Discussion on Peak Oil and the expected Energy Crisis.
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Thread: Discussion on Peak Oil and the expected Energy Crisis.

  1. #1
    '04 R1 - You are mine! Array FloMan's Avatar
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    Discussion on Peak Oil and the expected Energy Crisis.

    There are two general camps when it comes to predicting the future of our energy resources.

    Camp A believes that we are seeing the last few years (maybe even months) of relatively cheap oil. That in turn means that we are seeing the end days of prosperity and economic stability.

    Here are some good reads on the subject:




    According to some journalists and bloggers, we are already seeing the first victims of this emerging reality

    Here's an example:


    There are a few other contries that have already started showing symptoms of impending economic collapse and other that have already collapsed.

    Some of you have read the story of the argentinian architect that was posted on different forums a while ago. For those of you who haven't, here it is again:


    In total contrast with camp A, camp B believes that the global crude oil resources are more than enough to last us at least 200 more years, factoring in population growth and economic development.

    A splinter faction of camp B also believes that oil is in fact a renewable resource. They believe that deep in the belly of the earth, crude oil forms abiogenically and that it does not come from the remains of plant and animal life that died millions of years ago.

    This is called "The Abiotic Theory of Oil Formation."

    Here's more about that:


    What are your views on the subject? If you are of the same mind with those in camp A and believe that an energy crisis and a subsequent economic collapse is iminent, what are you doing to prepare?

    If you are a member of camp B and are laughing at those who are panicking, what do you base your optimism on?

    We've already had many zombie threads so I'd apreciate it if this thread didn't become yet another " how to kill zombies in a bio hazard-ish end of the world scenario".

    I am looking for mature opinions vis-a-vis a serious and very real issue.

    Last edited by FloMan; 01-27-2006 at 08:01 AM.
    “Your failure to be informed does not make me a wacko.”
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    “The truth will set you free, but first it will make you sick.”

  2. #2
    Moderator Array Harps's Avatar
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    My opinion...

    I think the current range of oil prices are here stay in the medium term ($55-$75). Although, more and more I'm leaning towards the possibility of an oil 'crash' with prices of crude going back down to the $30/barrel range. I don't think we'll see a sustained level of $100/barrell, as some are predicting.

    Even if oil prices skyrocket, I DON'T believe this will cause imminent economic instability...at least not in Canada.

    (I will expand later, no time now)
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  3. #3
    '04 R1 - You are mine! Array FloMan's Avatar
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    Quote Originally Posted by Harps
    Even if oil prices skyrocket, I DON'T believe this will cause imminent economic instability...at least not in Canada.

    I am very curious to hear why you don't think an energy crisis (whose advent would be signaled by "skyrocketing" oil prices) would trigger economic instability or economic collapse in Canada (or anywhere else in the world for that matter)

    I know you said you get'd back when time allows it and I am looking forward to your theory.

    In the mean time, here's are a couple paragraphs from www.lifeaftertheoilcrash.net

    It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

    In addition to transportation, food, water, and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices.


    It is becoming evident that the financial and investment

    community begins to accept the reality of Peak Oil, which

    ends the first half of the age of oil. They accept that banks

    created capital during this epoch by lending more than they

    had on deposit, being confident that tomorrow’s expansion,

    fuelled by cheap oil-based energy, was adequate collateral

    for today’s debt. The decline of oil, the principal driver of

    economic growth, undermines the validity of that collateral

    which in turn erodes the valuation of most entities quoted

    on Stock Exchanges. The investment community however

    faces a dilemma. It desires to protect its own fortunes and

    those of its privileged clients while at the same time is

    reluctant to take action that might itself trigger the

    meltdown. It is a closely knit community so that it is hard

    for one to move without the others becoming aware of his

    “Your failure to be informed does not make me a wacko.”
    -John Loeffler

    “The truth will set you free, but first it will make you sick.”

  4. #4
    builder of bikes Array cosworth's Avatar
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    This has been posted about 2956 times...

  5. #5
    '04 R1 - You are mine! Array FloMan's Avatar
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    Yes please! Oh! That wasn't a question?
    Quote Originally Posted by cosworth
    This has been posted about 2956 times...
    Yeah, trying to round up the number to 3000.
    “Your failure to be informed does not make me a wacko.”
    -John Loeffler

    “The truth will set you free, but first it will make you sick.”

