[graffis-l] PEAK OIL, ANOTHER VIEW! INDUSTRIAL HEMP ANYONE?

November 8, 2007

The Peak Oil Crisis: The Washington Post

Posted by: " Mark Graffis "

mgraffis

Thu Nov 8, 2007 3:04 am (PST)

an already old graph:

http://s98.photobucket.com/albums/l255/mgraffis/?action=view & current=oilcliff.jpg

http://www.fcnp.com/index.php?option=com_content & task=view & id=2048 & Itemid=35

The Peak Oil Crisis: The Washington Post Written by Tom Whipple Thursday, 08 November 2007

On Monday, our colleagues over at the Washington Post ran a

front-page story in an effort to explain to official Washington why oil

prices have soared by $25 a barrel in the last ten weeks and just what it

might mean. Now anyone who follows the peak oil story knows the answer already.

World Oil production stopped growing two years ago; consumption of oil in

China, India, and the major oil producing countries themselves continues

to grow rapidly; a gap between demand and supply is opening which for a

while will be filled by drawing down world stockpiles; increasing prices

are forcing the poor nations to get by with less oil.

Those who follow peak oil also know that within the next few years,

unless a really bad economic recession cuts consumption massively,

depletion from existing oilfields will run ahead of efforts to develop

new oil fields and alternatives. Liquid fuels production then will begin

to drop.

If, however, you have not taken on-board these easily observable

facts of life in the 21st century, you must search for other explanations

to account for rapidly rising oil prices. Sadly, this is the course that

the Washington Post’s 1,800-word story takes.

The Post starts out by asking the rhetorical question “How high can

[oil prices] go?” This of course is an irrelevant question, for the

answer is “as high as necessary to keep supply and demand balanced”. Oil

will eventually be $100 a barrel, $200 a barrel, and ultimately many

hundreds or perhaps thousands of dollars a barrel. The key point is that

the era of unlimited oil supplies is over and from here on there will be

increasingly severe supply limitations.

The Post clearly does not yet grasp this point for in the second

paragraph they opine that unlike previous oil spikes, the current one

does not appear to be linked “to any physical shortage.” NO SHORTAGE? For

weeks now the U.S. and the International Energy Agency have been shouting

“shortages coming this winter” and imploring OPEC to boost production as

much as they can.

Perhaps the Post has been listening to OPEC spokesmen endlessly

repeating their mantra that “the market is well supplied,” the market is

well supplied.” OPEC is right of course, for whatever the price of oil,

be it $100, $200, $500 or even $10,000 a barrel there will never be a

“shortage” of supply. There may not be too many oil-powered cars running

around, but supply will be there to meet demand at the going price.

After declaring we are not running short on supplies, the Post

settles on “traders” – a polite word for speculators – as a key reason

prices are going up. These traders, taking advantage of a weak dollar and

using money fleeing from an uncertain stock market, are buying oil as

something with intrinsic value.

Polling “veteran” oil analysts the Post suggests that our current

price spike may be a bubble that might just burst when we have a warm

winter, slower economic growth, or when OPEC cranks out a few more

barrels per day.

To maintain journalistic balance, the writer sought out some traders

to get their side of the story. Being well grounded in reality, the

traders pointed out that we have an unusually thin cushion of excess

capacity so when you consider continuing rapid growth in Chinese and

Indian consumption, you have a different situation than during earlier

price spikes.

A little realism then creeps into the Post’s story which notes that

we live in a world that is now consuming 85.9 million barrels a day and

only has 2 million barrels a day of spare capacity, most of which is

undesirable heavy Saudi crude. The Post draws the obvious conclusion that

with almost no reserves, the oil market is much more sensitive to threats

that would have been disregarded in other years.

To get back on a cheerier note, the story notes that some experts say

“high prices will change the balance, creating new supplies and lower

demand.” It quotes Daniel Yergin of Cambridge Energy who tells us those

very high prices “will “catalyze responses in supply and demand and

innovation.” Whatever that means it sounds promising!

After pointing out that oil prices went into slumps in the late

1980’s and late 1990’s the story gets back to the underlying question of

whether or not our current oil spike is fundamentally different than the

last. So in its most lucid moment, the story says “A few argue that the

world is running out [of oil]” and notes that massive growth of U.S.

suburbs and exurbs coupled with major economic advances in China and

India means that very high demand for oil is not going to go away with

increasing prices.

The story ends with the question of if and when the U.S. economy will

be laid low by increasing oil prices. After noting that many thought $50

or $60 oil would be the end, the story happily notes that at $96 we are

still growing at nearly 4 percent with low unemployment and modest

inflation. This happy development is explained by a more efficient

economy that uses much less oil per unit of production and that energy

costs are a much smaller piece of the average household budget.

What can we make from all this? The Post’s writer and editors who put

this story on the coveted front page certainly know about most if not all

the dots that make up the story of oil production and prices in the fall

of 2007. The biggest missing dot is a failure to mention that oil fields

run dry as you use them and if you cannot replace the ones that are

drying up fast enough you are in trouble.

