And finally the inevitable US$100 a barrel
It was only a matter of time but oil has touched $US100 a barrel.
Jan. 2 (Bloomberg) — Crude oil rose to $100 a barrel for the first time in New York as record global fuel consumption threatens to outpace production. Oil’s gain, extending last year’s 57 percent rally, was boosted by forecasts that U.S. stockpiles dropped to a three-year low last week. Unrest in Nigeria, Africa’s largest oil producer, also spurred prices.
Can we please now give some serious thought to govt investment in alternatives to oil? Isn’t it time Labour reconsidered its motorway strategy?
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January 3rd, 2008 at 2:08 pm
$100 a barrell isn’t expensive. Most European governments have been taxing petrol at more than $150 a barrell for decades. It hasn’t stopped traffic growing four times faster than in the USA.
January 3rd, 2008 at 2:23 pm
Russ
Is it true that you are going to be taking the seat currently occupied by Nandor?
January 3rd, 2008 at 4:22 pm
Even if the government managed to get forecasts that didn’t consistently underestimate the future price of oil, they wouldn’t significantly change their roading plans in an election year… unless a short-term price spike (maybe caused by Dubya deciding that the exit strategy for Iraq is to go through Iran) puts concern about future fuel prices into the minds of voters.
January 4th, 2008 at 9:20 am
As Solar power technologies improve, as forward looking Governments subsidise home-grown ethanol production, mayhap the Oil Barons can see the end of complete mobility control - I feel the price of oil will continue to go higher.
What I don’t understand is why these same Companies aren’t moving to establish their own ground in this inevitable move away from such a toxic and doomed product.
Somebody will be marketing the new energy modes - instead of feeling threatened and hiking the price - they could be even bigger winners if they led they way!
January 4th, 2008 at 11:07 am
So, its taken just over thirty years for oil price to rise an order of magnitude, do you think it’ll take another thirty odd to hit $1000/bbl…?
Still waiting to see all those schemes that would replace oil use once oil got to $20/bbl, $30/bbl, $40/bbl, you get the idea…
January 4th, 2008 at 11:36 am
dbuckley: are you talking inflation-adjusted dollars? The news I’ve seen puts todays price about the same as 1979-80 after the Iranian revolution. That was THE big spike that drove the world into recession. Our high dollar is shielding us from most of that pain now.
My take is that oil production in some countries will crash, but the overall decline will be slow, <1% per year, due to new discoveries, which were massively up in 2007- almost at replacement level. Oil will keep crawling up but won’t be unaffordable (for the OECD) for at least 10-20 years IMHO. $1000 in 2028? Auckland would still be arguing over who should pay for their public transport system
Kevyn I am interested in what roading projects you support- you made a reference to the road toll and how much of it is avoidable- do you have a list of fixable black spots?
That would be a Green policy I would support- fix the deadly bits first instead of congestion being the main driver…
January 4th, 2008 at 11:56 am
Mark52 said: “…as forward looking Governments subsidise home-grown ethanol production,…”
I don’t consider such subsidies to be forward looking at all. Their main achievement is to drive up the cost of food and line the pockets of existing players.
A forward looking government would pay for research and pilot projects into developing transport fuels (ethanol, methanol, methane = CNG even, oils, etc) from waste biomass. In New Zealand’s case, we have a lot of forestry biomass such as tree thinnings and prunings from shelter belts. This has a lot of potential, with the right developments in biotechnology.
Trevor.
January 4th, 2008 at 1:39 pm
Oil prices are quoted in $US/ barrel yet the $US rises and falls? So suppose the $US collapsed last year……… How is this [what’s the word……indexed?]
January 4th, 2008 at 2:19 pm
I don’t have a list, but I do have a local desire to get the Green party behind Transmission gully and to work out a way to get rail to work along it. I think this is in the “possible but difficult” basket but observing the height above Mean Sea Level and the longevity of routes (not exactly the same as roads) historically, we have to approach the problem of keeping access open to the rest of NZ.
Wellington is not going to be an island…. but if the ocean were up 2 meters or so it might well seem to be. The damage to our infrastructure would be immense and there seems to be no plan whatsoever construct/reconstruct/replace/design anything with those levels in mind.
IMHO the construction of infrastructure of ANY sort that is less than 10 M above Mean Sea Level should be kept to a minimum. I’d also love to see the plans to keep the ocean out of Britomart… oh… we don’t HAVE any of those either.
Is this still not being taken seriously in council plans? Why not?
respectfully
BJ
January 4th, 2008 at 2:26 pm
I would approach the oil price with some caution. It is a volatile commodity with price set at the margin. A severe recession (which the US seems intent on starting) could drop demand and price down to 60-75$ per barrel (using current dollars). The actual price in terms of US $ might easily double as the Fed pumps more of those into the economy…. and comparing things in terms of US$ prices is already getting a bit confusing.