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    Registered User Array SpideRider's Avatar
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    I plan to ride the wave of prosperity until it collapses, then I'll revert to a Mad Max-style of existence. Everyone guard their veggie crops. I'm coming for them.
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    Mortgage Pimp Array J_Scott's Avatar
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    Quote Originally Posted by SpideRider
    I plan to ride the wave of prosperity until it collapses, then I'll revert to a Mad Max-style of existence. Everyone guard their veggie crops. I'm coming for them.
    But the Liberal Gov't stole all of our guns.

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    Fast Pack Slow Guy Array Tattoodles's Avatar
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    A privileged sufferer settling for an Italian motorcycle
    In the near future, suburbs will be slums.

    Live close to your work and shopping districts. Learn to rely on local sources for food.

    Buy futures in fuel for the short term and bicycle technology for the long term.

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    Registered User Array radmtrbkr's Avatar
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    Gravity Warp Drive
    The Real Oil Crisis

    12 min australian news item


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    Moderator Array flowrider's Avatar
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  11. #11
    Registered User Array radmtrbkr's Avatar
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    points to ponder

    -the u.s and israel are currently caught between a rock and a hard place. unlike n. korea, iran seems she is commited and able to develop nuclear arms. germany, france, england, the u.s and israel have said this cannot be allowed to happen while the russians are playing the situation to their advantage. the economic devastation visited upon russia after her collapse will be returned in kind. watch for russia to bring europe, england and america to their knees through a strategic game of energy chess, she already is...

    the world is becoming emboldened by the foreseeable end of the u.s. empire via peak oil. from the rise of nationalism and islam throughout the mid east, a region that holds all the cards as far as energy goes, to the coming to power of socialist governments in south america to the signing of economic and military pacts to the exclusion of the u.s., to the shunning of u.s. assets and currency, uncle sam is finished and canada by proxy. you can only threaten countries for so long before they do something about it.

    Skyrocketing oil costs feared in nuke standoff
    By John Zarocostas
    January 24, 2006

    GENEVA -- The price of crude oil could reach $131 a barrel if Iran stopped production amid the standoff over Tehran's decision to resume uranium enrichment, a global market study predicts.
    Oil prices topped $69 a barrel yesterday on supply fears over the nuclear standoff.
    Iran supplies about 4 million barrels a day, or 5 percent of the world's oil supply, said William F. Browder, chief executive officer of Moscow-based Hermitage Capital Management.

    -reportedly israel is gearing up for an attack on iran in march. hopefully this won't happen cause if it does we're all in big trouble. iran has announced it will use missles to defend herself and attack outside targets, ie israel and oil tankers and export facilities in the persian gulf. with the sale of soviet missles to iran count on this happening. even more troubling is the policing of the strait of hormuz in which 20 million barrels or roughly 25% of the worlds daily use of crude pass daily in tankers. tankers that can easily be destroyed from shore in the narrow strait with unstopable and lethal soviet built sunburn missiles.

    Revealed: Israel plans strike on Iranian nuclear plant

    The Sunday Times March 13, 2005

    Uzi Mahnaimi
    ISRAEL has drawn up secret plans for a combined air and ground attack on targets in Iran if diplomacy fails to halt the Iranian nuclear programme.

    The inner cabinet of Ariel Sharon, the Israeli prime minister, gave “initial authorisation” for an attack at a private meeting last month on his ranch in the Negev desert.

    Israeli forces have used a mock-up of Iran’s Natanz uranium enrichment plant in the desert to practise destroying it. Their tactics include raids by Israel’s elite Shaldag (Kingfisher) commando unit and airstrikes by F-15 jets from 69 Squadron, using bunker-busting bombs to penetrate underground facilities.

    Iran vows missiles would fend off attack
    Last Updated Sat, 28 Jan 2006 11:11:21 EST
    CBC News
    The head of Iran's Revolutionary Guard, the country's chief military branch, has warned the United States and Britain that Tehran would respond with missiles if attacked.

    "If we come under a military attack, we will respond with our very effective missile defence," Yahya Rahim Safavi told state television.

    Last week, Iran announced that it had fully developed solid fuel technology for missiles. That would put British and U.S. forces in the Middle East in easy range.

    It's also a clear threat to Israel, which is also within range of such missile attacks.

    the reason for the iraq invasion is twofold.
    - right before the invasion the u.n. was about to lift sanctions and china, india and europe were waiting on the sidelines to get contracts for oil. with peak oil on the horizon, the u.s. and britain could not allow this energy to fall into others' hands.
    - 10 months before the u.s. invasion, saddam switched to selling oil for euros instead of the u.s. dollar and converted accounts to the euro amounting to what could have became the beginning of a dumping of u.s. currency. post invasion iraqi oil sells once again in u.s. dollars

    IMF economist speculates about a rush to dump the dollar
    By Andrew Peaple and Emily Barrett
    Dow Jones Newswires
    Monday, January 23, 2006

    LONDON -- A run on the U.S. dollar that would see investors rushing to dump the currency is a possibility, although it's difficult to judge how likely an outcome that is, the International Monetary Fund's chief economist said Monday.

