The next big economic blow?

[Eddie Dane]

The current crisis was in the cards.

In 2005 I'd already read numerous articles about the chain reaction that could be caused by falling housing prices.

So I guess it was kind of hard to miss to those who were looking. (It was nearly impossible to time, though)

Now, my question:

Is there -in your opinion- another big economic disaster in the works?
I'm talking about an elephant-in-the-room-obvious weakness now built into the system.

Are the rescue packages that Western governments us to save banks and institutions so big that it could cause strong inflation? Something else?

[drkitten]

Is there -in your opinion- another big economic disaster in the works?
I'm talking about an elephant-in-the-room-obvious weakness now built into the system.

Are the rescue packages that Western governments us to save banks and institutions so big that it could cause strong inflation? Something else?

The right-wing economic nutcases will provide you with thousands of examples. How credible they are is up to you to evaluate, of course.

For example, inflation. Yes, it's certainly possible that if the stimulus is too long and too persistent (i.e. if the government does not cut back on stimulus spending when the economy recovers, and if the Fed doesn't raise interest rates), the United States could end up in a bout of extreme inflation. This, however, doesn't appear to be likely to most economists; the major threat to the economy right now is deflation, so a bout of mild inflation would actually be a Good Thing.

The increasing debt is also (according to the same nutcases) supposed to lead to a loss of sovereignty as China gains the ascendancy over the US by buying all our T-bonds. It's not clear how this is supposed to happen -- bondholders have no authority, and if China decided for whatever reason to cause an economic panic by dumping bonds, they'd destroy their own economy first.

Increasing government involvement in the economy in general and in large companies in particular is supposed to destroy the economy. Again, it's not clear how a government takeover is supposed to make GM and AIG perform any worse, but there you have it.

So, no, I don't think there are any elephant-in-the-room problems at the moment. The economy is fragile and it's certainly possible for misguided policy to drive it off a cliff, but that's almost always true. And it looks like the policy makers are doing the right thing right now and NOT driving it off a cliff.

[lomiller]

The next economic crisis will be energy costs, at least in much of the US. Too much of the countries infrastructure is poorly designed to handle high energy costs.

The recession has taken off some of the pressure, but a return to economic growth will send oil back up. As China/India move towards higher standards of living and more consumerism their energy use will increase. I don’t see how supply can keep up with demand growth so the price of driving around is going to keep going up and because you really don’t have a choice in many US cities oil use is going to stay high and it’s going to keep fueling large trade deficits that are unsustainable in the long run.

[Eddie Dane]

The right-wing economic nutcases will provide you with thousands of examples. How credible they are is up to you to evaluate, of course.

For example, inflation. Yes, it's certainly possible that if the stimulus is too long and too persistent (i.e. if the government does not cut back on stimulus spending when the economy recovers, and if the Fed doesn't raise interest rates), the United States could end up in a bout of extreme inflation. This, however, doesn't appear to be likely to most economists; the major threat to the economy right now is deflation, so a bout of mild inflation would actually be a Good Thing.

The increasing debt is also (according to the same nutcases) supposed to lead to a loss of sovereignty as China gains the ascendancy over the US by buying all our T-bonds. It's not clear how this is supposed to happen -- bondholders have no authority, and if China decided for whatever reason to cause an economic panic by dumping bonds, they'd destroy their own economy first.

Increasing government involvement in the economy in general and in large companies in particular is supposed to destroy the economy. Again, it's not clear how a government takeover is supposed to make GM and AIG perform any worse, but there you have it.

So, no, I don't think there are any elephant-in-the-room problems at the moment. The economy is fragile and it's certainly possible for misguided policy to drive it off a cliff, but that's almost always true. And it looks like the policy makers are doing the right thing right now and NOT driving it off a cliff.

Ironically I picked up on the impending credit crisis when I was stuck in the disastafari peak oil panic echo chamber.

The credit crisis seemed a very likely scenario, and even after I grew out of BS stories from the alternative news sites (thanks JREF!), it still seemed like a logical analyses.

Now that the credit crisis has come to pass, I'm curious if it isn't just the first in string of dominos. With a logical next one to fall.

I fully expect to get my share of survivalist nutbaggery, but I know the posting history of many here.

Thanks for the warning though.

[Francesca R]

Now that the credit crisis has come to pass, I'm curious if it isn't just the first in string of dominos.Well (if you like storytelling) no, it can be verifiably said to not be the first in a string of dominos because it supposedly followed from over-easy central bank policy which followed from the prior equity-market-related wealth tumble which followed from the bull-market fuelled by imported disinflation from Asia which followed from the latter region's weak-exchange-rates which followed from the late 1990s East Asia currency and debt crisis which followed from [ . . . ]

I don't remember many 2005 articles that foretold that the eventual outworking of falling house prices (not that they were falling then) would be global growth changing from +4.5% to -2.5% in the space of a year, so I think magnitude as well as timing was not known in advance.

[geni]

Real estate crash 2.0 is still on the cards. Banks are holding a lot of houseing stock and are being less than honest about it's value. This has the protential to cause problems. Commercial property loans also have the potential to do suffer some serious failures.

Anything signficantly damageing China or India's economic growth (political instability say) has the potential to cause issues.

Financial derivatives may still have the potential to do damage that makes the AIG mess look trivial.

Any common error in the various algorithmic trading programs around has the potential to cause short term chaos although in theory medium term damage should be limited.

A switch in the use of the dollar for oil tradeing has the potential to cause issues.

[quarky]

The next big bubble, which will surely pop in time, could be carbon trading.

[JihadJane]

Tops of the Pops:


Commercial Real Estate Bubble

Bail-Out Bubble

Stock Market Bubble

[stilicho]

Real estate crash 2.0 is still on the cards. Banks are holding a lot of houseing stock and are being less than honest about it's value.

At this point it might be helpful to provide an example. Are these regional US banks? Banks in Myanmar? And what sort of "houseing stock"?

[Hindmost]

It might be a big drop in the dollar.

glenn

[Puppycow]

I keep hearing that commercial real estate is the "next shoe to drop."

Retail sales (http://www.nytimes.com/2009/08/14/business/14markets.html?scp=1&sq=retail%20sales&st=cse) are still very soft, and if retailers go out of business then they won't pay their rent and property owners may not be able to repay their loans.

I also wonder what will happen when China's high growth era ends. I don't know when it will end, but I assume it will eventually. Japan's era of high growth lasted about 2 decades and ended with the energy crisis of the 70's.

[Speculative]:
Economic collapse due to obesity epidemic.
Persistant high unemployment due to rapid progress of technology and productivity growth, less need for menial labor. (This would have good implications too, of course).

[JihadJane]

Peak Oil

[stilicho]

Peak Oil

Holy ****, JihadJane, you're right!

Here's a moron who agrees with you:

http://www.lifeaftertheoilcrash.net/

There are a large number of other mentally ill people cited there and you should use them in more of your funny one-liners here.

Can't wait!

[timhau]

It might be a big drop in the dollar.


Compared to what? You guys aren't the only ones doing quantitative easing.

[applecorped]

The next big economic blow?

Monica Lewinsky returns as an intern?

[Hindmost]

Compared to what? You guys aren't the only ones doing quantitative easing.

The Euro mainly...might cause OPEC to reconsider pricing oil in dollars.

glenn

[Hindmost]

Holy ****, JihadJane, you're right!

Here's a moron who agrees with you:

http://www.lifeaftertheoilcrash.net/

There are a large number of other mentally ill people cited there and you should use them in more of your funny one-liners here.

Can't wait!

Check with the sane people then.

http://dieoff.org/page140.htm

glenn

[JihadJane]

Eastern European countries default, starting with Hungary.

[soylent]

caveat emptor:

Commercial real estate will tank, as it often follows housing.

Parts of eastern Europe took out loans in a foreign currencies and if their currencies continue tanking there will be a severe meltdown. Many western European banks will fail as a result.

Many US banks are insolvent and should have been shut down a year ago. They are hiding junk in level 3 assets(mark-to-fantasy accounting) and deliberately avoiding forclosures so they delay the recognition of losses.

The FDIC is supposed to take over a bank before it takes _any_ losses.The FDIC has been taking 10-50% losses on almost every single failed bank (http://www.calculatedriskblog.com/2009/08/failed-bank-list-including-percent.html). The FDIC will be bailed out; if grandma loses her life's savings in a supposedly insured account it will result in civil unrest on a large scale.

Interest rates on US treasuries will go up and Bernanke will refuse to continue monetizing the massive amounts required to depress them; government will be forced to cut services, probably starting with stimulus projects and military spending. The greenshots nonsense will stop and the banks that are trying to earn their way out of insolvency under the cover of fraud will fail.

The various economic stimulus plans in the US, Europe and China will be spent without much to show for it when they stop or are forced by fisical constraints to stop. We'll enter a Japan style malaise that won't end until the fraud is stepped down on hard and confidence returns to the markets. Fraud is absolutely rampant, e.g. see this talk (http://www.informationclearinghouse.info/article23243.htm) by William Black, a senior regulator who came down hard on the banks during the savings and loans debacle.

[JihadJane]

Fraud is absolutely rampant, e.g. see this talk (http://www.informationclearinghouse.info/article23243.htm) by William Black, a senior regulator who came down hard on the banks during the savings and loans debacle.

Try telling that to drkitten. (http://forums.randi.org/showthread.php?postid=5022789#post5022789)




Peter Schiff: OIL is going well above $200 (http://thecomingdepression.blogspot.com/2009/08/peter-schiff-oil-is-going-well-above.html)

[funk de fino]

Try telling that to drkitten. (http://forums.randi.org/showthread.php?postid=5022789#post5022789)

Peter Schiff: OIL is going well above $200 (http://thecomingdepression.blogspot.com/2009/08/peter-schiff-oil-is-going-well-above.html)

Your uniformed Oil spam is becoming tedious.

[timhau]

But what, oh what do we do if the world doesn't end? What do I do with all this ammunition and beef jerky if there is no economic apocalypse?

[Eddie Dane]

But what, oh what do we do if the world doesn't end? What do I do with all this ammunition and beef jerky if there is no economic apocalypse?

Plinking and dog food, respectively.

[stilicho]

see this talk (http://www.informationclearinghouse.info/article23243.htm) by William Black, a senior regulator who came down hard on the banks during the savings and loans debacle.

http://www.law.umkc.edu/faculty/profiles/Black/black_cv.pdf

Your expert is a nobody who oversaw the winding down of operations everywhere he was.

[kevinquinnyo]

PuppyCow

[Speculative]:
Economic collapse due to obesity epidemic.
Persistant high unemployment due to rapid progress of technology and productivity growth, less need for menial labor. (This would have good implications too, of course).



Is the obesity thing a joke? Why would that cause economic collapse in any way? I'm having trouble even coming up with a loose correlation.

