Actually, it does address your point, such as it was. You just are so mired groupthink that you can't see it. Meanwhile, you're the one trying to have it both ways.

I spelled it all out for you rather clearly in post #33. Let's try again.

Demand destruction (due to sustained triple-digit price and slowing GDP growth) is part of the reason the price has fallen already. At $70-80, margin price is too low for producers to keep harvesting this more expensive crap-grade oil, evidenced by the majors dumping CAPEX and foreign investment drying up. So I'd say it's anything BUT silly to differentiate between conventional and unconventional, esp. when it's the latter that has been the ONLY thing maintaining tepid total liquids production growth the past 5-6 years. They'll rely on the false promise of more unconventional production going forward. Given that, do you think producers' costs will somehow suddenly decrease?

And, just to be clear: I don't dodge. That would be your allies in this debate, not me.

Of course not. $100-110 is more than enough to seize the engine, as we've already seen. $300 was just a hypothetical posed by your ally in this debate. Not me. The point is, you guys seem to think the world can just keep producing ever-increasing amounts of oil at any price. That's ridiculous.

You, like so many before you, seem to be wildly underestimating the central role that petroleum plays in modern, complex societies. With conventional crude, nothing is cheaper, more efficient, and more versatile. This despite decades of trying to perfect a replacement and get it up to scale. It's referred to as the petrodollar system for a reason. If it were so easy to replace, and high costs were an incentive, why in the world did we spend hundreds of billions to build and maintain CENTCOM right after the 70s oil shocks? For "democracy?" ... Ah, no.

You can't just say "battery tho" louder and louder and pretend it will ever provide what oil does.

Hey, I don't like it, ... and it disgusts me what our empire has done to secure ever-greater amounts of crude oil for over a century. But let's not pretend we can just willfully and seamlessly "transition" to something else.

I'm not a fan, and I'm not advocating for oil's dominance. Far from it. This is just the way it is, and the denial by cornucopians needs to stop.

As recently as the ATF thread, I believe, I listed a number of symptoms of global dysfunction brought on by historically high oil price. Not sure what you're looking for, but if you think there's no difference today - in terms of natural limits - than what we've faced for decades, you're obv. not reading the same financial headlines I am ... esp. statements from the IEA, IMF and World Bank.

No. We talked about how you apparently don't see a distinction. That's what's stupid.

Not enough to meet the needs of complex industrial societies. High price or low.

It already is really expensive. Much more than $75, and economies begin to fail ... esp. when borrowing limits are reached.

Again, though, your logic appears tortured. You're still presuming that the producers will keep drilling, and so the public can just keep buying goods and services at that elevated price. It can't, as we've seen several times over with oil price bumping up against that $100-110 ceiling.

Global producers need $125+ oil. Consumers can't afford $75+ oil. It's two sides of the same coin, and that's because all the low-hanging fruit has already been picked. Thus, GDP growth is doomed.

This is a serious question?

Is opening a new line of credit to pay off an old one a viable financial strategy in your view?

The bold is fine. Of course, its still simplistic because producers are still willing to invest in things that are currently unprofitable but that will very likely become profitable...

But that's besides the point, I bolded this because it shows that your argument is based on the premise of oil being priced at $70-$80 - which we both agree is only a very short term thing. So your whole argument about there not being enough production is based on the idea that the price is too low to make unconventional production worthwhile. Which you don't believe is true!


Lol, you did! And I don't have 'allies' in this debate.



It's not ridiculous, at least for the next few decades, and likely longer. And again, if your big fixation on peak oil is just that the global economy will grow at the same rate that it has for the past 5 years, ok? Maybe? It's hardly a catastrophe.


You, like so many before you, seem to be wildly ignoring the advances that have been made in the past 10 years in non-oil energy. And you also seem to miss that the price of oil has a HUGE effect on how much money gets put towards alternative energy sources. So you predict lots of really bad things (although not really in any quantitative or sourced way) but you don't predict that those bad things will also push for a massive investment in other energy sources?

Uh, what? Maybe if you spent just a fraction of your energy at learning advancements that have been made you'd understand the point better?


Like seriously, you don't realize how ridiculous you sound here? You're telling us how ****ed society is going to be because of the super high price of oil. But then you're also telling us that oil companies can't predict this. That right now just because oil has dipped to the low $80s they're packing up their **** and closing down production?

Companies, in all industries, understand that sometimes you invest in something that's not immediately profitable but that will be profitable in the future. The oil companies know this too.


Ah, ha! Now I think I get what you're saying. Are you saying that you think the price of oil will bounce between $75 and $125 and so both consumers are ****ed and producers won't produce?

