Jump to content
House Price Crash Forum
Sign in to follow this  
malco

Interesting Article On Peak Oil

Recommended Posts

The Oil Drum today presents an excellent summary about the state of global oil production at the moment. Author Staniford assembles the evidence that production probably won't rise much from where it is now. That is, we are about there now:

http://www.theoildrum.com/story/2006/3/1/3402/63420

Good collection of the evidence for Peak Oil, well worth a read if you have not looked into the subject much until now. If this is true, the prospects will depend heavily on what happens as we roll over the peak. Is it a sharp peak then high decline rates? If that, we're stuffed, it'll be like a wartime economy as governments introduce emergency legislation to maintain basic services and utilities. But there is no reason for it to be that bad. Maybe a more realistic expectation is of very slow decline as in the United States. This would mean fairly serious disruption for a while, but might not dump us into a depression.

Of course, this energy issue is greatly magnified by the financial problems that beset especially the USA.

Share this post


Link to post
Share on other sites

And the financial problems that are building in the UK. UK USA in a race to the bottom.

The effects of peak oil are already being felt in the UK people just dont recognize it and wont subscribe to

it. They seem to think that a magical fix will come along.

The mitigating aspects of peak oil and peak Gas will hit those households that have massive debts (Credit cards) un-secured loans hardest, already we are seeing the demand destruction, how long before this sends thousands of over streched households over the edge? My guess 3rd qtr of 2006 when the HPC really sets in.

Share this post


Link to post
Share on other sites

This is one of the issues that has until recently been quietly ignored in the mainstream press, the UKs rate of decline is one of the worst of the non-opec countries, check this out http://news.bbc.co.uk/1/hi/business/4402448.stm, just from a financial point of view the decline will affect the balance of payments which will ultimatly have an effect on interest rates, it may also be the main and unstated reason why there has been the push for reduced greenhouse emissions and renewable energy initianitives. In other words the need to cut down on fossil fuels because we have no other choice.

Share this post


Link to post
Share on other sites

And the financial problems that are building in the UK. UK USA in a race to the bottom.

The effects of peak oil are already being felt in the UK people just dont recognize it and wont subscribe to

it. They seem to think that a magical fix will come along.

As far as I can tell the only response the government is making is to build more airports. :rolleyes:

Share this post


Link to post
Share on other sites

This is one of the issues that has until recently been quietly ignored in the mainstream press, the UKs rate of decline is one of the worst of the non-opec countries, check this out http://news.bbc.co.uk/1/hi/business/4402448.stm, just from a financial point of view the decline will affect the balance of payments which will ultimatly have an effect on interest rates, it may also be the main and unstated reason why there has been the push for reduced greenhouse emissions and renewable energy initianitives. In other words the need to cut down on fossil fuels because we have no other choice.

IMHO it hasn't become media mainstream yet due to it being slightly too involved for a simple article to cover and is outside of peoples immediate sphere of worry. Its been doing the rounds in the petro industry for quite a few years and is now getting much more coverage in the financial press. The release of Syrianna this weekend and the next price spike (this US summer driving season/more problems in Nigeria or Venezuela/escalation of the Iran situation) will bring it into the mainstream - look out for an Independent front page 'picture' on it before the end of this summer..

On the subject of slow decline in oil production over the peak, I think this is all but certain to happen (although fields can get much more unreliable as they age, so this is not certain to be the case). However, the issue is the speed of increase for the supply gap differential, with India and China on full booster I cannot see this being slow or pretty.

On a side note, if you are searching for an interesting book to read (and fitting with the allegedly 'gloomy' outlook of this board ;) ), then I heartily recommend Collapse by Jared Diamond as one amazon.co.uk reviewer amusingly puts it

It makes a change for books like this to be well researched, thoughtful and accessible - as opposed to the polemics written by po-faced eco-loonies who believe that mother earth will die unless we all start knitting our own yoghurt.

A very astute and well researched review of the problems faced by other historical (and now mostly foundered) civilizations and the lessons we may take from them, it also has some very pertinent suggestions as to the likely outcome from peak oil if we follow the route almost every other major civilization earth has watched pass by

Edited by RobertPaulson

Share this post


Link to post
Share on other sites

This is one of the issues that has until recently been quietly ignored in the mainstream press, the UKs rate of decline is one of the worst of the non-opec countries, check this out http://news.bbc.co.uk/1/hi/business/4402448.stm, just from a financial point of view the decline will affect the balance of payments which will ultimatly have an effect on interest rates, it may also be the main and unstated reason why there has been the push for reduced greenhouse emissions and renewable energy initianitives. In other words the need to cut down on fossil fuels because we have no other choice.

You are quite correct to focus on UK trade balance and effect on interest rates in the scenario whereby UK energy imports are rising year on year. Let's look at the situation in a bit more detail:

1) In recent interview for the recent interview for British Society of Magazine Editors Tony Blair stated that over the next 15 to 20 years UK was moving from between 80 and 90% self sufficiency in oil and gas to between 80 and 90% importing it.

