Peak Oil Redux Part VI
From 03/02/05 China Syndrome Part III:
During a liquidity bubble, sensational claims (e.g., “the world is running out of raw materials” or “1.3 billion Chinese soon consume like Americans”) tend to proliferate, juicing up the prices of oil and other natural resources. These have almost always turned out to be false.
Oil prices have averaged twenty-three 2003 dollars per barrel since 1861, when oil was first sold as a commodity, similar to the average price of twenty-six 2003 dollars per barrel over the past 50 years.
Current oil prices are still half as high as their average during the oil shock in the late 1970s, which caused a global downturn. The OECD economies are much less dependent on oil, and current prices are not very high relative to their income. They should be able to cope with current or even higher oil prices. China, however, is a different story, and it is driving oil prices today.
See: Oil Bubble
From CERA in Cambridge, MASS:
CERA believes there will be no “peak oil” problem before 2020. However, sometime beyond 2020 an inflexion of sorts will occur, but it will not be followed by a precipitous decline in productive capacity.
The "peak oil" scenario will play out much differently then the oil controlled media hype would lead you to believe, as a step change in investment occurs and new technology is pumped into exploration, field upgrades, stranded gas, and heavy oil projects in a manner quite unlike any other period in the history of the oil industry.
At the inflection time around 2020 CERA believes that the worldwide capacity profile will track an “undulating plateau” for a number of decades before starting to decline more slowly than might be thought today.
Despite current fears that oil will soon “run out,” global oil production capacity is actually set to increase dramatically over the rest of this decade.
As a result, supply could exceed demand by as much as 6 to 7.5 million barrels per day (mbd) later in the decade, a marked contrast to the razor-sharp balance between strong demand growth and tight supply that is currently reflected in high oil prices hovering around $60 a barrel.
In a rigorous new field-by-field, bottom-up analysis of the world’s capability to produce hydrocarbon liquids, Worldwide Liquids Capacity Outlook To 2010 — Tight Supply Or Excess Of Riches, CERA indicates that worldwide capacity could rise by as much as 16 mbd between 2004 and 2010 - a 20 percent increase over the period.
“We expect supply to outpace demand growth in the next few years, which would take the pressure off prices around 2007–08 or thereafter and even lead to a period of price weakness,”
“Following development of the current worldwide inventory of major discoveries, we also foresee far more capacity expansion in the medium term from field upgrades than through exploration.”.
Cambridge Energy Research Associates Report
So we again address economies of scale, and sensationalized claims. In addition, Morgan Stanley believes the Chinese are driving prices to a certain extent by their willingness to pay any market price.
And we also make a case for Mish's contention that oil really isn't that expensive, relatively speaking and we are seeing Jevon's Illogical Paradox at work, more on this later.
In addition, CERA's findings contradict the pessimistic Malthusian outlook of "peak oil" theorists. Arguing "peak oil" is like divorce court, he said, she said, and somewhere between lies the truth. Stay tuned, more to come, no flipping...
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
During a liquidity bubble, sensational claims (e.g., “the world is running out of raw materials” or “1.3 billion Chinese soon consume like Americans”) tend to proliferate, juicing up the prices of oil and other natural resources. These have almost always turned out to be false.
Oil prices have averaged twenty-three 2003 dollars per barrel since 1861, when oil was first sold as a commodity, similar to the average price of twenty-six 2003 dollars per barrel over the past 50 years.
Current oil prices are still half as high as their average during the oil shock in the late 1970s, which caused a global downturn. The OECD economies are much less dependent on oil, and current prices are not very high relative to their income. They should be able to cope with current or even higher oil prices. China, however, is a different story, and it is driving oil prices today.
See: Oil Bubble
From CERA in Cambridge, MASS:
CERA believes there will be no “peak oil” problem before 2020. However, sometime beyond 2020 an inflexion of sorts will occur, but it will not be followed by a precipitous decline in productive capacity.
The "peak oil" scenario will play out much differently then the oil controlled media hype would lead you to believe, as a step change in investment occurs and new technology is pumped into exploration, field upgrades, stranded gas, and heavy oil projects in a manner quite unlike any other period in the history of the oil industry.
At the inflection time around 2020 CERA believes that the worldwide capacity profile will track an “undulating plateau” for a number of decades before starting to decline more slowly than might be thought today.
Despite current fears that oil will soon “run out,” global oil production capacity is actually set to increase dramatically over the rest of this decade.
As a result, supply could exceed demand by as much as 6 to 7.5 million barrels per day (mbd) later in the decade, a marked contrast to the razor-sharp balance between strong demand growth and tight supply that is currently reflected in high oil prices hovering around $60 a barrel.
In a rigorous new field-by-field, bottom-up analysis of the world’s capability to produce hydrocarbon liquids, Worldwide Liquids Capacity Outlook To 2010 — Tight Supply Or Excess Of Riches, CERA indicates that worldwide capacity could rise by as much as 16 mbd between 2004 and 2010 - a 20 percent increase over the period.
“We expect supply to outpace demand growth in the next few years, which would take the pressure off prices around 2007–08 or thereafter and even lead to a period of price weakness,”
“Following development of the current worldwide inventory of major discoveries, we also foresee far more capacity expansion in the medium term from field upgrades than through exploration.”.
Cambridge Energy Research Associates Report
So we again address economies of scale, and sensationalized claims. In addition, Morgan Stanley believes the Chinese are driving prices to a certain extent by their willingness to pay any market price.
And we also make a case for Mish's contention that oil really isn't that expensive, relatively speaking and we are seeing Jevon's Illogical Paradox at work, more on this later.
In addition, CERA's findings contradict the pessimistic Malthusian outlook of "peak oil" theorists. Arguing "peak oil" is like divorce court, he said, she said, and somewhere between lies the truth. Stay tuned, more to come, no flipping...
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
Comments