I mean, that's totally wrong, but at least I understand what you're saying. And if "GDP growth is doomed" is your prediction, maybe you're right. Maybe we're in for a few decades of ****ty GDP growth. That's not the end of the world or society or really anything.


It's what you're saying they're already doing. You called the whole system a gigantic ponzi scheme - why wouldn't they keep doing it if what you're saying is true?

Jiggs, I might keep posting, but I probably won't - at least in a large way. I almost deleted my last post, but figured since I wrote it I might as well post it. I think I understand generally where we disagree:

1. You seem to think our reliance on oil is much more pervasive and permanent than I believe it is.
2. You seem to not understand the basics of supply/demand/pricing/investment and how they relate to each other.
3. You seem to not understand how the price of oil is a big factor in how fast alternative energy sources are developed.
4. You seem to believe in a much higher causation relationship between oil and global instability than I do.
5. You seem to believe the world is currently in a much worse place than I believe it is.
6. You seem to believe a period of slow global growth is much worse than I believe it is.

True

False

That doesn't prove what you say it does if your assertion is true. Micro economics says something different.

There can't be both a price drop AND a shortage of oil. If there is a shortage of oil prices will increase and more marginal sources of oil will be become profitable and will be developed.

This is definitely one of the root misunderstandings that Jiggs' beliefs are based on. And its actually even stronger than what you said. Because even the prediction of higher oil prices is enough to encourage more marginal sources of oil to be developed even if they aren't profitable.

Jiggs doesn't believe oil follows the rules of supply and demand, doesn't believe oil has a downward sloping demand curve, and thinks that ENERGY IS THE ECONOMY, so lots of luck with line of discussion.

See, this shows - like the many I've encountered before you - that you just don't understand the extraction process. Somehow, in your rosie world view, you seem to believe that it either gets cheaper the deeper you dig, or you eventually dig so deep, that an endless pool of abiotic oil is reached and comes rocketing up to the surface. Because, obv., digging ever deeper, and moving your rigs around to make up for cliff-like decline rates of existing wells will somehow "become profitable" at some undetermined point in the future.

Back here in reality, they harvest the sweet spots first. It's all downhill from there. There's a reason the industry has incurred a 10% annual increase in production costs the past decade as we turn more and more to sands, shale and deepwater. This isn't changing. But you don't see why a distinction should be made.

Also, the producers of unconventional crap-grade oil don't put up much of the capital. It's investors, foreign and domestic, who do.

I remain baffled as to how you, still, at this point in the discussion, can't seem to get half my argument straight.

- oil at $70-80 is too low to maintain production quotas * (yes)
but also
- oil at $90-$125 is too high for complex, debt-based societies to function

That's the predicament. So pick your poison. ... .OBVIOUSLY the collective of oil producers could (for a while) harvest more fossil fuels with the price per barrel back up like it was in June (and higher) ... But therein lies the problem. Things begin to break down at that price, demand gets crushed, and price dips all over again. Rinse repeat, as we've seen since 2008.

(*Some would argue oil under $100 is too low for Iran and Russia to maintain production. ... and certainly, as my charts in post #36 show, some of them need the price much closer to $130)


No, I didn't. You just didn't have an explanation for the fact that the world can't afford the elevated price.

And, yes... They most certainly are your allies in this debate. It's the same short-sighted responses from you "economics trumps everything" types. Your argument isn't unique. So, own it.

LOL... See? It's the same pollyanna rationale ... From Phill, to Keed, to coffee, to Gambool, and a few dozen others in between, all leading to you. "So, this is the affects of peak oil? Doesn't seem so bad!"

Now, I could trot out a few hundred examples of industrial society breaking down as municipal budgets continue to fail, but I'm sure it will be met with the same analysis that goes no deeper than "that has nothing to do with high oil price."

To you guys:

• Arab Spring was a result of evil dictators
• U.S. debt collapse was a result of normal boom/bust cycles and overleveraging
• Ukraine conflict was a result of Russia's unprovoked meddling
• Mexico's failures are a result of corruption
• EU bailouts were the result of European socialism ...

on and on and on and on...

You guys never seem to accept the fact that the world hums on sustained cheap energy. ... It's elevated energy cost that destroys discretionary spending, exposes ballooned asset value, depletes liquid capital, and breaks municipal (and household) budgets. When it's no longer cheap, things break down. Conflicts flare up.

