This is a post of mine that is in the ASPO-USA newsletter today.
The world holds a huge amount of oil resources. Besides liquid oil, there is very heavy oil in various forms. There is also liquid oil trapped in oil shale, oil in very deep water, and oil that in not yet fully formed (still kerogen) in shale oil. Some would like us to believe that eventually, all of this can be extracted, so there is no issue with peak oil.
How do we explain that this cannot really happen? The way I think of the situation is that our resources are of varying “quality”, or ease of extraction. If we order them from highest quality to lowest quality, they would probably form something like a triangle (or perhaps the shape would be more like a rectangle, if the high quality resources are closer to equal in quantity to the low quality resources—it doesn’t matter too much for this discussion).
Figure 1. Schematic diagram of economic and non-economic resources
A few days, ago, Robert Knight of WBIA public radio in New York City interviewed me about the problems in Egypt. The interview touched a little on Libya’s problems as well. I am not certain of when the interview actually aired. He asked me about a number of issues, including peak oil.
I thought a few readers might be interested. This is a link to the MP3 recording. It is about a half-hour in length.
Tverberg Oil Interview – 22 Feb 2011
The idea that high oil prices cause recessions shouldn’t be any surprise those who have been following my writings, or those of Dave Murphy, or those of Jeff Rubin. Yesterday, though, the Wall Street Journal finally decided that to mention the idea to its readers, in an article called “Rising Oil Prices Raise the Specter Of a Double Dip“. The quote they highlight as a “call out” is
When Consumers spend more at the pump, they often cut back on discretionary purchases.
The WSJ shows this graph, linking oil price hikes to recessions:
Figure 1. Wall Street Journal graphic showing connection between oil price rise and recession.
A Financial Times blog by Gavyn Davies says something very similar:
Each of the last five major downturns in global economic activity has been immediately preceded by a major spike in oil prices. Sometimes (e.g. in the 1970s and in 1990), the surge in oil prices has been due to supply restrictions, triggered by Opec or by war in the Middle East. Other times (e.g. in 2008), it has been due to rapid growth in the demand for oil.
But in both cases the contractionary effects of higher energy prices have eventually proven too much for the world economy to shrug off.
In this post, I explain what the WSJ and Financial Times articles are missing regarding the connection between oil and the economy. I also explain how the inability of oil prices to rise very far suggests that the downslope may be considerably steeper than most models based only on the Hubbert curve would predict. Continue reading
We keep hearing about unrest in the Middle East and Northern Africa, with Libya being the latest country to get top billing. Why all of the concern, especially related to oil?
Libya is a relatively oil-rich country. According to the CIA World Factbook, its per capita income is more than double Egypt’s. While Egypt is clearly on a down-hill slope with respect to exports based on my earlier analysis, Libya still has high export income and little debt. The fact that revolution could hit Libya shows that it is possible for revolution to hit any of the countries in this region, not just ones that don’t have the money to maintain their promises.
Figure 1. Libya's Oil Production and Consumption - EIA
One issue that Libya has in common with other oil producing countries is a high unemployment rate, listed as 30% by the CIA Factbook. Its population has been growing rapidly also, so there are many young people looking for work. While the country provides subsidies, this is not the same as each individual being able to provide for himself or herself. Continue reading
We keep seeing statements from the Center for the Advancement of a Steady State Economy suggesting that a steady state economy is desirable. I would agree that growth in a finite world is not sustainable, but even continuation of our current level economic level, or a drop to an economic level two or three levels below that where we are today, is not sustainable. Continue reading