Peak Oil at 2014?

Peak oil is limiting growth and will ultimately mean that the current debt will never be repaid!



http://energypolicy.columbia.edu/sites/default/files/energy/Kopits%20-%20Oil%20and%20Economic%20Growth%20%28SIPA%2C%202014%29%20-%20Presentation%20Version%5B1%5D.pdf (4.5MB file)
Conclusions from the pdf

Conclusions
Demand-constrained models dominate thinking about oil demand, supply, prices and their effect on the economy

•The data have not supported these models in recent years; the data do fit a supply-constrained model

•A supply-constrained approach will not be applicable if China falters, US short term latent demand is sated, and oil supply growth is robust.

•For a supply-constrained model to be valid, oil must be holding back GDP growth as an implicit element of model construct.

•If the supply-constrained approach is right, then GDP growth depends intrinsically on increasing oil production.

•Without such increases, OECD GDP growth will continue to lag indefinitely, with a long-term GDP growth rate in the 1-2% range entirely plausible, and indeed, likely.

•In turn, if this is true, then current national budget deficit levels and debt levels will prove unsustainable, and a second round of material and lasting adjustment will be necessary.

Waestrel wrote: »

excellent video, watched it through. However, how dos the model conclude that prices wont rise? Surely they will have to if supply is less than demand?

There appears to be a "glass ceiling" that prevents prices staying above a certain level without triggering another recession. The "west" has been configured to operate in a world of cheap and plentiful oil, just look at all the places people live that are totally car dependent. It's this type of person who is getting squeezed by high fuel prices and some are now moving into the towns from the country, you can see this in the "housing shortage" that is appearing in Dublin now. People are moving to where the jobs are rather than commuting long distances to work.

Another key factor is the fact that for many people their wages have declined, so even if prices remain the same, they can afford less.

Places like India & China don't have these legacy consumers, they are still converting from animal power to mechanised power in agriculture & industry, so one litre of extra oil to them is powering their economy directly instead of being used to take Paddy to the cinema.

I think that the key point is that if the price rises, some consumers will cut back on consumption as they simply can't afford the rise thus releasing more fuel to those who can afford it.

Looks more and more likely that the original claim of this thread that oil production will peak in 2014 will be proven to be correct.
http://crudeoilpeak.info/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels

Unnoticed by the mainstream media, US shale oil covers up a recent decline of crude oil production of 1.5 mb/d in the rest of world (using data up to Oct 2013). This means that without US shale oil the world would be in a deep oil crisis similar to the decline phase 2006/07 when oil prices went up. The decline comes from many countries but is also caused by fights over oil and oil-related issues in Iran, Libya and other countries which can be seen on TV every day.

Business analysts are getting worried about lack of increasing supply of oil to support growth.

http://www.ft.com/intl/cms/s/0/d738b160-dc17-11e3-8511-00144feabdc0.html#axzz31yKt5cKH
Opec “will need to increase production significantly in the second half of the year in order to meet world demand, according to the west’s energy watchdog.”
“While production gains of about 400,000 barrels a day in April have gone some way towards easing tight global markets, the International Energy Agency says a bigger increase will be needed in the second half of the year when consumption picks up after the northern hemisphere summer.
“In order to balance forecast demand, Opec countries would need to hike third quarter production by another 900,000 b/d from April levels,” the agency said in its latest monthly report.
But the Paris-based organisation said it was not clear if Opec, which controls about a third of world oil production, would be able ….A series of problems have hampered crude supply from Opec members.
….As a result of these problems, the IEA has cut its estimate for non-Opec supply growth by 100,000 b/d to 1.5m b/d.

Updated Chris Martinson "crash Course" video. Peak oil is only a (key) part of the story.
A must see as it ties up the economy, energy and the environment all together and discusses the risks to prosperity & growth.
It explains why we will soon have to choose either growth or prosperity but will be unable to have both.

