Jump to content
House Price Crash Forum
zceb90

Depletion Of Energy Resources

Recommended Posts

The editor of 'The Oildrum' has published a new paper this weekend entitled 'What Happens When Energy Resources Deplete?' Since publication it's attracted so many comments that it's been relisted; for those who want to read thru the hundreds of earlier comments link is here.

Since the banking crisis occurred there's been quite a switch in opinion re energy price trends away from 'ever rising prices due to increased demand and developing scarcity' to 'much greater price volatility due to marginal costs of energy during price spikes exceeding what our economies seem able to afford'. This paper has a good summary of this situation and this quote contained in one of the comments sums up the dilemma with regard to vehicle fuel prices:

It's not $10/gal [uS gallon] gasoline you have to worry about; it's $2/gal gasoline that you can't afford.

Given that energy is such a key input to our economies it's hard to see how economic growth, which the politicians and business leaders keep referring to, can occur without increased energy availability and yet fossil fuels are finite....and subject to ever increasing demand from the BRIC nations and, not least, from the oil producers themselves. The UK is in a particularly difficult position as we have become complacent re energy security after 3 decades of strong output from the North Sea. Our exports of energy collapsed very quickly after peaking of N Sea oil production in 1999 with gas peak following shortly thereafter; UK is now on track in order to maintain a BAU (business as usual) scenario to have to fund oil and gas imports costing £50bn pa in foreign currency within a few years. I and others keep questioning how the markets are going to take to such a systemic shock to UK's energy trade balance especially in view of the pre-existing large trade deficit which seems to be a permanent feature. Any economic recovery therefore is likely to stall as we come up against twin barriers of limited supply and higher price; these factors will then (temporarily) go away as we enter another downturn....the cycle then repeats itself.

I don't see any quick solutions in sight - a major energy crisis is coming to the UK and soon. Within a few years China alone is predicted by some to be able to absorb most of the oil available on world export markets and unlike indebted OECD nations it has huge currency reserves to fund energy imports. I don't think the UK will have much choice but to use less energy as renewables are starting from a tiny base and cannot fill the gap in time; new nuclear capacity is barely in the planning stage and would take a decade to start making a difference.

Society in the UK (and even more so in the US) is designed around 'cheap and abundant oil'. If I were looking to move house today I would be very reluctant to take on a large mortgage as staying clear of debt has to one of the key priorities in an energy-scarce world. Furthermore long commutes in single occupancy vehicles which are typical in many areas today are soon going to become unsustainable for many on 'normal' wages.

Edited by zceb90

Share this post


Link to post
Share on other sites

The editor of 'The Oildrum' has published a new paper this weekend entitled 'What Happens When Energy Resources Deplete?' Since publication it's attracted so many comments that it's been relisted; for those who want to read thru the hundreds of earlier comments link is here.

Since the banking crisis occurred there's been quite a switch in opinion re energy price trends away from 'ever rising prices due to increased demand and developing scarcity' to 'much greater price volatility due to marginal costs of energy during price spikes exceeding what our economies seem able to afford'. This paper has a good summary of this situation and this quote contained in one of the comments sums up the dilemma with regard to vehicle fuel prices:

Given that energy is such a key input to our economies it's hard to see how economic growth, which the politicians and business leaders keep referring to, can occur without increased energy availability and yet fossil fuels are finite....and subject to ever increasing demand from the BRIC nations and, not least, from the oil producers themselves. The UK is in a particularly difficult position as we have become complacent re energy security after 3 decades of strong output from the North Sea. Our exports of energy collapsed very quickly after peaking of N Sea oil production in 1999 with gas peak following shortly thereafter; UK is now on track in order to maintain a BAU (business as usual) scenario to have to fund oil and gas imports costing £50bn pa in foreign currency within a few years. I and others keep questioning how the markets are going to take to such a systemic shock to UK's energy trade balance especially in view of the pre-existing large trade deficit which seems to be a permanent feature. Any economic recovery therefore is likely to stall as we come up against twin barriers of limited supply and higher price; these factors will then (temporarily) go away as we enter another downturn....the cycle then repeats itself.

