Gail Tverberg on the Leonardo Maugeri argument" http://ourfiniteworld.com/2012/06/28/lower-oil-prices-not-a-good-sign/
> One of the issues with high oil prices is that the higher prices, > especially among oil importers, give rise to a kind of systemic > risk<http://www.theoildrum.com/node/3382>that affects many kinds of > businesses simultaneously. High > oil prices tend to do several things at > once<http://ourfiniteworld.com/2011/07/26/how-limited-oil-supply-can-lead-to-a-continuing-financial-crisis/http://>: > lower the real growth rate, make it more difficult to repay loans, and > increase the unemployment rate. All of these issues make it more difficult > for governments to function, because governments play a back up role. If > workers are laid off from work, governments are expected to compensate > laid-off workers at the same time they are collecting less in taxes and > bailing out distressed banks. This type of systemic risk leads to the > possibility of multiple government failures. > > *Promises of Future Oil Capacity Growth Aren’t Very Helpful * > > We keep reading articles claiming that world oil production will grow by > some large amount by some future date. One of the latest of these is by > Harvard Kennedy School researcher (and former oil company executive) > Leonardo Maugeri, called Oil: The Next > Revolution<http://belfercenter.ksg.harvard.edu/publication/22145/new_study_by_harvard_kennedy_school_researcher_forecasts_sharp_increase_in_world_oil_production_capacity_and_risk_of_price_collapse.html>. > According to the report, “Oil production capacity is surging in the United > States and several other countries at such a fast pace that global oil > output capacity is likely to grow by nearly 20 percent by 2020, which could > prompt a plunge or even a collapse in oil prices”. > > Even if the forecast were true (which I am doubtful), the problem is that > this is simply too little, too late. We have been having oil supply > problems for quite some time–since the 1970s. The rate of oil supply growth > keeps ratcheting downward, and the world keeps trying to adapt, with > recessions to show for its efforts. (James Hamilton has > shown<http://reason.com/archives/2011/03/08/oil-price-shocks-and-the-reces>that > 10 out of 11 recent recessions were associated with oil price spikes.) > > We don’t have time to wait until 2020 to see whether the supposed > additional capacity (and production) will actually materialize. We have a > problem right now. The downturn in oil prices and the reduction in demand > in the US and PIIGS is looking more and more like the current oil price > spike (of 2011 and early 2012) may give rise to yet another recession. > Based on our experience in 2008-2009, and our difficulties since then, this > recession may be severe. > On Tue, Jun 26, 2012 at 2:47 PM, D & N <[email protected]> wrote: > There are probably a few such charts providing specifics on gas price at > the pumps following any negative news--which would, last count, be > practically diurnal; moreover, those showing the sharpest increases > relating to upcoming holiday weekends. No conspiracy suspected. > > Note: the price per barrel has been dropping for months, but the pump > price stays profitable. They're used to the profits, and government is > quite happy to get royalties, if only to offset out the subsidies. > > *Natalia* > > > On 26/06/2012 1:07 PM, Tom Walker wrote: > > Harvard? Not impressed. Martin Feldstein is from Harvard. > > I reiterate, though, that peak oil is NOT about the amount of oil > available. It is about rates of production that are tied to prices and > profitability, which in turn rely on rates of economic growth that can be > sustained at those (varying) oil prices. > > I'm pasting a snapshot of a figure comparing interest rates, the price of > oil and the U.K. housing market from 2005 to 2009. It's from an article by > Colin Hay about the demise of what he calls "the Anglo-liberal growth > model." The peak in oil prices in the second quarter of 2008 was not the > result of some sudden change in oil supply. To simplify massively, it > reflects changes in interest rate policy in response to inflation > (including oil price and housing price rises). It's not as if the > privatized-Keynesian growth model would be just fine if only there was more > oil. The model was inherently unstable and there would appear to be no way > of putting Humpty-Dumpty back together again. > > > > > > On Tue, Jun 