    Speaking at a conference on global imbalances, Raghuram Rajan also said a rapid and large appreciation of the Chinese yuan against the dollar and other currencies would be more likely to damage the world economy than be of benefit to it.

    With the U.S. current account deficit running at close to 7% of gross domestic product, economists have long expected the dollar to depreciate against other major currencies, and feared the dollar could go into free fall if that prompted international central banks and investors to flee the greenback.

    "We are in a risky situation," said Rajan. "You cannot discount a run on the dollar. But you cannot fully quantify that risk at the moment."

    Rajan added that he's more concerned about the possibility that a run on the currency will be triggered by foreign private investors abandoning the dollar than the risk that international central banks will diversify away from U.S. assets.

    "The first action will come from foreign private investors, who have no motives other than returns," he said.

    The U.S. government has long argued that China's yuan is undervalued against the dollar, leading to a large bilateral trade deficit between the U.S. and China.

    The Chinese authorities are very slowly moving towards a more flexible currency regime, having abandoned a pure dollar peg in July in favor of fixing the yuan against a basket of currencies.

    Since that move, however, the yuan hasn't moved much against the dollar, and U.S. politicians and industrial lobby groups continue to call for a stronger yuan.

    But Rajan said a sharp appreciation in the Chinese currency could be more of a curse than a blessing for efforts to rebalance the global economy. Although a sharply stronger yuan would boost Chinese consumer demand by making imported goods cheaper, it could also slow the country's economy by hitting its exports.

    "A huge step appreciation (in the exchange rate) would do more harm than good, " Rajan said.

    He added that the IMF advocates a more gradual approach to allow the yuan to respond to market forces more flexibly. The IMF is also urging the U.S. to cut its budget deficit, and pressing the European Union and Japan to implement structural reforms that will boost their long-term growth potential.

    But Rajan said there is a risk that before these actions are taken to rebalance the global economy, rising protectionism will lead to weaker growth.

    "The...worry is that before (these adjustments) happen, we'll have much greater protectionist forces raising their head, Rajan said.

    the next move in the game is the fact that iran is now setting up it's own domestic market in which their oil will be sold at home and priced in euros to the detriment of american and british exchanges and currencies. you can use your imagination as to where this is leading to. the biggest problem though is that iran has a strong military and too many other nations have vested interests in iran to sit idly by and do nothing. we are damned if we do damned if we don't...

    Iran - a threat to the petrodollar?
    By Emilie Rutledge ALJAZEERA
    Thursday 03 November 2005, 13:10 Makka Time, 10:10 GMT
    Iran's decision to set up an oil and associated derivatives market next year has generated a great deal of interest.

    This is primarily because of Iran's reported intention to invoice energy contracts in euros rather than dollars.

    The contention that this could unseat the dollar's dominance as the de facto currency for oil transactions may be overstated, but this has not stopped many commentators from linking America's current political disquiet with Iran to the proposed Iranian Oil Bourse (IOB).

    The proposal to set up the IOB was first put forward in Iran's Third Development Plan (2000-2005). Mohammad Javad Assemipour, who heads the project, has said that the exchange will strive to make Iran the main hub for oil deals in the region and that it should be operational by March 2006.

    Geographically Iran is ideally located as it is in close proximity to major oil importers such as China, Europe and India.

    It is unlikely, in the short term at least, that large numbers of energy traders will decamp and set up shop in Iran; a country which happens to be categorised as a member of the "axis of evil" by the president of the world's largest oil-importing country; the United States.

    But over time, Iran could take some business away from the two incumbent energy exchanges, the International Petroleum Exchange and the New York Mercantile Exchange who both invoice sales solely in dollars.

    Economic motives

    If successful, the IOB will provide Iran with concrete economic benefits especially if it invoices at least some of its energy contracts in euros.

    Iran has around 126 billion barrels of proven oil reserves about 10% of the world's total, and has the world's second largest proven natural gas reserves.

    From an economic perspective, invoicing oil in euros would be logical for Iran as trade with the euro zone countries accounts for 45% of its total trade. More than a third of Iran's oil exports are destined for Europe, while oil exports to the United States are non existent.