Wrong. Infinitely, renewably wrong. And I'll confidently wager I have a much firmer grasp of how far along those technologies are than you do. I also have an honest understanding of the basic laws of thermodynamics, the basic law of diminishing returns, and am aware that all energy sources have indirect and direct cost. They also have a lead time to mass commercial production, and an inability to fully replace one another for the full spectrum of uses that they provide.

Hope is not a policy.

Like I asked of Dude earlier in this thread (and he wouldn't answer), which do you think will spread faster? The transition to the as-yet-unnamed new miracle energy source and the infrastructure involved to bring it up to scale, or the panic that ensues when the oil majors can no longer hide the fact that conventional (and unconventional) crude production is set to begin decline within the next 5 years?

You don't appear to show an honest acknowledgement of how a lack of confidence can spook the markets. You're resting your entire argument on a hope-based presumption that spans decades. I'm resting mine on IEA, EIA, USGS, World Bank and IMF data that forecasts near-term global production decline.

In any event, when you can point to the energy source that is set to replace just one main aspect that oil provides - transportation fuel for 1 billion combustion engine vehicles - you may be ready to try and move the ball. Right now, you don't have anything besides the hope and promise of "pouring more money into the problem."

Essentially, your argument is like this:



OK, I'll let you argue with yourself here, I guess. Nevermind that I never described how "****ed" society is going to be, all I said was that they're reducing expenditures and selling off assets. Do you think they'll just blissfully buy them all back again when oil (temporarily) returns to the price they need? It's the volatility that is at issue here. No one said anything about the price staying in one place.

Please don't apply rudimentary axioms to the energy extraction game. And, as I said earlier, it's external investment that has to be convinced, not the companies themselves.

Yes, that's what I'm saying, and no, it isn't wrong at all. See post #36 again, and perhaps watch the presentation.

Don't be unoriginal and fall into that same trap. I didn't say anything about the world ending. That's your lazy straw man for my argument.

QE is being tapered back for a reason. It's completely unsustainable. Same with the European bailouts. ... It was a short-term band-aid on a gaping wound.

Re: Buffalo. Our answer isn't that there aren't dissapearing Buffalo. It's that people will switch to cattle.

Like they did.

In fact I bet you could make many analogies to past societies facing a declining resource and in all cases see that basic economic theory was followed. Just like what is happening with oil.

Fail.

I'll ask again. What IS the "cattle" today in your analogy for energy?

You, like all the rest, have yet to answer. That's because there is nothing as cheap, as versatile, as efficient as sweet crude. ... and the biggest problem, there is nothing remotely close to being ready to replace it.

I'm sure you'll respond with "word salad - technology solves everything - word salad."

Wind, solar, nuclear, coal, natural gas, buffalo ****, hydroelectricity, tidal, ethanol, yadda yadda yadda.

A primer on oil prices

Oil is unique. There is a tight relationship between energy supplies, especially affordable quantities of oil, and the level of overall economic activity. Simply put, economies stop growing when their use of energy stops growing. The world moves with oil, and petroleum lubricates the global economy. It is not simply a natural resource, but the substance that allows all other systems – from food to cities to (unfortunately) war – to exist at the massive scales of today.

For most of the 20th Century, the world’s supply of oil grew steadily, while the price generally declined and remained low1. This enabled the world’s GDP to expand by a factor of 15, a rate vastly greater than at any time in human history. The opening years of the 21st century have broken with these trends. The price of oil is higher (even adjusted for inflation) than it has been since the opening days of the oil age (except for a few brief periods), but global supplies of oil are growing very slowly, if at all, and economic growth is stalling all over the world.

The booming story of American shale oil development and the prospect of “energy independence” had been a defining narrative driving optimism about our economy since 2009. Many advisors have bought into this story, which depended on enjoying both our new oil and high world energy prices. The current price collapse could be a threat to that part of our prosperity.

Oil extractors need high prices. The cost of getting oil out of the ground has been rising at more than 10% per year for over a decade as the new sources of oil moved to deep water, tar sands and shale deposits. In addition, many nations, especially Russia and those in OPEC, need the revenue from oil to pay their national bills and support the promises made to their people and their militaries. The break-even price for those producers is approximately $110 per barrel for Brent, and that was the regular price from 2010 to this summer, bouncing around in a tight range.

Great for heating a fraction of homes... None of them get you to work, move freight, provide jet fuel, pave roads, lube computer chips, fertilize crops or kill insects, etc. etc. etc. ... Do better.

Oil is fungible. We don't need to find cost effective alternatives today for each and every one of its uses today even if we did live in a world where oil production was actually declining.

This seems to be a major sticking point.

