Oil reaches US$133
Oil at $133 a barrel. I have been tracking the price of oil for the last 6 or 7 months as it sneaked up towards and then over $100 a barrel, while the whole time saying I thought these high prices were slightly ahead of peak oil’s schedule. I think the last time I posted on the price it was $122. That was just over 2 weeks ago now. Since then it has risen another 9%.
This issue should be the biggest Budget Day topic of discussion. How is the Minister of Finance going to restructure our economy so that we can survive now that one of our main sources of energy has increased in price so dramatically? Let’s not forget, 10 years ago the price was between $11 and $17 a barrel.
How far is a tax cut going to go while our economy continues to run on fossil fuel and the escalating costs of oil begin to rampage their way though our food chain, our housing prices, transport costs and other costs of living?
The Australian Business Spectator covers the emerging credibility of peak oil theory with this story:
So are the peak oilists right? A series of recent events certainly appears to lend credence to those who argue that the world’s ageing oilfields are being sucked dry amid China’s and India’s determination to lift themselves out of poverty and the west’s reluctance to give up the luxuries of modern oil-dependent life…
Output declines as an oilfield ages – sometimes dramatically. One example is Mexico’s Cantarell field. Discovered by a fisherman in 1976, Cantarell at its peak produced more than 2 million b/d. Today, the field pumps half that volume and is in relentless decline, losing 24 per cent of its production each year.
It is worth reading the whole story. It’s major failing is that it focuses towards the end on reducing growth in demand for oil as a solution rather than reducing demand itself. Reducing growth means we are still using more oil each year than last (or best case scenario, the same mount as last year) whereas the real solution needs to be a managed transition away from oil before we are forced to transition in a much more painful manner.
May 22nd, 2008 at 10:42 am
nbc5i.com/community/16330040/detail.html
N. Texan Builds Electric Car That Costs $7 For Every 300 Miles
The self-described computer geek from Kennedale bought the 1993 Eagle Talon from a junkyard for just $750.He then spent about $4,000 more to convert the gas-guzzler to run on electricity alone, doing all the work himself in his garage at home. “I bought the electric motor and I was like well, I gotta figure out a way to couple it together with the original transmission,” he said.
The car can hit 55 mph, driving right past the high prices at gas stations.
May 22nd, 2008 at 10:56 am
And from Tesla, the makers of the cool, all-electric supercar roadster:
“Tesla plans to offer home roof mounted solar-photovoltaic systems through Solar City, another Elon Musk funded company, that will offset power used by the home charger, allowing 50 miles (80 km) of travel per day without burdening the power grid, thus making the package “energy positive” for a driver whose average daily mileage is less than that”
tinyurl.com/59bh95
May 22nd, 2008 at 11:53 am
All good BP, but as I see it (and I expect someone far more learned to chip in at some point) many people will not be able to access, let alone afford to buy these types of things any time in the next several years, while the price of what they are dependent on (oil) goes up and up and up…At the very least I would expect a painful transition period of several years, esp if whoever our lovely government is does not ‘do something’ to facilitate such transitions…
May 22nd, 2008 at 12:12 pm
I’d suggest the lovely government focus on it, rather than pretending toy trains are the answer, and that sending billions to Russia will achieve anything.
First step: Let’s build the electricity infrastructure required. Stop blocking hydro power generation, for starters.
May 22nd, 2008 at 12:21 pm
Sure. But assuming we get over electricity supply issues, I would just wonder how (we seem to only be talking about personal transport issues here, which i spose could trickle down to other uses) everyone is supposed to find the money required to make this transition, whether it be to upgrade their car, or buy a new one. These are BIG costs for most people, and lots of people getting rid of a petrol car would *really* drive down prices, nullifying the effect of using the cash from the sale to upgrade, if they could find a buyer at all! Public transport on the other hand, has the costs socialised, and therefore is affordable and thus accessible for everyone…
May 22nd, 2008 at 12:33 pm
Sure, the replacement would be incremental, but we need to starts somewhere. And if the cost of public transport can be socialised, so too can private electric car ownership.
Not saying we shouldn’t develop public transport, just that we shouldn’t pretend it is going to replace the private vehicle.
May 22nd, 2008 at 12:53 pm
I would imagine (probably not the right word) that economies of scale would place public transport at a big advantage over more individual transport systems, and therefore be PT socialisation costs would be much more cost effective for the taxpayer/ratepayer dollar - and THAT tends to be what people want, no?. BUT they also want flexible, individual transport options, so the size of the cost difference would be crucial, and even more so would the source of all of this new expenditure! Would you want to use that Regional Fuel Tax for subsidising people’s cars? Or perhaps the ETS…?
