by frog
Will we touch US$120 before the end of the month? Perhaps. But only because US inventories are low going into the summer driving season and because OPEC is sitting on its hands and the Nigerians and Iraqis are having a field day blowing up pipelines. Trevor29 rightly points out that we are way above the green line, shown in my post from November last year. The green line was MED’s interpretation of Colin Campbell‘s 2005 Peak Oil scenario entitled The Heart of the Matter.
Rather than pick on Ralph Samuelson from the MED I would rather choose to praise him for having the foresight to include Campbell’s peak oil scenario in their forecast way back in 2005. It took a lot of courage back then to say that there might be a high price scenario while the futures markets were showing that oil would be:
I’m sitting at home this weekend just scratching to go into work and update the chart from my previous post. I last updated it when oil hit US$110. I’ll do it on Monday and post it. It should be fun.
Meanwhile, I’ll stick to the forecasting that I’ve done all along here at frogblog, that oil will be at a steady average of at least US$100 between July and September of this year. That’s what my trend line shows and from what I gather from all the peak oil geologists, we are due for a fresh spike in production this year as a couple of megaprojects come on stream and offset the declines from older fields enough to lower prices – temporarily. It’s a volatile market and part of the pressure on prices is from the middle – refinery capacity shortages. This year, several new refineries will be commissioned and will go into production, a further downward signal for the market. Stay tuned, it’s going to be a bumpy ride!
Published in Campaign | Economy, Work, & Welfare by frog on Sat, April 19th, 2008
Tags: colin campbell, energy, futures, MED, megaprojects, oil, peak, ralph samuelson, trend
on the trolls and those who are unable to keep on topic
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this is New Zealand fwog,
all we ask you to do, is help us and you can yous Green ,
you can own your own Country
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It will dip below 90, possibly below 80 for some time about Jan 09 as recession economics and supply peaks hit stride. That won’t last a long time… the recession may be prolonged by the stubborn resistance of the universe to our expectation that there will miraculously be more of the stuff buried in the planet every year. Prices may not rise so much as the supply of (real) money to pay them diminishes.
BJ
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Given that two of our SOE power generation companies are considering importing natural gas, does anyone have any predictions for the price of natural gas over the next couple of decades?
My bet is that natural gas will track oil on a dollars per unit energy basis, since many vehicles can be converted to use natural gas.
The same applies to LPG which we are currently importing.
Trevor.
PS: I certainly can’t blame the authors for the green line not being high enough. Hopeefully those with a touching faith in the red line prediction may have had their faith shaken up enough to consider whether there is more going on in the oil industry than just business as usual.
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So what steps should the Government be taking to mitigate the effects of an increasing international oil price – apart from selling off the family silver?
Encouraging vehicle conversion to natural gas might help.
Encouraging power companies to build geothermal rather than natural gas power stations would preserve that gas for the above.
Trevor.
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Trevor29: My personal view is that the Government should:
1) Not assume technology will find an alternative fuel (it may, but don’t rely on it)
2) Assume that oil and natural gas will be unaffodably expensive within a few decades, possibly as little as 10-20 years).
As a result of points (1) and (2)
3) Focus most money into public transport. Especially look at options such as trolley buses and trams which can be powered by (hopefully) renewable electricity generation.
4) Forget about any new roading projects, except where the main reason for building the road is to cater for public transport.
5) Build safe cycle ways on as many roads as possible.
6) Introduce congestion taxes or very expensive parking rates in inner cities.
7) Something has to be done with housing (to ensure people) live closer to where they work … I’m not sure what.
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How about low interest loans to the Stewart Island and Chatham Islands power companies to install solar, wind and/or wave powered generation to reduce the amount of diesel oil they use?
Trevor.
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I fail to understand why there isn’t a HVDC link to Stewart Island; their energy costs are stupidly high…
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dbuckly
BEcause an HVDC link would be stupidly expensive for 200 or so people – or should everyone else pay (note you probably mean an AC link as DC would need to be connected to Benmore or have a whole new infrastructure built). They are currently examining a wind generator but that is also expensive and still requires back up generation.
Frog
Don’t confuse long term price averages for a short term spot price. You and Ralph are talking different languages otherwise.
Trevor
ExxonMobil released something in the last week saying LNG will be THE growth hydrocarbon over the next 20-30 years.
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insider – I’m not confusing them at all. Long term price averages are built out of short term spot prices, (usually the closing price each day, averaged). That’s looking backwards in time. Of course Ralph cannot do that for a forecast, so he uses monthly futures prices, which are a fair proxy for the same thing, as futures prices must by definition converge to the spot price at maturity. It is not his fault that futures traders up until recently believed in the tooth fairy and an ever expanding amount of oil in the ground. Those who play the arbitrage game must be laughing hysterically about now, as so many futures prices were so wrong at their inception. But, as Simon Teggs points out in his paper that I linked to in today’s post about oil, the futures prices are beginning to converge around the idea that prices will remain high.