There is nothing wrong with pointing out that there are many

intangible factors that can drive the futures market up and down. But the

Post is missing the forest while discussing the trees. The forest of

course is the fact that oil prices have risen nearly five fold in this

decade and show no signs of retreating.

One of these days the Washington Post will connect all the dots and

start explaining to official Washington and the many policy makers among

their readers the true story of oil. We can only hope that day will not

come too late. DAt 08:30 AM 11/8/07, you wrote:

The Peak Oil Crisis: The Washington

Post

Posted by: " Mark Graffis " mgraffis

mgraffis

Thu Nov 8, 2007 3:04 am (PST)

an already old graph:

http://s98.photobucket.com/albums/l255/mgraffis/?action=view & current=oilcliff.jpg

http://www.fcnp.com/index.php?option=com_content & task=view & id=2048 & Itemid=35

The Peak Oil Crisis: The Washington Post

Written by Tom Whipple

Thursday, 08 November 2007

On Monday, our colleagues over at the Washington Post ran a front-page

story in an effort to explain to official Washington why oil prices have

soared by $25 a barrel in the last ten weeks and just what it might mean.

Now anyone who follows the peak oil story knows the answer already. World

Oil production stopped growing two years ago; consumption of oil in

China, India, and the major oil producing countries themselves continues

to grow rapidly; a gap between demand and supply is opening which for a

while will be filled by drawing down world stockpiles; increasing prices

are forcing the poor nations to get by with less oil.

Those who follow peak oil also know that within the next few years,

unless a really bad economic recession cuts consumption massively,

depletion from existing oilfields will run ahead of efforts to develop

new oil fields and alternatives. Liquid fuels production then will begin

to drop.

If, however, you have not taken on-board these easily observable facts of

life in the 21st century, you must search for other explanations to

account for rapidly rising oil prices. Sadly, this is the course that the

Washington Post’s 1,800-word story takes.

The Post starts out by asking the rhetorical question “How high can [oil

prices] go?” This of course is an irrelevant question, for the answer is

“as high as necessary to keep supply and demand balanced”. Oil will

eventually be $100 a barrel, $200 a barrel, and ultimately many hundreds

or perhaps thousands of dollars a barrel. The key point is that the era

of unlimited oil supplies is over and from here on there will be

increasingly severe supply limitations.

The Post clearly does not yet grasp this point for in the second

paragraph they opine that unlike previous oil spikes, the current one

does not appear to be linked “to any physical shortage.” NO SHORTAGE? For

weeks now the U.S. and the International Energy Agency have been shouting

“shortages coming this winter” and imploring OPEC to boost production as

much as they can.

Perhaps the Post has been listening to OPEC spokesmen endlessly repeating

their mantra that “the market is well supplied,” the market is well

supplied.” OPEC is right of course, for whatever the price of oil, be it

$100, $200, $500 or even $10,000 a barrel there will never be a

“shortage” of supply. There may not be too many oil-powered cars running

around, but supply will be there to meet demand at the going

price.

After declaring we are not running short on supplies, the Post settles on

“traders” a polite word for speculators as a key reason prices are

going up. These traders, taking advantage of a weak dollar and using

money fleeing from an uncertain stock market, are buying oil as something

with intrinsic value.

Polling “veteran” oil analysts the Post suggests that our current price

spike may be a bubble that might just burst when we have a warm winter,

slower economic growth, or when OPEC cranks out a few more barrels per

day.

To maintain journalistic balance, the writer sought out some traders to

get their side of the story. Being well grounded in reality, the traders

pointed out that we have an unusually thin cushion of excess capacity so

when you consider continuing rapid growth in Chinese and Indian

consumption, you have a different situation than during earlier price

spikes.

A little realism then creeps into the Post’s story which notes that we

live in a world that is now consuming 85.9 million barrels a day and only

has 2 million barrels a day of spare capacity, most of which is

undesirable heavy Saudi crude. The Post draws the obvious conclusion that

with almost no reserves, the oil market is much more sensitive to threats

that would have been disregarded in other years.

To get back on a cheerier note, the story notes that some experts say

“high prices will change the balance, creating new supplies and lower

demand.” It quotes Daniel Yergin of Cambridge Energy who tells us those

very high prices “will “catalyze responses in supply and demand and

innovation.” Whatever that means it sounds promising!

After pointing out that oil prices went into slumps in the late 1980’s

and late 1990’s the story gets back to the underlying question of whether

or not our current oil spike is fundamentally different than the last. So

in its most lucid moment, the story says “A few argue that the world is

running out [of oil]” and notes that massive growth of U.S. suburbs and

exurbs coupled with major economic advances in China and India means that

very high demand for oil is not going to go away with increasing

prices.

The story ends with the question of if and when the U.S. economy will be

laid low by increasing oil prices. After noting that many thought $50 or

$60 oil would be the end, the story happily notes that at $96 we are