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Peak Oil/Peak Exports
post Posted: Apr 28 2011, 08:52 PM
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In Reply To: triage's post @ Apr 25 2011, 10:17 PM

Here is the Catalyst program's webpage about peak oil (the program itself was shown tonight on ABC1 tv).

Not only does the webpage have the segments that made up the tv program it also has extended interviews and links to previous shows about peak oil that have appeared on the various ABC outlets.

"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog

Said 'Thanks' for this post: bermuda  Alethia  Barra  crooky  
post Posted: Apr 25 2011, 10:17 PM
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Here, imo, is an excellent primer on peak oil, done by ABC Radio National's Science Show this last weekend. It seems that Catalyst on ABC 1 tv next Thursday is also about peak oil (but it may be the same interviews (?)).

What is most notable for me in the segment is the turnaround in the story that the International Energy Agency (IEA) is telling, from six years ago till now. I got the Science Show link from the always civil and informed discussions at (TOD). Fairly quickly another TOD contributor posted an interview of the same IEA bloke, Mr Fatih Birol, from January 2009.

So in 2005 one of the directors of the IEA dismissed peak oilers as doomsayers, in 2009 the IEA's chief economist predicted that production of conventional oil would plateau in 2020 and now in 2011 the same chief economist of the IEA says that conventional oil production actually peaked in 2006.

Apparently the IEA was set up by the OECD in 1974 as a response to the oil shocks to act as a policy advisor to the member states. Also apparently other national governments seek policy advice regarding energy from it. So it is not a journo's assertion or even the IEA's assertion that governments obtain policy advice from it: that is actually what it was set up to do. Which makes its revisions all the more remarkable.

The fact that auntie is now onto it may mean that peak oil is about ready to go mainstream (????).

"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
post Posted: Apr 21 2011, 11:09 AM
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In Reply To: bermuda's post @ Apr 21 2011, 07:32 AM

bermuda: You do KNOW how much a value your knowledge/opinions and I do read your posts always with great interest. Incidentally, we both are of the SAME opinion: Oil is a FINITE RESOURCE and as such should not "just" be seen as a "commodity"!
You mention that "it is almost the same scenario as last time" but mention 4 NEW factors.
May I add 1 more NEW factor:
Last time, people thought that for those energy hungry Chinese/Indian populations, NUCLEAR power ( a lot of new reactors are being planned to be built....) would help to "bridge" the shortfall of more traditional energy resources.
The FUKUSHIMA mess has now led both China and India to re-assess their drive forward for nuclear power. Moreover, in some European countries currently producing nuclear reactors are being SHUT down - like in Germany and likely more to follow...) Hence, I do believe that FUKUSHIMA is a further factor for making oil that more precious/costly at present and into the future.
PS: Last but not least: A happy Easter holiday to you and your lovely wife. Hope to be able to see you again sometime in the not too distant future?!

Said 'Thanks' for this post: triage  bermuda  
post Posted: Apr 21 2011, 07:32 AM
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In Reply To: davo22's post @ Apr 20 2011, 08:58 PM

It is almost the same scenario as last time when oil hit $147/bbl. Despite the price of oil surging, Saudi Arabia were not able to increase production. If they had been able to they could have supplied the market and avoided the surge. And made a fortune. In the end demand destruction/recession took the heat off their inability to increase production.

This time round we have to deal with several new factors.
1. Last time round there was a lot of fat in the system. People learnt to conserve. This time around the world is running on a leaner machine. We can still conserve a lot more but it will be harder.
2. The Middle East is in turmOIL. A couple of rockets in the wrong place and oil will rocket to levels not seen before. If I were running a government I would be increasing strategic reserves and putting a large tax on consumption to increase efficiency.
3. The Opec countries have increased their internal consumption so much that their ability to export has been curtailed.
4. Chinese and other Asian demand has soared.

I am afraid that we are in for another spike and consequent recession.

ps Last time around Goldman Sachs made an absolute fortune as it correctly forecast the wildly swinging oil price. This time around they have tried ( last week ) to manipulate the market by saying that it was time to sell oil. It didn't work. The price has soared again.