Overall the pressure is on at the moment and it will rise until the recession does bite. .. but falling demand can bring it down.
So let us not “crow” over this event. It may well be more short lived than significant. When it tops this level AFTER the recession, and it will, it will not have any opportunity to fall again.
respectfully
BJ
January 4th, 2008 at 2:28 pm
Gawd… RanDoM capITalIZatioN… I really need to take more time with this stuff.
BJ
January 4th, 2008 at 2:34 pm
BJ what are the ranges a and timescales currently predicted for sea level rises?
January 4th, 2008 at 3:04 pm
” But publicly, at least, the Organisation of the Petroleum Exporting Countries argues that oil at $100 is the result not of a shortage of supply but of financial speculation.
There might be some truth in that: in recent years, the volume of oil traded on markets such as New York’s Mercantile Exchange (NYMEX) has risen out of all proportion to the amount consumed. Hedge and pension funds and even individual investors have been piling into commodities of late. This influx of money could be exaggerating the market’s gyrations. Indeed, oil only topped $100 in a single transaction before falling back.”
http://www.economist.com/displayStory.cfm?story_id=10436089&fsrc=RSS
January 4th, 2008 at 4:11 pm
Looks like The Economist is arguing against itself:
The biggest impediment is political. Governments in almost all oil-rich countries, from Ecuador to Kazakhstan, are trying to win a greater share of the industry’s bumper profits. That is natural enough, but they often deter private investment or exclude it altogether. The world’s oil supply would increase markedly if Exxon Mobil and Royal Dutch Shell had freer access to Russia, Venezuela and Iran. In short, the world is facing not peak oil, but a pinnacle of nationalism.
None of that will help consumers or governments. The economic toll of expensive oil is just as high whether geology or politics is to blame—and the best response is just the same. Policy should encourage energy efficiency and support research into alternative fuels. Governments seeking to shield their citizens with subsidies or price caps should instead expose them to the full cost to foster frugality. All this will be hard and unpopular. But politicians might console themselves with the thought that even the most recalcitrant petro-regime is more malleable than the brute realities of geology.
January 4th, 2008 at 5:10 pm
Production goes up by the stairs; consumption goes up by the elevator.
January 4th, 2008 at 6:57 pm
JH:
The IPCC predicts a sea level rise of considerably less than 1m by 2100. However, there are many uncertainties. You can see a discussion here:
http://www.realclimate.org/index.php/archives/2007/03/the-ipcc-sea-lev el-numbers/
January 5th, 2008 at 4:09 am
uk_kiwi,
Fortunately a full list of blackspots was tabled in response to written questions in Parliament in 2006. I have merged them into a single PDF
http://www.petroltax.org.nz/PDF/BlackSpots.pdf
The LTSA definition of a crash black spot is “A site where 5 or more crashes OR 3 or more SERIOUS or FATAL crashes have been recorded in a 5-year period, within a 510m DIAMETER for RURAL areas, or a 70m DIAMETER for URBAN areas�.
As the tables provide a list of contributing factors you can see for yourself how few have road factors identified by the police and how many have “poor handling”. It’s not surprising so few crashes are blamed on road factors when you see how limited the LTSA’s database is (table 26):
http://www.transport.govt.nz/assets/NewPDFs/section2-casualties-and-cr ashes-2006.pdf
Compare that with Transfund’s Road Safety Audit Checklists:
http://www.ltsa.govt.nz/funding/tfm9/tfm9.pdf
A summary of black spot improvements:
“Fatal crashes slashed by targeted road engineering” - LTSA 2004
http://www.transfund.govt.nz/research/documents/stats-2004-07.pdf
and the detailed version:
http://www.landtransport.govt.nz/roads/crash-reduction-programme.html
January 5th, 2008 at 11:06 am
uk_kiwi: my dollars are the price at the time, not inflation adjusted.
Thus when you put the “appropriate” rise in the “real” price of oil and then help it along with a collapsing USD, the rate of increase of price will, I think, be rather higher.
It is easy to understand why oil producing countries would rather not trade oil in USD at the moment, but - literally - just about anything else. However there are strong policitical forces at play to keep the USD as the currency of oil, not to mention that the last significant oil-trading country that decided to shift away from USD paid a heavy price.
BJ: We’ve not actually reached the level of $100 yet, it’s just a one day event. I’m not convinced we’ve made $90, but the signs are strong that a realistic $90/bbl is looming large. The wobbles on price are very large, but fining a reasonable (realistic?) mid-point is non-trivial.