And, the technology causes collapse I always thought was silly. It sounds like make-work bias. There will always be jobs, and ways to turn money and labor into more money. It doesn't matter if we create robotic armies that do work for us, there will always be a demand for leisure and entertainment. (or something entirely new) The computer didn't destroy jobs, it actually created entirely new and thriving fields.

Think about how that is happening right now. We have all of these industries centered on entertainment and leisure, because we have more time for it.

If you are building a fence, you wouldn't break your power drill and go back to the old mechanical hand torque drill and hand saw instead of electric circular saw because of fear of finishing the job too quickly, so why would an economy be any different.

[mhaze]

....If you are building a fence, you wouldn't break your power drill and go back to the old mechanical hand torque drill and hand saw instead of electric circular saw because of fear of finishing the job too quickly, so why would an economy be any different.
Why do you not overcome this despicable weakness of rationality and get with the program?

[TriangleMan]

Credit card debt.

[JihadJane]

Is the obesity thing a joke? Why would that cause economic collapse in any way? I'm having trouble even coming up with a loose correlation.

And, the technology causes collapse I always thought was silly. It sounds like make-work bias. There will always be jobs, and ways to turn money and labor into more money. It doesn't matter if we create robotic armies that do work for us, there will always be a demand for leisure and entertainment. (or something entirely new) The computer didn't destroy jobs, it actually created entirely new and thriving fields.

Think about how that is happening right now. We have all of these industries centered on entertainment and leisure, because we have more time for it.

If you are building a fence, you wouldn't break your power drill and go back to the old mechanical hand torque drill and hand saw instead of electric circular saw because of fear of finishing the job too quickly, so why would an economy be any different.

Bread and circuses didn't save the Roman empire.

[Eddie Dane]

Please note,

I'm asking about current weaknesses in the economic system.
Not scenarios for the collapse of our civilization.

Although I expect some nutty theories, let's not go in that direction.

[JihadJane]

Harvard law professor and chair of the Congressional Oversight Panel, Elizabeth Warren, lays it out in lavender and tactfully explains why we're screwed:

"We've got a real problem coming in commercial mortgage ... 50-60% default rates."

VIDEO: http://economicedge.blogspot.com/2009/08/elizabeth-warren.html

[drkitten]

Harvard law professor and chair of the Congressional Oversight Panel, Elizabeth Warren, lays it out in lavender and tactfully explains why we're screwed:

"We've got a real problem coming in commercial mortgage ... 50-60% default rates."

VIDEO: http://economicedge.blogspot.com/2009/08/elizabeth-warren.html

And there are your nutty theories, right on schedule.

[JihadJane]

And there are your nutty theories, right on schedule.


You think Elizabeth Warren is a nutcase?

[drkitten]

You think Elizabeth Warren is a nutcase?

No, but I think only a nutcase could misinterpret her as you (and your out-of-context blogger) have.

[zaphod2016]

The right-wing economic nutcases will provide you with thousands of examples.

You rang?

Back in Fall '08 I was convinced that the bailouts were going to trigger a) the loss of our international credit rating, b) a collapse of the USD as the world fled to the Euro and c) eventual hyperinflation on par with the Weinmar Republic.

This assessment missed one critical point- the rest of the world was so dependent on our house of cards that they would have no genuine recourse anyway. China's economy is based on American imports; the Euro is connected to more national debt (as % of GDP) than the USD. We all jumped out of the plane at the same time- so long as no one looked down, the relative altitudes looked about the same.

Almost a year later, I was wrong on all counts: a) National debt, projected to hit $20T in 2020, is still AAA rated b) USD v. gold & Euro is down slightly, but nothing too dramatic. Gold hasn't broken $1k since the Q4 '08. and c) we have seen a mild deflation these past few months.

I couldn't have been more wrong.

However, as the OP writes:

So I guess it was kind of hard to miss to those who were looking. (It was nearly impossible to time, though)

It may turn out that my assessment was totally accurate- just off by a few years. Only time will tell.

[Aepervius]

Holy ****, JihadJane, you're right!

Here's a moron who agrees with you:

http://www.lifeaftertheoilcrash.net/

There are a large number of other mentally ill people cited there and you should use them in more of your funny one-liners here.

Can't wait!

Just out of curiosity do you believe the amount of oil is infinite ? Or renewed by an abiotic process ? Because if you agree that oil has been produced through a biologic raw material and a physical process , and is thus in finite quantity, then it follow by logic that oil will have a peak production and afterward production will drop and oil become expansive.

What is open is how much oil there is in total, and whether the peak will be in our lifetime, past us, or in 10, 100 or 1000 years (;)). Some aergue that we are at the peak and present argument. Contrary argument to the gist of "technology will evolve to allow us exploit new source" is wishful thinking (you CAN'T ever be sure such tech WILL appear).

My opinion, is that MAYBE oil might be a problem globaly, but for certain region on earth, potable water will be a quicker problem, and if the doom and gloom of global climate change are right, sooner or later coastal area will have a problem. I see to both a potential human crysis which then probably would provok an economic crysis.

Am I sure of my prediction. ? No way. But if I am right I wanna collect my million dollar ;).

[Hindmost]

Just out of curiosity do you believe the amount of oil is infinite ? Or renewed by an abiotic process ? Because if you agree that oil has been produced through a biologic raw material and a physical process , and is thus in finite quantity, then it follow by logic that oil will have a peak production and afterward production will drop and oil become expansive.

What is open is how much oil there is in total, and whether the peak will be in our lifetime, past us, or in 10, 100 or 1000 years (;)). Some aergue that we are at the peak and present argument. Contrary argument to the gist of "technology will evolve to allow us exploit new source" is wishful thinking (you CAN'T ever be sure such tech WILL appear).

My opinion, is that MAYBE oil might be a problem globaly, but for certain region on earth, potable water will be a quicker problem, and if the doom and gloom of global climate change are right, sooner or later coastal area will have a problem. I see to both a potential human crysis which then probably would provok an economic crysis.

Am I sure of my prediction. ? No way. But if I am right I wanna collect my million dollar ;).

Actually, I have had arguements discussions with a few on this board that believed oil is an infinite resourse and that abiotic oil is a proven reality.

The world is much closer to 10 years to peak oil than 100. Too much evidence...Russia is past peak production as is Mexico, Iran, the North Sea, the US and probably others. We are using 30 billion barrels of oil each year and not discovering sufficient deposits to keep production at current rates. With population growth, we will have to replace the energy--and that will be difficult.

glenn

[Yoink]

At this point it might be helpful to provide an example. Are these regional US banks? Banks in Myanmar? And what sort of "houseing stock"?

It was spelled that way on the van!

[Aepervius]

Actually, I have had arguements discussions with a few on this board that believed oil is an infinite resourse and that abiotic oil is a proven reality.

The world is much closer to 10 years to peak oil than 100. Too much evidence...Russia is past peak production as is Mexico, Iran, the North Sea, the US and probably others. We are using 30 billion barrels of oil each year and not discovering sufficient deposits to keep production at current rates. With population growth, we will have to replace the energy--and that will be difficult.

glenn

The only real evidence I see some source peaked is the official announcement from what i think was shell, that their production peaked. The rest are more speculation from what i can see.

[timhau]

Russia is past peak production

Where did you get this information?

[JihadJane]

No, but I think only a nutcase could misinterpret her as you (and your out-of-context blogger) have.

Are you a nutcase?

[Hindmost]

Where did you get this information?

Just time for a quick response...

http://www.eia.doe.gov/cabs/Russia/Oil.html

look at the table with depletion about 3/4 down the page

there is a possibility of more discovery, but the capsian sea has been disappointing so far.

glenn

[Hindmost]

The only real evidence I see some source peaked is the official announcement from what i think was shell, that their production peaked. The rest are more speculation from what i can see.

Please read this link I posted before...when I get time, I will provide more stuff.

glenn

http://dieoff.org/page140.htm

[funk de fino]

Actually, I have had arguements discussions with a few on this board that believed oil is an infinite resourse and that abiotic oil is a proven reality.

The world is much closer to 10 years to peak oil than 100. Too much evidence...Russia is past peak production as is Mexico, Iran, the North Sea, the US and probably others. We are using 30 billion barrels of oil each year and not discovering sufficient deposits to keep production at current rates. With population growth, we will have to replace the energy--and that will be difficult.

glenn

There is a difference between peak production and potential production. Russia's infrastructure and lack of investment/technology is holding them back from increasing production, not a lack of oil. Production around the world could be much higher.

The doomsayers who certain members here spout and link to are generally as clueless as the poster themselves. Ruppert for one.

[funk de fino]

Please read this link I posted before...when I get time, I will provide more stuff.

glenn

http://dieoff.org/page140.htm

If you do please bring more up to date stuff.

Scientific American, March 1998

[funk de fino]

recent piece on this

http://www.nytimes.com/2009/08/25/opinion/25lynch.html?_r=2

[Hindmost]

recent piece on this

http://www.nytimes.com/2009/08/25/opinion/25lynch.html?_r=2

The scientific american article still has resonable evidence...not much has changed. The definitions of certain terms are important...the concept of P90 reserves etc. People that tend toward the "free market" end of the spectrum tend to quote P10 reserves. The doomsayers quote the opposite.

Lynch is a really poor data point. He has a rose colored glasses attitude and seems to have difficulties with the laws of thermo. His article has been disputed by quite a few. However, even without looking at any research, his opinion has some disturbing issues. He states that the Saudis are pumping sea water into their fields to boost pressure. That type of enhanced recovery is only required when the field is past its peak. Previously, they only had to sink another well to get production up.

This is a reasonable response to his piece. Pay particular attention to the "net energy" section. This is important as the net energy return on oil shale and tar sands is just not very good--so when proved reserves of such is mentioned, it doesn't exactly translate to energy in the gas tank.

http://www.theoildrum.com/node/5711

http://www.theoildrum.com/node/2409

If we look at Prudhoe bay, it was developed in the 70s and was estimated to have about 20 billion of proven reserves. It hit peak production of about 2 million barrels a day in about 1981 and has been falling ever since. Key point it how it takes about 10 billion barrels of reserves to achieve one million barrels a day of production. The world is currently using about 80 million barrels a day and based on projections, that would ramp up to 107 million barrels in future along with the population. Without massive discoveries, keeping production high for a sufficient period of time to replace the energy will be essentially impossible. What concerns me is how we are going to 470 to 675 quads of energy in the next 20 years with oil and gas reserves probably going down.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

http://www.eia.doe.gov/oiaf/aeo/gas.html

Peak oil is a fact, the question is just timing. It may be now or may take another 20 years or more--that is still . About 85% of the energy use...and infrastructure is based on oil and natural gas. Replacing that will take time and be more difficult and cost intensive. If anything was cheaper..it would have been developed already.