26, 2012 at 12:30 PM, Arthur Cordell <[email protected]>wrote: > >> Many environmentalists are distressed that there seems to be more oil >> available than we had heretofore thought. Wonder why. >> >> >> >> As to the author’s facts, all I know is that it was reported in the NY >> Times, he is at one of the institutes at Harvard and the press release is >> from the same place. >> >> >> >> arthur >> >> >> >> *From:* [email protected] [mailto: >> [email protected]] *On Behalf Of *Tom Walker >> *Sent:* Tuesday, June 26, 2012 2:13 PM >> >> *To:* RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION >> *Subject:* Re: [Futurework] A Fresh Look at Oil's Long Goodbye - >> NYTimes.com >> >> >> >> That would indeed be interesting (but hardly earth shattering) if the >> author does indeed know what "peak oil" is about. It's not about how much >> oil there is in the ground somewhere. It's about the interactions between >> price, profit, supply, geopolitics, technology, pollution and political >> economy. >> >> I'm not saying Maugeri is wrong -- I haven't read his book. I'm just >> saying I've heard it all before about peak oil being "disproven" based on >> ludicrous (or mischievous) misinterpretations of what peak oil is about. It >> is not about "running out of petroleum in nature." It's about cheap >> petroleum being able to play a role in a particular model of political >> economy and economic growth. The amount of solar energy that hits the earth >> each day is stupendous but has little to do with how much of it can be >> profitably exploited for industrial production. >> >> >> >> >> On Tue, Jun 26, 2012 at 10:18 AM, Arthur Cordell <[email protected]> >> wrote: >> >> I think it’s the difference between the short term and long term. I >> agree that it is confusing. I left out a lot from the posting but in the >> posting the second to last para says. >> >> *The combination of new production in the Western Hemisphere and the >> still growing production in other parts of the world could lead to a sharp >> drop in oil prices, Maugeri finds, which if steep enough could lead oil >> companies to cut back on investment and ultimately slow down oil supplies. >> But if oil prices remain above about $70 per barrel, sufficient investment >> will occur to sustain continued growth in production, possibly leading to a >> stable phenomenon of oil overproduction after 2015.* >> >> So there might be a sharp drop which if it goes below 70 could lead to >> cutbacks in production. >> >> >> >> The interesting part of the article is that the author says we are NOT at >> peak oil at this time. >> >> >> >> >> >> >> >> *From:* [email protected] [mailto: >> [email protected]] *On Behalf Of *Tom Walker >> *Sent:* Tuesday, June 26, 2012 1:03 PM >> *To:* RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION >> *Subject:* Re: [Futurework] A Fresh Look at Oil's Long Goodbye - >> NYTimes.com >> >> >> >> To make a long story short: a big increase in unconventional oil >> production, fueled by high prices may lead to a sharp drop in oil prices. >> >> In other words, the production projections are based on price projections >> that ignore the feedback effect on prices of the production projections. >> >> On Tue, Jun 26, 2012 at 9:53 AM, Arthur Cordell <[email protected]> >> wrote: >> >> >> http://dotearth.blogs.nytimes.com/2012/06/25/a-fresh-look-at-oils-new-boom-time/?nl=opinion&emc=edit_ty_20120626 >> >> >> >> *A Fresh Look at Oil’s Long Goodbye* >> >> *By ANDREW C. >> REVKIN<http://dotearth.blogs.nytimes.com/author/andrew-c-revkin/> >> * >> >> My bedtime reading tonight is “Oil: The Next Revolution – The >> unprecedented upsurge of oil production capacity and what it means for the >> world<http://belfercenter.ksg.harvard.edu/files/Oil-%20The%20Next%20Revolution.pdf>.” >> *This mind-bending report points to a prolonged period of rising oil >> production, particularly in the United States (for reasons laid out below), >> and a potential collapse in oil prices, with all kinds of implications for >> security, international politics, the economy and, without doubt, climate. >> * >> >> The report is written by Leonardo >> Maugeri<http://belfercenter.ksg.harvard.edu/experts/2510/leonardo_maugeri.html>, >> a top oil company executive from Italy who is currently a research fellow >> at the Geopolitics of Energy >> Project<http://belfercenter.ksg.harvard.edu/project/68/geopolitics_of_energy_project.html>of >> Harvard’s Belfer Center for Science and