May 22nd, 2008 at 12:53 pm
…if there is one.
May 22nd, 2008 at 12:54 pm
Went away and looked in to this for several hours. Looks like this may not be peak oil (yet). It’s more like ‘Peak Greed’.
I make the case (for discussion purposes) here:
http://truthseekernz.blogspot.com/2008/05/peak-greed.html
Constructive, on-topic responses appreciated.
May 22nd, 2008 at 12:54 pm
BP,
It would be way more cost-effective if the government invested in energy conservation measures rather than building new generating capacity, whether its thermal or hydro and would let people know that they can’t depend on the government to shelter them from market price signals. Its rediculous that SOE debts aren’t counted as government debt as after all they are government enterprises.
Instead the government spends a paltry $56m on insulation for State Houses.
I guess we’ll have to rely on the private sector. Too bad most are too myopic and unimaginative to take the oppurtunities handed to them by Peak Oil and are too wedded to the status quo to change.
My preference would be the Project Better Place initiative, an Open Source car design like Society for Sustainable Mobility, combined with a solar installer company that provides solar and/or wind generation in exchange for signing up to a “power purchase agreements” like they have in the States for meeting home power needs and Qurrent who provides a neighbourhood “smart grid” to trade surplus energy.
http://blog.wired.com/cars/2007/10/selling-electri.html
http://tinyurl.com/3ec5k2
http://www.qurrent.com/
http://www.osgv.org/
May 22nd, 2008 at 1:05 pm
Thanks, STH. I’ll have a read…
I also read a novel idea recently. Use the electric cars as part of the electricity grid. When a car is left plugged in, it can upload power, if and when required. Much like the Seti idea for idle computer cycles….
May 22nd, 2008 at 1:11 pm
This is a real surge in price we are seeing. I wonder if some non-public, very bullish information has just come into the scene- Saudi drying up or Bush about to attack Iran possibly???
“It would be way more cost-effective if the government invested in energy conservation measures rather than building new generating capacity,”
An oft-repeated statement that is unfortunately not true. The price of energy is low, so it is an inelastic good- most ordinary people spend very little on energy (*apart from petrol) so don’t care enough to use energy frugally. Industrial and commercial users have mostly already put into place efficiency measures where profitable to do so.
Energy efficiency will not offset natural growth in energy usage, full stop. For instance, you need to budget for around 2% increase in electricity generation per year from historical guides.
As for how people will get to work- walk, bus, carpool or bite the wallet and drive. How did people get to work in the 1950s?
May 22nd, 2008 at 1:30 pm
Why has no one looked into combining private transport and public transport. Each person can own an electric private vehicle which works on the road network using its small battery. Once the car arrives at the highway it enters a guided highway where it is driven via computer from the highway entry point to the higway exit point. The highway should also provide electricity to both power the vehicle and recharge its batteries.
You pay for the electricity you use during the trip this money is used to maintain the highway. Since while you are on the highway you are not driving the car as its on a guiderail you can use that part of your morning commute to check emails read the paper etc. Once you arrive at the exit you leave the highway and start driving your car again on the streets.
Since the highway could return a profit you could even privatize them and allow private companies to build and maintain the road.
Your highway becomes a combined highway/railway which interlinks cities and allows for the delivery of cargo. Its the combining of the personl freedom of the motor car with the efficiency of the train.
Of course you wont get things like that happening in NZ since we no longer like to lead and have instead slipped into a desire to only follow.
May 22nd, 2008 at 1:54 pm
uk_kiwi, I can’t seem to find the link on the Herald website, but I was reading at lunchtime that the figures for oil reserves had come out for the US, and it was 5 million barrels less than first thought (which was for a slight increase). 5 million is not significant (since the US uses almost 10m a day) but one economist said that prices were so jittery that if his lawnmower started leaking oil, prices would go up based on that (or to that effect).
The cost of extracting oil is also increasing quite a lot - an example was the Kashgan oilfield in Khazakhstan, where freezing temperatures for half a year necessitated building islands of some sort for the rigs - very expensive.
May 22nd, 2008 at 2:10 pm
“Why has no one looked into combining private transport and public transport.”
In a word cost, in two words, sunk cost.
You make it sound like it’s a reality but electric cars are still on the absolute cutting edge of technology and still have a long way to go before they are feasible for widespread use, and consumer acceptance. Who will buy a car with a range of 100km then a 4 hour recharge?