I believe we need to reduce oil use about 1-2% each year over the next 30 years or so and replace it with some other type of energy for long term success of the planet. In the US, that type of "regulation" is tough to accomplish. There are too many people that believe that the free market will take care of it. Somehow, poor management of important resources is considered some type of virtue.

glenn

[JihadJane]

Michael Lynch was invited to debate Julian Darley of the Post Carbon Institute by Democracy Now in 2006:

http://www.oilempire.us/democracy-now.html

Scroll down to:

'April 28, 2006 - Democracy Now! finally mentions Peak Oil, but invites flat earther to discussion'


"If DN! invited a civil rights leader onto the show, they probably would not ask a member of the KKK to debate them -- that is the equivalent of asking an anti-environmentalist to debate whether Peak Oil is real or not when trying to profile the Post Carbon Institute."

[funk de fino]

The scientific american article still has resonable evidence...not much has changed. The definitions of certain terms are important...the concept of P90 reserves etc. People that tend toward the "free market" end of the spectrum tend to quote P10 reserves. The doomsayers quote the opposite.

Lynch is a really poor data point. He has a rose colored glasses attitude and seems to have difficulties with the laws of thermo. His article has been disputed by quite a few. However, even without looking at any research, his opinion has some disturbing issues. He states that the Saudis are pumping sea water into their fields to boost pressure. That type of enhanced recovery is only required when the field is past its peak. Previously, they only had to sink another well to get production up.

This is a reasonable response to his piece. Pay particular attention to the "net energy" section. This is important as the net energy return on oil shale and tar sands is just not very good--so when proved reserves of such is mentioned, it doesn't exactly translate to energy in the gas tank.

http://www.theoildrum.com/node/5711

http://www.theoildrum.com/node/2409

If we look at Prudhoe bay, it was developed in the 70s and was estimated to have about 20 billion of proven reserves. It hit peak production of about 2 million barrels a day in about 1981 and has been falling ever since. Key point it how it takes about 10 billion barrels of reserves to achieve one million barrels a day of production. The world is currently using about 80 million barrels a day and based on projections, that would ramp up to 107 million barrels in future along with the population. Without massive discoveries, keeping production high for a sufficient period of time to replace the energy will be essentially impossible. What concerns me is how we are going to 470 to 675 quads of energy in the next 20 years with oil and gas reserves probably going down.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

http://www.eia.doe.gov/oiaf/aeo/gas.html

Peak oil is a fact, the question is just timing. It may be now or may take another 20 years or more--that is still . About 85% of the energy use...and infrastructure is based on oil and natural gas. Replacing that will take time and be more difficult and cost intensive. If anything was cheaper..it would have been developed already.

I believe we need to reduce oil use about 1-2% each year over the next 30 years or so and replace it with some other type of energy for long term success of the planet. In the US, that type of "regulation" is tough to accomplish. There are too many people that believe that the free market will take care of it. Somehow, poor management of important resources is considered some type of virtue.

glenn

From your postings it is obvious you do not work in the oil industry eh? Not much has changed? Hilarious!!

Peak Oil is a red herring and a fancy woo woo for people like JJ to cling to. Everyone knows that the oil will run out. The world will not end and the humans race will go on.

If you really want to get a good idea of when the oil is close to running out then keep an eye on Oil service companies R&D budgets and projects. Till then stop worrying. You will be dead when it runs out.

[zaphod2016]

If you really want to get a good idea of when the oil is close to running out then keep an eye on Oil service companies R&D budgets and projects. Till then stop worrying. You will be dead when it runs out.

In your best estimate, how long do we have?

50 years?

100 years?

Over 100 years?

Being that this is how you make your living, I'm interested in your opinion.

[JihadJane]

In your best estimate, how long do we have?

50 years?

100 years?

Over 100 years?

Being that this is how you make your living, I'm interested in your opinion.

The destructive economic impact of Peak Oil is about the oil running out. It's when supply cannot meet demand.

[Hindmost]

From your postings it is obvious you do not work in the oil industry eh? Not much has changed? Hilarious!!

Peak Oil is a red herring and a fancy woo woo for people like JJ to cling to. Everyone knows that the oil will run out. The world will not end and the humans race will go on.

If you really want to get a good idea of when the oil is close to running out then keep an eye on Oil service companies R&D budgets and projects. Till then stop worrying. You will be dead when it runs out.

If I knew you were going to ignore/not read what I wrote and come back with a strawman, I wouldn't have taken so much time to provide the associated data. I did not post anything about the world ending or the human race along with it. I also did not post anything about oil running out. Did you read what I posted about Prudhoe bay? Just expand that to the rest of the planet and you will see what peak oil is all about.

As far as rig counts, I will provide you the site I used to follow the issue:

http://www.bakerhughesdirect.com/cgi-bin/bhi/myHomePage/myHomePage.jsp

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

They went down!

As far as the scientific american article...the issues and definitions stated in that article have not changed. OPEC nations gaining more reserves overnight and the concepts associated with reserves are valid. There has been no major discovery of oil within the past decade. So, things have changed, we have used up at least another 200 billion barrels of oil.

I provided evidence of Russian oil being past peak...Saudi oil fields with the same probability with your link. In addition, evidence of the North Sea and Mexican oil fields in severe decline. Norway isn't doing much better.

Now, you tell me where we are going to get an extra 200 quads of energy while the planet adds another billion people to the planet over the next 20 years? And don't forget, the infrastructure is 85% based on oil and natural gas.

glenn

PS: I know I will be dead before it runs out, but I tend to be concerned for those still around.

[drkitten]

The destructive economic impact of Peak Oil is about the oil running out. It's when supply cannot meet demand.

That's asinine and illustrates a tremendous misunderstanding of basic economics.

Depending upon how you look at it, supply will either ALWAYS meet demand, or NEVER meet demand. This is true for every good and service from corn dogs to concussion grenades. If oil were free, I'd -- and almost everyone else -- would do a lot more driving, keep my house much warmer in winter, and so forth. If it were a lot more expensive, I'd invest in a better bicycle and a warmer sweater,... and use a lot less oil. Price is determined by how the available supply intersects with the demand curve.

Double the costs of oil and the supply curve shifts, which will reduce demand. The supply will still be there _if_ you're willing to pay for it. If you're not willing to pay for oil, then you'll have to either find something else (like solar heating to keep your house warm) or do without.

And that's why Hibbert's peak is vaguely symmetric (and in theory, perfectly symmetric). As we get past "Peak Oil," there is still a substantial supply but it becomes more expensive, which means people are less willing to buy oil, which in turn reduces the rate of consumption.

[funk de fino]

If I knew you were going to ignore/not read what I wrote and come back with a strawman, I wouldn't have taken so much time to provide the associated data. I did not post anything about the world ending or the human race along with it. I also did not post anything about oil running out. Did you read what I posted about Prudhoe bay? Just expand that to the rest of the planet and you will see what peak oil is all about.

As far as rig counts, I will provide you the site I used to follow the issue:

http://www.bakerhughesdirect.com/cgi-bin/bhi/myHomePage/myHomePage.jsp

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

They went down!

As far as the scientific american article...the issues and definitions stated in that article have not changed. OPEC nations gaining more reserves overnight and the concepts associated with reserves are valid. There has been no major discovery of oil within the past decade. So, things have changed, we have used up at least another 200 billion barrels of oil.

I provided evidence of Russian oil being past peak...Saudi oil fields with the same probability with your link. In addition, evidence of the North Sea and Mexican oil fields in severe decline. Norway isn't doing much better.

Now, you tell me where we are going to get an extra 200 quads of energy while the planet adds another billion people to the planet over the next 20 years? And don't forget, the infrastructure is 85% based on oil and natural gas.

glenn

PS: I know I will be dead before it runs out, but I tend to be concerned for those still around.

Guess which company you have linked to that I work for? You say I made strawmen and you mention rig counts? Guess why rig counts are down recently?

I am talking about oil service companies that drill for oil. Not rig owners. You would know that if you had a clue about the industry.

No large discoveries? What about Brazil recently?

I will address your other stuff later

[JihadJane]

That's asinine and illustrates a tremendous misunderstanding of basic economics.

Depending upon how you look at it, supply will either ALWAYS meet demand, or NEVER meet demand. This is true for every good and service from corn dogs to concussion grenades. If oil were free, I'd -- and almost everyone else -- would do a lot more driving, keep my house much warmer in winter, and so forth. If it were a lot more expensive, I'd invest in a better bicycle and a warmer sweater,... and use a lot less oil. Price is determined by how the available supply intersects with the demand curve.

Double the costs of oil and the supply curve shifts, which will reduce demand. The supply will still be there _if_ you're willing to pay for it. If you're not willing to pay for oil, then you'll have to either find something else (like solar heating to keep your house warm) or do without.

And that's why Hibbert's peak is vaguely symmetric (and in theory, perfectly symmetric). As we get past "Peak Oil," there is still a substantial supply but it becomes more expensive, which means people are less willing to buy oil, which in turn reduces the rate of consumption.

For all your patronizing blather it appears you have little understanding of the fundamental role that an ever-growing energy supply has played in sustaining our growth-based economic system.

[Hindmost]

From your postings it is obvious you do not work in the oil industry eh? Not much has changed? Hilarious!!

Peak Oil is a red herring and a fancy woo woo for people like JJ to cling to. Everyone knows that the oil will run out. The world will not end and the humans race will go on.

If you really want to get a good idea of when the oil is close to running out then keep an eye on Oil service companies R&D budgets and projects. Till then stop worrying. You will be dead when it runs out.

Guess which company you have linked to that I work for? You say I made strawmen and you mention rig counts? Guess why rig counts are down recently?

I am talking about oil service companies that drill for oil. Not rig owners. You would know that if you had a clue about the industry.

No large discoveries? What about Brazil recently?

I will address your other stuff later

The reason I indicated the strawman was for the first statement marked in bold above. It was a strawman as I never indicated those things.

The reason I linked to Bakerhughes is related to the second bolded item. I keep an eye on oil services by using that site. The reason being is in the literature on the site as follows:

The Baker Hughes Rig Counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active they consume products and services produced by the oil service industry. The active rig count acts as a leading indicator of demand for products used in drilling, completing, producing and processing hydrocarbons.

I assumed your request about oil service companies and R&D was related to drilling and Baker Hughes keeps records related to drilling on a weekly basis. I do not understand your comment about rig owners. I have no idea who owns them as the site doesn't indicate ownership and I don't see why it matters. Obviously the loss of rotary rigs is due to the price of oil dropping with the economy.