2) The June 2006 Energy Trends report from DTI shows that between 1Qr05 and 1Qr06 N Sea oil output has declined by 8.5% and gas production by 4.5%. Given that decline in North Sea production is not being met by corresponding consumption reductions by UK consumers it follows that the declines have to be made up by imports. Applying a price of $75/bbl ($75/boe i.e. barrel oil equivalent for gas) the resulting increase in oil / gas imports added £3.65bn to the annual UK trade deficit. Put another way N Sea declines had the effect of adding £10m per day to UK annual trade deficit.

The big concern is that the production declines in 2) above are far from a one-off affair as Tony Blair is effectively recognising in interview referenced in 1) above. Both oil and gas production in UK N Sea is in terminal decline and imports will thus need to rise inexorably if existing levels of oil and gas consumption are to be maintained. Various studies indicate demand growth of a bit over 2% pa for gas; for simplicity I've assumed demand growth of 2% pa for oil / gas combined. Taking the mid point of TB's figures i.e. 85% imports by 2023 would require UK to import 4.3m boe/day by 2023 - at current prices cost to UK trade deficit would be £64bn pa. Not least this would be in addition to existing UK trade deficit of at least £3bn per month, very little of which is energy related, yet (btw June'06 figure was much higher than this). In short a 'business as usual' scenario indicates UK trade deficit surpassing £100bn pa by 2023.

Notice that the above occurs irrespective of oil and gas production peaking globally. UK has already seen both the regional oil and gas peaks thus ongoing N Sea declines combined with 'business as usual' consumption leads more or less inevitably to a balance of payments 'crunch'. I appreciate that 2023 sounds a long way away but the impact of rising energy imports will increase year on year and it would seem most likely that UK will experience major economic problems well before then, maybe by around 2010. In terms of adapting our infrastructure to use less energy that's 'tomorrow'.

As to effect on the housing market, rising trade deficit means higher interest rates as UK competes with other heavily indebted nations (especially US) to borrow foreign currency to fund energy imports. Rising interest rates will make large mortgages higher to service and the resulting fall in discretionary spending will reduce job prospects in the providers of discretionary goods and services. Such a scenario is extremely unlikely to be associated with rising (or even maintained) house prices...and will occur well within the lifespan of mortgages taken out since c1995. My personal view is that UK can't afford future energy imports on anything like the scale projected above in which case a lot of the imbalance will be addressed by UK consumers simply 'going without' in terms of oil and gas. Again recession would be precipated which in turn would impact the housing market.

Share this post


Link to post
Share on other sites
Guest Alright Jack

You are quite correct to focus on UK trade balance and effect on interest rates in the scenario whereby UK energy imports are rising year on year. Let's look at the situation in a bit more detail:

1) In recent interview for the recent interview for British Society of Magazine Editors Tony Blair stated that over the next 15 to 20 years UK was moving from between 80 and 90% self sufficiency in oil and gas to between 80 and 90% importing it.

It would be very interesting to know exactly what it is that we will export in exchange for this oil and gas. Since we have destroyed our manufacturing base. A VERY grim future for the UK. The USA got away with it because they had apparently discovered alchemy... what is to become of us?

Share this post


Link to post
Share on other sites

The Oil Drum today presents an excellent summary about the state of global oil production at the moment. Author Staniford assembles the evidence that production probably won't rise much from where it is now. That is, we are about there now:

http://www.theoildrum.com/story/2006/3/1/3402/63420

Good collection of the evidence for Peak Oil, well worth a read if you have not looked into the subject much until now. If this is true, the prospects will depend heavily on what happens as we roll over the peak. Is it a sharp peak then high decline rates? If that, we're stuffed, it'll be like a wartime economy as governments introduce emergency legislation to maintain basic services and utilities. But there is no reason for it to be that bad. Maybe a more realistic expectation is of very slow decline as in the United States. This would mean fairly serious disruption for a while, but might not dump us into a depression.

Of course, this energy issue is greatly magnified by the financial problems that beset especially the USA.

It's all correct but.... It's a peak of CHEAP oil. when the price wll become high enough, the other types of oil will be excavated. so it's not too bad for rich western economy.

Bitumen is the heaviest, thickest form of PETROLEUM. The 2 largest-known sources of bitumen (in Alberta and Venezuela) each contain more petroleum than the entire proven conventional oil reserves of the Persian Gulf. Synthetic crude oil produced from bitumen accounts for about 28% of Canada's total oil production.

Share this post


Link to post
Share on other sites
Guest Alright Jack

It's all correct but.... It's a peak of CHEAP oil. when the price wll become high enough, the other types of oil will be excavated. so it's not too bad for rich western economy.

Bitumen is the heaviest, thickest form of PETROLEUM. The 2 largest-known sources of bitumen (in Alberta and Venezuela) each contain more petroleum than the entire proven conventional oil reserves of the Persian Gulf. Synthetic crude oil produced from bitumen accounts for about 28% of Canada's total oil production.

