Well, it looks like oil has done it. It has hit the big six zero more than a year before I will hit mine. Crude futures today in New York sold for $60.55 a barrel, or $1.44 a gallon. It is making gasoline and other oil-based products go up as well. It is due to the Saudis and other OPEC members not being able to convince the rest of the world that they can increase production. In fact, many in the oil business say that they no longer can, and if so, then maybe peak oil has been reached. Kenneth Deffeyes has been predicting that magic moment for 2005 November 24.
To me the important thing is when demand exceeds supply. If reduced supply reduces demand, that postpones that exceeding point. I predict that to occur in 2008. It then remains to be seen whether this will cause severe economic problems for the world, or whether it will cause such a reduction in demand that an oil glut will develop, despite production ability being in decline.
Once again I hear that part of the reason for crude's upward rise is refinery shortages. I don't know why they keep saying that. Maybe it's something they just say. But it does not make sense. Refinery shortages should cause crude prices to go down. If I am crude and can't get refined, then I am worthless. My price should drop then. No, the reason for the increase in crude prices is a perceived crude shortage, which is probably based on a real one. The latest fear is that Gödelized Iran will halt or slow down oil shipments.
I did a least squares fit on oil prices from 2004 January 1 to 2005 June 22, using data from the tax department of the state of Alaska. The resulting equation is:
Crude Oil Price = 35.12599281*exp(0.000852*t)*(1+0.044513*sin(0.0793*t+3.213698406))
where t is the time in days since 2004 January 1 and the argument of the sine is in radians. If you graph this function, you get a wavy exponential increase. There is oscillation going on, probably caused by 2004's huge increases. The formula predicts the following prices:
2005 July 1 57.25
2005 Sept 8 61.95
2005 Oct 12 58.46
2005 Nov 27 66.28
2005 Dec 30 62.55
2006 July 22 81.17
2007 Jan 1 92.69
2008 Jan 1 120.38
2009 Jan 1 163.51
2010 Jan 1 236.55
So that we will hve $237/gallon oil in 2010.
Monday, June 27, 2005
Monday, June 20, 2005
Oil crash coming?
I found an article on CNN's Money web site today. Since this link will probably go dead in a few days, here is a quote:
SINGAPORE (Reuters) - The oil market may be quickly headed for a massive crash as global economic growth slackens, alternative energy gains ground and financial traders sense a price peak, an economist with Morgan Stanley said Thursday.
His projection for a multi-year bear cycle stands in sharp contrast to the super-spike scenario envisioned three months ago by Goldman Sachs, Morgan Stanley's arch-rival in the world of oil derivatives trading, where they are the two biggest players.
"As evidence of weakening demand and ample supply accumulates, the market may panic," Andy Xie, Greater China economist in Hong Kong, said in a report. "I believe it could correct in the most speculative fashion -- it could collapse."
This article is further evidence that people just don't seem to understand or want to talk about the possibility of cheap oil running out soon. They say that growth will slacken, that advances in alternative energy will be made, and that economists will think the price is getting too high and is forming a bubble. Sure these things will influence oil prices for a while, but there are many people that say that these are not going to make much difference. I happen to think that oil prices will continue to go up for the foreseeable future.
The price may very well crash. It may go down into the 40s or even the 30s. But then it will go right back up again, just like it did in February. If indeed the price is headed for a crash, it presents an investment opportunity. Sell out of energy stocks and bonds, wait for the crash to occur, then rebuy into them.
SINGAPORE (Reuters) - The oil market may be quickly headed for a massive crash as global economic growth slackens, alternative energy gains ground and financial traders sense a price peak, an economist with Morgan Stanley said Thursday.
His projection for a multi-year bear cycle stands in sharp contrast to the super-spike scenario envisioned three months ago by Goldman Sachs, Morgan Stanley's arch-rival in the world of oil derivatives trading, where they are the two biggest players.
"As evidence of weakening demand and ample supply accumulates, the market may panic," Andy Xie, Greater China economist in Hong Kong, said in a report. "I believe it could correct in the most speculative fashion -- it could collapse."
This article is further evidence that people just don't seem to understand or want to talk about the possibility of cheap oil running out soon. They say that growth will slacken, that advances in alternative energy will be made, and that economists will think the price is getting too high and is forming a bubble. Sure these things will influence oil prices for a while, but there are many people that say that these are not going to make much difference. I happen to think that oil prices will continue to go up for the foreseeable future.
The price may very well crash. It may go down into the 40s or even the 30s. But then it will go right back up again, just like it did in February. If indeed the price is headed for a crash, it presents an investment opportunity. Sell out of energy stocks and bonds, wait for the crash to occur, then rebuy into them.
Monday, June 13, 2005
Peak Oil Looks Like a Real Cliffhanger
Welcome to Cliffhanger, my newest blog. This blog will be devoted to Peak Oil and related issues, such as Global Warming, alternative energy, hybrid and fuel cell cars, development encroachment, and anything else that impinges on the health of this planet or on our supply of resources.