Secondly to re-engineer the roads in the manner you suggest would be mind-bogglingly expensive, better to spend that money on something compatible with the existing infrastructure like PT investment.
May 22nd, 2008 at 2:40 pm
“How did people get to work in the 1950s?” Half of them worked at home. Now there’s a novel solution. Ration jobs to one per household. Then ration expenses to match incomes, just like they did in the fifties.
May 22nd, 2008 at 2:52 pm
“Then ration expenses to match incomes”
What? But how would all the specuvestors be able to afford their $500,000 “investment” properties on a $50,000 income? Where would the flat-screen TVs come from if not hire-purchase or the 4-cars-per-household all bought on eeezy credit from the local car finance dealer?
People must have lived in some kind of serious poverty back then, without even realizing it!
May 22nd, 2008 at 3:17 pm
I was alive in the 50’s, in a small rural town in a largely rural region.
Of my class mates, apart from those whose fathers were farmers/other food producers from land, many of our dads, including mine, rode a bicycle to work as their work was in and around the town. Some caught the bus to travel to the freezzing works, a big employer.
Heaps of our working class families did not have a car, not in the late 40’s, early 50’s. Mums stayed home when we were little then had part-time jobs, either seasonal work, or in the local clothing factory or the cottage hospital. Of the Maori families, the men worked at ‘the works’, the cheese factory, for the local builders or joined the shearing gangs. Again, mostly no private cars.
Of course few of our homes had refrigerators, there was no TV, all our dads had great vege gardens, and very few families aspired to sending their children away for tertiary education. Nurses trained on the job in the hospitals. With nurses’ accomodation.
We did not consider ourselves very poor. A bit ‘hard up’ at times, but not poor. Each little town had a primary school with attached high school, we had a doctor or two, a dentist, the usual butcher, baker, grocery stores. Many stores delivered goods to the homes. Our town had a cheese factory.
Life was so simple so different it does not compare.
However, it is my memory/understanding that Wellington had very good public transport.
May 22nd, 2008 at 3:23 pm
We didn’t have a car in the sixties
And my dad ran the local clothing factory…
May 22nd, 2008 at 3:29 pm
UK_Kiwi,
Cost is the only reason against electrified highways
Certainly not technology since I believe the US looked into it in the 1970’s. Thats 38 years ago and only costs, big oil and the car lobby stood in its way. An electrified highway negates the need for advanced battery tech.
Isn’t it weird that NZ is probably the number one country in the world when it comes to a love of the Auto. I mean we are still talking about building more motorways in Auckland. Even the US has given up on trying to build motorways every where.
May 22nd, 2008 at 3:35 pm
LA the most disgusting city in the world had a wonderful tram system. Along comes GM and Oil and they told LA rip up the trams and build highway’s because oil will never be $133 never oil will last forever.
The sad thing is NZ is like a 1960’s america still listening to GM and Oil, Lets build motorways in Auckland go on lets do it.
Lets Quote the brought and paid for dis-honorable MP Dr Cullen
Auckland is different and only highways will work. In 10 years time are Aucklanders going to be allowed to tar and feather Cullen for his stupidity.
May 22nd, 2008 at 3:38 pm
uk_kiwi
Electronic and hybrid vehicle technology is developing rapidly all the time.
Altairnano has developed a battery based on nano technology that powers a car for 60 miles and recharges within 10 minutes.
http://media.cleantech.com/node/784
http://www.evworld.com/article.cfm?storyid=1258
There is now a retrofit kit now available that also include hotswappable battery kits.
http://www.autoindustry.co.uk/news/24-04-08_10
Kevyn
As you said in another thread the economics of the 1950s weren’t affordable then and even less so now cos of our massive current account deficit. No use looking back to the past. We gotta move on and think what we can do for the future taking into account modern realities.
May 22nd, 2008 at 4:19 pm
turnip28
“Isn’t it weird that NZ is probably the number one country in the world when it comes to a love of the Auto.”
Thats cos Japan, in order to support its car industry, has a policy where they levy a massive tax on a car if its over something like 5 years old so it encourages people to buy new cars more often than they would otherwise so Japan has a glut of second hand cars on its hands that they have to offload, which means just about any New Zealand can afford to own a car. Now Kiwis have just got accustomed to driving everywhere.
May 22nd, 2008 at 4:58 pm
“Electronic and hybrid vehicle technology is developing rapidly all the time.
Altairnano has developed a battery based on nano technology that powers a car for 60 miles and recharges within 10 minutes.”