The Chinese have spent the last 10 years securing future energy ( oil ) supplies. The USA are now suffering due to a lack of similar action although a concentrated switch to natural/shale gas may save them in the long run.

Oil, a Precious Finite Resource.

Said 'Thanks' for this post: wasabibarako  triage  
post Posted: Apr 20 2011, 08:58 PM
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<H2 class=title>
<H2 class=title>"Saudi's slash oil output" ... or did physics? </H2>by Martin Payne "The market is overbalanced ... Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don't know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied," Naimi told reporters.
Saudi oil minister Ali al-Naimi, April 18, 2011

Does that statement make any sense? Saudi production goes down in the face of rising demand, and prices skyrocket, and that shows the market is oversupplied??? Wouldn't prices have dropped drastically during that period if the market had been oversupplied?

Once again, it seems that Saudi oil production went from 9.125 MMBO/D in February, to 8.292 MMBO/D in March. And remember (as we used to always tell the boss) February is always a "bad month" because it has fewer days. Meanwhile, oil prices increased substantially in March.

You've got to ask yourself, why would Saudi oil minister al-Naimi issue this seemingly nonsensical press release?

Realize that the Saudis are our "partners" in trying to keep the world economy out of the ditch - they know it is not in their best interests to wreck the world economy, else demand for their product (oil) will go down. So, they are not interested in $200 oil, or even $150 oil. As the King said years ago, "You need the oil, we have the oil." In exchange, we no doubt have security arrangements with them, and sell them billions in defense hardware. (According to the WSJ today, Saudi Arabia had $41.3 billion in defense spending in 2009, compared to Iran's $8.6 billion in that year.)

So, back to the question. If the "jig were up" - that is, if the onset of production rate decline was imminent, or even past tense - for the country generally believed to have the world's largest reserve capacity in terms of production rate, as well as the largest remaining reserves, then there might be one more ploy, one that might hold up for a few months (or not). That would be to suggest that you were voluntarily cutting back production rate, rather than it happening despite your best efforts to increase it. Or, put another way, that you were cutting the rate on purpose, rather than it dropping due to the inevitable decline in the production rate of a limited resource, aka Peak Oil.

One other thing: Why would President Obama, in his "energy policy speech" of March 30, 2011, suddenly say we need to do more drilling for oil in the US, embrace shale gas and natural gas vehicles? Previously President Obama only had room for renewables in his public speeches. Continued oil and gas development, utilization of natural gas for transportation, conservation (of primary importance), renewables and sensible clean coal and nuclear make up the bulk of the often touted "all-of-the-above solution". Often touted ... but not by President Obama! Why the sudden shift in "policy"? We already knew the answer, but hearing it from the President sent a chill up our spine, nonetheless. It might be as close to a Presidential Peak Oil admission as we ever get - and likely as close as we really want. It's time to stop petitioning, stop talking about why this or that won't work, and start focusing on what you can do, what your role is in the "all-of-the-above" solution.

Full press release here: Saudi's slash output

post Posted: Apr 20 2011, 08:56 PM
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What is going on? The International Monetary Fund -- a body that states its mission is to "foster global growth and economic stability" has produced a major report which concludes the world has entered an era of oil scarcity, and openly discusses a peak oil scenario in which global GDP doesn't grow, but declines steeply !

<A style="MARGIN-BOTTOM: 1em; FLOAT: left; CLEAR: left; MARGIN-RIGHT: 1em" href="" imageanchor="1">IMF's Main findings
  • global markets have entered a period of increased scarcity
  • scarcity is due to supply and demand fundamentals of rapid growth in demand in emerging economies and a "downshift in the trend growth of oil supply" -- IMF speak for peak oil.
  • the impacts of oil scarcity are "important and far-reaching" on "growth, inflation, external balances, and poverty"
Optomistic Scenario
The report centres on three scenarios for oil scarcity. The most optimistic one has been seized upon by mainstream media such as The Economist, Bloomberg and the Wall Street Journal and paints a picture of an almost perfect world where oil production declines smoothly and gradually and the effect on world GDP growth is minimal. While the story has gained some traction in overseas media, it seems only Brian Farrow in the New Zealand Herald has picked up the story in New Zealand. He makes a reasonable fist of summarising the main findings, but like the overseas reports, fails to mention the more pessimistic peak oil scenario outlined in the report.
Even in the IMF's most optimistic scenario the oil price will spike immediately by around 60% and induce a reduction in GDP in oil importing countries such as New Zealand.

