Peak oil’s not so bad? Please consider the descent, that’s when it gets very bad. Hank Aaron’s home run totals in his final years: 47, 34, 40, 20, 12, 10. Translate this decline to oil. Tar sands are not oil—you can—with much energy invested—get liquid fuel from bitumen. These costs have accerated and maybe by 2015 tar sands will produce 3mbd -not much to offset decline from peak.

And coal is not limitless—for instance much of what’s left is brown coal—lignite—and a lot is under bulidings, etc. What about the release of pollutants? And the cost of liquifaction? This is not an answer, it’s a perpetuation of in-the-box analysis.

Too much economics here and too little appreciation of geology and exponential math. Definitely read the OilDrum for conceptual blockbusting in action.

http://www.thepeakist.com/

For starters, at least the way I understand markets to work, there will always be a difference of opinion regarding future prices relative to today’s price. Otherwise, today’s price would be different than it is. If all knowledgable people expected prices to fall (with a little room to account for borrowing rates), then today’s price would be lower. Only some knowledgable people expect prices to fall.

But back to missing the point. There is a strong flavor of “I have the answer” in this discussion. Nobody does. My point is that notions like “people don’t add to inventories if they expect prices to fall” assume too little ambiguity. The oil market is not behaving in ways that lend confidence to simple “if this, then that” analysis. In the case of oil inventories, if one thinks that the most likely outcome is for prices to fall, but that a still reasonably lchance that prices will be boosted by supply interuptions, then building inventories may still be a good choice. Arguing that this is not so because futures markets provide a reliable hedge is not satisfactory when your customers prefer actual product to compensation.

IF the Bush administration KNEW we were at peak oil, say the Saudies coghed up the truth, what do you think Bush would do? Seeing as how it’s reasonable to think that a global shortage of oil could wreck the US/global economy, why not invade, say, Iraq and try to control their supplies. At the same time, perhaps allow Libya to come back into the global fold, and oh, by the way, if a Chinese oil company were to buy an American producer, we just won’t allow that to happen.

I’m NOT a conspiracy theorist. I sure as think it’s highly unlikely the Administration has engineered high oil prices (it certainly can’t do anything else right, so why that?), but I DO think that it would be in a position to know about oil production within OPEC and outside of OPEC and you get to thinking….the Iraq war is such a farcical thing, perhaps this makes some sense.

Coupled with the known inelasticity of short run demand, this is a recipe for prices becoming highly unstable (though not necessarily higher on average). Relatively small supply or demand shocks (a local war, an OPEC member defecting, Chinese demand for cars, etc) will cause much larger movements in price – both up and down – than they did in the past.

This will happen regardless of the fact that there may be near-unlimited oil that is profitable to extract at the long-term average price but which needs a long lead time to bring on-stream. That long-term average price might not change much, but the variance around it will increase markedly.

Ummm, isn’t that exactly what I said?

For all reasonable values of 3 and 15, 15 is always a lot more than 3 ;->

What you’re (willfully perhaps?) ignoring is removing the usual Opec profit from the equation when we get it from a local source. That Opec profit is a significant percentage of the price of a barrel of oil.

All that is necessary for shale/sands to be an economic winner for the public is for that Opec profit to exceed the extraction/refining cost delta—THEN the sand/shale product, at the pump, becomes cheaper than the Opec product.

Q: if it can’t be competitive—as you seem to be implying, then why is anyone working on it at all? That would just be money thrown down a rathole.

This also raises the questions of the true fungibility of oil as supply diminishes. How many countries, especially those that want to no longer ride bicycles as a way of life, are willing to fight for that resource? How many countries are willing to give that resource to the highest bidder? How much are we going to have to change our habits and our way of life?

All important questions that I hope folks will consider the answer to.

Tar sands refining is also much more costly and potentially environmentally damaging than the refining of light sweet crude. If you actually want some sources, I’ll point you to this post:

http://www.theoildrum.com/story/2006/6/19/234011/719

and there are quite a few others at TOD on oil/tar sands, oil shale, CTL, LNG, ethanol and the like. I think you’ll find that NONE of them are the energy panacea they are made out to be.

I hope we all spend a little more time learning about where our energy comes from. The sooner the better.

I’m reminded of the reports that the Saudis were pumping 7 million gallons of seawater into the Ghawar field 18 months ago, and getting 90% seawater back from some wells. That doesn’t make that field sound very healthy.

But if knowledgable people expect prices to fall, why are they adding to inventories?

Of course. The Saudi extraction cost is somewhere in the range of $3/bbl, tar sands somewhere in the $15/bbl range.

However, the Saudis are pocketing a huge dollop of profit when the market price is $70/bbl.

At current prices, there’s plenty of room for large scale tar sands development if the conventional oil pumper’s profit is removed and applied towards the domestic sands extraction cost delta.

If we went full bore on sands, and took a big chunk of US demand out of the world market, you’d see world oil prices fall back into the $40/bbl range…maybe lower.

The question of whether this is a local or global production maximum is mostly interesting to an environmentalist. The economist is more concerned w/ the actual price of oil in the short and long term. In the short term, many other factors influence the cost of oil, and 3 years counts as the short term, here. We are not going back to $20/barrel oil, but there is a lot of oil left to be had at $50/barrel.