I don't see any quick solutions in sight - a major energy crisis is coming to the UK and soon. Within a few years China alone is predicted by some to be able to absorb most of the oil available on world export markets and unlike indebted OECD nations it has huge currency reserves to fund energy imports. I don't think the UK will have much choice but to use less energy as renewables are starting from a tiny base and cannot fill the gap in time; new nuclear capacity is barely in the planning stage and would take a decade to start making a difference.

Society in the UK (and even more so in the US) is designed around 'cheap and abundant oil'. If I were looking to move house today I would be very reluctant to take on a large mortgage as staying clear of debt has to one of the key priorities in an energy-scarce world. Furthermore long commutes in single occupancy vehicles which are typical in many areas today are soon going to become unsustainable for many on 'normal' wages.

Look at oil now- $77 a barrel

Despite rising unemployment across the world and financial instability i.e. near collapse of Southern European states.

Share this post


Link to post
Share on other sites

Look at oil now- $77 a barrel

Despite rising unemployment across the world and financial instability i.e. near collapse of Southern European states.

Given collapse of sterling vs dollar in past 2 years price in UK is now £53/bbl or around 33.5p/litre and that's before refining and delivery costs - some of us without mains gas know all about the cost of heating oil. With China reported to be adding over 1m vehicles a month to their roads and engaged on a big program of airport expansion it's not hard to figure why the price is resiliant despite the downturn elsewhere.

I've read various reports in past few days about the impact of the disaster in GOM. A combination of drilling / development moritoriums in deepwater areas, tighter regulatory regimes and difficulty (and cost) of obtaining finance and insurance are pointing to estimated loss of capacity of between 400k and 900k bbls/day by 2015. Given that BP is liable for costs (with estimates varying between $20bn and $100bn plus) it's not hard to conclude that few companies are going to have much of an appetite for deepwater drilling. The oil might be there and society might want it....but the risks and costs involved may put these marginal barrels beyond the reach of most economies in recessionary times. One cannot escape the thought that peak oil may well be more or less at hand otherwise why would the oil majors incur the costs and risks of drilling in such places?

Share this post


Link to post
Share on other sites

Given collapse of sterling vs dollar in past 2 years price in UK is now £53/bbl or around 33.5p/litre and that's before refining and delivery costs - some of us without mains gas know all about the cost of heating oil. With China reported to be adding over 1m vehicles a month to their roads and engaged on a big program of airport expansion it's not hard to figure why the price is resiliant despite the downturn elsewhere.

I've read various reports in past few days about the impact of the disaster in GOM. A combination of drilling / development moritoriums in deepwater areas, tighter regulatory regimes and difficulty (and cost) of obtaining finance and insurance are pointing to estimated loss of capacity of between 400k and 900k bbls/day by 2015. Given that BP is liable for costs (with estimates varying between $20bn and $100bn plus) it's not hard to conclude that few companies are going to have much of an appetite for deepwater drilling. The oil might be there and society might want it....but the risks and costs involved may put these marginal barrels beyond the reach of most economies in recessionary times. One cannot escape the thought that peak oil may well be more or less at hand otherwise why would the oil majors incur the costs and risks of drilling in such places?

I saw an article that suggested that the well at the centre of BP's woes was only economically viable at $75 oil, hence the concentration on just geetting the thing capped and left.

What price now for such a well, let aloen the "risk" factor.

Economic and viable on a risk basis at twice the price?

Share this post


Link to post
Share on other sites

a major energy crisis is coming to the UK and soon

I agree whole heartedly, as both a concerned citizen and an engineer working in the North Sea oil industry.

We were on our way to obscurity when oil was found in our territory. The security it brought to all the nations bordering the North Sea was one of major catalysts in bringing an end to the cold war.

The growth of energy consumption in the UK seems have inversely reflected the size of the British empire as well.