IMF Peak Oil Scenario
But the report itself points out that the adverse effects could be much larger depending on the "extent and evolution of oil scarcity". This is where there second and more pessimistic (realistic?) IMF scenario makes for fascinating reading. Fascinating because the IMF economists give serious consideration and credence to a scenario where oil production declines at 3.8% annually -- which is the type of oil decline scenario projected by peak oil proponents for many years.

In this scenario the effect on GDP and nation's current accounts is to put it mildly severe and downright scary. As you can see from the graph left - (blue line = optimistic scenario and red dotted line = peak oil scenario) for the USA (the closest to New Zealand's oil dependence situation?) there would be a 4 to 5% reduction in GDP within five years and a 14% reduction in 20 years .

But the most striking aspect of this scenario is that supply reductions of 3.8% would lead to an oil price spike of 200% immediately and 800% over 20 years. The IMF admits these price rises would be "unprecedented" and so huge that they blow their modelling off the chart. More likely is that the world economy descends into severe recession or a depression and prices never reach these heights?

How Is The Report Relevant to New Zealand?
Alarmingly for New Zealand the most severe impacts arise from particular vulnerabilities idendified by the IMF which all apply to New Zealand -
  • we have high oil intensity
  • we have weak export links to oil exporters -- most of our exports are to other oil importing countries such as Australia China etc
  • our economy relies very heavily on on "airlines, trucking, long-distance trade and tourism" which the IMF points out " would be affected by an oil shock much earlier and much more severely than others"
  • the effects of large-scale bankruptcies in such industries could spread to the rest of the economy
  • what is even scarier for New Zealand as an oil importer is that the IMF acknowledges that it's scenarios for oil decline do not take account of oil exporters keeping more and more of their own product for domestic consumption. Studies show this is already happening , that exports are declining faster than production and the export decline rate accelerates with time. Which means the extent of oil scarcity is even more severe for New Zealand as an oil importer. What matters to us is not the scarcity levels of oil production per se, but how much oil is available for export.

Policy recommendations for government

The IMF suggests two broad policy review areas --
  1. get ready to adjust to any unexpected changes in oil scarcity
  2. lower the risk to oil scarcity including through the development of sustainable alternative sources of (transport) energy
But expect the New Zealand government to ignore this advice, just as they have ignored International Energy Agency calls for critical government intervention
[list=1][/list]Tthe IMF also suggests that governments could also "pre-emptively reduce oil consumption through taxation or support for new oil-saving technologies". Fat chance of that happening. Our Energy strategy is not to pick winners and there is next to zero support for bio fuels and electrification, and the government won't impose an earthquake levy even when most kiwis support it.

Whichever way you cut it, it is quite remarkable that a group whose aim is to foster economic growth and stability is warning of not just oil scarcity, but resultant declines in world growth. No doubt our mainstream media and politicians will ignore this report as they have done with dozens of others. But unlike the global financial crisis, they will not be able to say that they were not warned.


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post Posted: Feb 21 2011, 07:29 AM
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In Reply To: triage's post @ Feb 19 2011, 06:21 PM

triage - Shell pushing into biofuels too

Shell, Cosan form $12bn ethanol deal -Tue 15-Feb-2011 10:10

Anglo-Dutch energy titan Shell and Brazilian sugar-production group Cosan say they were forming a joint ethanol fuel venture with an estimated market value of $US12 billion. The new entity, to be called Raizen, would be one of the biggest players in the sector worldwide, employing around 40,000 people and producing over 2.2 billion litres of ethanol per year to Brazilian and international markets, the two companies said in a statement. Raizen should be launched in the first half of this year, they said.

