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Jan 3, 2008

Oil Surpasses $100 Per Barrel

Posted by in categories: geopolitics, sustainability

Peak OilIn an upward spurt that has been long predicted by the more realistic analysts, oil has finally broken through the triple digit threshold. While some experts maintain that this number is little more than a psychological barrier and has little real-world importance it is an inescapable fact that oil prices themselves have actually increased approximately 73% in the past year.

This price increase alone should be a call to action sufficient to bring us to a state of alert yet it appears that the general population remains relatively complacent in the face of this looming crisis. It should be noted by those of us more aware of the ramifications of peak oil and the impending oil supply shock that such a drastic reduction in oil availability represents one of the clearest and most present threats to the stability of a global peace and the longevity of mankind.

As with all threats of a global nature, the Lifeboat Foundation will continue to monitor news related to oil reserves, prices, supply and of course replacement technologies and continue to provide information, perspective and solutions.

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Comments — comments are now closed.

  • James D. Miller on January 3, 2008 7:18 pm

    This is one concern that the lifeboat foundation should ignore because markets would do an excellent job of responding to any oil supply shock.

  • oliver.starr on January 3, 2008 9:27 pm

    James,

    With all respect I beg to differ. While I don’t disagree that markets have the potential to absorb a certain amount of supply shock we’re not talking about a transient supply/demand issue here but a permanent and catastrophic decline (ultimately towards zero) of available oil.

    Even now it is plain to see the geopolitical gamesmanship taking place on the global chessboard as we begin to set up for the final moves of the end of the age of oil. Knowing that absent religious ideology, virtually all global conflict has been rooted in competition for limited resources, and knowing too that the global economy is currently inextricably tied to oil supply and demand, it seems to me that far from being a topic that should be ignored by the Lifeboat Foundation, our dwindling oil supply ought to be at or near the forefront of the threats we monitor.

    In fact, it seems to me that there are (aside from a massive NEO impact) few threats to humanity so clearly plausible in the near term nor so readily impacted by the work of enlightened minds and brilliant research.

  • James D. Miller on January 4, 2008 2:14 pm

    People not raw materials are the most important resource of an economy. In fact there is some evidence that having large amounts of natural resources harms an economy. (See “The curse of Natural Resources” Sachs and Warner, 2001.)

    It is impossible for the quantity supplied of oil to go to zero because as oil becomes more scarce its price goes up causing less oil to be consumed.

    Also, it’s not oil that matters but energy. And there is plenty of coal, shale oil , geothermal power, uranium, and solar energy for humanity to consume for the next 1000 years.

    If there was going to be an energy crisis the free market is the perfect mechanism to deal with it.

    The Exxon-Mobil company is worth about $512 billion. The market therefore must not believe that we are about to run out of oil.

  • oliver.starr on January 8, 2008 8:16 am

    James,

    Once again I think you are underestimating the importance of oil to global energy production as well as the likely reaction to a demand that vastly exceeds available supply.

    While I agree in principal that in a free market system scarcity will cause prices to increase until they are sufficient to destroy demand this assumes that demand is discretionary and not essential.

    We are decades away from seeing a global replacement for hydrocarbon powered vehicles and this alone will create a likely crisis situation at a certain point in time.

    It is obvious that we didn’t go to Iraq to beat up on Al Qaeda or to Afghanistan either. As you probably well know these were moves to position the US to dominate this region in order to control the large stores of oil and natural gas in the area.

    If we are already behaving in this aggressive fashion when there are still substantial supplies accessible in the ground via conventional methods, is there really any argument as to what we’re likely to do when supplies truly become limited?

    As to the market cap of Exxon, the company had its most profitable year in history and sits on contracts that guarantee a minimum average production for the next decade; with the likely increase in price and the federal incentives that allow the company to tack on massive profits, it is no wonder the market cap is so massive. In other words they’ll get it while the getting is good and pay no mind to tomorrow. After all, the company doesn’t even spend a billion annually on research and development of alternate energy supplies…

  • James D. Miller on January 8, 2008 9:53 am

    Oliver,

    You wrote “While I agree in principal that in a free market system scarcity will cause prices to increase until they are sufficient to destroy demand this assumes that demand is discretionary and not essential.”