January 5th, 2008 at 7:18 pm
Just a thought: they say the oil price isn’t such a worry to the US economy because they use energy more efficiently now……..
Well suppose we had had a stronger Green influence in building (say a fanantically focused minister. and the Green Party hadn’t put so much effort into “social justice” shinanagins etc……) then we, with our lovely warm houses and efficient urban design, would be also able to say….
January 6th, 2008 at 3:47 pm
jh, we’ve put lots of effort into changing the building code. We have made some progress with the latest revisions and Jeanette’s energy efficiency program is designed to escalate the level of retro-fitting of old houses which is just as important. I wish we could’ve acheived more but we have used our six vote leverage as best we were able. It’s actually a classical issue of crossover between social justice and environmental sustainability so I don’t see it as an either or. Russel
January 6th, 2008 at 5:49 pm
What was the fuel efficiency of cars in 1973 compared to todays cars? Of course people have to drive further today also.
January 7th, 2008 at 1:46 am
jh, The US government provides the following info on historic fuel efficiency:
http://www.bts.gov/publications/national_transportation_statistics/exc el/table_04_22.xls
Vehicle MPG
1970 1975 1985 1995 2005
13.5 13.9 17.4 21.1 22.9 Car
10.0 10.5 14.3 17.3 16.2 Light Truck/Van
50.0 49.6 50.0 50.0 50.0 Motorcycle
Occupant MPG
1970 1975 1985 1995 2005
25.8 26.4 29.3 33.6 36.1 Car
18.4 19.0 25.1 27.5 28.1 Light Truck/Van
50.0 53.1 65.9 56.1 63.5 Motorcycle
January 7th, 2008 at 3:41 am
jh, The UK government provides the following info on historic fuel efficiency:
http://www.dft.gov.uk/pgr/statistics/datatablespublications/tsgb/editi on2006.pdf
Converted from metric to miles per US gallon.
1978 1985 1995 2005
21.1 26.7 26.4 29.2 Car MPG
38.5 47.0 46.4 49.9 Occupant MPG
New Zealand probably fits half way between these figures.
In regards to driving further, it is notable that NZ, UK and USA all approximately doubled their light vehicle miles travelled during the 1960s. During the 1970s there was only a one-third increase. In the 1980s NZ & USA had another one-third whereas Uk increased by one-half. In the 1990s Uk one-fifth, USA one-quarter, NZ one-third. In the first half of this decade UK & USA have increased by less than one-tenth, NZ by one-fifth.
January 7th, 2008 at 7:42 pm
IEA Chief Says Oil May Rise to $150 on China Demand (Update1)
Jan. 3 (Bloomberg) — Oil prices may rise to as high as $150 a barrel because of booming demand from India and China, according to the director of the International Energy Agency.
“In a very high growth scenario in China and India it may move up to $150,” Nobuo Tanaka said in an interview in Paris today. Those countries “are consuming energy in a very, very substantial way.”
Oil touched a record $100 a barrel in New York yesterday as renewed violence in Nigeria, Africa’s largest crude producer, raised the specter of further supply disruptions. Prices are up 71 percent from a year ago.
“Suddenly the lower-level price age may be over and we are now in the age of very high energy prices,” Tanaka said.
The IEA won’t use its strategic oil stockpiles to ease record prices, Tanaka said. The U.S. also doesn’t plan to tap strategic reserves, a spokeswoman for President Bush said yesterday.
Crude oil for February delivery rose as much as 36 cents, or 0.4 percent, to $99.98 a barrel on the New York Mercantile Exchange today. The contract traded at $99.35 at 3:55 p.m. London time.
Tanaka said he disagreed with officials from the Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, who have denied that the strength in prices is a result of demand and supply fundamentals.
`Fragile Market’
“The supply-demand situation is a basic determinant to the direction of the price,” he said. “The current level of spare capacity and the current level of stocks is showing that the market is quite fragile.”
OPEC officials, including Qatari Oil Minister Abdullah al- Attiyah, have said the producer group can’t lower the oil price because it’s driven by speculative investors rather than fundamentals.
In a high-growth scenario, oil import prices will rise to $150 a barrel by 2030 in nominal terms, or $87 a barrel in inflation-adjusted 2006-dollar terms, the IEA said in its Nov. 7 World Energy Outlook Report.
http://www.bloomberg.com/apps/news?pid=20601012&sid=adTrIStEuO9M&refer =commodities
January 7th, 2008 at 10:50 pm
JH:
The end of your quote says:
“n a high-growth scenario, oil import prices will rise to $150 a barrel by 2030 in nominal terms, or $87 a barrel in inflation-adjusted 2006-dollar terms, the IEA said in its Nov. 7 World Energy Outlook Report. ”
In other words, the IEA is predicting a lower cost per barrel in 2030 than today (after adjustment for inflation). Even if the $150 per barrel was after the inflation adjustment, do you really think that this is likely, especially in a “high growth scenario”? The prediction seems overly optimistic to me.
