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Monday Message Board

March 21st, 2005

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. Discussion starter: What did you do for the Easter holiday? Civilised discussion and no coarse language, please.

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  1. Andrew Reynolds
    March 23rd, 2005 at 10:35 | #1

    wbb, ender – please understand this. There is no global shortage of oil – there is plenty of it left for years to come and in enough locations that if a few have problems (more than likely to occur) the others can take over. The problem at the moment results from the very low price we have been paying for oil over the last couple of decades – underinvestment. The problems are in distribution and refining, not an absolute shortage of oil.
    Even if all the oil somehow disappears there are close substitutes that can be brought on stream quickly – gas, ethanol, methanol amonsgt others.

  2. March 23rd, 2005 at 10:39 | #2

    Ender, you have the direction of causality wrong on German oil. When they lost, they were cut off from fuel (mostly Rumania).

    Hitler disagreed – correctly – with his generals advocating strategic retreats in 1943/4 on the grounds that “the trouble with my generals is that they don’t understand economics”. Hitler knew perfectly well that he couldn’t retreat past his oil resources.

    The result was, if Hitler had listened to his generals and not issued his stand fast order in 1943, your reasoning would have been sound. They would have lost from lack of oil, a year earlier. But as it was they lost their oil because they lost the war, a few months before the end.

  3. March 23rd, 2005 at 10:41 | #3

    wbb
    You make a very good point – war. 80% of China’s oil is shipped through the Straits of Malacca. Guess who controls that waterway – the USA . China is desperate to modernise its Navy so that it can control its choke points. I foresee a war just on our doorstep. Who knows what weapons the USA and China/Russia will use to secure the last drops of oil.

    Cameron
    Pebble-Bed reactors are reputed to be safer and on the surface NP is not scary. It is only when you delve into the depths of storing waste and controlling the spread of nuclear material does it become murky. No human institution has lasted more than 1000 years. Yet we produce material that has to be kept seperate from humans for 20 or 30 thousand years. Assuming the humand race survives, in 5000 years the USA and our society could well be a legend told to children as fables much like Atlantis is today. How do we ensure that the waste sites are marked so that in 10 000 years people still keep away from them. One scientist tasked with thinking of a way only came up with an Atomic Priesthood that passed the knowledge in a series of religious taboos. Not very encouraging.

  4. March 23rd, 2005 at 11:16 | #4

    Andrew
    You are right in one sense. There is plenty of oil left – but you misunderstand the problem. The problem is not the amount of oil but whether this amount can meet rising demand. Currently the average Chinese uses the equivalent of 664kg of oil per year – we use about 5341kg per year. China and India are growing fast and if they approach our level of development the current oil reserves of 1000 billion barrels will dwindle very quickly. Current usage is 80 million barrels per day. If China and India and others significantly increase their demand then this 80 million barrels per day could skyrocket to 200 or 300 million barrels per day. Do the maths for 200 million barrels per day and see how long the oil lasts.

    Read list article http://msnbc.msn.com/id/5945678/

    The main problem is not lack of oil but vastly increasing demand as others that look at our lifestyles and want the same.

    Sources
    http://www.alsagerschool.co.uk/subjects/sub_content/geography/Gpop/HTMLENH/stats/ene.htm
    http://www.eia.doe.gov/emeu/iea/table81.html

  5. Andrew Reynolds
    March 23rd, 2005 at 11:47 | #5

    Ender,
    To me, your links prove my point. Even if there was an immediate jump to 200,000,000 bpd consumption (not possible), no new reserves found or new extractive technologies developed (unlikely) and using the most pessimistic figures presented we still have a bare minimum of 14 years left. Using any logical assumptions about China’s and India’s growth blows that out to about 30 years. Long before then there will be a drop in comsumption of oil as the price gradually increases, perhaps by shifting to LNG for power production and to fuel our cars. The natural gas reserves are much larger and better spread than oil.
    Thanks for the links, I will use them in future to prove my point.

