# emmess Says:
August 7th, 2008 at 12:02 am

> I have been predicting for a couple of weeks now if the price fell below $120,
the bubble would burst.

I don’t think it’s a proper bubble, because speculators cannot easily store oil like they can with grain, shares or land. Of course the oil drilling compaines can store oil by leaving it in the ground a bit longer, but they have different incentives – they wouldn’t risk creating a bubble because they can’t leave the market and invest in something else before the bubble bursts.

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bigblukiwi
Please identify the observations you find so objectionable.
All the observations are based on documented data.

My preferred option for rural and “scenic” living is clusters or hamlets of typically a dozen households rather like the French and Italian villages. The last hamlet I developed had lots of only 2000 sq m (but sitting within a park) which proved very attractive to divorced women because they had security and could manage the garden. The 4ha lot (except for those who really need that amount of land) is just about the worst way to use rural and scenic land one can imagine.

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Yes, in a perfect world we all stop driving our cars as much and demand for oil continues to drop. Logic suggests that when the price drops, we’ll be back in our cars, driving like there’s no tomorrow.

Unfortunately, petrol isn’t the only product we get from oil, and driving personal cars isn’t the one thing we use petrol for.

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I think Owen may have a point about (I think he has said) letting people spread into the countryside: not as carpet sprawl but dotted in say 1ha lots as they wish.

One thing I don’t agree with is the notion that lower prices in the perimeter (Houston case) compensate for being built out by a later high rise…

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I have been predicting for a couple of weeks now if the price fell below $120,
the bubble would burst. I predict over the next month or two the price will plummet as speculators get out of the market. Not sure how low, I would say at least under $80, possibly even under $50

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Owen – one of your worst posts in my view.

Alexking – Bravo.

Kevyn – Bravo.

Kahihatea -are these the same economists who designed this crappy system ?

Hydrogen – Nah !!

Solar in all it’s forms – Yah!

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alexking Says:
August 6th, 2008 at 11:16 am

> I would think there may be some months at these lower levels, but then the price of oil will resume its upward direction again. I think there has been a temporary demand reduction. People will become used to the higher prices, and return to their previous use levels after a while.

on the contrary, as people get used to higher prices, they tend to become better adapted to them, and manage to reduce consumption more. People get houses closer to their jobs, or jobs closer to their houses. They buy more fuel-efficient cars, though that takes a long time to have an effect – not only does it take many years to replace a large proportion of the car fleet, but new-car-buying habits in the short term are strongly influenced by what the factories are set up to make, and that takes time to change too. People get round to arranging car-pooling, or the public transport system expands to accommodate the larger number of people who now want to use public transport.

Economists describe this as petrol demand being inelastic in response to price in the short term, but elastic in the long term.

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Those reductions in driving are significant and are certainly reducing demand.
American drove about 120 billion fewer miles in 2008 than in 2007. But increased public transport ridership accounted for only 2-3% of that reduction.
Significantly, the most dramatic reductions are in the rural areas, probably because country folk can more freely plan their travel times, and share their rides. Also, they spend no time at traffic lights, in gridlock, or looking for parking spaces. When petrol prices are high such waste is infuriating.
Hence, while none of us can be sure about future human behaviour, early data suggest that high petrol prices are a further force for decentralisation.
Kunstler and other catastrophists are sure we shall all rush to the city centre. However, no human behaviour is uniform. Some people will go downtown and some – probably more – will go to rural centres. Many will go to more remote locations for “the sea change, the tree change and the ski change.�
For most of human history people have had access to private point-to-point transport using horses, camels, mules, donkeys, lamas or whatever. Christ rode into Jerusalem on the contemporary equivalent of a VW.

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Yeah, once China gets back to work after the Olympics, expect prices to resume normality.

Unless America has a proper recession; huge numbers of fired no-longer-commuting Americans will reduce the oil price usefully.

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You’ve gotta hand it to the global gamblers, it was a brilliant get rich quick scheme. Buy enough oil futures to bid up the price. Off-load them to the herdfollowing mugs before Q1 earnings are announced. Now buy auto and airlines shares. The mugs’ll sell when they shouldn’t, driving oil price below it’s correct level and driving auto and airline shares above their real value. Now you can sell the shares you bought at inflated prices and make a killing.

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Edge:

Yes.

Oil production is on a bit of a plateau, and has most likely peaked already. The price however is having a cup of tea, and will soon resume its climb.

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Was that peak oil?

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except the NZD is also falling against the USD so NZ’rs aren’t going to see the full benefit at the pump of these reductions.

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I would think there may be some months at these lower levels, but then the price of oil will resume its upward direction again. I think there has been a temporary demand reduction. People will become used to the higher prices, and return to their previous use levels after a while. It would only be a permanent reduction if they bought smaller (more energy efficient) cars, or permanenty switched to different transport modes, or permanently changed their consumption habits.

Any demand reduction is a one-off. People who have maybe bought a smaller car, have saved maybe 20% of their oil use via the car, and maybe 10% of their overall oil use. Peak oil though means a reduction in world supply of roughly 5% per year, every year. So it’s only a matter of (a short amount of) time before the oil market becomes tight again.

In the mean time, those pesky poor people in other countries still want to eat! And the “growing middle classes” I keep hearing about actually want to consume like we do! This will tend to offset reductions in the west due to recession.

I doubt fanciful ideas about electrolysis has any impact on the oil price today. Most of the world’s electricity is produced from coal – which has it’s own rising price problem and will have its own peak in the not too distant future. Before we switch to hydrogen cars fueled by acres of silicon solar cells producing hydrogen from water, how about we replace the existing coal fired generation first? How many percent of the earth’s surface do we need to cover with these? Not more than a few percent surely? We didn’t need the food we used to grow in those fields, did we? Or perhaps they can float at sea, the oceans aren’t doing anything useful with their solar energy, are they? Or maybe we can put them on mountain tops, there’ll be so much energy produced on the Himalayas that you’ll be able to get an escalator to the top of Everest.

What _would_ be more sensible would be to change our transport modes, our lives and consumption, and the organisation of our society to be less energy intensive. There is no technical fix to keep us at our current level of consumption and allow the rest of the world to join us. We need to be more reasonable.

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