In my opinion, we have a cliffhanger coming in the next few years, and it is hard to say what will happen. According to many experts, including Kenneth Deffeyes, Colin Campbell, and Matt Simmons, world production of oil is nearing a peak, and despite rapid demand growth, especially from the United States, China, and India, production will decrease rapidly a few years after the peak is reached. Projections of the peak are anywhere from right now to 2112, with the median seeming now to be somewhere around 2008. After this, oil and gasoline prices will rise dramatically, and economic recession or depression, world tensions, possible famines, and other undesirable things will start to happen. A good review of what will happen to Suburbia can be found in the film The End of Suburbia, published by Postcarbon Books. A good site for describing these changes rather frankly is Clusterfuck Nation, by James Kunstler, especially his Chronicles.
Or will all this happen? Disaster has been predicted over and over again, especially by Colin Campbell, who always seems to be predicting imminent disaster. President Jimmy Carter in 1977 said that the peak was coming in the 1980s, but developments in oil extraction technology and discoveries in the North Sea and Prudhoe Bay has delayed this peak. The economists say that supply and demand will take care of the situation. There are alternative sources of energy, such as wind, tar sands, hydrogen, solar, coal, nuclear, and natural gas (but each of these has their own problems, especially the latter three). When oil becomes too expensive, these other technologies will take over. Further, technological developments will make what use of energy we do have more efficient. A good example of this is the Toyota Prius, which uses a motor to help maximize the efficiency of an internal combustion engine, resulting in a car with 50 mpg fuel economy. Because of this cliffhanger I see coming up, I have purchased a Prius.
So what will happen in the future? There is no denying that supply and demand is a powerful force. But will it fully address the Peak Oil problem? I think it is going to be a close call. This one is a cliffhanger, folks. This is why I have named my blog "Cliffhanger". I have chosen this blog as my Monday blog, on the most depressing day of the week, and after James Kunstler publishes his next installment of his Clusterfuck Chronicles. I expect that demand for oil will drop drastically when oil rises in price, causing conservation and technological developments to increase. This happened in the 1970s, resulting in a huge oil glut. It will happen again. But supplies will continue to dwindle. In my opinion, supply and demand will kick in, but it will result in a massive disruption in our way of life, as we convert from one set of lifestyles to another. The result will be a crisis, and this may be well the Fourth Turning that Strauss and Howe are calling for. The results of this disruption and adjustment to me are uncertain. And that is why I am monitoring this situation and have constructed a blog for it, in which I will report any developments I see on it and also my feelings about what is going to happen. I am hoping for a happy conclusion to this crisis but am still concerned.
In my opinion, we have a cliffhanger coming in the next few years, and it is hard to say what will happen. According to many experts, including Kenneth Deffeyes, Colin Campbell, and Matt Simmons, world production of oil is nearing a peak, and despite rapid demand growth, especially from the United States, China, and India, production will decrease rapidly a few years after the peak is reached. Projections of the peak are anywhere from right now to 2112, with the median seeming now to be somewhere around 2008. After this, oil and gasoline prices will rise dramatically, and economic recession or depression, world tensions, possible famines, and other undesirable things will start to happen. A good review of what will happen to Suburbia can be found in the film The End of Suburbia, published by Postcarbon Books. A good site for describing these changes rather frankly is Clusterfuck Nation, by James Kunstler, especially his Chronicles.
Or will all this happen? Disaster has been predicted over and over again, especially by Colin Campbell, who always seems to be predicting imminent disaster. President Jimmy Carter in 1977 said that the peak was coming in the 1980s, but developments in oil extraction technology and discoveries in the North Sea and Prudhoe Bay has delayed this peak. The economists say that supply and demand will take care of the situation. There are alternative sources of energy, such as wind, tar sands, hydrogen, solar, coal, nuclear, and natural gas (but each of these has their own problems, especially the latter three). When oil becomes too expensive, these other technologies will take over. Further, technological developments will make what use of energy we do have more efficient. A good example of this is the Toyota Prius, which uses a motor to help maximize the efficiency of an internal combustion engine, resulting in a car with 50 mpg fuel economy. Because of this cliffhanger I see coming up, I have purchased a Prius.
So what will happen in the future? There is no denying that supply and demand is a powerful force. But will it fully address the Peak Oil problem? I think it is going to be a close call. This one is a cliffhanger, folks. This is why I have named my blog "Cliffhanger". I have chosen this blog as my Monday blog, on the most depressing day of the week, and after James Kunstler publishes his next installment of his Clusterfuck Chronicles. I expect that demand for oil will drop drastically when oil rises in price, causing conservation and technological developments to increase. This happened in the 1970s, resulting in a huge oil glut. It will happen again. But supplies will continue to dwindle. In my opinion, supply and demand will kick in, but it will result in a massive disruption in our way of life, as we convert from one set of lifestyles to another. The result will be a crisis, and this may be well the Fourth Turning that Strauss and Howe are calling for. The results of this disruption and adjustment to me are uncertain. And that is why I am monitoring this situation and have constructed a blog for it, in which I will report any developments I see on it and also my feelings about what is going to happen. I am hoping for a happy conclusion to this crisis but am still concerned.
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