    The IOB could create a new euro denominated crude oil marker, which in turn would enable GCC nations to sell some of their oil for euros. The bourse should lead to greater levels of foreign direct investment in Iran's hydrocarbon sector and if it facilitates futures trading it will give regional investors an alternative to investing in their somewhat overvalued stock markets.

    Euro zone countries alone account for almost a third of Iran's imports and currently Iran must exchange dollars earned from hydrocarbon exports into euros which involves exchange rate risk and transaction costs.

    The decline in the dollar against the euro since 2002 - some 26% to date - has substantially reduced Iran's purchasing power against its main importing partner.

    If the decline continues, more states will increase the percentage of euros vis-à-vis the dollar they hold in reserve and in turn this will increase calls both in Iran and the GCC to invoice at least some of their oil exports in euros.

    A move away from the dollar and a strengthening of the euro would further benefit Iran as according to a member of Iran's Parliament Development Commission, Mohammad Abasspour, more than half of the country's assets in the Forex Reserve Fund are now euros.

    It is primarily the US which stands to lose out from any move away from the petrodollar status quo, it is the world's largest importer of oil and a move away from invoicing oil in dollars to euros will undoubtedly have a negative effect on its economy.
    Fewer nations would be willing to hold the dollar in reserve which would cause a significant devaluation and result in the loss seigniorage revenues. In addition, US energy-related companies stand to lose out as they will be unable to participate in the bourse due to the longstanding American trade embargo on Iran.

    Political considerations

    In the 1970s, not long after the collapse of the gold standard, the US agreed with Saudi Arabia that Opec oil should be traded in dollars in effect replacing the gold standard with the oil standard.

    Since then, consecutive US governments have been able to print dollar bills and treasury bonds in order to paper over huge current account and budgetary deficits, last year's US current account deficit was $646 billion.

    Needless to say, the current petrodollar system greatly benefits the US; it enables it to effectively control the world oil market as the dollar has become the fiat currency for international trade.

    In terms of its own oil imports, the US can print dollar bills without exporting commodities or manufactured goods as these can be paid for by issuing yet more dollars and T-bills.

    George Perkovich, of the Washington based Carnegie Endowment for International Peace, has argued that Iran's decision to consider invoicing oil sales in euros is "part of a very intelligent strategy to go on the offense in every way possible and mobilise other actors against the US."

    This viewpoint however, ignores Iran's economic motives, just because the decision, if eventually taken, displeases the US does not mean that the rationale is purely political.

    In light of such sentiments and the US's current insistence that Iran be referred to the UN Security Council Iran must consider and weigh carefully the economic benefits against the potential political costs.

    Although a matter of conjecture, some observers consider Iran's threat to the petrodollar system so great that it could provoke a US military attack on Iran, most likely under the cover of a preemptive attack on its nuclear facilities, much like the cover of WMD America used against Iraq.

    In November 2000, Iraq began selling its oil in euros, its Oil For Food account at the UN was also transferred into euros and later it converted its $10 billion UN held reserve fund into euros.

    At the time of the switch many analysts were surprised and saw it as nothing more than a political statement, which in essence it may have been, but the euro has gained roughly 17% over the dollar between then and the 2003 US invasion of Iraq. Perhaps unsurprisingly, since the US led occupation of Iraq its oil sales are once again being invoiced in dollars.

    The best policy choice for Iran would be to proceed with the IOB as planned as the economic advantages of such a bourse are clear, but in order to mitigate against the potentially greater political "threat" should provide customers with flexibility.

    It would make it much harder for America to object to the new bourse, overtly or covertly, if Iran allows customers to decide for themselves which currency to use when purchasing oil, such an approach would facilitate for euro purchases without explicitly ruling out the dollar.

    Emilie Rutledge is a British economist who is currently based at the Gulf Research Center in Dubai.

    so what happens when the dollar is about to implode? you start printing more to make up for the shortcomings. how do you hide this excess printing of cash? you stop reporting the _M3_ supply.

    What's Happened To M3?
    David Chapman
    Federal Reserve Statistical Release

    M3 is very important. Indeed of the Fed's monetary numbers only M3 was of major importance and in other G7 countries we also focus on M3 including our own Bank of Canada. No word that they intend to follow. So why are they dropping M3? Well we have seen nothing to tell us why we only know they are doing it. Oh it's not that the numbers will completely disappear. For those that wish to take the time they can pore through the Flow of Funds accounts (released quarterly as Z.1 release and the H.8 bulletin released weekly for commercial banks) and piece together the former M3. Painstaking, but that is not the way it is supposed to be. European Central Bankers put great stead in M3 so why has the Fed after all these years decided to cease publication?