International Affairs >> >> For convenience, here’s an excerpt from the Harvard news release on >> Maugeri’s report: >> >> ========== >> >> Oil production capacity is surging in the United States and several other >> countries at such a fast pace that global oil output capacity is likely to >> grow by nearly 20 percent by 2020, which could prompt a plunge or even a >> collapse in oil prices, according to a new study by a researcher at the >> Harvard Kennedy School. >> >> The findings by Leonardo Maugeri, a former oil industry executive who is >> now a fellow in the Geopolitics of Energy Project in the Kennedy School’s >> Belfer Center for Science and International Affairs, are based on an >> original field-by-field analysis of the world’s major oil formations and >> exploration projects. >> >> *Contrary to some predictions that world oil production has peaked or >> will soon do so, Maugeri projects that output should grow from the current >> 93 million barrels per day to 110 million barrels per day by 2020, the >> biggest jump in any decade since the 1980s. What’s more, this increase >> represents less than 40 percent of the new oil production under development >> globally: more than 60 percent of the new production will likely reach the >> market after 2020.* >> >> Maugeri’s analysis finds that the gross additional production from >> current exploration and development projects in the world could produce an >> additional 49 million barrels per day by 2020, an increase equivalent to >> more than half the world’s current 93 million bpd. After adjusting that >> gross output increase for political and technical risk factors as well as >> the offsetting depletion rates of current fields, the analysis projects the >> net increase by 2020 to be about 17.5 bpd. >> >> *His study attributes the expected growth in oil output largely to a >> combination of high oil prices and new technologies such as hydraulic >> fracturing that are opening up vast new areas and allowing extraction of >> “unconventional” oil such as tight oil, oil shale, tar sands and >> ultra-heavy oil. These increases are projected to be greatest in the United >> States, Canada, Venezuela and Brazil. Maugeri also predicts a major >> increase in Iraq’s oil output as it regains stability, which will add new >> production in the Persian Gulf region — potentially destabilizing OPEC’s >> ability to manage output and prices.* >> >> The combination of new production in the Western Hemisphere and the still >> growing production in other parts of the world could lead to a sharp drop >> in oil prices, Maugeri finds, which if steep enough could lead oil >> companies to cut back on investment and ultimately slow down oil supplies. >> But if oil prices remain above about $70 per barrel, sufficient investment >> will occur to sustain continued growth in production, possibly leading to a >> stable phenomenon of oil overproduction after 2015. >> >> *“Leonardo’s conclusions are not only startling, but his paper provides >> a transparent explanation for how he reaches them – something lacking in >> many studies,” said Meghan L. O’Sullivan, the Jeane Kirkpatrick Professor >> of the Practice of International Affairs at the Kennedy School and director >> of the Geopolitics of Energy Project. “His findings have major implications >> for geopolitics, suggesting important shifts in how countries interact and >> wield influence.”* >> >> >> >> >> _______________________________________________ >> Futurework mailing list >> [email protected] >> https://lists.uwaterloo.ca/mailman/listinfo/futurework >> >> >> >> >> -- >> Cheers, >> >> Tom Walker (Sandwichman) >> >> >> _______________________________________________ >> Futurework mailing list >> [email protected] >> https://lists.uwaterloo.ca/mailman/listinfo/futurework >> >> >> >> >> -- >> Cheers, >> >> Tom Walker (Sandwichman) >> >> _______________________________________________ >> Futurework mailing list >> [email protected] >> https://lists.uwaterloo.ca/mailman/listinfo/futurework >> >> > > > -- > Cheers, > > Tom Walker (Sandwichman) > > > _______________________________________________ > Futurework mailing > [email protected]https://lists.uwaterloo.ca/mailman/listinfo/futurework > > > > > _______________________________________________ > Futurework mailing list > [email protected] > https://lists.uwaterloo.ca/mailman/listinfo/futurework > > -- Cheers, Tom Walker (Sandwichman)
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