So, what does that say about a future with no domestic energy reserves? You don't need to be an engineer to see that coming.

The Malthusian solution is to start killing off all the chaff, big style.

Edited by cashinmattress

Share this post


Link to post
Share on other sites

I saw an article that suggested that the well at the centre of BP's woes was only economically viable at $75 oil, hence the concentration on just getting the thing capped and left.

What price now for such a well, let aloen the "risk" factor.

Economic and viable on a risk basis at twice the price?

Exactly the point made in OilDrum paper I referred to in OP - last time we hit just under double current price ($147/bbl) it coincided with start of banking crash. I don't think it was a total coincidence that the 2 events more or less coincided - the rise in US gasoline price from $1/gal(US) to $4/gal had a lot to do with subsequent sub prime defaults.

The long time aim of US presidents has been 'more energy security' and the US lower 48 onshore production has been in decline since 1971 hence big push to drill offshore including deepwater, Alaska etc. A key source of oil for the US, Mexico, is experiencing steep decline in output of it's key Canterall field and may well cease to be an oil exporter within a few years. Without deepwater oil US would be forced to rely more heavily on the Gulf states, including Iran as there aren't that many other options to supply US oil imports which are in the order of 14m bbls/day. The more one looks at this situation the more one tends to agree with Matt Simmons - 'peak oil is ugly'.

Share this post


Link to post
Share on other sites
Guest Steve Cook

This articles pretty much sums up why the monetising of all of the bad debt built up over the last few decades is insane. Plain and simple.

It's not just the rank imorality of burdening future generations with the bad debt of today. It's the fact that the debt can never be repaid.

As soon as the world economy tries to grow again, we will hit the same resource buffers that led to the crisis of late 2007. This process of successive collapses, each one taking us to a newer low, is set to repeat from now on in.

All the way to the bottom.

Share this post


Link to post
Share on other sites
Guest Steve Cook

This article pretty much sums up why the monetising of all of the bad debt built up over the last few decades is insane. Plain and simple.

It's not just the rank imorality of burdening future generations with the bad debt of today. It's the fact that the debt can never be repaid.

As soon as the world economy tries to grow again, we will hit the same resource buffers that led to the crisis of late 2007. This process of successive collapses, each one taking us to a newer low, is set to repeat from now on in.

All the way to the bottom.

Share this post


Link to post
Share on other sites

This article pretty much sums up why the monetising of all of the bad debt built up over the last few decades is insane. Plain and simple.

It's not just the rank imorality of burdening future generations with the bad debt of today. It's the fact that the debt can never be repaid.

As soon as the world economy tries to grow again, we will hit the same resource buffers that led to the crisis of late 2007. This process of successive collapses, each one taking us to a newer low, is set to repeat from now on in.

All the way to the bottom.

Madness indeed.

GOM = menas to push through crap and trade.

$7-a-gallon gas?

http://www.nypost.com/p/news/opinion/opedcolumnists/gallon_gas_9GlF3o1xIcIBelOV3k0RsK

Share this post


Link to post
Share on other sites

Look at oil now- $77 a barrel

Despite rising unemployment across the world and financial instability i.e. near collapse of Southern European states.

I guess your point is that since oil has declined from a peak of ca $147 a barrel, there must be plenty of supply. The contrary argument is that at any price over ca $80 a barrel, western economies are tipped into recession. So energy demand comes down, and prices fall, as we've seen. Recovereh kicks in, price rises, into recession, demand falls, price falls. Rinse and repeat along the peak oil plateau until things get really sticky.

Share this post


Link to post
Share on other sites

I've read various reports in past few days about the impact of the disaster in GOM. A combination of drilling / development moritoriums in deepwater areas, tighter regulatory regimes and difficulty (and cost) of obtaining finance and insurance are pointing to estimated loss of capacity of between 400k and 900k bbls/day by 2015. Given that BP is liable for costs (with estimates varying between $20bn and $100bn plus) it's not hard to conclude that few companies are going to have much of an appetite for deepwater drilling. The oil might be there and society might want it....

