more oil news

[chelidon]

Pickens: Oil spike will lead to $3 gas
(subhed: Head of BP Capital Management says the black gold in the ground simply won't meet demand)

NEW YORK (CNN/Money) - Gasoline prices, reversing a two-month slide, are again approaching records and at least one expert thinks they could hit $3 a gallon soon in the United States.

"We'll see it within a year," T. Boone Pickens, head of the billion-dollar hedge fund BP Capital Management, said on CNN's "In The Money" over the weekend.
[snip]
Pickens said a shortage of oil is the main reason behind the price increase and didn't see how the world could produce more than the current 84 to 85 million barrels a day that currently comes out of the ground.

"We're coming up on a brick wall," he said. "The fourth quarter this year is going to maybe be the most interesting quarter I've ever experienced in my 50 years in the oil industry."

Unsurprising -- the supply/demand curves are colliding even now. And while higher oil/gasoline/diesel/heating oil prices are important, that's really small potatoes compared to the fireworks that peak natural gas production will cause a few years later, since an increasing number of our electrical generation plants run on natural gas. If oil prices spike, gasoline gets more expensive, as well as diesel, jet fuel, etc, and that affects the cost of transporting goods (including ourselves). If natural gas prices spike, electricity, and everything that depends on it suddenly costs twice or three times what it used to). Yikes.

Since it takes years to design, plan, build and put a new power plant into prodution, now is a really good time to press local, state and national politicians and your local utility to start building renewable source plants (wind, solar, hydro, geothermal) An appeal to patriotism and reducing dependence on foreign oil is a good card to play now, but the real reason to start building renewable now (better yet would have been 20 years ago...) is that it'll help mitigate the effect of oil and natural gas prices spiking dramatically.

Here's an interesting and readable review of investment banker Matthew Simmon's new book, describing what he sees as the inevitable near-term decline in Saudi oil production. If this happens, and like global warming, more and more signs are pointing in that direction, the oil economy will be in full-scale retreat, soon.

I may be giving Bush and Co way more credit than they're due for any kind of long-term planning ability, but Bush's Middle East crusades make a lot more sense if viewed as a desperate (and ultimately, hopeless) attempt to ensure military control of dwindling supplies of Middle-eastern oil to keep America's (and his oil buddy's) economy from suddenly collapsing.

Comments

[anthologie.livejournal.com]

I don't know about the rest of the US, but it's nearly $3 here already...

[chelidon.livejournal.com]

Yeah, S.F. is pricey for gas, that's for sure. The only place I know of that's consistently higher is Hawaii. It's still a lot cheaper than it is in Europe, but that's largely because of our relatively quite low taxes.

One possible silver lining is that spiking petrochemical prices will focus urgent attention (and money) on mass transit and alternative energy. Those things take time to build or expand, though, and it could be a bumpy ride in the meantime...we'll see.

[anthologie.livejournal.com]

I have this (probably idealistic, and possibly morbid) fascination with what will happen when the petrol runs out. Whether people will just go back to living on the land and doing things by hand.

At the same time, high-speed Internet access, if it's thoroughly built in before the petrol runs out, might still make it possible for most of us to keep at jobs of some sort *without* having to commute everyday.

Then again jobs might not be as useful in a post-oil economy.

Anyhow, as a sociologist, I'm pretty curious what that would be like.

Isn't gas in the US subsidized by the government? I can't remember.

[chelidon.livejournal.com]

If the Peak Oil scenario plays out the way it looks like it might, I'd prefer to think there will be a slow, gradual degeneration (some amount of economic stagnation/recession while the world economy adapts and retools), from the unsustainable high-energy-consumption world we have now, to one where most food production is local, more things are hand-made and locally-produced, and so on. there's a lot of potential there for good things to happen, as well as the bad. The huge artificially-sustained material affluence will be over, though -- huge quantites of cheap mass-produced consumer goods from low-wage manufacturing centers will probably be replaced by much more expensive, locally-made stuff designed to last. I mean, how in the world does it make sense to manufacture shoes and cars across the country, or literally half-way across the world, and sell them here? It only makes sense when the cost of oil (and thus transportation) is artificially hyper-low, and once that changes, the whole system turns upside down. The good news is that it'll be easier to find places to put our stuff, because there'll be less of it ;>

What I fear is that many U.S. cities and especially suburbs, being based on cheap oil and massive continual amounts of long-distance transportation of everything from food to shoes to water, will prove to be completely unsustainable, and there will be at least partial widespread collapse, riots, disease, etc. in some areas as distribution systems slow down or break down. In times of severe economic stress, it tends to come down to the basics -- access to good food and clear water, and some skills or source of livelihood with which to obtain what you can't grow or make yourself. The Amish will do just fine ;>

I dunno about the Internet. It's my bread and butter, one of the true wonders of the modern world, but what happens if power generation and distribution is spotty, and terribly expensive to boot, and all of the complex equipment and parts (made overseas) that make it possible become incredibly expensive or impossible to obtain? And how many people will be able and willing to pay for the kinds of things you and I do for money over the Internet? I figure it will come down to how much disruption happens, how gradual the process is -- will it be a gradual let-down or a collapse? One thing's sure, though, just based on the facts we know -- some serious change is coming, and not 50 years out, but 10 or 5 or 2. Let's hope we all adapt relatively gracefully...