January 9th, 2008 at 10:06 pm
I think I heard Jim Anderton on the radio saying that the government was doing something about this - they were investing in bio-diesel research.
The amount that they are putting in is probably less than the extra cost of even one day’s oil imports at the higher prices.
If they were serious, they would increase the amount spend on making New Zealand energy-sufficient or even a net exporter of energy. (We already export energy in the form of Aluminium.)
See http://www.awatea.org.nz for some ideas.
Trevor.
January 11th, 2008 at 7:50 am
Another Nail in the Coffin of the Case Against Peak Oil
By
Matthew R. Simmons
The best of the world’s “raw numbers� on global crude oil production still comes
from the U.S. DOE/EIA. Eighteen months ago, I began looking closely at the EIA’s
global crude oil and condensate production report summarized in the EIA’s
Monthly Energy Report (Table 11.1b) as it showed a peak in crude oil production in
2005. For almost a year, minor adjustments to the 2005 data were made. Over
time, however, the facts point to the glaring and inconvenient reality that the May
3
2005 crude production represented an all-time high, even though it barely
exceeded 74 million barrels a day – 74,298,000/day according to the EIA. April,
May and December 2005 were the first three months in the 150-year history of oil
when the world ever produced this much oil. In July 2006, global crude once more
inched above the 74 million barrel a day high-water mark. No other monthly report
before or since shows oil produced at or above the 74 million barrel per day mark.
As months passed, the EIA revisions ended through 2006 data. As we near the end of 2007, May 2005 is still the magical “moment in time� when global crude oil peaked at 74.3 million barrels a day. Some miracle series of new oil fields could suddenly be found and quickly brought on to production, but the more time that passes, the less likely this is.
http://www.simmonsco-intl.com/files/Another%20Nail%20in%20the%20Coffin .pdf
January 11th, 2008 at 8:44 am
It was reported on the news this morning that the price had slipped to under $US95 per barrel…
Trevor.
January 11th, 2008 at 12:46 pm
Normally at this time of year the price of oil collapses from an early case of spring fever. Speculators get cold feet when guessing the price for oil being delivered at the tail end of the winter heating season. They don’t get bullish again until the summer driving season is nigh.
A breif peak at $100 is insignificant compared with the price of crude not falling below $60 by the end of this month.
January 12th, 2008 at 6:00 am
“Wood is more precious than gold
The price of gold is going crazy as investors look for a shelter from a dipsy-doodling stock market.
It reminds me of one of my grandfather’s stories. During the bad financial times of the early 1920s in Germany, the peasants (ancestors of ours) traded their potatoes for gems that the rich people were forced to pay to get something to eat.”
http://www.energybulletin.net/39047.html
January 18th, 2008 at 2:28 am
Has George W. has a road to Damascus awakening and converted to Peak Oil?
“If they don’t have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do.”
The full quote and link to the ABC Bush interview is at The Oil Drum
http://www.theoildrum.com/node/3514#more
January 18th, 2008 at 10:52 am
As little as I may like Bush, there has never been any point I can recall in which he denied the existence of peak-oil as a problem. He doesn’t talk much about it, but I don’t think he ever said it wasn’t real.
Prove me wrong?
The issue with him is what Cheney’s plan for dealing with it actually is.
respectfully
BJ
January 18th, 2008 at 11:06 am
Kevyn - I believe that George has always been an oil insider and has always been fully aware of the threat to the US of peak oil, having grown up through the years of the US peak in the ’70s. I am sure his understanding of it is what underpins his absolute conviction that occupying Iraq is in the US interest, whatever his rhetoric. The fact that I disagree with him is not relevant. I also concur with your earlier comment that the most relevant thing will be if January’s average price per barrel remains high. I monitor this stuff closely, and my current trend line doesn’t put oil at $100 per barrel until August this year.
I was just sitting down to write a post about all the peak oil quotes from 2007, in part fed from the TOD blog. Good reading that!
January 19th, 2008 at 1:01 am
bj, perhaps I was too gobsmacked by his interview performance. Maybe now that he doesn’t have the same imperative to keep the newsmedia sweet he isn’t going to go through the motions of taking silly questions seriously. He certainly didn’t in the ABC interview. When was the last time you heard a politician give a blunt, straight answer in an interview. Far from taking time to think of an answer that would keep the greatest number of voters happy he basicly just laughs at the suggestion that the US President can reduce gas prices by taking a hard line with the Saudis.