As for recent oil discoveries, not too many are that big.

http://www.businessweek.com/bwdaily/dnflash/content/nov2007/db20071115_045316.htm

5-8 billion barrels under 7000 feet of water...that is about one years worth of oil for the US. They expect peak production of one million barrels a day in 2020. There have been a few other discoveries, but nothing like the numerous discoveries in the past. There was a fairly large discovery in the Gulf, but most have been relatively modest.

glenn

[drkitten]

For all your patronizing blather it appears you have little understanding of the fundamental role that an ever-growing energy supply has played in sustaining our growth-based economic system.

... or alternatively, that I understand it much better than you do.

Given that your economic understanding can be unfavorably compared to that of a turnip, I think the second is much more likely.

[zaphod2016]

...Hibbert's peak is vaguely symmetric (and in theory, perfectly symmetric). As we get past "Peak Oil," there is still a substantial supply but it becomes more expensive, which means people are less willing to buy oil, which in turn reduces the rate of consumption.

Understood. So I will rephrase my question for Mr. funk de fino.

Mr funk de fino, in your professional opinion, how long until we are far enough past Hibbert's peak as to significantly affect our economy? In your best judgment, accounting for increased production, consumption and discovery, how long we got?

10 years? 50 years? 100 years? 500 years? More? Less?

I honestly though the "Peak Oil" theory was nearly universally accepted at this point. Clearly I'm wrong. How wrong?

[JihadJane]

Understood. So I will rephrase my question for Mr. funk de fino.

Mr funk de fino, in your professional opinion, how long until we are far enough past Hibbert's peak as to significantly affect our economy? In your best judgment, accounting for increased production, consumption and discovery, how long we got?

10 years? 50 years? 100 years? 500 years? More? Less?

I honestly though the "Peak Oil" theory was nearly universally accepted at this point. Clearly I'm wrong. How wrong?

As wrong as thinking most people accept the theory of evolution!

[zaphod2016]

As wrong as thinking most people accept the theory of evolution!

Yeah, that was quite a shock to me also.

[HereticHulk]

Tops of the Pops:


Commercial Real Estate Bubble

Bail-Out Bubble

Stock Market Bubble

Don't forget Peak Oil and the sea level rising/global warming.

[Highly Selassie]

And that's why Hibbert's peak is vaguely symmetric (and in theory, perfectly symmetric).

Mr funk de fino, in your professional opinion, how long until we are far enough past Hibbert's peak as to significantly affect our economy?

Hubbert (http://en.wikipedia.org/wiki/M._King_Hubbert), not Hibbert. :)

[funk de fino]

The reason I indicated the strawman was for the first statement marked in bold above. It was a strawman as I never indicated those things.

I never said you did. I said others do. Ruppert and his diciples. Peak oil is a rallying call for these uninformeds.

The reason I linked to Bakerhughes is related to the second bolded item. I keep an eye on oil services by using that site. The reason being is in the literature on the site as follows:

They are not a barometer for Oil service companies R&D budgets AND projects. The rig counts are a barometer for drilling activity which rises and falls regardless of peak oil or any other production issues. The low oil and most importantly the low gas is the reason thoise activities have dropped. The US has the most rigs and is focused on gas, they are struggling worse than any other country at the moment. My company has shed 5000 jobs recently and the vast majority are in the US. The rig counts also do not count certain large countries.

I assumed your request about oil service companies and R&D was related to drilling and Baker Hughes keeps records related to drilling on a weekly basis. I do not understand your comment about rig owners. I have no idea who owns them as the site doesn't indicate ownership and I don't see why it matters. Obviously the loss of rotary rigs is due to the price of oil dropping with the economy.

Its about future R&D for MWD tools and its future projects and technology. Once the money drops from those budgets and projects then the ed of oil is nigh. The service companies will move onto other technology/energy. Once they start focussing on alternative tech stuff its pretty much all over.

You do not coem across like some of the CT lot who are into peak oil but they are ere and they are ignorant on the subject. You have studied it but I fear you may be looking at one side only and do not have the insider knowledge and experience to see when some claims are wrong. Your "nothing much has changed " was a particularly funny one for someone involved in drilling tools. I can give you some data tomorrow about changes in drilling.


As for recent oil discoveries, not too many are that big.

http://www.businessweek.com/bwdaily/dnflash/content/nov2007/db20071115_045316.htm

5-8 billion barrels under 7000 feet of water...that is about one years worth of oil for the US. They expect peak production of one million barrels a day in 2020. There have been a few other discoveries, but nothing like the numerous discoveries in the past. There was a fairly large discovery in the Gulf, but most have been relatively modest.

glenn

Not many or none? Thats a big one and more are expected. I have been there three times and I am going back again in October.

[Toke]

What is wrong with the ides of Peak Oil?
At some point production will drop and that will affect the world economy.
In the 70´es, Denmark suffered badly from oil prices.
We happened to become one of the best at using energy efficiently, both fossil and renewably.
I have no idea how dramatic the effect on price will be, is that where the disagreement is?

[drkitten]

What is wrong with the ides of Peak Oil?

It's an expensive precaution to take if it's not needed, basically.


At some point production will drop and that will affect the world economy.

Yes, and "not necessarily." That's one of the questions.

Yes, obviously production will eventually drop -- but that might be ten years from now or it might be a thousand years from now, and that's one of the questions. It's silly to be taking action NOW to stave off a possible crisis in 3009 AD.

And even if production drops, it will not necessarily affect the world economy, depending upon what other substitute goods are available. (Just as an example, a world-wide potato blight today would have considerably less effect than a merely Ireland-wide one did in the 19th century, because we have both substitute goods and the capacity to move them around. "Let them eat rice.") A world-wide pine blight would have been a disaster in the 19th century because only pine trees could be used for ship's masts; today it would barely make a blip on the paper and pulp industries.

If we have another fifty years of technological development, oil-based energy will probably disappear all by itself, replaced by cheaper, cleaner, sources of electrical power. At that point, "Peak Oil" will become a non-issue because no one will be using it any more. On the other hand, if oil production drops dramatically over the next five years, it's likely to cause serious problems because there aren't any viable substitutes ready to roll.

So the question becomes one of timing, risk, and the amount of oil we expect to be able to produce before the needed breakthrough happens.

[Toke]

Ok, so when, and how, steep a dropoff in production.
And that will effect the consequenses.

How is the credit card crisis comming?
I mean with rising unemployment and people in heavy debt.

[Hindmost]

I never said you did. I said others do. Ruppert and his diciples. Peak oil is a rallying call for these uninformeds.

Fair enough....I assumed it was a direct response to my post.

They are not a barometer for Oil service companies R&D budgets AND projects. The rig counts are a barometer for drilling activity which rises and falls regardless of peak oil or any other production issues. The low oil and most importantly the low gas is the reason thoise activities have dropped. The US has the most rigs and is focused on gas, they are struggling worse than any other country at the moment. My company has shed 5000 jobs recently and the vast majority are in the US. The rig counts also do not count certain large countries.

As I am sure you know, drilling has been on the back burner for a long time due to cheap oil--with the recent upswing as the price of oil increased. We were playing catchup and now the economic issues make things worse. I want to see oil prices in a reasonable range in order to keep drill rigs turning. We should (and eventually will) be drilling in ANWR, in the eastern gulf, off the coast of California....etc.


Its about future R&D for MWD tools and its future projects and technology. Once the money drops from those budgets and projects then the ed of oil is nigh. The service companies will move onto other technology/energy. Once they start focussing on alternative tech stuff its pretty much all over.

It is the transition that I am concerned about. Transition from an economy and infrastructure build over a 100 years on cheap energy to one with more expensive energy. As I stated, I believe we should reduce oil and natural gas usage 1-2% each year and replace it with other forms of energy. A soft transition...I just don't see that happening.

You do not coem across like some of the CT lot who are into peak oil but they are ere and they are ignorant on the subject. You have studied it but I fear you may be looking at one side only and do not have the insider knowledge and experience to see when some claims are wrong. Your "nothing much has changed " was a particularly funny one for someone involved in drilling tools. I can give you some data tomorrow about changes in drilling.

I am aware of many advancements in drilling techniques along with enhanced recovery methods of oil--I don't have your knowledge, but the concepts are not rocket surgery. When I indicated "not much has changed," I am refering to the level of discovery and the overall concepts with peak oil. As I stated before, we are not finding 30 billion barrels of oil each year.

I see the limitations of oil shale and tar sands...the energy balance is poor when compared with standard oil exploration. Of course the environmental issues associated with refining tar sands are also not good. Oil shale won't be better when a resonable process is found. I am hoping microwaves will provide some promise.

Personally, I hope we find another trillion barrels of easy to get oil, but I don't see it happening. As someone close to the issue, what do you think is possible?

I really believe that we need to be ahead of the curve on this. In the US, energy policy has been non-existent and recent legislation is not the answer.

Not many or none? Thats a big one and more are expected. I have been there three times and I am going back again in October.

I look at this periodically...we found a big deposit in the gulf of mexico and some more in angola. Just not enough to replace consumption. When we are drilling in thousands of feet of water, there is obviously a trend toward more difficult oil recovery. I don't see that changing in the future and the energy balance is trending down.

glenn

PS: I startup nuclear power plants...but have friends in the oil industry and have followed energy issues since my college days...back in the 70s.

[Eddie Dane]

Peak Oil

I went in deep in 2005.
Just around the time my little girl was born I had to find out that civilization was going off a cliff. It depressed me an effected me profoundly. I even started preparing for an "energy famine".

Not a happy time for me.

Luckily I kept investigating the issue and came a across the Hirsch report. (http://en.wikipedia.org/wiki/Hirsch_report)

Though we a by no means out of the woods, it is important to get a somewhat balanced view of the issue.

There is a link to the summary of the report in the Wiki article. (PDF)

[funk de fino]

If we have another fifty years of technological development, oil-based energy will probably disappear all by itself, replaced by cheaper, cleaner, sources of electrical power. At that point, "Peak Oil" will become a non-issue because no one will be using it any more. On the other hand, if oil production drops dramatically over the next five years, it's likely to cause serious problems because there aren't any viable substitutes ready to roll.

So the question becomes one of timing, risk, and the amount of oil we expect to be able to produce before the needed breakthrough happens.

This is a good post. To me most of the Peak Oil stuff is shouting fire in a theater. When idiots like Ruppert hang their hat on it and say the human race will end, then it veers into CT woo territory.

[funk de fino]

As I am sure you know, drilling has been on the back burner for a long time due to cheap oil--with the recent upswing as the price of oil increased. We were playing catchup and now the economic issues make things worse. I want to see oil prices in a reasonable range in order to keep drill rigs turning. We should (and eventually will) be drilling in ANWR, in the eastern gulf, off the coast of California....etc.

But you are missing the point about the drilling activity in the US. They have the most small operators with small rigs and independant oil production from smaller companies compared to te rest of the world. The US had approx 400,000 oil wells producing less than 10 barrels a day. the focus is mainly on gas drilling in the US and the excess gas and low prices is stagnating it more than anywhere else in the world at the moment. Even more than a very matrue field like the North sea. This skews the figures as does the fact the link does not include Russia or China (onshore).