Great, it looks like their prototype has survived 50 charging cycles. So in 10-15 years once they’ve fixed all the inevitable engineering problems, built vast factories in China and begun to ship them outside the USA at only twice the price of a new ICE-powered car; I’m sure you’ll see the odd wealthy person driving them around in Auckland.
Meanwhile, back on earth, shouldn’t we be preparing to put in place proven solutions that work right now and can be bought off-the-shelf?
May 22nd, 2008 at 9:04 pm
Please do not get me wrong. I would love to see a huge fleet of electric cars with wonderful batteries and ability to recharge quickly. Or whatever cheap efficient non-oil based vehicle they can create.
My caution is simply that the big diesel users, freight, farming, forresters and fishermen are going to need much more than the current city bubble hybrids.
Heaps more R & D anyone?
May 22nd, 2008 at 9:51 pm
Don’t hold your breath on the electric cars. They still have to pay the same road user charges as a 3.5 ton truck in New Zealand.
The Texan above would pay about 3 times at much in RUC as for the electric fuel.
Anyone know if they have thought of changing this moronic policy in the budget?
May 23rd, 2008 at 12:34 am
Emerald. Nope, RUCs are still based on a purely road works cost allocation model. One might have thought that a goverment dedicated to carbon neutrality would have added environmental costs to the model but they appear to have no intention of doing that. In fact the government’s failure to act on it’s promise to review the RUC cost allocation model has upset Transit and the RTF. although for exactly opposite reasons. I’m surprised the Greens didn’t keep their members informed during the review process. In fact te petrol tax and RUCs are supposed to be reviewed every year to ensure the correct amounts are collected from car and trucks having regard to how much cost/benefit is attributable to each class of vehicle for the particular mix of road works being funded. The model created in 1979 takes into account vehicle length, width and off-tracking, axle weights, AADT on different classes of roads for each different type of road work, ie bridges, safety barriers, earthworks, land purchase, reseals, pavement rehabilitation, etc. This years mix of road works is vastly different from the mix when the model was last used in 1986. Even in 2002 the model showed that trucks were subsidising private cars by at least $50m.
May 23rd, 2008 at 12:42 am
“Isn’t it weird that NZ is probably the number one country in the world when it comes to a love of the Auto.”
Not really. Cars are vital for transport in rural areas, optional in urban areas. Break each EU country’s car ownership down into regions and you find the most cars per capita in the least densely populated regions. Same thing for the USA. Same thing for New Zealand. Same thing for OECD countries. Nothing weird about it. Census’ from the 1800s included horses and other livestock. Same relationship then too.
May 23rd, 2008 at 1:11 am
joy, The good news is that hybrid systems add less percentage to the price of heavy vehicles than cars or vans. Hybrid systems for cars have to be compact which rules out most of the types that store energy mechanicly. Thats not a problem on trucks, tractors, harvesters, etc.
Heaps more R & D? That challenge went out to F1 designers in 2006. Most teams will have their solutions racing next year. All it needed was for the problem to be handed over to fast innovative thinkers. You don’t find many of them in big business or big government but there are hundreds of them in F1.
http://www.racecar-engineering.com/articles/f1/182014/f1-kers-flybrid. html
http://www.motortrend.com/features/editorial/112_0803_technologue/inde x.html
May 23rd, 2008 at 1:21 am
i think this will play a major roll next year in the states
http://www.google.co.nz/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fwww.hydr ogen.co.uk%2Fh2%2Ffuelcell_cogeneration.htm&ei=VHI1SNb1L5b8pgTfqNG6DQ& usg=AFQjCNEFDo4fZve-U9lSbF5HcDcxGOMnGA&sig2=mCTjmGUqJY_JGj4_FYrAbw
May 25th, 2008 at 9:07 am
The problem with the world is simple….
it took hundreds of thousands of years for earth to create energy resources like petroleum and coal..
humans are going to consume most of these in about 100 years..
the consumption patterns of humans are unsustainable in the long run.
=================================
I also agree with the China and India part.
I am from India. The demand for petro-products is very strong in India.
high oil prices are having an effect on the economy, but the demand for oil seems inelastic.
even if oil were to cross $150, the demand in India won’t go down.
already Indian consumers are paying one of the highest prices for petrol (gasoline as in US).
the retail price of petrol in India is around Rs 50 per litre.
This is around $4.5 per US gallon.
out of this nearly half the price is due to taxes.
Break-up of Petrol prices in India
with the economy growing at 8%+, demand for crude oil is only going to go up.
=================================
With rapid development in Asia, the west has new competitors for natural resources like crude oil and coal.
If the west has to survive in this competitive era of fast-vanishing resources, it has no choice, but to make efficient use of these resources.