  6. March 23rd, 2005 at 12:49 | #6

    I glad that you see the links as a positive. Most people would see this as a crisis not reassurance.

    There is no evidence that increasing oil prices will cause a drop in demand. This is an assumption based on classical economics which does not apply in the real world. Long before we get to the last drops of oil there will be conflict to secure oil supplies.

    Your assumption is only correct if the number of people consuming oil remains constant. The ‘new’ consumers of oil are increasing so despite increasing prices the overall number of consumers will rise increasing demand. There are 1000 million people in China and 900 million in India.

    If what you say is true then there should have been a drop in demand as oil prices rose from USD25.00 per barrel to USD57.00 a barrel. No such drop has been observed as far as I know. Therefore it is reasonable to assume that even if oil prices get to USD80.00 per barrel then there still will not be a drop in demand as millions of new consumers will be added to the demand. Demand could exceed 200 million barrels per day. 1000 million new people using 1 extra barrel per day is a billion barrels per day. Even if the only 10% of China and India’s population use 1 more barrel per day then that is an increase of 190 million barrels per day. This gives you an idea of the problem.

  7. Andrew Reynolds
    March 23rd, 2005 at 13:16 | #7

    Ender,
    Demand for oil is, I agree, inelastic in the short term. It takes time (and money) for people to convert their cars and power stations away from oil to the alternatives and a doubling in a year of the price, for clearly transitory reasons, is not enough, but it may slightly accelerate the rate. People just substitute other consumption to pay the higher price in the short term.
    In the long run, however the picture changes greatly. Per unit of GDP demand for oil has more than halved in developed countries since the 1970′s oil shock and this process is continuing, partially driven by tax changes and greenhouse fears. This tranfer rate will simply increase as the price rises as supplies deplete.
    Markets around the world have dealt with resourse depletion innumerable times before.
    I would contend that long before the last barrel of oil is pumped the world generally will have ceased to notice what the oil price is and the closing of the last well will only be a note of interest at the bottom of some bloggers page somewhere in the distant future.

  8. March 23rd, 2005 at 14:05 | #8

    Andrew
    For all our sakes I sincerely hope you are right.

  9. March 30th, 2005 at 00:40 | #9

    May I recommend this article dated 9 March 2005 to interested parties
    US report acknowledges peak-oil threat

    It’s about a US government report whose conclusion is “the world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary”.

  10. Andrew Reynolds
    March 30th, 2005 at 10:17 | #10

    WBB,
    I seem to remember a previous report, put out in the 1970′s along the same lines. I will try to dig it out – not sure it is online.

  11. April 1st, 2005 at 00:56 | #11

    Club of Rome? The Limits To Growth? Turns out that that report is being shown to have underestimated the problem.

    It is clear that the skeptics and scoffers of the Club of Rome’s The Limits to Growth got the real message of The Limits to Growth wrong, at least from an energy perspective. They turned out to be as wrong about The Limits to Growth as they were wrong about the entire energy picture as the 20st Century came to a close. These name-plate energy economists ended up spending too much time criticizing this work and attributing doomsday dates that were never even part of this written work. They then spent far too much time pontificating on how energy was gradually becoming less important to the wonders of a New Economy and would obviously cost less as time went by.

    Instead of rolling up their collective sleeves to begin addressing serious energy issues, these kibitzers spent their precious hours attacking the few voices of energy sanity. Over the years, the energy economists’ incorrect dismissal of this important work was not only a mistake but their criticism also turned somewhat mean-spirited and at times even shrill! What a sad conclusion for such a well-intended work to finally produce.

    Lurking in the backdrop of this silly, misinformed chirping was a body of statistics, all in the public domain, that were proving that many of the key issues raised by The Limits to Growth were not only serious,but the magnitude of the problem was growing as the gap between the rich and the poor widened and the poor population expanded at a much faster pace than the rich.

    Perhaps the ultimate irony capping all the other mistakes which too many energy planners made as the 20th Century came to an end is that the work they lambasted so viciously turned out to be true.

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