PS @ Waestrel, there are a number of "peak oil " websites that do some good analysis on the subject. eg. peakoil.com

Many of the doomer "end of the world type sites have discredited the peak oil predicament by skipping the "wind down" phase and going straight to total collapse.

The main thrust of the video is that the current economy is built up on abundant cheap fossil fuel it is this that is now in ever declining quantities, I agree that there is probably a (human) lifetime’s supply remaining, but realistically there is insufficient supply to allow the current economic & financial model working for much longer in its current form. The seeds of the next financial meltdown are germinating in the Middle East right now, if there is a real risk of a cut in supply, then the price will certainly rise and rise enough and remain high for long enough to trigger another recession.

Economic growth is totally dependent on increasing the supply of energy to the economy, most of the efficiency improvements, the "economics of scale" (giant ships/ factories/multinational companies) have already been done. There is little more that can be done to keep the wheels on.

Many of the "alternative" fuels are robbing Peter to pay Paul types of substitutes, bio-fuels for example displace food crops for fuel crops. LNG is a by-product of oil extraction that was until recently simply burned off, it will only be available to the UK while there is little demand elsewhere for it, if the Chinese joint ventures with Saudi Arabia are completed then China is likely to lock up the entire LNG supply and the UK will have none. The US "shale boom" is only a short lived event and will most likely be spent within five years (peak then decline) along with the extra gas. The US is more likely to sell it to Canada for use in the "tar sands" oil extraction.

Capt'n Midnight wrote: »

Yes we've reached peak oil in the sense that the price of oil won't be going down.

No, the prophets of doom are wrong about the collapse of civilisation because.

But they might be right about another 1973 oil shock

The more I look into peak oil the more I am forming the opinion that it will not be doom but a change of direction, but the financial system in its current form is doomed due to the lack of growth required to create money to repay debt (or is that the other way round), unless debt repayments are pushed into the century after next!

As for the "real economy" changes will be more subtle, wages will fail to rise in line with fuel costs and commuters will be squeezed out of their individual cars and either take up car sharing or move closer to their place of work. Changes like this are already happening as can be seen by the explosion in rents in Dublin and empty houses in the Midlands. As the (eventual) decline in oil supply becomes apparent to all, these trends will be "encouraged" by governments such that fuel shortages are unlikely. Construction of new rural "one offs" are already discouraged and potential builders are goring through hoops to be allowed to build, it won't be too long before they're banned completely. Doing this will reduce the future energy footprint of the population as people will be more concentrated in towns & cities and the countryside will be depopulated over time. Medium density living in an urban environment with a tram (or similar) public transport system would consume only a fraction of the energy required by the same people living in rural Ireland and commuting to the City each day. Large family sized flat (apartment) verses a detached house and public transport verses a long (single occupancy) car journey, the savings will be huge.

It's easy to forget that it is not that long ago that most people lived close to where they worked, it will become that way again.

So peak oil (energy) brings challenges but I can't see it being a "mad max" unless you are a small population on a remote island that loses it regular supply shipment of fuel.

According to the author, peak oil at 2014 is still on track!
This is despite increased production from the US via fracking.

http://peakoilbarrel.com/david-archibald-lto-plus-net-imports/#more-4629

Looking at his second chart it looks like he is predicting the peak of world oil production to be this year, 2014. That falls within my prediction of a peak in 2015, give or take one year.

Waestrel wrote: »

Are we worried about nothing? Is everything good now, for ever?

http://www.reuters.com/article/2014/10/07/us-oil-markets-inflection-analysis-idUSKCN0HW09L20141007

Certainly in the short term, it looks good, but if prices fall below the profit margins for producers, then they'll simply stop drilling! The drilling frenzy over the past 8 years or so have produced results. But to maintain that increased output they need to constantly drill as the depletion rates of the shale fields is as much as 60% in the first year. A lot of money is needed to develop a well before it produces anything, if the price drops then they'll just wait until the prices rise again. Just like what happened in the run up to the "oil price superspike" in 2008.