about is the end of cheap oil. That era has already drawn to a close circa 2005/2007. Given our current economic system requires perpetual economic growth for reasons that are well trodden on this forum, the very least we can expect is an ongoing collapse of our economies. At worst, given that this economic system has fuelled an unprecedented population explosion over the last two centuries such that we are now painted into a corner in the sense that we simply cannot sustain that population without continued access to cheap oil (largely for the production of fertilizer and transportation of food around the world), we get mass starvation. Starting, of course, in the less developed parts of the world as we progressively price them out of the energy market. However, this wave of starvation will inexorably march northwards until, eventually, it will be knocking on the doors of southern Europe.

Will this catastrophe hit Europe in my lifetime (I'm 46)? I used to think not. Now I am not so sure. What I am sure of is that it will hit within my children's lifetime.

I share your worries. However, it's worth bearing in mind that agriculture and food transportation makes up only a very small fraction of our total energy usage, at least in the West. Most of our fossil fuel consumption goes on space heating, other industries and transportation. Here's a link if you fancy trawling some tables to see what I'm talking about. Air travel currently burns more fossil fuels than we expend producing food production! Most air travel is discretionary and we could stop doing it at the drop of a hat. What does worry me is how we adapt to the death of energy intensive activities like air travel, much of the motor industry and so-on. I don't think our politicians and business leaders are willing to recognise this possibility (or eventuality IMO), and that is our biggest problem. We can start planning for change now, or we can wait until the mother of all energy crunches and the subsequent depression forces the change on us anyway. Maybe it has already started as the OP suggests. Will the peak oil issue not be our downfall because we fundamentally can't solve the problem, or will it be our downfall due to poor leadership, or will we muddle through?

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I think oil is going VERY high (up again to $150+) within the next 18 months. The IEA tell us in the latest market report that $170 billion of oil investment hasn't been made as planned, canceling or delaying by at least 18 months 4.2 million barrels per day of new production. Oil production is already down some 2.7 mbpd (~3%) from last year. Lack of investment now means it will be very hard to bring that back.

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Cheap oil has enabled us to build a fantasy land economy which can only function with cheap oil.

What's going to happen is very simple, the oil price will crash will then build an economic recovery around that, demand goes up, prices goes up. It will then hit the critical point where the economy cannot support the oil price causing a recession, oil price falls and then we start all over again.

Rinse and repeat.

We need to move away from oil, we need more energy efficient devices.

The post war boom will be look on in horror by future generations for all the energy selfishly wasted in the name of economic growth.

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Cheap oil has enabled us to build a fantasy land economy which can only function with cheap oil.

What's going to happen is very simple, the oil price will crash will then build an economic recovery around that, demand goes up, prices goes up. It will then hit the critical point where the economy cannot support the oil price causing a recession, oil price falls and then we start all over again.

Rinse and repeat.

We need to move away from oil, we need more energy efficient devices.

The post war boom will be look on in horror by future generations for all the energy selfishly wasted in the name of economic growth.

That's a very optimistic outlook you have there. You think there will still be a record of what post war generations did a few generations down the line?

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US Strategic reserve is about 700 million barrels which is a bit more than one days global consumption at 85 millions barrels per day (not that the Americans intend to share it with anyone else or to use it for everyday consumption).

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

So the US strategic reserve is equal to 9 days global demand. Let's assume that other countries reserves, temporary tanker storage, etc amounts to another 10 or 20 days worth.

In the bigger picture of global demand exceeding supply, that will play out over years/decades, then holding 20-30 days worth of oil is of no significance.

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