It is the transition that I am concerned about. Transition from an economy and infrastructure build over a 100 years on cheap energy to one with more expensive energy. As I stated, I believe we should reduce oil and natural gas usage 1-2% each year and replace it with other forms of energy. A soft transition...I just don't see that happening.

Everyone should be concrned by te transition if no movemnet is made to look elsehwere for energy and for us to blindly carry on as we are. I do not believe this will happen. thats why i say to look to companies who suplly the oil companies and drillers. once they start to realise the cash cow is coming to an end they will diversify into other stuff. The technology will be applied elsehwere. Comapnies like Schlumberger and Halliburton will not just dissappear when oil dissappears. Keep and eye on their aquisitions also in future.

I am aware of many advancements in drilling techniques along with enhanced recovery methods of oil--I don't have your knowledge, but the concepts are not rocket surgery. When I indicated "not much has changed," I am refering to the level of discovery and the overall concepts with peak oil. As I stated before, we are not finding 30 billion barrels of oil each year.

If they are not rocket surgery then our companies would not make the money they do though. An example is horizontal drilling. 1990 - 1000 wells drilled worldwide. 2001 - 20,000 wells drilled worldwide. Jumping from one well to another when you get a small drop off in production due to low pressure is not an option now because we have the tech to keep going, whether it be water injection or whatever means. This is not a sign of oil running out it is a sign of using tech to get every drop from a reservoir that you have spent millions on tapping. Its like buying an apple, the first few bites you take are big. then as you carry on the bites have to be smaller and you have less satisfaction till eventually the apple is done. You could take a couple of big bites and throw the apple away and buy another. That is not an economical way to do things though. Oil recovery rates from reservoirs have increased from approx 10% of the total to around 70%. There are still a lot of reservoirs out there that are ripe for re-entry through tubing work that will produce more oil. This is pretty big in the US. Even the North Sea has

I see the limitations of oil shale and tar sands...the energy balance is poor when compared with standard oil exploration. Of course the environmental issues associated with refining tar sands are also not good. Oil shale won't be better when a resonable process is found. I am hoping microwaves will provide some promise.

There are limitations and the cost is one as well as energy balance but if the oil is needed then it will be taken out. Some new tech may come along which reduces the cost and energy balance but these costs will be passed onto the consumer. Cheap oil will dissappear but expensive oil will not. Keeping traders from speculating on it might help though.

Personally, I hope we find another trillion barrels of easy to get oil, but I don't see it happening. As someone close to the issue, what do you think is possible?

I really believe that we need to be ahead of the curve on this. In the US, energy policy has been non-existent and recent legislation is not the answer.

I cannot see super elephant finds but I see big finds and I see more tech coming to help with older wells. Oil companies are sitting on a lot at the moment because it costs them more to drill these again but they will go back in. The US energy policy has certainly not helped and it will have to change.

from your own link.

Geologists say the discoveries challenge one of the notions of the peak oil theory, which claims oil companies already have found nearly all of the world's usable oil.


I look at this periodically...we found a big deposit in the gulf of mexico and some more in angola. Just not enough to replace consumption. When we are drilling in thousands of feet of water, there is obviously a trend toward more difficult oil recovery. I don't see that changing in the future and the energy balance is trending down.

The problem with the Peak Oil was that Hubberts data was flawed and people have jumped on it and become doomsayers. The general idea of Peak oil is correct but its a bear ***** in the woods theory. Oil will run out and if we dont do something it will all end in tears. Not now, not for a long time, and the human race is far more resourceful than Hubbert gives them credit for IMO.

glenn

PS: I startup nuclear power plants...but have friends in the oil industry and have followed energy issues since my college days...back in the 70s.

I may have come across as bolshy in my first few posts and I apologize. I am used to dealing with truthers and those that spout the Peak Oil stuff as espoused by Ruppert. They are clueless. If it seemed as if I initially dealt with as if you were one of those then I apologize.

[JihadJane]

Peak Oil

I went in deep in 2005.
Just around the time my little girl was born I had to find out that civilization was going off a cliff. It depressed me an effected me profoundly. I even started preparing for an "energy famine".

Not a happy time for me.

Luckily I kept investigating the issue and came a across the Hirsch report. (http://en.wikipedia.org/wiki/Hirsch_report)

Though we a by no means out of the woods, it is important to get a somewhat balanced view of the issue.

There is a link to the summary of the report in the Wiki article. (PDF)

Hirsch report:

"The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

What did you find reassuring about the Hirsch report?

[JihadJane]

'Don't Waste Your Time Reading The Peak-Oil Deniers (http://www.businessinsider.com/dont-waste-your-time-reading-the-peak-oil-deniers-2009-8)'

Comments on:

Michael Lynch

Daniel Yergin and CERA

Raymond Learsy

http://www.businessinsider.com/dont-waste-your-time-reading-the-peak-oil-deniers-2009-8

[Eddie Dane]

Hirsch report:

"The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

What did you find reassuring about the Hirsch report?

The doomsday theory is that oil production would go suddenly off a cliff.
This does not seem to be the case.

The most interesting conclusion the report was that the alternatives should not be implemented before they become economically viable.
That is: when prices have already risen enough to make alternatives attractive to the public.

If you implement alternatives too early, the companies implementing them will go bankrupt.

The depressing side of this that we will be burning energy like idiots until the prices force us to handle energy matters in an intelligent way.
The reassuring part is that there is a time for those alternatives to take effect. Look at the sudden popularity of fuel efficient cars in the US.

I still think energy depletion is one of the big issues we are facing. i don't think all is well, but we can deal.

Until then we will be driving hummers to the health club to watch Monster Trucks on the big screen plasma TV from the hottub. Our houses will be boxes that we heat and cool with fossil fuels instead of using intelligent architectural concepts with lots of insulation and passive solar power. Hell, we won't even carpool until we can't afford to stand in morning traffic alone.

[drkitten]

The doomsday theory is that oil production would go suddenly off a cliff.
This does not seem to be the case.

That particular doomsday theory is flat out wrong. Under no rational economic theory is it possible for there to be a sudden sharp drop in production. Again, look at Hubbert's peak -- it takes just as long for production to unwind as it did to wind.

What is expected to be a sharp shock (under certain semi-rational theories) is oil costs, precisely because oil demand is so price-inelastic; a sudden drop in production (say, 3% a year) will leave 3% of the current customers without oil, which basically leaves their business shut down. Most businesses would be willing to pay almost any price to avoid that, which in turn means that the price will skyrocket -- that 3% production drop could in theory result in gasoline prices doubling.

[funk de fino]

Hirsch report:

"The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

What did you find reassuring about the Hirsch report?

That the point they are describing is wayyyyyy offffff.

[mhaze]

That the point they are describing is wayyyyyy offffff.Another Sliding Timetable of Doom?

Yet another "Urgent action required now?" claim?

[Toke]

That particular doomsday theory is flat out wrong. Under no rational economic theory is it possible for there to be a sudden sharp drop in production. Again, look at Hubbert's peak -- it takes just as long for production to unwind as it did to wind.

What is expected to be a sharp shock (under certain semi-rational theories) is oil costs, precisely because oil demand is so price-inelastic; a sudden drop in production (say, 3% a year) will leave 3% of the current customers without oil, which basically leaves their business shut down. Most businesses would be willing to pay almost any price to avoid that, which in turn means that the price will skyrocket -- that 3% production drop could in theory result in gasoline prices doubling.

Yes, unstable prices is an obvius flaw of unchecked capitalism.:duck:

[JihadJane]

That particular doomsday theory is flat out wrong. Under no rational economic theory is it possible for there to be a sudden sharp drop in production. Again, look at Hubbert's peak -- it takes just as long for production to unwind as it did to wind.

What is expected to be a sharp shock (under certain semi-rational theories) is oil costs, precisely because oil demand is so price-inelastic; a sudden drop in production (say, 3% a year) will leave 3% of the current customers without oil, which basically leaves their business shut down. Most businesses would be willing to pay almost any price to avoid that, which in turn means that the price will skyrocket -- that 3% production drop could in theory result in gasoline prices doubling.

Who promotes this off-the-cliff theory? I haven't come across it. It's not a "straw man" is it?

[drkitten]

Who promotes this off-the-cliff theory?

The idiot who wrote post #50 and talks about oil running out, for one.

[JihadJane]

The idiot who wrote post #50 and talks about oil running out, for one.

Thanks for pointing that out. It's a typo.

It should read:

"The destructive economic impact of Peak Oil isn't about the oil running out. It's when supply cannot meet demand."

I guess you are of some use after all!

So who else (wittingly or unwittingly!) promotes the off-the-cliff theory?

[funk de fino]

Ruppert and his merry bunch of clowns (fans)

[Eddie Dane]

Thanks for pointing that out. It's a typo.

It should read:

"The destructive economic impact of Peak Oil isn't about the oil running out. It's when supply cannot meet demand."

I guess you are of some use after all!

So who else (wittingly or unwittingly!) promotes the off-the-cliff theory?

I cheked where I got that from.
Looks like you're right. The prediction is not a sudden dropoff in production but a sudden price increase due to th realisation that oil production has peaked.

Quote:
Should the oil markets themselves begin to 'connect these dots', then all our lives are going to be impacted violently and immediately. The commodity traders for various interested firms live solely by anticipating conditions and events, not by debating them and verifying them. The old mantra is, you "buy the rumor, sell the news". This is the reason you'll never see "Peak Oil" covered by a respected media outlet. Because as soon as it is recognized that for all practical purposes the situation is already upon us, then a fast and viscious resource grab will be initiated. The price of oil in the markets will begin to rise dramatically. This will initiate a circular hedging / hording mentality in large end-users, governments, and multi-nationals. This will then have a myriad of devastating effects, but all average Joe Consumer is going to notice is that the price at the pump will experience a brief and dramatic blip upward, gas lines will form for a short time at the corner-stations, and then suddenly the corner gas-stations will go dry altogether...perhaps getting a few sporadic deliveries, but more likely simply for good. Gasoline will not be available to individual drivers, as precedence is given to heating oil, critical government and commercial uses, public transportation, transport of food and goods, etc. How the situation unfolds after that you can imagine just as well as I....

Full article. (http://deconsumption.typepad.com/deconsumption/2005/03/the_most_import.html)

[Toke]

Eddie,
That sounds like "Enron" will be running out gas supply.
I have a hard time beliving goverments will allow private speculants to run the oil markeds like they did it for grain last year.

[Eddie Dane]

As I said before. The topic of discussion is possibe economic trouble in the near future, not the end of civilisation.