Trevor – as the closest thing to a direct substitute for oil, natural gas (and LNG) will track the oil price rises, bringing the geological peak for gas forward as oil gets more constrained. Here’s an article about that from over the weekend:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_LJaX9WIBoY
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Trevor – I linked to the wrong story a moment ago, and now have lost the original. However – this one shows that the bidding war for LNG has already begun, and the west so far is missing out:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLAY88aAETI0
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We can no longer drive around fwog, we used to and people still do on Sunday in some dream,
Are you prepared to answer the obvious questions fwog of how our Cities and Rural villages will change .
Many writers in different places see the total demolition of City streets by greedy developer building concrete hen houses for the new poor.
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Insider – I mean a HVDC “lite” system, of probably 5MW capacity or so. Sure, it costs megabucks to transfer GW of power, but IGBT technology has made small HVDC systems a practical proposition.
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frog said:
“…as the closest thing to a direct substitute for oil, natural gas (and LNG) will track the oil price rises, bringing the geological peak for gas forward as oil gets more constrained.”
Sounds very plausible to me.
I wonder if the management at our SOE power generators has the same belief about the CNG and LPG prices, and how long CNG and LPG will last globally. If they are talking about building 480MW gas-fired generation power stations and CNG shipping terminals, this message doesn’t seem to be getting through.
Trevor.
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dbuckley:
The cost of an undersea cable between Stewart Island and the South Island would be more expensive than additional local generation, and there would be a significant maintenance cost. You would still need local generation to deal with a possible cable outage, and of course you would need to use generation on the South Island (or North Island) to supply the power. Better to oversupply with renewable energy sources and use the surplus for space heating and water heating. Then add batteries such as vanadium flow batteries – already being used for this purpose on King Island:
http://www.vrbpower.com/docs/media/Windpower011307.pdf
Insider:
Do you have a link to the use of wind generation on Stewart Island?
Trevor.
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Samiuela,
“1) Not assume technology will find an alternative fuel (it may, but don’t rely on it)”
Technology has already delivered a viable alternative fuel – hydrogen. What is lacking is the commitment to building the retail supply chain.
“2) Assume that oil and natural gas will be unaffodably expensive within a few decades, possibly as little as 10-20 years).”
IMHO a good assumption.
“3) Focus most money into public transport. Especially look at options such as trolley buses and trams which can be powered by (hopefully) renewable electricity generation.”
Current public transport is only more fuel efficient than private cars on high traffic corridors. Everywhere else it is less fuel efficient. Until the bigger is better mentality of public transport providers is done away with we shouldn’t invest any money in it unless it is all-electric.
“4) Forget about any new roading projects, except where the main reason for building the road is to cater for public transport.”
As above. Instead, forget about any new roading projects and spend the money improving the safety of existing roads.
“5) Build safe cycle ways on as many roads as possible.”
Walking and cycling initiatives should be focused on the types of trips where the average person could comfortably walk or cycle. Journeys of less than 4 or 5km happen to be the most fuel intensive because they are almost completely cold start running. So expand that to redesign all non-arterial roads to encourage walking and cycling and discourage driving.
“6) Introduce congestion taxes or very expensive parking rates in inner cities.”
Agreed. Essential.
“7) Something has to be done with housing (to ensure people) live closer to where they work … I’m not sure what.”
If the impact is sufficiently gradual then the normal process of buying ans elling houses should be all that is required to move people closer to where they work. Mainly because today’s cities have multiple employment centres rather than a single CBD and industrial area as was the case 50 years ago. It will probably be necesary to relax zoning laws to allow more infill housing to help things along. A study by Portland city council found that average car miles travelled each day is three times higher on the rural fringe than in the CBD but in all other residential areas poulation density has no effect on car usage. Notably all areas including the CBD and fringe have an average 3.6 trips per person per day, taking close to one hour. This one hour a day travelling time should be at the heart of all planning for a post peak oil world. Provide alternatives to cars and/or suburbia that retains this one hour travel time and you will be meeting a basic need of the average person for that amount of mobility. There is a growing body of research that this daily travel time is an important part of being happy – a valuable opportunity for a change of scenery, being alone or being with others. Focus on making it possible for people to make their daily trips in one hour and they won’t be overly fussed about losing their dependence on the car.
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no point moving closer to work when you can lose that job this year & get another one on the other side of town. these days 2 years in one job makes you a veteran. wife might be working north, husband working east, etc.
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Found one:
http://www.scoop.co.nz/stories/AK0711/S00223.htm
“Southland District Council and Right House Announce Project To “Greenâ€? Stewart Island Power Supply” dated Nov 2007.
and a follow up:
http://www.stuff.co.nz/southlandtimes/4486894a6568.html
No mention of wave or tidal flow generation, not that I really expected that there would be. Just wind and solar.
Trevor.
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Saw this today
http://www.businessweek.com/ap/financialnews/D906BQ380.htm?campaign_id=rss_daily
Diesel costs a LOT more than petrol in the US? Is this some funny business with taxes then?
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“summer driving season” expected to put more pressure on prices…yet during winter we get people using oil for heating…putting pressure on prices? So is there really much seasonal variation within the US at all?
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Stephen, It’s Americas answer to RUCs. The high diesel tax and higher rate of sales tax on truck tyres is how they ensure trucks meet their full obligations to the Federale govt’s Highway Trust Fund. RUCs do a much better job of correctly recovering highway costs from different sizes of trucks.
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ta Kevyn
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