If society wants it badly enough they will indemnify the companies and live with the environmental destruction. Or, they will use companies they've nationalised/expropriated -- USA could use BP B)

(Arguably an informal indemnity is already in place to some extent, in the sense that both energy producers and users are not called to account for certain of their externalised costs).

Good to see you posting again BTW, always insightful stuff.

Share this post


Link to post
Share on other sites

I agree whole heartedly, as both a concerned citizen and an engineer working in the North Sea oil industry.

We were on our way to obscurity when oil was found in our territory. The security it brought to all the nations bordering the North Sea was one of major catalysts in bringing an end to the cold war.

The growth of energy consumption in the UK seems have inversely reflected the size of the British empire as well.

So, what does that say about a future with no domestic energy reserves? You don't need to be an engineer to see that coming.

The Malthusian solution is to start killing off all the chaff, big style.

And the engineering solution is to convert to nuclear power, big style..

Share this post


Link to post
Share on other sites

Perhaps we need to build lots more windfarms, just so we can pay them to turn off when the wind is blowing. Yes, this happens. Sheer lunacy.

http://wattsupwiththat.com/2010/06/20/firms-paid-to-shut-down-wind-farms-when-the-wind-is-blowing/

Energy firms will receive thousands of pounds a day per wind farm to turn off their turbines because the National Grid cannot use the power they are producing.

Critics of wind farms have seized on the revelation as evidence of the unsuitability of turbines to meet the UKs energy needs in the future. They claim that the intermittent nature of wind makes such farms unreliable providers of electricity.

The National Grid fears that on breezy summer nights, wind farms could actually cause a surge in the electricity supply which is not met by demand from businesses and households.

The electricity cannot be stored, so one solution known as the balancing mechanism is to switch off or reduce the power supplied.

The system is already used to reduce supply from coal and gas-fired power stations when there is low demand. But shutting down wind farms is likely to cost the National grid and ultimately consumers far more. When wind turbines are turned off, owners are being deprived not only of money for the electricity they would have generated but also lucrative green subsidies for that electricity.

The first successful test shut down of wind farms took place three weeks ago. Scottish Power received £13,000 for closing down two farms for a little over an hour on 30 May at about five in the morning.

Whereas coal and gas power stations often pay the National Grid £15 to £20 per megawatt hour they do not supply, Scottish Power was paid £180 per megawatt hour during the test to switch off its turbines.

Edited by Pick It Down

Share this post


Link to post
Share on other sites

The editor of 'The Oildrum' has published a new paper this weekend entitled 'What Happens When Energy Resources Deplete?' Since publication it's attracted so many comments that it's been relisted; for those who want to read thru the hundreds of earlier comments link is here.

Since the banking crisis occurred there's been quite a switch in opinion re energy price trends away from 'ever rising prices due to increased demand and developing scarcity' to 'much greater price volatility due to marginal costs of energy during price spikes exceeding what our economies seem able to afford'. This paper has a good summary of this situation and this quote contained in one of the comments sums up the dilemma with regard to vehicle fuel prices:

Who cares?

I shall be dead before the morons who will be affected by it realise it's a problem for THEM.

tim

Share this post


Link to post
Share on other sites

petrol.jpg

What should be of particular note is that 4 out of the 5 nations with lowest gasoline cost on this graph are key oil exporters which brings us to the Export Land Model. A combination of low (heavily subsidised) fuel prices in the oil producer states combined with huge inflows of petrodollars lead to rapid growth of internal energy consumption. When nation's oil output goes flat or enters its decline phase internal consumption is still rising hence a disproportionate rate of collapse of their oil exports. This factor is going to have a major impact on our economies in future given that some estimates show that China will be capable of requiring (and be able to pay for) all available global oil exports within a few years. Export Land Model in more detail (pdf).

Edited by zceb90

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.