Peak Oil is a good point to bring up. Economic instability requires far less catastrophic circumstances than economic instability.
Rising oil prices have a huge economic impact because of the widespread use in production, transport, packaging etc. It is (I think) a significant price component of nearly everything we consume. Hence rising oil prices will lead to higher prices for consumer goods and food.

But I think that these problems are not exactly on our doorstep.

If the process is slow and not "oil shock", then many processes may be adjusted.
Energy from renewable sources, smart houses, food production closer to home, manufacturing closer to home.

All these things have major upsides. Especially as I think that our current use of energy is crazy and we'd do ourselves and the environment a favor by making the above changes.

Not to mention that most of the things will create labor, and not just in China for a change.

[Eddie Dane]

Eddie,
That sounds like "Enron" will be running out gas supply.
I have a hard time beliving goverments will allow private speculants to run the oil markeds like they did it for grain last year.

I have no idea.

Do you think they'd nationalize the oil markets?

I don't know enough about these markets and how a government could intervene.

[Toke]

I have no idea.
Do you thing they'd nationalize the oil markets?
I don't know enough about these markets and how a government could intervene.
Neither do I, but the Enron way looks like something that would be stopped.

[drkitten]

Eddie,
That sounds like "Enron" will be running out gas supply.
I have a hard time beliving goverments will allow private speculants to run the oil markeds like they did it for grain last year.

The role of "speculators" in commodity bubbles is vastly overrated by the general public, for two reasons.

First, speculators are trading cash-settled futures contracts, and never take possession of the actual goods they're trading, and in many cases they can't. If you buy a futures contract for a million barrels of oil come October, you will have to sell that contract to someone else or else you're going to have a oil tanker come and park on your lawn. While they can to some extent adjust the price, they can't adjust the level of supply, precisely because they lack the storage capacity to hold goods off the market.

Second, for every futures contract that is bought, another is sold. Options and futures contracts are what mathematicians call a zero-sum game, meaning that the wins and losses balance out among the players. When one oil speculator makes a killing buying a contract, he does so at the expense of the other speculator who sold it to him.

[Hindmost]

But you are missing the point about the drilling activity in the US. They have the most small operators with small rigs and independant oil production from smaller companies compared to te rest of the world. The US had approx 400,000 oil wells producing less than 10 barrels a day. the focus is mainly on gas drilling in the US and the excess gas and low prices is stagnating it more than anywhere else in the world at the moment. Even more than a very matrue field like the North sea. This skews the figures as does the fact the link does not include Russia or China (onshore).

Thanks for the extra info. I am aware of the status of stripper wells. One of the issues about natural gas for me is related to electricity production...in the past 20 years or so, the only plants built have fired natural gas because they are the only plants that can be sited due to environmental or political reasons. To me, it is an absolute waste of this natural resource to make electricity. Of course, we should be drilling in the eastern gulf since is should have a pile of natural gas.

Everyone should be concrned by te transition if no movemnet is made to look elsehwere for energy and for us to blindly carry on as we are. I do not believe this will happen. thats why i say to look to companies who suplly the oil companies and drillers. once they start to realise the cash cow is coming to an end they will diversify into other stuff. The technology will be applied elsehwere. Comapnies like Schlumberger and Halliburton will not just dissappear when oil dissappears. Keep and eye on their aquisitions also in future.

I am concerned about the transition mainly due the amount of energy that needs to produced and the amount of infrastructure to support it. I assume Halliburton and Schumberger will be involved. Working in the nuke industry, some think we can solve this...we can't. There just isn't enough time or industrial capacity or trained engineers or trained crafts right now.

If they are not rocket surgery then our companies would not make the money they do though. An example is horizontal drilling. 1990 - 1000 wells drilled worldwide. 2001 - 20,000 wells drilled worldwide. Jumping from one well to another when you get a small drop off in production due to low pressure is not an option now because we have the tech to keep going, whether it be water injection or whatever means. This is not a sign of oil running out it is a sign of using tech to get every drop from a reservoir that you have spent millions on tapping. Its like buying an apple, the first few bites you take are big. then as you carry on the bites have to be smaller and you have less satisfaction till eventually the apple is done. You could take a couple of big bites and throw the apple away and buy another. That is not an economical way to do things though. Oil recovery rates from reservoirs have increased from approx 10% of the total to around 70%. There are still a lot of reservoirs out there that are ripe for re-entry through tubing work that will produce more oil. This is pretty big in the US. Even the North Sea has

I was being slightly facetious using the Bill Nye quote...What I was implying was that angle drilling, enhanced oil detection and other enhance recovery methods were proven technologies. (e.g. making oil drilling in west texas and certain oil shale deposits available etc.)

There are limitations and the cost is one as well as energy balance but if the oil is needed then it will be taken out. Some new tech may come along which reduces the cost and energy balance but these costs will be passed onto the consumer. Cheap oil will dissappear but expensive oil will not. Keeping traders from speculating on it might help though.

I agree completely. I am hoping for microwave processes to make oil shale and tar sands more viable. The refining process is just not very good right now. Of course, we could always nuke the wells to get extra oil out...I am talking real nukes.:)


I cannot see super elephant finds but I see big finds and I see more tech coming to help with older wells. Oil companies are sitting on a lot at the moment because it costs them more to drill these again but they will go back in. The US energy policy has certainly not helped and it will have to change.

from your own link.

[quote]Quote:
Geologists say the discoveries challenge one of the notions of the peak oil theory, which claims oil companies already have found nearly all of the world's usable oil.


The problem with the Peak Oil was that Hubberts data was flawed and people have jumped on it and become doomsayers. The general idea of Peak oil is correct but its a bear ***** in the woods theory. Oil will run out and if we dont do something it will all end in tears. Not now, not for a long time, and the human race is far more resourceful than Hubbert gives them credit for IMO.

I don't see any major discoveries on the horizon and hope that no one is really expecting any. I want us to be ahead of this on energy policy. However, the past 30 years has seen nonexistent energy policy--and that is my major concern that we won't due what is needed .

I may have come across as bolshy in my first few posts and I apologize. I am used to dealing with truthers and those that spout the Peak Oil stuff as espoused by Ruppert. They are clueless. If it seemed as if I initially dealt with as if you were one of those then I apologize.

Fully accepted--since my posts are not that literate at times, it can be that I come across the wrong way...it is in the past and just forget about it. I do believe we agree on essentially all issues here.

glenn

[Hindmost]

It's an expensive precaution to take if it's not needed, basically.



Yes, and "not necessarily." That's one of the questions.

Yes, obviously production will eventually drop -- but that might be ten years from now or it might be a thousand years from now, and that's one of the questions. It's silly to be taking action NOW to stave off a possible crisis in 3009 AD.

And even if production drops, it will not necessarily affect the world economy, depending upon what other substitute goods are available. (Just as an example, a world-wide potato blight today would have considerably less effect than a merely Ireland-wide one did in the 19th century, because we have both substitute goods and the capacity to move them around. "Let them eat rice.") A world-wide pine blight would have been a disaster in the 19th century because only pine trees could be used for ship's masts; today it would barely make a blip on the paper and pulp industries.

If we have another fifty years of technological development, oil-based energy will probably disappear all by itself, replaced by cheaper, cleaner, sources of electrical power. At that point, "Peak Oil" will become a non-issue because no one will be using it any more. On the other hand, if oil production drops dramatically over the next five years, it's likely to cause serious problems because there aren't any viable substitutes ready to roll.

So the question becomes one of timing, risk, and the amount of oil we expect to be able to produce before the needed breakthrough happens.

Oil isn't going to be a prime source of energy 1000 years from now. 100 years from now, there may be nostolgia parties.

The probability of oil based energy disappearing on its own and being replaced by cheaper, cleaner sources of electricity is just about zero unless fusion becomes unbelieveably viable. Cheap oil has fueled economic growth as the energy related cost of doing business has remained low. Any of the available sources of energy in the future promise to be more expensive and require rework of infrastructure. The tree analogy doesn't really cover the complexity of this issue.

glenn

[Hindmost]

As I said before. The topic of discussion is possibe economic trouble in the near future, not the end of civilisation.

Peak Oil is a good point to bring up. Economic instability requires far less catastrophic circumstances than economic instability.
Rising oil prices have a huge economic impact because of the widespread use in production, transport, packaging etc. It is (I think) a significant price component of nearly everything we consume. Hence rising oil prices will lead to higher prices for consumer goods and food.

But I think that these problems are not exactly on our doorstep.

If the process is slow and not "oil shock", then many processes may be adjusted.
Energy from renewable sources, smart houses, food production closer to home, manufacturing closer to home.

All these things have major upsides. Especially as I think that our current use of energy is crazy and we'd do ourselves and the environment a favor by making the above changes.

Not to mention that most of the things will create labor, and not just in China for a change.

Economic crises don't actually come around that often either....the lastest one was certainly more serious than any problems that have occured in the past few decades. Energy issues could become a problem that cause the next economic crisis in 10 years. It may not be probable, but it is possible. But it could be bees or water too...

glenn

[Toke]

The role of "speculators" in commodity bubbles is vastly overrated by the general public, for two reasons.

First, speculators are trading cash-settled futures contracts, and never take possession of the actual goods they're trading, and in many cases they can't. If you buy a futures contract for a million barrels of oil come October, you will have to sell that contract to someone else or else you're going to have a oil tanker come and park on your lawn. While they can to some extent adjust the price, they can't adjust the level of supply, precisely because they lack the storage capacity to hold goods off the market.

Second, for every futures contract that is bought, another is sold. Options and futures contracts are what mathematicians call a zero-sum game, meaning that the wins and losses balance out among the players. When one oil speculator makes a killing buying a contract, he does so at the expense of the other speculator who sold it to him.

I could have that tanker anchor of e.g. Gibraltar and wait for higher prices, there were several there 2 weeks ago when we stopped to bunker. (ok, they were emty and next to a refinery, but still, tankers can be parked somewhere else than ones lawn)

The prices of grain and oil did rise rather dramaticly last year, without any connection to production. A drop in production and associated hype could easily be used for dramatic price bubles.
I wonder how rigid the consumption of oil is compared to prices, that is, if a 10% decrease in supply would would require e.g. 20% or 220% increase in price to convince the 10% of consumers that they don´t need the oil after all.

Your zero-sum game includes the end consumer not just speculators, and end consumers can sometimes be milked for quite alot.

[mhaze]

..... Second, for every futures contract that is bought, another is sold. Options and futures contracts are what mathematicians call a zero-sum game, meaning that the wins and losses balance out among the players. When one oil speculator makes a killing buying a contract, he does so at the expense of the other speculator who sold it to him.No.

A zero sum game does not have the 3rd party.

Traders.

[drkitten]

I could have that tanker anchor of e.g. Gibraltar and wait for higher prices, there were several there 2 weeks ago when we stopped to bunker.

