Oil and the World Economy: Some Possible Futures

[arkmundi]

A new IMF report, not to be ignored. Last graph puts it together:

http://www.washingtonpost.com/blogs...ould-do-serious-damage-to-the-global-economy/
The possible scenarios:
1) Oil production grows very slowly or plateaus. This is the baseline scenario that Kumhof and Muir use. They assume that oil grows by about 1 percentage point less each year than its historical average.
2) Oil production grows at a slower rate, but the world adapts fairly easily. In this scenario, oil production declines, but countries start switching to electric cars or fueling their vehicles with natural gas. Vehicles and manufacturers become more efficient. In economist terms, the “elasticity” of demand quickly increases.
3) Oil production grows at a slower rate, but the world can’t find substitutes. As the IMF authors note, it’s not assured that the world can quickly adapt to steadily increasing oil prices. Oil is, after all, quite valuable and hard to replace. Electric cars may not catch on. It’s tough to build infrastructure for natural-gas vehicles. The chemical industry might struggle to find substitutes for oil as feedstock.
4) Oil turns out to be far more important than most economists had assumed. The Energy Information Administration estimates that petroleum purchases make up just 3.5 percent of the U.S. economy. Looked at from that angle, expensive oil shouldn’t do too much damage. But, the IMF authors note, several books and articles have pointed out that this understates how crucial oil is to the functioning of a modern economy.
5) Oil production starts shrinking rapidly. This is the doomsday scenario. Nothing good.

The full report: Oil and the World Economy: Some Possible Futures

 

[deronmoped]

I have been wondering lately,

With all the protests, the Occupy Wall Street, ban the grocery bag, free contraception... Where is the march on Washington over super high gas prices and the result of it ruining most peoples ability to go places and also the added cost of all goods and services. We have plenty of resources and if we tapped them, it would tend to drive prices down. Is everyone going to settle for $5.00, $6.00, $10.00, $15.00... a gallon gas. Heck, it was $1.60 in 2004 and then again in 2008. It's gone up nearly 300% and no one is marching on Washington.

 

[dogman dan]

Stumps me completely that nobody makes the slightest connection between the rape of oil producer profits and the slow recovery of the world economy. 3.5% of the economy? If so, only because we don't make our own plastic anymore. Hell, virtually everything is made of oil, or coal, or some fossil fuel. Try making a car without heat. Or getting product to the store without boats, trucks and trains.

Seems like a pretty simple correlation to this agriculture degree moron. Oil above $100 a barrel hammers every buisness, and every consumer.

I'm not saying oil should remain as cheap as it was in the past. I just keep being outraged by the obvious and regularly scheduled jack up of the price every spring that they have learned to do so successfully.
They, of course is anybody who produces oil. So that also includes the USA along with Iran. All profit from rumors of war.

 

[o00scorpion00o]

I have been wondering lately,

With all the protests, the Occupy Wall Street, ban the grocery bag, free contraception... Where is the march on Washington over super high gas prices and the result of it ruining most peoples ability to go places and also the added cost of all goods and services. We have plenty of resources and if we tapped them, it would tend to drive prices down. Is everyone going to settle for $5.00, $6.00, $10.00, $15.00... a gallon gas. Heck, it was $1.60 in 2004 and then again in 2008. It's gone up nearly 300% and no one is marching on Washington.

Try 8.60 a gallon !

 

[dnmun]

gas is cheap. the problem of prices in california is the restrictions placed on the refineries by the state to produce 'local' formulation that is not produced by refineies in other regions. when the two main refineries on the west coast producing that formulation were shut down the market adjusted the price to reflect the shortage. no conspiracy or raping profits. just refinery fires.

the price of crude is function of world demand. midcontinent oil is $25/bbl cheaper than brent right now and canadian oil is even less.

 

[neptronix]

I have been wondering lately,

With all the protests, the Occupy Wall Street, ban the grocery bag, free contraception... Where is the march on Washington over super high gas prices and the result of it ruining most peoples ability to go places and also the added cost of all goods and services. We have plenty of resources and if we tapped them, it would tend to drive prices down. Is everyone going to settle for $5.00, $6.00, $10.00, $15.00... a gallon gas. Heck, it was $1.60 in 2004 and then again in 2008. It's gone up nearly 300% and no one is marching on Washington.

