Well now, 2005 has come and gone, and along with it the Deffeyes Thanksgiving of 2005 November 24, supposedly the date that Peak Oil occurs. It has been an eventful year all right. Both petrol and oil went up in price dramatically, raising the price of oil to about $66 a barrel and the price of petrol to $2.54 near where I live. The hurricanes then came, possibly sent to us by Peak Oil's brother, Global Warming. That destroyed so much in the Gulf of Mexico that the price of petrol went all the way to $3.25 on average near where I live, and at some stations hit $3.49 a gallon. Then they went down rapidly, down to $1.95 a gallon, because refineries came back on line, oil from the Strategic Petroleum Reserve arrived, and so did oil, petrol, and natural gas from Europe. I expected this because of the rebound effect. Petrol prices should now go up, and I have observed this, as they are now about $2.15 a gallon. The price of crude oil actually went down when the hurricanes struck, because with fewer refineries operating, there is less demand for crude oil. It is now going back up, around $61 a barrel. The world is operating without any slack, producing and consuming 82 million barrels of oil each day.
So what's ahead for 2006? I think prices are going to go up. Oil will probably hit about $95 a barrel, just short of the century mark. Petrol around here will be $3.50 a gallon in the summer. Prices should then edge back again, provided a new batch of hurricanes don't cause trouble in the Gulf.
I do not think oil has peaked yet, but it could soon. Some people are saying the peak will not come until 2020 to 2025, and they may be counting oil from a number of unconventional sources, including deep ocean, Canadian tar sands, liquefied coal, and oil shale. These take a substantial part of a barrel of energy to produce one barrel, hardly efficient. I think the progress to the peak will be slow, and the ill effects that James Kunstler predicts in his Clusterfuck Nation Chronicles for 2006 may eventually come up in future years. For example, I hardly think that the Dow will go to 4000. I think it will end the year around 10,700, about where it is now. If you want your money to earn money, try energy stocks and funds, gold, gold stocks and funds, and money market funds. Inflation should be coming up, but I don't see that happening. I find it interesting that Kunstler thinks that China is going to go cuckoo and that South America is going to go loco. In other words, the whole world is going to go bananas soon. Further, he thinks that China will wag the dog and attack a central Asian nation to divert attention from domestic troubles caused by a worsening fuel situation. I don't see any evidence that will happen any time soon.
There are some ominous developments, hwoever. The price of oil is going back up again. Russia is denying Ukraine gas because Ukraine will not pay $230 per 1000 cubic meters of gas. This price corresponds roughly to a monthly bill here for gas of about $1,400. Pretty high. Ukraine has enough to last 6 months. Its pipelines also feed western Europe, so the result could be a skirmish between western Europe and Russia. Even worse yet, Euripe could cut gas to the United States, causing serious problems here. There could be cold snaps here this winter. And as Kunstler points out, the price of gas goes up when the weather is colder than normal and down when it is warmer.
So what's going to happen in the future? As I said before, this one may go down to the wire. It's a cliffhanger. Supply and demand is pretty powerful and will push alternative energy sources into the marketplace as the cost of fossil fuels go up. Whether this will be enough to cause a catastrophic shortage remains to be seen. Conversion to the new sources will cause a series of crises in future years, and the outcome of these will determine what kind of future our world will have.
Note that I use the word "petrol" to describe fuel for motor vehicles, rather than gasoline or benzine. Gasoline is confusing because it shortens to "gas", which also means methane from the ground. Benzine can be confused with benzene, the aromatic compound with ring molecules.
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