[quote=EconProf]Remember Peak Oil? A few years ago we were all told that oil prices, then over $100, would soon double and then double again, as the world’s supplies became exhausted.
Then along came fracking. Good old capitalism harnessed technology to again stymie the doomsayers. Now the US will become an energy exporter to the rest of the world. In some previous years we imported about half of our oil. Soon we will produce more energy than Saudi Arabia. Once again the market system comes through.[/quote]
Peak oil did happen back around 2005, but one has to see and understand the context of the individuals associated with the theory/problem.
To begin, the theory of “peak oil” was proposed in the 1950’s by a shell oil geologist named Marion Hubbert and then popularized around the early 2000’s by Matthew Simmons (who ran an investment banking services firm for the energy industry) after he wrote the book “Twilight in the Desert.”
What these two (DEAD) individuals were most likely concerned with was the peaking of liquid fuels delivered from “conventional” oil NOT tight oil (e.g. oil derived from shale or tar sands!!).
Since you most likely are looking at the problem of “peak oil” with an economics mind set, you might be thinking there is no longer a problem because there is the simple solution of “economic substitution.”
From the consumer stand point oil from convention land based fields like “spindel top” in Texas, or “guwair” the superfield in Saudi Arabia is no different from oil derived from “cantarell” which is a shallow water oil field in the gulf of mexico!
Then one has to consider “tight” oil derived from the tar sands in tar sands in alberta, and of course there is the latest source of oil (energy) from shale in barnett TX, and the marcellus in the appalachian basin.
The simplest 30 second way to understand why “conventional” peak oil is indeed a very real economic problem in the long run, is watch the intro to the beverly hillbillies theme song and note the image associated with “bubbling crude”
Long story short, conventional oil is cheap and easy to extract/process and bring to market! BUT the “economic substitutions” for easy to get to conventional oil from unconventional geological formations I mentioned above, requires lots more money and resourced to bring to market!!
If you are trying to figure out why there there has been a rapid drop in oil prices this past couple of months, one has to think like a a long term investor and a student of peakoil!!!
I myself see the shale revolution of this past half decade as kinda like the “optimistic” atomic energy revolution of the 1950’s (IMHO the phrase “too cheap to meter” is a reto sound byte, applicable to “fracking”)
Personally I’m guessing there is lots more to the sudden drop in prices of oil than meets the eye.
In other words the current KSA powers that be are borrowing the bill casey CIA playbook of the reagan era (in other words the USA screws the USSR, by investing in oil infrastructure in Sauda Arabia there by lowereing the cost below the cost to produce for the USSR, in addition the USA sells weapons systems to Sauda Arabia which creates jobs in the USA and as another bonus the US consumer gets cheap gas to fuel the SUV fad! So bottom line a strategy was developed so that the economy of the USA during this era is the global winner!!)
Before matt simmons died, I heard he said before we clearly see the downward side of the production curve, there would be an oscillating plateau for a while (i.e. time period we are now in where convention oil production declines would be filled by technology like increased extraction techniques from convention fields, and extraction from tight geological formations like “fracking” from shale)
There is a difference between human and geological time (and it is important to be aware of those differences when trying to understand what exactly is going on).
What we are experiencing now with the economy is the short term effects of money flows in the market place w.r.t. oil prices! BUT in the end society will have to face the reality that there is no way to ignore the laws of physics!!