We burned through America's 'low hanging fruit' oil long ago. The rest of what we have is environmentally very risky ( like the shit that BP was trying to get at ), environmentally very pollutive ( like Canada's tar sands ), or requires using imenent domain, drilling on wildlife preserves, etc.

Hopefully Bush and Obama's campaign of killing >1 million people and counting in the middle east and destabilizing pretty much every oil containing country from Syria all the way down to Uganda will get you the cheap prices you're looking for, but there is yet another externality involved there, because we are creating future terrorists, and that will bite us in the ass later.

How about we stop consuming 5 times more oil per capita than every other country, instead of rain hellfire on brown people to keep them desperate to sell us oil for less.. and/or destroy the water supplies and land on this continent to extract the last drops? just an idea.

High gas prices will spur innovation in alternative fuels and improved efficiency like you have never seen. You can only kick the can down the road so far. You are on the wrong side of the battle if you want to keep things the way they are.

 

[arkmundi]

Its just that the IMF report suggests five scenarios, none of which predict an increase in oil production able to sustain gains in the global GDP. So, its how does the economy respond? Its scenario #2 that ought be of interest here at ES:

Oil production grows at a slower rate, but the world adapts fairly easily. In this scenario, oil production declines, but countries start switching to electric cars...

Electric is more fuel efficient and fuel flexible. Its the only scenario that suggests economic sanity to me.

 

[Dauntless]

Stumps me completely that nobody makes the slightest connection between the rape of oil producer profits and the slow recovery of the world economy.

Mainly because the connection you're looking for doesn't exist. 'It's rained on Tuesday before, today is Tuesday, it must be raining' isn't going to work. Oil cost was far higher when the economy was better without being what brought it down.

I have been wondering lately,

With all the protests, the Occupy Wall Street, ban the grocery bag, free contraception... Where is the march on Washington over super high gas prices and the result of it ruining most peoples ability to go places and also the added cost of all goods and services. We have plenty of resources and if we tapped them, it would tend to drive prices down. Is everyone going to settle for $5.00, $6.00, $10.00, $15.00... a gallon gas. Heck, it was $1.60 in 2004 and then again in 2008. It's gone up nearly 300% and no one is marching on Washington.

We burned through America's 'low hanging fruit' oil long ago. The rest of what we have is environmentally very risky ( like the shit that BP was trying to get at ), environmentally very pollutive ( like Canada's tar sands ), or requires using imenent domain, drilling on wildlife preserves, etc.

People don't want to walk that far. They'd DRIVE to Washington, but that's gotten expensive. Meanwhile, people seem to understand they can't affect prices that way. Just as they understand Occupy would never do anything so anyone with a life didn't join, banning the grocery bag is a fund raiser for the local city but in no way environmentally conscious while degrading the value of pyrolysis in that neighborhood, (Ooops, maybe a bit too scientific for even THIS board) free contraception is of course keeping people busy who might have otherwise joined the movement.

Its just that the IMF report suggests five scenarios, none of which predict an increase in oil production able to sustain gains in the global GDP.

So they want to make liquid fuel from coal. (Coal Liquifaction.) At still the same environmental impact of the strip mining and complete demolition of mountains that is now the standard for coal mining, then whatever pollution of the processing into liquid form, winding up with however clean or dirty a fuel. Throw in the tearing out of a few more rain forests to grow organics for processing into biofuels. Our useage of what used to be 100% oil fuels has increased faster than our oil production, these fuels are now less than 90% oil. Make sure you understand the biofuels cost more per mile than if they were 100% oil, because the mileage drops but the price remains high. You might get 60% of the mileage (12 miles instead of 20) from a gallon of E85, but you pay almost as much for it as the regular fuel. There's no projections on bringing about a price drop.