    Some of the reasons we have seen floated around are as follows:

    * History has shown that only failing economies e.g. Soviet Union keep data secret (Financial Sense - Toni Straka - Unpleasant M3 Trend, November 12, 2005). An interesting premise and a theme we saw woven amongst a number of writers is that they have something to hide. The claim is that the Fed should be transparent and by not publishing the number the Fed now lacks transparency.
    * The end of publishing of M3 in March 2006 coincides with the start of the Iranian Oil Bourse. The premise here is that the with the oil bourse trading in Euros there will be a rush out of US$ into Euros and that M3 could drop sharply. A sharp drop in M3 would of course presage a recession as falling M3 is a characteristic of weak economic periods.
    * M3 is a measure of inflation in the economy. A somewhat unproven rule of thumb is GDP + inflation = M3. Will be able to properly measure inflation going forward if we don't know what M3 really is.
    * We are about to enter a period of hyperinflation and by eliminating M3 we will not know how much liquidity the Fed is pumping into the system. Remember the Fed doesn't really print money it is the banking system that expands money supply. But the Fed influences it through open market operations. We will have to watch daily Fed repo action very carefully irrespective of whether they are going to publish Repos (RPs) as noted in the bulletin above. The Fed doing repos puts money into the system and the Fed doing reverse repos takes money out of the system. Of course as well this is the exact opposite of the collapse in M3 premised with the oil bourse above.
    * Further on the theme above a period of hyperinflation would occur as the Fed tries to save us from a collapsing housing market and softer consumer demand. The Fed adds more and more liquidity to the system to stave off a sharp economic decline. By not publishing Repos (RPs) as noticed in their bulletin above the Fed again is hiding what they do on a day to day basis. This will make it difficult for both currency traders and equity traders to know what the Fed is up to.
    * The conclusion is that the Federal Reserve will be hiding a debasement of the US$.

    fasten your seat belts folks, "iceberg right ahead".

    Last edited by radmtnbkr; 01-29-2006 at 05:11 PM.

  12. #12
    Fixer Array oldsquid's Avatar
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    oil and such is constantly produced from the center of the earth. it is a neverending supply.

    Náisiúnaithe na hÉireann.

  13. #13
    rain? whats that! Array REVELATIONS's Avatar
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    Dont cry wolf too many times.

    Obviously we have had a good run here in the west for 100 years, but all good things must come to an end. How quick? We should see change over the next 50 years. I think thats a safe assumption.

    The Americans are due for another attack soon, perhaps even during the superbowl.

    Speaking of which, the CIA have been cited for plotting many things, 9/11 included. There are far too many inconsitensies in said event that keep on popping up and wont go away, and its not the demorcrats crying in their cornflakes either.

    If we dont end up destroying ourselves in the next 50 years, which I seriously doubt based on the US forgein policy, who knows, we might even find a REAL viable, alternative energy source.

    As for the rest of us, invest in water, dont smoke, get exercise (buy that bicycle now) and eat right.

    Move out of the city, if you can help it, to where the roads are free and the police are few

    LiVe life a day at a time. Why worry about the uncontrollable?
    Last edited by REVELATIONS; 01-29-2006 at 06:33 PM.

  14. #14
    Vindicated Array JamieJames's Avatar
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    I find it funny that despite massive (and record) inventory builds of crude oil and petroleum products in the OECD, and significantly below average draws in US natural gas inventories (yes it's been warm on the east coast but there have been warmer periods that have experienced more substantial draws and never a build in late December until recently) people continue to argue supply is unable to keep up with demand and that demand has not been impacted by high energy prices. Supplies cannot build if supply and demand are tight.. it's impossible. Purely matematically impossible.

    Supplies are building because of 2 things: demand is being destroyed and supply is amply greater than demand.

    Iran isn't stupid.. they can't cut off oil production because they need the money. Even if they did, the rest of OPEC has enough oil production capacity (not to mention oil production that will be coming online in 2 years from non-OPEC countries) that will further increase the gap of supply over demand.

    For the record, Iran only produces approximately 4 million barrels per day.

    That's all I'm saying.
    "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

    -Mark Twain

    Hello BCSB!

  15. #15
    Registered User Array radmtrbkr's Avatar
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    JJ, can you comment on the fed decision to stop reporting on M3? anyone?

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