Not unless it's your tanker and you're willing to pay substantial demurrage charges while it's sitting there parked. Even a tanker "at anchor" costs an enormous amount to run.

And that's why cash-settled futures traders can't have much effect. The producers and the consumers, who typically do have storage facilities already built and paid for as part of the cost of doing business, can afford to have the oil just sitting there until the price improves. The cash trader doesn't have those facilities and can't afford to buy or rent them on a short-term basis.

[drkitten]

No.

A zero sum game does not have the 3rd party.

And once again you're wrong. There is no third party in a futures contract. You buy a future; I sell it to you. The spot price is what it is, and we settle the value of the futures contract based on what the spot price is when the contract comes due.

If you never touch a futures contract, then it doesn't matter what speculators do, because you're committing yourself to always paying the spot price (no matter what it is). Cash-settled speculators CANNOT affect the spot price because they can neither flood the market with oil (they don't have any oil to flood it with) nor can they withhold it (because they don't have storage facilities).

[Toke]

Not unless it's your tanker and you're willing to pay substantial demurrage charges while it's sitting there parked. Even a tanker "at anchor" costs an enormous amount to run.
Yes, there is a charter price pr. day*, it is perfectly possible for the value of the carge to increase more pr. day than the charter price for the vessel.
*There are thick books writen on the terminology, and who pay what under which circumstances.
I belive grain merchant have used that trick during faimes for most of written history.

And that's why cash-settled futures traders can't have much effect. The producers and the consumers, who typically do have storage facilities already built and paid for as part of the cost of doing business, can afford to have the oil just sitting there until the price improves. The cash trader doesn't have those facilities and can't afford to buy or rent them on a short-term basis.
The problem here might be that you live in a world with very a specific trade language on this subject.
I can´t tell one kind of trader/speculator from another just from the name.

What I can do is to notice that the price of grain and oil had a major rise and fall last year, without any relation to production/consumption.
I find it quite likely that a drop in oil production can be used for speculation with dramatic impact on prices.

[mhaze]

......
The problem here might be that you live in a world with very a specific trade language on this subject.
I can´t tell one kind of trader/speculator from another just from the name.

What I can do is to notice that the price of grain and oil had a major rise and fall last year, without any relation to production/consumption.
I find it quite likely that a drop in oil production can be used for speculation with dramatic impact on prices.

Oh, that could be. I simply pointed out that when you have intermediaries, aggregators, whatever you wish to call them, then a zero sum game does not exist. Granted, if as Dr Kitten cites, buyers delt exactly with sellers, there would be no such thing.

I am aware of a few of the latter variety, but countless instances of the former.

[drkitten]

Oil isn't going to be a prime source of energy 1000 years from now. 100 years from now, there may be nostolgia parties.

Er,.... not necessarily.

There is, for example, a lot of interesting research regarding biocreation of oil (essentially, feed "garbage" to bacteria and watch them make oil, the same way that corn makes oil). A great use of solar power....


The probability of oil based energy disappearing on its own and being replaced by cheaper, cleaner sources of electricity is just about zero unless fusion becomes unbelieveably viable.

You've never heard of fission? Or batteries?

[JihadJane]

Er,.... not necessarily.

There is, for example, a lot of interesting research regarding biocreation of oil (essentially, feed "garbage" to bacteria and watch them make oil, the same way that corn makes oil).

And what are the chances that this can replace lost fossil oil production?

[oldhat]

Is there -in your opinion- another big economic disaster in the works?
I'm talking about an elephant-in-the-room-obvious weakness now built into the system.

Commercial real estate and Alt-A (Option ARM) resets that will peak in 2010.

[Toke]

And what are the chances that this can replace lost fossil oil production?

I doubt there is anything that will beat fossil fuels at the current price, but as production go down and prices increace, there will be plenty of alternatives.

E.g. straw from grain production can be turned into alcohol by engineered yeast, perhaps a yeast will be made that can turn it into some diesel equvalent.

[JihadJane]

I doubt there is anything that will beat fossil fuels at the current price, but as production go down and prices increace, there will be plenty of alternatives.

E.g. straw from grain production can be turned into alcohol by engineered yeast, perhaps a yeast will be made that can turn it into some diesel equvalent.


Is it wise to rob the soil of biomass?

Peak Oil theorists do not predict steadily rising fossil fuel prices but violently fluctuating prices, like those we have seen recently. Price instability isn't sympathetic to new business start-ups or R&D.

[drkitten]

And what are the chances that this can replace lost fossil oil production?

Between 0 and 100%. If you think you have a more accurate guess, you're wrong.

[Hindmost]

Er,.... not necessarily.

There is, for example, a lot of interesting research regarding biocreation of oil (essentially, feed "garbage" to bacteria and watch them make oil, the same way that corn makes oil). A great use of solar power....

Fair enough, but my post was related to the old fashioned kind. There will be limitations to biofuels, but they do hold some promise.

You've never heard of fission? Or batteries?

Go back and read my posts--but I will cover it again for you...fission is not going to solve any energy issues due to limited industrial capacity and other issues. There are not enough engineers and crafts to get the work done. Many plants will have to be shutdown over the next 20 years as they reach the end of their operating license. We will be fortunate to break even over the next 30 years.

I have to admit I have no idea what you are talking about on the battery front outside of storage?

glenn

[drkitten]

Go back and read my posts--but I will cover it again for you...fission is not going to solve any energy issues due to limited industrial capacity and other issues. There are not enough engineers and crafts to get the work done. Many plants will have to be shutdown over the next 20 years as they reach the end of their operating license. We will be fortunate to break even over the next 30 years.

Post #88 doesn't mention a time-frame at all. My post, to which you were responding, mentions a fifty-year time frame.

I don't know where you came up with the thirty year limitation, but if you think that you can predict technology thirty years out,.... you're wrong.

[Hindmost]

Post #88 doesn't mention a time-frame at all. My post, to which you were responding, mentions a fifty-year time frame.

I don't know where you came up with the thirty year limitation, but if you think that you can predict technology thirty years out,.... you're wrong.

I wasn't predicting all "technology" thirty years out--but I can tell you nuclear fission won't be much different 50 years from now even if gen IV reactors come online. The technology is mature and there won't be any big changes. I am predicting that we will not be able to build enough nuclear plants in the next 30 to 50 years to solve energy issues on the planet. I never said the 30 years was any kind of limitation, but by about 2045, the US utilities will have to shutdown all 105 plants operating now. Current schedules have the first new reactor in the US coming online in about 2016 if all goes as scheduled. Now, for the 30 years past 2016, we would have to startup 3 reactors a year to replace the current capacity. That isn't exactly easy.

There are other issues as well...including derregulation and cost.

glenn

[JihadJane]

'Washington Capitulates: Peak Oil Is Real (http://www.energybulletin.net/50005)'

'North Sea oil exploration suffering as banks refuse to lend':
http://www.timesonline.co.uk/tol/news/uk/scotland/article6817563.ece

"Recession may push North Sea oil and gas production into a much steeper decline than previously forecast due to the difficulties faced by smaller oil companies in getting finance to pay for exploration and oilfield development.

Industry leaders warned in Aberdeen yesterday at a media briefing that up to a quarter of the 20 billion barrels of oil known to be still recoverable from the North Sea may stay in the ground because of the contraction in the lending capacity of the banks and other financial institutions.

They added that this and uncertainties around future government tax policies towards the offshore industry could cost the government up to £250 billion in lost tax revenues."

[Eddie Dane]

'Washington Capitulates: Peak Oil Is Real (http://www.energybulletin.net/50005)'

There's no need to drag the Carter administration into this.

[funk de fino]

'
'North Sea oil exploration suffering as banks refuse to lend':
http://www.timesonline.co.uk/tol/news/uk/scotland/article6817563.ece

"Recession may push North Sea oil and gas production into a much steeper decline than previously forecast due to the difficulties faced by smaller oil companies in getting finance to pay for exploration and oilfield development.

Industry leaders warned in Aberdeen yesterday at a media briefing that up to a quarter of the 20 billion barrels of oil known to be still recoverable from the North Sea may stay in the ground because of the contraction in the lending capacity of the banks and other financial institutions.

They added that this and uncertainties around future government tax policies towards the offshore industry could cost the government up to £250 billion in lost tax revenues."

Clueless. There's a credit crunch. Welcome to the world.

As soon as it eases and the money given to the banks is released to these business, then the drilling will start again.

Rita Marcella, Dean of Aberdeen Business School at Robert Gordon University and the survey leader, said that 89 per cent of the vulnerable firms named the banking crisis as having had a serious impact on business performance.

Nothing to do with peak oil. A lot of this is the moaning oil companies, who make billions, being upset cause the UK govt have the temerity to tax them on it.

[drkitten]

I wasn't predicting all "technology" thirty years out--but I can tell you nuclear fission won't be much different 50 years from now even if gen IV reactors come online. The technology is mature and there won't be any big changes. I am predicting that we will not be able to build enough nuclear plants in the next 30 to 50 years to solve energy issues on the planet.

And I'm giving your technological predictions of 30-50 years out all the attention they merit.

[Hindmost]

And I'm giving your technological predictions of 30-50 years out all the attention they merit.

At least try to show me why you think I am wrong about this.

glenn

[funk de fino]

BP announce "giant" find in GOM

http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7055818

In addition to the already announced Kaskida find. Initial industry rumours for this new one is 3 billion bbls.

[Emperor_Gestahl]

Damn I was hoping for a broad economic thread and it turned into an oil peak argument.

What about debt?

I know everyone thinks the Govt will print us out of the public debt, but what about private debt? Consumer deleveraging? The next domino in my mind will be when the "the recession is over" bubble pops.

Lower payrolls/employment = higher default rates both for domestic and commercial real estate, sentiment on the dollar is EXTREMELY bearish, perhaps even ahead of itself..

----

And here's some speculation of mine.. Is monetizing bank debt really an inflationary action? What if the inflation has already occurred in the past tense over the last decade? If banks lent out money they didn't have then that was inflationary then, not now. Doesn't monetization just conjure up solvency to justify spending that has already happened?

If I go to a bar, buy everyone all the free beer they can drink, then my credit card gets rejected.. Let's say I call in my rich uncle to bail me out.

The free beer was a result of me acting like I had a lot of money I did not have. My uncle paying my tab and driving me home is not an event that generates more free beer, just legitimizes the beer everyone already drank.

Comments?

[Eddie Dane]

I too was hoping for a more broad discussion about economics.
Since I don't know very much about the subject, don't count on me to get it back on track.

The PO problem is a valid point in this discussion though.

[JihadJane]

Quite right, Emperor_Gestahl:

Peter Schiff on the phony economy:

'Peter Schiff predicts Imminent Doom - Fear And Loathing In America'

djgH9wA-JSU

[Emperor_Gestahl]

I'd add further for my beer analogy, there would be a period where guys would come back to that bar and call each other bro a lot while expecting me to return and get everyone wasted one last time. Unfortunately, regardless of what's been the case for the last 8 years, the patrons of the bar eventually have to decide as a group that beer isn't free. I regret to tell you but the kind of frat boys who frequent this bar are not going to take the news well.