I'm not saying you're wrong, but if you want to convince people, you need to show that oil prices are a major contributing factor.

Actually all of them can heat houses, get you to work, and move freight.

And there are other alternatives for some of the other stuff, but like LetsGambol said we don't actually need to find alternatives for all oil stuff. Just enough alternatives that demand falls to a place where the price of oil makes sense for those other alternatives.

That's not even enough for me. I need him to explain how many of the equivalent events in the 20th century - that came when oil prices weren't high - aren't related to oil price and how those factors were irrelevant for these other events.

Before I respond, are you sure you typed this correctly? Or was it in error?

Give me some examples of what you're referring to.

It's more than just global price that spurred energy-related conflict throughout the 20th century. It's also been about access to it, so as to control the flow and profit of.

In any event, one example of global finance reacting to oil price spikes (pre-Bernanke, anyway) is in the Fed funds rate:

Please proceed Governor.

So, demand falling for oil makes the price rise to the point that it makes sense for alternatives?

Now you get supply and demand?

The alternatives come when the oil price is high. As alternatives are found that reduces demand for oil. Price goes down. And so on and so forth.

The point being that we don't need to find alternatives for all uses of oil. And not all uses of oil have the same price point where alternatives need to be found. The important thing being its ridiculous to think that oil is special and doesn't respond to basic supply and demand.

do you? you seem to be changing what you earlier advocated, where you put cart before horse... In any event, demand isn't falling because we've "found alternatives." ... it's falling because the average consumer doesn't have the purchasing power ...

further: demand does not fall "to the point that the price makes sense for alternatives." ... price must rise to the point that it makes sense, and then hope an alternative actually exists.

Again, you'd need to touch on alternatives that are even remotely ready to replace oil. Rifling off a bunch of energy sources without qualifying how they can move freight or fertilize crops - nor who is ready to bring them up to mass commercial scale - does absolutely nothing for your argument. Your argument is, in essence, "trust me, technology always wins."

It may feel good inside to tell yourself that oil is easily replaceable with "alternatives," but it brings you no closer to reality. We're many decades into trying to find alternatives to oil. What progress have we made? Oh, that's right... we focus most on even more-expensive, and less-efficient liquid fossil fuels. What does that tell you? ... Nothing replaces oil. Certainly not to the tune of 91 million barrels of energy productivity per day that modern industrial society absolutely depends upon. Not even a fraction of that, in fact. ... So while it's possible to convert coal to liquids and move a truck, or create nitrogen-based fertilizers with natural gas, it's horribly inefficient, and will never amount to much. ...

You need a more honest conceptualization of what's being discussed here, because like the dozens before you, you're a classic cornucopian with limitless hope, and little functional understanding of net energy and its relationship with economics (EROEI).

Cool story. Yet, with Brent around $100 for four years, one would think your heroes of technology would be on the cusp of energy revolution any day now. What is the price point for innovation to take hold, exactly? You said it's breathtaking how swiftly investment money can pour in to alternatives? OK, link away. Where is it? .... And try to link to something better than private efforts "still in the test phase (and has been since the 70s)"

Unfortunately, there are no breakthroughs ready for any of the functions I listed. Meanwhile, what source does the vast majority of $ billions go in investment? That's right. Ever more dirty, more expensive, less efficient tight oil and gas production. ... That's because the men far more experienced, honest and pragmatic than you know that nothing is out there that gives the same bang for the buck than does hydrocarbon liquids, and won't be.

If alternatives were viable, why are we continuing to do this for ever more of the old stuff?:



Toxic Chemicals, Carcinogens Skyrocket Near Fracking Sites - The spikes almost certainly will lead to a cancer increase in surrounding areas, a study author says.

LOL

- it is quite "special" ... far more than you obviously realize, and the more you deny it, the more foolish you make yourself look
- while it may respond to basic supply and demand, that doesn't mean anything can replace it to even a fraction of the 91M bpd it provides, nor do so in time to quell panicked markets. ... NOR keep nations from getting violent for control of it.

No matter how you slice it, the world is facing degrowth. Embrace it. I know you guys are psychologically addicted to capitalism's false promise of infinite growth, but a shrinking world economy doesn't have to be the unmanageable disaster you make it out to be. ... It's time to re-wire.

one thing that is most amusing is the fact that in 5.5 years of this debate, you guys have gone from:

- no, conventional oil is not peaking...
- ok, but there's plenty of THIS kind of oil... and cost to produce dirtier oil doesn't matter

and now, it's:

- ok, yeah, it's too expensive... but, technology!

What about profit margins being too low at 80/barrel?