The economic ills that we need to cure

It can be difficult when you are in the middle of a problem to stand back and look at the whole thing. You can only see the whole by standing away from it. The view from the middle is restricted. When looking at the economic problems which currently affect us all the difficulty in seeing the whole thing arises usually because there is nowhere that you can go to stand back and see the whole. So accepting that my viewpoint is not ideal, after all I function within the economy and it is difficult to escape the economy) what problems do I regard the world has having which are critical problems?
I think I shall make a list and then thin it down. Here we go, as they say, in no particular order:- Continue reading

Peak oil and New Best Friends

The concept of peak oil has a history all of its own. It has been adopted, almost as a footnote to the energy and climate change debate, scorned and dismissed. Learned people have argued against it; economists and politicians have ignored the consequences of planning for a time when oil supplies decline in real terms, and the decline is exacerbated by growing demand. Continue reading

Where will oil prices go in the next five years?

David King, who was Chief Scientific Office for the Blair government for seven years until 2007, has added his voice to the growing body of experts who are worried about eh price of oil. He claims that governments across the world are ignoring the risk of there not being enough oil to meet demand from 2015 and beyond.

I have already written about the amount of oil that the world has left. It is a position that constantly needs re-evaluating and each of my re evaluations has been downwards in recent years. It is always hard to predict the future but I shall try.

I am cynical about the reserves declared by the oil companies and the oil producing nations. I believe, and I admit my belief is a gut feeling, that reserves have been declared at high figures than are warranted. That means that there is less oil left than we think.

I believe that oil has already peaked in terms of its production, in 2008. I do not think we shall see as much oil produced again, although it will take probably five or six years for the bell curve to reach the stage where there will be shortages on the market.

I also believe that the existing recession has disguised the shortage of oil by creating less demand for it. Economies now appear to be coming out of recession; economically and psychologically this is the most difficult time for people because they have only just come out of denial and are now facing the reality of “cuts” which means having and consuming less. As the economies start to grow, so the demand for oil will increase.

It also seems clear that the developing nations – China, India, Brazil, México, for example – all will continue to grow economically, that that growth will be relatively high as they meet the demands of a world coming out of recession and as their own people achieve higher standards of living, which means, among other things, more oil will be consumed.

Finally, Mr Obama has described the Deepwater Oil spill as the environmental 9-11. He is wrong about that because the environmental 9-11 is not a single event but has been the past forty or fifty years of profligate emission creating but all the developed world, led by The United States, Australia, Canada and parts of the European Union. Environmental costs of oil extraction are becoming significant risk factors for oil companies. The precedent that Mr Obama has now set with BP will be closely followed by future governments throughout the world whenever any oil company has a spillage or another environmental disaster.

The effect of Mr Obama’s stance will be not only to restrict oil extraction in the dep sea but also to make oil extraction much more costly; the oil companies will need to pass these costs on to the consumer.

These factors all conspire to create an ever higher oil price and a shortage of oil, which Mr King suggest will happen in 2015. I suspect that Mr King has got it about right. I would suggest that we will see ever higher oil (and natural gas) prices for the next five years with rationing beginning to be discussed in 2015 or 2016.

Did peak oil happen in 2008, and did that cause the recession?

According to Professor Peter Newman of Curtin University in Australia peak oil has already occurred. The professor thinks that demand now outstrips supply, or would do so if the global recession had not curtailed the demand for oil significantly. He thinks that oil reached its peak (in terms of supply) when its price peaked at $140 a barrel in 2008, and its price then significantly contributed to the recession. Certainly more oil was produced in 2008 that in 2009 and probably there will be less oil produced in 2010. Continue reading

Peak oil, peak coal, peak gas and projected fossil fuel use

It is interesting how much difference there is between targets and projections. The United Kingdom has an ambitious target to cut greenhouse gases by 80% by 2050. For this figure to be realistic we have got to cut them by 60% by 2030, because the easiest gains in emissions reduction come first. Of course there is little sign of the United Kingdom making any emission reductions for the time being, but that is another story. Continue reading

OPEC, oil prices and oil reserves

OPEC will be meeting in Vienna this week in order to decide on production. OPEC do not control all of the world’s oil production, but the organisation controls around 35% of it and if they reduce production by a few percentage points the oil price will rise. Since 1982 OPEC has operated a quota system for its member countries which has the effect of limiting their production and keeping the oil price high, but with some stability. Continue reading

Biofuels – we drive and the world starves

 

Sometimes you can only see a picture clearly if you step back from it, so you can see the whole canvas. So it is with energy. Without any doubt we are heading for an energy crisis. The oil will probably peak – that is to say reach its maximum production in ten years time. Oil companies are discovering smaller and smaller fields – not by chance or by accident or a run of bad luck, but simply because there is less oil in the ground to be discovered.

 

The same scenario exists with coal, natural gas and uranium. These will probably all peak at around the same time (give or take a decade) as developing countries ape the habits customs and lifestyles of the developed countries. With this in the back of some politician’s minds (and in the forefront of others) many developed countries are looking for new sources of energy which are, in the current jargon, sustainable.

 

Biofuels – that is fuel made from growing crops – seemed like a good idea at the time. Continue reading