Sep 072011
James Quinn writing about the lack of oil price declines in the face of a recession:
It would probably be a surprise to most people that U.S. oil consumption today is at the same level it was in 1997 and is 10% lower than the peak reached in 2005. This is not a reflection of increased efficiency or Americans gravitating towards smaller vehicles with better mileage. Americans are still addicted to their SUVs and gas guzzling luxury automobiles. It’s a reflection of a U.S. economy that has been in a downward spiral since 2005.
1996 18,476.15 3.89 % 1997 18,774.07 1.61 % 1998 18,946.01 0.92 % 1999 19,603.83 3.47 % 2000 19,717.92 0.58 % 2001 19,772.60 0.28 % 2002 19,834.31 0.31 % 2003 20,144.82 1.57 % 2004 20,833.01 3.42 % 2005 20,924.36 0.44 % 2006 20,803.93 -0.58 % 2007 20,818.37 0.07 % 2008 19,563.33 -6.03 % 2009 18,810.01 -3.85 %
If the U.S. isn’t driving oil demand in the world, then why are prices going up? There are three main factors:
- Dramatic increase in demand from China and other developing countries.
- A plunging U.S. Dollar
- Peak oil has arrived
The other factor for us trading commodities on world market: the middle east situation is unstable and volatile!this always raises the price of oil!
It is implied that possibly further down the line:if things deteriorate: oil production and shipping will be disrupted
This is a strong probability :libya is already “out”presently.
Economists and pundits and theorisrts don’t like to factor in war.
However in the real world of day t day business one HAS to calculate ahead for disruption
Peak oil is not about government restrictions on drilling. It is the idea that fossil fuels are running out and need to be replaced with alternates, soon. It is an argument that is used to support more government subsidies of non-economic substitutes for oil and gas. It is not supported by the facts.
I agree. But I was trying to apply charitably the term to the post instead of saying it loses all credibility. Often a writer gets most everything right but still has a glaring error. Perhaps the error is really in the title itself: “Oil prices should be declining” — i.e., if all conditions were different, it should be going down; but they aren’t different, they are what they are: we do have growing demand in the emerging markets, we do have dollar devaluation, and the US does have a growing need to import because of a decline in domestic production. My personal view of the matter is that oil is cheap now, and its going to go up, much much higher, because of the very conditions that we are faced with. If, e.g., that oil pipeline is built from the Canadian prairies to the West coast, be sure that the US midwest will be paying Brent prices ($113 vs. $86 for WTI) for crude because the Canadian crude will suddenly be wide open to the world market.
Ironically, peak oil advocates seem often to be the same people who try to stop oil production, presumably as means of rationing–but more often because they are anti-capitalists in the first place. It becomes a vicious circle or a self-fulfilling prophecy.
I agree with your post and you state the very reason for my strong negative response to Monty re peak oil. It is a charlatan tactic used by statists to justify destructive government intervention. Monty runs a fantastic site which espouses free market approaches, not government intervention and coercion. The idea of peak oil is counter to all Monty preaches.
The credibility of this post is completely wiped out with the totally laughable assertion about peak oil. This piece of ignorance is beneath you, Monty.
It depends on what is meant by “peak oil”. If it means the inability to produce sufficient oil for the world, then I agree with Kent. But if supply not keeping up with demand, then it is essentially correct. The Obama administration has actively sought to diminish supply with the Gulf coast moratorium being a chief instrument. But then leftists are trying to end fracking and oil sands production as well. Canada is producing the largest portion of the imported in the US. I’m for building East-West pipelines (instead of North South to the US). East, so we can use our own Western crude in Ontario and in the Atlantic provinces, and West, so that we can put it on a boat to China.
Peak oil never has to happen because unconventional heavy oil resources are virtually inexhaustible, at least for the foreseeable future. One should take into consider new techniques for producing heavy oil, such as THAI by Petrobank, for these techniques will increase the world’s usable oil reserves by several multiples.
Peak Oil refers to the cost of obtaining oil to it’s value. If oil is pumping out of the ground, it is cheap to get. If you need to go through government red tape, build billion dollar oil rigs and drill thousands of feet, oil cost go up. Basically, the easily accessible half of the world’s oil supply has already been collected, so what is left is more costly. That’s what I believe he is referring to.