Amid all the anger there hasn't been much actual discussion of the issue. I think what Arkmundi was looking for was more like what I'm about to say. I think right now we're sort of between 2 and 3. and are likely to stay there. All these experiments with switchback grass, algae oil, the results being too expensive for us to use - YET! As the price of oil rises, we'll be seeing these mixed in, slowing the rising cost and use of oil. Oh, we'll have more oil. Have you given any thought to HOW MUCH more oil the world is producing now compared to WWII? Not only can we drill from wells we couldn't even find before the new technology, we can go back to old wells and get more out of them. But the USEAGE is growing faster. Are you familiar with Thomas Malthus theory of food production increasing arthmetically while food comsumption increases algebraically? I guess you could say energy consumption increases trigonometrically. Cubed, even.

So I knew the guy who went to work the first time oil was going to crack $100/barrel. His subject matter was producer fuel: World War II era producer fuel. I warned him going in that ultimately producer fuel, homemade gas substitutes, were a drop in the bucket at the time, he ultimately said more like two or three drops but nonetheless it was indeed a disappointment to him.

Oh, though I had great fun with it last year when I had a presentation on it. Buses running about the cities with bladders on their roofs, powered by the gases from wood once it's heated. If you were driving your car in Europe, you probably had a gassifier on it. A great photo I wish I could find was 'Deliverance' meets 'There Will be Blood,' the oil companies buying the moonshine to mix in the gas.

The thing to remember about that is that the wood is heated by burning whatever wastes were available, the alcohol is distilled by burning the leftover cobbs from the corn. (Is this a sooty, dirty burn?) You get not just corn squeezin's but this syrup that the farmers had uses for. Factory alcohol for fuel burns natural gas, with no ready uses for biproducts. Less energy efficient. What happens to these biproduct and are they dangerous? The wastes from Ben & Jerrys ice cream that they were dumping in a big field turned out to be toxic. It also turned out that pigs could eat those toxic wastes. Ben & Jerry opened a pig farm on the open field they fouled. How will we deal with the yet undiscovered dangers of synthetic fuel?

So we haven't just used up the 'Low Fruit' of the oil, we've used up the low fruit of the alternative fuel. High tech oil will get more and more expensive WITHOUT there being more and more profits. Natural gas use will continue to see expanded use, at a higher price. Alternative fuels will hold price steady as fossil fuel prices rise to meet them. We'll keep finding a higher place to step to as the water level rises, just barely keeping our head above water. No real solution there.

The tantalizing thing about the electric vehicle is the ever more effective solar cell. You reach the point you have more powerful cells on your roof and have left over electricity after your home use, you're then charging your car for free . . . .

 

[arkmundi]

Seems when conventional fuel costs too much, people will use the alternatives:
http://www.cleantechblog.com/2012/03/record-public-transit-ridership-reduces-u-s-oil-dependency.html

The United States is reducing its dependency on oil as we now consuming 18.3 million barrels a day, down from our peak of 21 million barrels a few years ago. Record use of public transit is a major factor.... According to a report released today by the American Public Transportation Association (APTA), Americans took 10.4 billion trips on public transportation in 2011, the second highest annual ridership since 1957. Only ridership in 2008, when gas rose to more than $4 a gallon, surpassed last year’s ridership.

 

[cal3thousand]

I have been wondering lately,

With all the protests, the Occupy Wall Street, ban the grocery bag, free contraception... Where is the march on Washington over super high gas prices and the result of it ruining most peoples ability to go places and also the added cost of all goods and services. We have plenty of resources and if we tapped them, it would tend to drive prices down. Is everyone going to settle for $5.00, $6.00, $10.00, $15.00... a gallon gas. Heck, it was $1.60 in 2004 and then again in 2008. It's gone up nearly 300% and no one is marching on Washington.

We've been living in a time where the price of gas was tremendously low due to it's abundance and the low demand. There isn't a march on Washington because people understand that this is closer to the real cost of energy. If we believe in market economics, we should believe that there will be a necessary increases in the market price due to the ever increasing demand and the ever decreasing supply. It will continue to happen until a good portion of people just can't afford to use it. People will start having to be much more wise about fuel and it's cost.

 

[deronmoped]

Maybe I can build a engine that runs on Milk.

It's cheaper and the price is stable.

 

[Arlo1]

Its this simple. There is no way to more efficiently move around then with electricity! You CAN make your own electricity!

For those two reasons everything I travel with will soon be electric!

At the end of the day they can try to deny it all they want but electrics will take over its just time!