    No it doesn’t. Markets work even with essential goods. Nothing in supply and demand analysis relies on a good being essential or non-essential. Economists don’t even bother distinguishing between essential and non-essential goods because we don’t think the term essential goods has much meaning. Because oil is a commodity market mechanisms work BETTER for oil than they do for most other goods.

    You wrote “It is obvious that we didn’t go to Iraq to beat up on Al Qaeda or to Afghanistan either. As you probably well know these were moves to position the US to dominate this region in order to control the large stores of oil and natural gas in the area.”

    This is not obvious to me. Our occupation of Iraq has not given us any advantage in the oil market.

  • oliver.starr on January 10, 2008 6:06 am

    James,

    You are making it abundantly clear that your expertise is in economics and far exceeds my own. I am clearly not qualified to argue economic theory and the nature of free markets with you. However, that does not mean that you are correct by any stretch of the imagination. Your entire economic model (and even your argument about essential vs. non-essential items and how valid that distinction may be) simply will not hold up when a country’s entire economy is on the precipice of disaster because of a looming energy crisis.

    I quote:

    Michael Meacher, Member of the British Parliament, former member of Tony Blair’s cabinet

    http://politics.guardian.co.uk/iraq/comment/0,12956,1036687,00.html
    “This war on terrorism is bogus: The 9/11 attacks gave the US an ideal pretext to use force to secure its global domination“
    Michael Meacher, Saturday September 6, 2003, The Guardian

    Was this inaction [the Air Force “stand down”] simply the result of key people disregarding, or being ignorant of, the evidence? Or could US air security operations have been deliberately stood down on September 11? If so, why, and on whose authority? The former US federal crimes prosecutor, John Loftus, has said: “The information provided by European intelligence services prior to 9/11 was so extensive that it is no longer possible for either the CIA or FBI to assert a defense of incompetence.” .…
    .… the so-called “war on terrorism” is being used largely as bogus cover for achieving wider US strategic
    geopolitical objectives. .…
    The 9/11 attacks allowed the US to press the “go” button for a strategy in accordance with the PNAC agenda which it would otherwise have been politically impossible to implement.
    The overriding motivation for this political smokescreen is that the US and the UK are beginning to run out of secure hydrocarbon energy supplies. By 2010 the Muslim world will control as much as 60% of the world’s oil production and, even more importantly, 95% of remaining global oil export capacity. As demand is increasing, so supply is decreasing, continually since the 1960s. .…
    The conclusion of all this analysis must surely be that the “global war on terrorism” has the hallmarks of a political myth propagated to pave the way for a wholly different agenda — the US goal of world hegemony, built around securing by force command over the oil supplies required to drive the whole project.

    In the end we may just have to agree to disagree but I simply don’t think you are seeing this situation realistically in spite of (or perhaps because of) your education and associated bias towards the idea that a free market economy will constantly move towards a supply/demand homeostasis. Consider the simple fact above that by 2010 60% of global oil production will be controlled by the Muslim world.

    Are you really going to try and tell me that if this group as a whole were to elect to curtail or even completely refuse the US oil imports that we would not use our military to secure access? I think you need to look at the bigger, global picture to see where I am coming from and understand exactly why I feel that oil scarcity is a very real threat and one that absolutely deserves the attention and mental energy of the LIfeboat Foundation as a major potential threat.

  • Edward Greisch on January 11, 2008 12:06 am

    You are complaining about the rabbit in the living room and ignoring the elephant. Global warming will make civilization fall sooner and quite probably cause the extinction of our species, Homo Sapiens. It isn’t oil that you should worry about. Worry about CO2 production. Would the extinction of the human race and almost all mammals have an economic impact? Did you notice the drought in Georgia? It is worldwide at that latitude. The drought will spread, ending food production and civilization. 99.99% of us will die of that alone, not waiting for the coming extinction event. The extinction event is like the End-Permian and 2 other mass extinctions caused by global warming. Warm oceans can’t dissolve enough oxygen, fish die and are decomposed by sulfur bacteria. The sulfur bacteria will make enough H2S to kill everybody. Global Warming is therefore the ONLY problem, not just the only environmental problem, worthy of attention at this time; except for the problem of escaping from Earth and setting up a self-sustaining colony on Mars, just in case. See the chart on page 274 of “Six Degrees” by Mark Lynas. We have until 2015 to BEGIN REDUCING our total CO2 output and we have until 2050 to actually reduce our CO2 output by 90%. The only technology we have right now to replace coal fired power plants is nuclear power plants. I like solar, wind, hydro, and geothermal, but all of them together cannot replace the base load capacity of coal. Sorry, but nuclear is the only option. If we don’t follow the schedule in Six Degrees, we will encounter positive feedbacks which will take the control of the climate out of our hands.