"Due to the size of its operations, Raizen will help sugarcane ethanol, a sustainable, clean and renewable source of energy, to consolidate itself worldwide and strengthen Brazil's position in the international biofuels trading business," said the venture's chief executive, Vasco Dias.

Raizen will have 23 mills able to crush 62 million tonnes of sugarcane per year to produce the ethanol. The mills will also output four million tonnes of sugar per year. The venture will distribute some of the product in 4,500 service stations across Brazil, and through participation in distribution depots for aviation fuel in 54 airports. The statement said the new company would have approximately $US1.6 billion in cash inflow. "We want to be even bigger," Dias said. "We want to be recognised globally for our excellence in the development, production and marketing of sustainable energy."

The European Commission gave the green light last month to form the new joint venture.

Brazil is the second-biggest producer of ethanol in the world, after the United States, and the biggest exporter of the biofuel. It sustains a large domestic market using ethanol through the sales of cars whose engines can take either petrol, ethanol or a mix of the two.

"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
post Posted: Feb 21 2011, 12:35 AM
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In Reply To: triage's post @ Feb 20 2011, 07:14 PM

Hi Triage
Thats why I watch youtube. smile.gif
It was an Adam Curtis made doco, whom I stumbled upon a few weeks ago, and he has become my new 'poster girl'
I've even penciled him in as hero in my hero list after I went to his BBc blog and he was taking on Rupert. He's got balls


He explains his views on his film making here

The last one I watched was The power of nightmares

Very enlightning I think, I like the depth he goes to in these documentaries and as he said, with the internet you can watch parts at your leisure and therefore he can make longer films.

As for oil, well David Kawasaki (I mean Suzuki) said a very long time ago that we should use cheap oil to build the expensive renewables now, made sense then and more so now.


post Posted: Feb 20 2011, 07:14 PM
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In Reply To: Commander C's post @ Feb 19 2011, 08:22 PM


Don't really have a clue of how this peak oil thingy will resolve itself, maybe the cornucopians are right and as always humans will come up with some solution to keep the music playing. Your scenario about gas could eventuate. For a contrary view, the author of this article raises some concerns.

As for all the posts... well yes I am surprised at how many posts on ss I've made. Maybe I'll do a BSA and sign off on a nice round number. He got to 8,000 which I can't see me reaching. Perhaps another 1000 posts will see me done. Posting my thoughts and ideas on ss has certainly been a good learning and filtering process for me and the contributions of others have been invaluable. Congratulations on your milestone and thanks for all the interesting stuff you've posted.


Got through the four parts of The Self series, which veered off into the use of focus groups in political policy formation. Very sad to me that Australian politics is like Australian tv in that much of it these days is no more than old American and British reruns. Thanks again for the link.

"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
Commander C
post Posted: Feb 19 2011, 08:22 PM
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In Reply To: hoaky's post @ Feb 15 2011, 05:07 PM

hah agree, "The End of Cheap Oil" is a far better description.

An interesting dynamic --- as borne out by low US gas prices and the big discount of WTI (American) oil compared to Brent (UK) or Tapis (Asian) oil, as the US has relatively more surplus oil being produced unconventionally --- will be shale gas. Unlike coal seam gas, shale gas typically comes out wet (with condensate/light oil and LPG).

If oil prices remain stronger for longer (meaning that banks will update their internal oil prices assumptions and be willing to lend more money out) and assuming no GFC (meaning that banks will still be lending normally)
then (wet) shale gas projects around the world will start rolling out.
Santos/Beach/Stuart are already talking about Cooper Basin.

One scenario could be
* oil moves into range of between US$100-$120/bbl
* a zillion wet shale gas projects (and conventional LNG condensate projects) get rolling from North America to Australia to Europe
* oil demand met at this price range, from increase in condensate production from unconventional shale projects
* HUGE gas surplus leading to plummeting gas price
--- becomes economic to start converting cars to CNG (compressed natural gas), lessens demand for oil at very high oil prices
--- Gas-to-Liquids projects using the very cheap gas being economic, again lessening demand for oil at very high oil prices

Just realised - over 1000 posts!
Triage you are nearing your 2nd millennium:)


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