(edit: I think what we're seeing today is the comedic beer heist/cross-border-tequila-run attempt that follows starring Will Farrel and Vince Vaughn... of this analogy.)

In this analogy I am the bank, I have a speculative credit card limit and am not letting the bartender swipe the card til last call. but It's a very pretty platinum card that twinkles so hard it makes a "ting" sound (superhero teeth style)) so the barkeep allows this due to a mechanism similar to the "Mentos effect".

Fast forward back to that day at the bar when I no longer walk in though that door, no longer put $100 in the jukebox and offer to buy all the drinks. How much physical cash do you think people still bring to the bar being accustomed to an apparently insane man buying drinks for everyone (not to mention that the bar owner learned it could raise prices on drinks by 100% and still the fool persisted)?

Who's the most screwed of all? The credit card company! (In this analogy, American Taxpayers/Creditors!)

The bar patrons are most like the corps and the beer is most like their profits. Of course they also have credit cards (doh!).

[Hindmost]

Damn I was hoping for a broad economic thread and it turned into an oil peak argument.

What about debt?

I know everyone thinks the Govt will print us out of the public debt, but what about private debt? Consumer deleveraging? The next domino in my mind will be when the "the recession is over" bubble pops.

Lower payrolls/employment = higher default rates both for domestic and commercial real estate, sentiment on the dollar is EXTREMELY bearish, perhaps even ahead of itself..

----

And here's some speculation of mine.. Is monetizing bank debt really an inflationary action? What if the inflation has already occurred in the past tense over the last decade? If banks lent out money they didn't have then that was inflationary then, not now. Doesn't monetization just conjure up solvency to justify spending that has already happened?

If I go to a bar, buy everyone all the free beer they can drink, then my credit card gets rejected.. Let's say I call in my rich uncle to bail me out.

The free beer was a result of me acting like I had a lot of money I did not have. My uncle paying my tab and driving me home is not an event that generates more free beer, just legitimizes the beer everyone already drank.

Comments?

I too was hoping for a more broad discussion about economics.
Since I don't know very much about the subject, don't count on me to get it back on track.

The PO problem is a valid point in this discussion though.

Since the OP asked for the next or a possible economic problem, I personnally felt that energy...not just peak oil...could be a problem in the future as energy is a big cost of doing business. Economic growth has been based on cheap--"inifinite"--energy. That will change in the future. Oil has been the most versitile, cheapeast and easy to distribute commodity. As oil thins out, any replacement will be more expensive and more difficult to distribute. (electric cars may be great...but electric farm equipment and electric trucks, not so much) Producing enough energy to slowly reduce oil consumption while ramping up food production and economic growth will be a big challenge. Many alternative energies are still in the development stage and will need a bunch of infrastructure to be developed.

In the US, we have a program to develop hydrogen production from nuclear power plants....building about 250 pebble bed plants will provide enough hydrogen to provide about 25% of the US tranportation needs. There are only 105 nuclear plants in the US now. (I am going on memory here for the numbers of pebble bed plants...so I may be wrong)

glenn

[JihadJane]

From a recent interview with Robert Hirsch:

"Peak oil is a bigger issue than health care, than federal budget deficits, and so forth. We’re talking about something that, to take a middle of the road position—not the Armageddon extreme and not the la-la optimism of some people—is going to be extremely damaging to the U.S. and world economies for a very long period of time. There are no quick fixes."

Interview with Bob Hirsch - The Stonewalling of Peak Oil (http://www.energybulletin.net/node/50055)

http://www.energybulletin.net/node/50055

[funk de fino]

From a recent interview with Robert Hirsch:

"Peak oil is a bigger issue than health care, than federal budget deficits, and so forth. We’re talking about something that, to take a middle of the road position—not the Armageddon extreme and not the la-la optimism of some people—is going to be extremely damaging to the U.S. and world economies for a very long period of time. There are no quick fixes."

Interview with Bob Hirsch - The Stonewalling of Peak Oil (http://www.energybulletin.net/node/50055)

http://www.energybulletin.net/node/50055

More clueless cherrypicking and spamming. You need to grow some.

[Marc39]

The other shoe hasn't dropped on commercial real estate. If the jobless recovery continues, so, too, will the drop in consumer spending, which could result in an increase in shopping mall bankuptcies, like General Growth.

[Francesca R]

The other shoe hasn't dropped on commercial real estate.People keep saying that. Could have fooled me that it "hasn't dropped"

NCREIF index (appraisal based and therefore reflects tradable values falling with a long lag:

http://forums.randi.org/imagehosting/127464ab9468b12bde.gif

Bloomberg index of commercial real estate investment trusts, which reflect market sentiment more or less straight away:

http://forums.randi.org/imagehosting/127464ab9468b1bd9a.gif

[Ambrosia]

E.g. straw from grain production can be turned into alcohol by engineered yeast, perhaps a yeast will be made that can turn it into some diesel equvalent.

If only we could make diesel from biomass (http://www.ls9.com/)...

If someone had done that already, then this would pretty much kill off "Peak Oil" completely wouldn't it?

[daenku32]

If by bubble you mean excessive investment, maybe Gold.

[Puppycow]

If only we could make diesel from biomass (http://www.ls9.com/)...

If someone had done that already, then this would pretty much kill off "Peak Oil" completely wouldn't it?

How many barrels/day can they make though, and at what price?

[Puppycow]

"Option" mortgages to explode, officials warn (http://www.reuters.com/article/newsOne/idUSTRE58G5U320090917)

WASHINGTON (Reuters) - The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset.

"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.

"That's the next round of potential foreclosures in our country," he said.

Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.

In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.

"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."

This next one may depend on how reliable Matt Taibbi is, so maybe a grain of salt is warranted:
Waking up to discover the mortgage market was a giant criminal enterprise (http://trueslant.com/matttaibbi/2009/09/22/landmark-decision-massive-relief-for-homeowners-and-trouble-for-the-banks/)

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

via Landmark Decision: Massive Relief for Homeowners and Trouble for the Banks.

This is a potentially gigantic story. It seems that a court has ruled that about half of the mortgage market has been run as a criminal enterprise for years, which would invalidate any potential forelosure proceedings for about, oh, 60 million mortgages. The court ruled that the electronic transfer system used by the private company MERS — a clearing system for mortgages, similar to a depository, that is used for about half the mortgage market — is fundamentally unreliable, and any mortgage sold and/or transferred through MERS can’t be foreclosed upon, at least not in Kansas.

[Ambrosia]

How many barrels/day can they make though, and at what price?

Right now approximately zero.

Twenty years from now, how much do you want?

I'd guess that running costs for production would be about the same as producing beer.

Not to mention it's a US based company, it could mean that once the technology is fully developed the US can produce all the oil it needs for itself.

[mhaze]

People keep saying that. Could have fooled me that it "hasn't dropped"

NCREIF index (appraisal based and therefore reflects tradable values falling with a long lag:

http://forums.randi.org/imagehosting/127464ab9468b12bde.gif

Bloomberg index of commercial real estate investment trusts, which reflect market sentiment more or less straight away:

http://forums.randi.org/imagehosting/127464ab9468b1bd9a.gifHuh? You gotta be kidding.

That is, unless you mean "It has begun to drop". But everyone knew that, so do you have a point?

[Toke]

If only we could make diesel from biomass (http://www.ls9.com/)...

Yes, the idea straw to diesel is rather obvious, and there must be plenty of people looking for a way.

If someone had done that already, then this would pretty much kill off "Peak Oil" completely wouldn't it?

Turning straw and other farm waste into fuel is still dependent of area farmed and is likely to be more expensive than oil is now.

I doubt the yeast will be sturdy enough for some 3.world farmers backyard still/brewing vat.

[ksbluesfan]

I think the next crisis will be driven by heavy investments in commodities by those who don't have a stake in the commodity. For example, Missouri has it's pension program heavily invested in commodities. Hopefully everybody is wise enough to diversify.

Keep in mind that I'm not an economist. I'm just guessing.

[Hindmost]

Right now approximately zero.

Twenty years from now, how much do you want?

I'd guess that running costs for production would be about the same as producing beer.

Not to mention it's a US based company, it could mean that once the technology is fully developed the US can produce all the oil it needs for itself.

Well, considering that beer costs about 10 US dollars per gallon....it really doesn't seem like much of a bargin.

Any bio product has to deal with the laws of thermo. Viable products will be available in the future, but they will not be "easy" or "cheap" to produce. Bio products essentially convert solar and chemical energy into something like ethanol or biodiesel or something. The US uses 200 billion gallons of diesel and gas each year. A bio product will have to convert sunlight into that much energy....minus thermo loses on a yearly basis. That isn't easy.

glenn

[Frank Newgent]

Well, considering that beer costs about 10 US dollars per gallon....it really doesn't seem like much of a bargin.

Consider the methane a 12 pack of Budweiser can produce.

[Hindmost]

Consider the methane a 12 pack of Budweiser can produce.
I don't think the OP considered that definition of "economic blow"...

glenn :boxedin:

[Emperor_Gestahl]

Well Taibbi has a point that the mortgage market has been a criminal enterprise. Are we really to believe that home prices would have gotten so high if the banks weren't lending to anyone and everyone? The banks both created the housing bubble and were the primary beneficiaries of it (on paper at least, with M2M abolished). If we had wise and benevolent government they'd cut the principal on all mortgages to be more in line with realistic housing prices, and let the banks burn for their shenanigans.

[Eddie Dane]

Well Taibbi has a point that the mortgage market has been a criminal enterprise. Are we really to believe that home prices would have gotten so high if the banks weren't lending to anyone and everyone? The banks both created the housing bubble and were the primary beneficiaries of it (on paper at least, with M2M abolished). If we had wise and benevolent government they'd cut the principal on all mortgages to be more in line with realistic housing prices, and let the banks burn for their shenanigans.

Well, in hindsight that Fanny May / Freddy Mac thing was a pretty bad idea.

[Francesca R]

Huh? You gotta be kidding.

That is, unless you mean "It has begun to drop". But everyone knew that, so do you have a point?That falling real estate (apartment, industrial, office, retail) is not "the next big economic blow". Anyone who thinks it has not already cratered has "gotta be kidding". Apart from--as I said--appraisal-based and non-tradable indexes of property, which contain only slightly more information about the state of that asset class than your posts do.

[Hindmost]

Well, in hindsight that Fanny May / Freddy Mac thing was a pretty bad idea.

No they weren't. They did not cause the problem and only jumped on the band wagon when they lost market share to the brokerage firms.

glenn