    References:
    Books: “Under a Green Sky” by Peter Ward

    “Six Degrees” by Mark Lynas. See a summary at
    http://www.marklynas.org/2007
    /4/23/six-steps-to-hell-summary
    –of-six-degrees-as-published
    –in-the-guardian

    “The Long Summer” by Brian Fagan

    “Collapse, How Societies Choose to Fail or Succeed” by Jared
    Diamond. Rated R: Cannibalism has been proven to happen in when societies fail.

    “Environmentalists for Nuclear Energy”, by B. Comby
    English edition, 2001, 345 pp. (soft cover), 38 Euros
    TNR Editions, 266 avenue Daumesnil, 75012 Paris, France;
    ISBN 2−914190−02−6
    order from: http://www.comby.org/livres/livresen.htm
    Read a review of this book by the American Health Physics
    Society at:
    http://www.comby.org/media/
    articles/articles.in.english/
    HealthPhysics-NUC-July2002.htm

    Articles: http://www.sciam.com/article.
    cfm?articleID=00037A5D-A938-150E–
    A93883414B7F0000&sc=I100322

    http://www.geosociety.org/meetings
    /2003/prPennStateKump.htm

    http://www.astrobio.net/news/
    modules.php?op=modload&
    name=News&file=article&sid=672

    http://www.astrobio.net/news/
    modules.php?op=modload&
    name=News&file=article&sid=1535

    http://www.astrobio.net/news
    /article2509.html

    http://astrobio.net/news/modules
    .php?op=modload&name=
    News&file=article&sid=2429
    &mode=thread&order=0&thold=0

    Reliable information URL:
    http://www.world-nuclear.org/

    32 nations representing 2/3 of humanity have nuclear power
    plants, only 9 nations have nuclear bombs.

    The Canadian Candu reactor runs on UNenriched uranium. That
    means that the expensive enrichment process can now be skipped
    by everybody who buys a reactor or technology from Canada.

  • oliver.starr on January 11, 2008 3:00 am

    Edward, actually my principal motivation for my involvement with the LIfeboat Foundation is my concerns about global warming.

    However, Oil pales in comparison to the threat caused by the use of dirty burning coal fired power plants, especially in developing countries.

    If you haven’t yet seen it I urge you to check out John Doerr’s speech at TED last year: http://www.ted.com/index.php/talks/view/id/128

    You should also check out AERO, the Advanced Energy Research Organization: http://www.aero2012.com/en/index.html

    Regards,

    Oliver Starr

  • Matt John on January 14, 2010 9:13 pm

    The price of petroleum as quoted in news generally refers to the spot price of either WTI/Light Crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, cissp training, Oklahoma, or of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe. The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content, and its location. The vast majority of oil is not traded on an exchange but on an over-the-counter basis.[citation needed] Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its “world oil price”.

    The demand for oil is highly dependent on global macroeconomic conditions. According to the International Energy Agency, high oil prices generally have a large negative impact on the global economic growth. Others[who?] argue that the run-up in oil prices over the past few years actually led to an acceleration in global growth. The huge surpluses built up by oil exporting countries were recycled through sovereign wealth funds and the banking system and (through the money multiplier) greatly increased investments in emerging markets and helped hold down interest rates in the U.S.

    The Organization of the Petroleum Exporting Countries (OPEC) was formed to control the price of oil, and essentially worked as a cartel.

    Oil price has undergone a significant decrease since the record peak it reached in July 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the global financial crisis began, and has been trading between US$35 a barrel and US$82 a barrel in 2009.