:lol::lol::lol::lol::lol::lol::lol::lol::lol::lol:

Share this post


Link to post
Share on other sites

It would be very interesting to know exactly what it is that we will export in exchange for this oil and gas. Since we have destroyed our manufacturing base. A VERY grim future for the UK. The USA got away with it because they had apparently discovered alchemy... what is to become of us?

US is also getting away with it (for now) due to global currency for oil being the US dollar. Energy importers are forced to buy dollars to pay for oil thus US has virtually a ready market for increasing issue of greenbacks. Of course there are 'rumblings' that some future oil trading might move away from dollars to either Euros or some other petrocurrency - declining confidence in the dollar could accelerate this trend but expect US authorities to be very resistant to such a move.

UK has allowed much of its manufacturing (and some service) base to move offshore i.e. to China, India and other low cost regions. Tourism is also reported to be in deficit by as much as £18bn pa, hardly that surprising if one notes that most passengers on 'cheap' airlines seem to be UK folks heading abroad. The only major area of UK economy in surplus is the financial sector - banking, insurance, currency trading etc. The impact of rising global energy prices is likely to lead to more UK citizens staying at home for their holidays as air fares etc rise. This would help UK trade deficit but could well be offset by a downturn in foreign currency earnings by the 'city' as the implicatins of peak oil starts to impact the markets. We might well be looking a few years into the future here but it takes time to 'get one's house in order' i.e. eliminate / reduce debt, adapt lifestyle to more expensive energy etc.

Share this post


Link to post
Share on other sites

I find it most interesting what Matthew Simmons (click here) has to say about this.

I also think we are there or thereabouts. The next two years are going to be very interesting.

I've just returned from the depletion workshop at Pisa, ASPO 5. A number of peak oil 'heavyweights' addressed the conference including Chris Skrebowski, Colin Campbell, Jean Laherrere, Robert Hirsch, Jeremy Leggett and Richard Heinberg. We had the chance to ask questions both in the forum and individually with the presenters at coffee breaks etc. None of the speakers believed the long delayed peak suggested by IEA, USGS, CERA etc was credible and the major body of opinion opted for the global 'all liquids' peak by around 2010. Chris Skrebowski's latest oilfield megaprojects review presented at Pisa concluded that global peaking would occur some 1500 days from now, in late 2010 based on what projects were known to be coming onstream and projected oil demand. It was significant to note that differing methodologies such as the megaprojects review and Hubbert linearization are all pointing to peak occurring by 2010 to 2012; such dates are extremely close at hand given the far reaching implications for the oil consuming world.

I've only joined this forum today and am not sure if Dr Robert Hirch's report commissioned by US DOE has been referenced but it's a very worthwhile read and here's the link (91 page report, pdf download): Peaking of World Oil Production: Impacts, Mitigation and Risk Management. The key conclusion of the report is that mitigation needs to start on a 'crash program' basis 20 years ahead of the peak to avoid major economic dislocation. To date the response of UK Gov't seems inadequate to say the least - building more roads and airport runways is exactly the wrong direction if we are to seriously address the issue of peak oil (and the UK regional oil and gas peaks, both of which have already occurred).

Share this post


Link to post
Share on other sites

As far as I can tell the only response the government is making is to build more airports. :rolleyes:

And more roads!

They're extending the m6 I read the other day

Share this post


Link to post
Share on other sites
Guest Alright Jack

And more roads!

They're extending the m6 I read the other day

It's crazy isn't it?

As Kunstler describes the US, we took all our post war industrial wealth and invested it in a living arrangement that has no future. And we continue to do so even to this day, more roads, more suburban sprawl.

Share this post


Link to post
Share on other sites
Guest Alright Jack

The Oil Drum today presents an excellent summary about the state of global oil production at the moment. Author Staniford assembles the evidence that production probably won't rise much from where it is now. That is, we are about there now:

http://www.theoildrum.com/story/2006/3/1/3402/63420

Good collection of the evidence for Peak Oil, well worth a read if you have not looked into the subject much until now. If this is true, the prospects will depend heavily on what happens as we roll over the peak. Is it a sharp peak then high decline rates? If that, we're stuffed, it'll be like a wartime economy as governments introduce emergency legislation to maintain basic services and utilities. But there is no reason for it to be that bad. Maybe a more realistic expectation is of very slow decline as in the United States. This would mean fairly serious disruption for a while, but might not dump us into a depression.

Of course, this energy issue is greatly magnified by the financial problems that beset especially the USA.

I would say it is the opposite way round.

The financial problems are not so much problems as the symptoms of a population that hallucinates wealth and sells this so called wealth to gullible tw@ts the world over. ANYONE stupid enough to pay money to a 'pension fund' - private or public - really must be touched in the head. It is the most obvious ponzi scam ever. More so than the real estate racket. The money aint there. It isn't getting 'saved', and it certainly aint getting invested (unless you think global bubble credit derivative bets are an 'investment') The surplus is spent by the fund managers bloated salaries so they can enjoy fast cars, fast women, wine and restaurants.

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...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 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.