by frog
Since I have a habit of reporting whenever oil hits a new $10 level, I thought it only fair that I wade in and report when it has dropped as much. As I write, oil is sitting at US$130, and NZ oil companies have mercifully dropped petrol prices by 4 cents a litre. This is good news at a time when both households and businesses are reeling from the impact of high oil prices, which are still at historic highs, despite the drop.
Having said how good it is, it is far too early to start celebrating the end of the nasty oil ‘spike’. As the Transition Culture blog reports, and Matthew Simmons supports, we are still in denial about just how cheap oil really is, and how much higher the price is likely to go. Watch this video to see the finance gurus at CNBC’s Fast Money squirm in their seats and Simmons points out just how dire our predicament is, and why we should have been doing something about it for the last twenty years or so.
Simmons points out that whenever prices rise, the finance people call the change abnormal. Whenever they drop, they call this ‘normal’. What a joke. Any graph will show you that price rises have been ‘normal’ for a long, long time. Simmons also says that oil is more likely to go to up towards $600/bbl than go back to $50/bbl, and could do so in any time between six months and five years. This is what he says in response to the recent price drops:
So what do we make of this? I suggest it is just the calm before the storm.
Published in Environment & Resource Management by frog on Fri, July 18th, 2008
Tags: culture, economy, historic, matthew simmons, oil, peak, peak oil, transition
on the trolls and those who are unable to keep on topic
I don’t see any calm frog – I see just the sort of extreme price volatility that was likely when oil reached it’s production plateau.
The peak oil theory does not project inexorably rising prices at this point – it predicts uncertainty and volatility. Over time the trend will be up (as it has been) but there is still room for lots of volatility as markets attempt to find a new equilibrium price when the equilibrium is continuously moving as eonoimic griowth drives oil demand up and supply is unable to respond (significantly).
As Matt Simmons said, it would take a pretty massive recession to generate enough demand destruction to see oil prices fall back to $40 barrel.
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kiwinuke – I agree that it is not truly calm, but that’s the way the finance punters are billing it. They think that this recent drop in price, like the recent stabilisation of global temperatures, proves that peak oil (and climate change) are a myth and that everything will be OK. This is definitely just the kind of perturbation that the models predict. That was my point. It’s a false calm, but really it’s just part of the storm.
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frog..why link us to vids that are no longer available..?
phil(whoar.co.nz)
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So… You think Oil is expensive? Well, when you measure other things in “Barrels” like Oil is priced, then you get this picture…
US light sweet crude……………..$130brl
Coca Cola……………………….$126brl
Milk……………………………$163brl
Perrier Water……………………$300brl
Budweiser……………………….$447brl
Starbucks latte………………….$954brl
Ben & Jerry’s ice cream…………$1,609brl Tabasco sauce………………….$6,155brl
Chanel No 5………………..$1,666,560brl
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Mr Simmons interview as usual was botched by the ‘bimbo’ who acts as anchor on this wholly insubstantial program, however it did support the view that the ‘fundamentals’ all point to an ever-increasing price of oil.
It would have been interesting for her to have followed up on his comment that ‘all the major oil companies are in liquidation’. I take this to mean that they are all scrambling to get out of oil as their major business and invest in the coming energy boom – alternatives’. Note – T Boone Picken’s recent investment of $ 4 billion in Wind. I note that investment in ‘new oil’, in all it’s forms, has shown a slackening off, and wonder if this is a sure sign to investors that alternatives are the future. The market will out !
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Paraniod Peter – your point is ? Tabasco sauce powered cars ?
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I wonder how much a barrel of whisky is – you never know it might be cheaper to run the old car on it but i still reckon it is better to drink it
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Corn ethanol? Good old moonshine
Sacrilege to burn it 
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