I’ve mentioned several times the looming oil crunch, exacerbated by the current plummet in oil field investment. The article linked below is a better than average example of the myopia that can run rampant in oil discussions.
The entire focus is on the “lack of investment now means a crunch later” meme, with not one word about peak oil or the possibility that oil prices now could look absurdly cheap in 12 months or so. This newspaper is not alone in seeing the world this way, of course. Listen to any of the talking heads on financial TV shows and you’d be forgiven for thinking that there’s an infinite supply of oil, climate chaos doesn’t exist, and the only impediment to consuming all the oil we can dream of is the cost of extracting and using it.
So, we have yet another Convenient Fiction. Oil prices are high? No, it’s not any sort of nasty, unavoidable geological limitation, you silly, silly information consumer! It’s just bad management by the oil companies! Really!
For all the complaining some people (including me) do about the lousy job the media does with their faux balance nonsense when covering climate chaos (“But here’s some guy we found sleeping on a park bench who thinks James Hansen is a doody head!”), the oil situation is even worse. There, no one is even talking about the problem or uttering That Which Must Not Be Said, “peak oil”. Frankly, we’re so close to the peak in world oil production that I think fighting the public relations war and trying to educate the mainstreamers about it is now a lost cause. The best we can do is support policies, like the development and roll-out of petroleum-free alternatives (under the guise of reducing CO2 emissions), and not bother telling anyone that we critically need to reduce our petroleum dependency, as well.
Calgary Herald: Energy supply crunch brewing:
Forget low oil prices. The worry of the moment is a spike in oil prices and how long it will take before a supply crunch sends prices soaring.
And if one subscribes to the views of former CIBC World Markets economist Jeff Rubin and University of California, San Diego economics professor James Hamilton, a spike in prices could send the world tumbling back into recessionary territory, just as it is about to climb out of it.
Both Rubin and Hamilton hold the view that the current recession is the result of a spike in oil prices and not the collapse in the U. S. housing market.
So what’s the deal with the about-face in sentiment on oil prices?
It doesn’t get much simpler than the basic economic principles of supply and demand.
Ever since the bottom dropped out of the economy — and the oil market — last fall, there has been a single-minded focus on the weekly demand numbers released by the various energy agencies around the world. The conclusion drawn was that oil prices were going to remain weak for the foreseeable future because of the huge drop in consumption.
This, despite other compelling information that has long determined the decline rates of existing fields, even with steady demand, is going to push the world toward an oil shortage.
Now, all of a sudden, the tide has turned and the focus is on the supply side.
What’s interesting is the mix of organizations on the supply-shortage bandwagon.
[mentions IEA, OPEC, and consulting firms]
…
Consulting firm McKinsey &Co. also weighed in with its analysis this week, which showed supplies could begin to tighten as early as next year, even if economic growth is on the weak side.
All this should make Albertans happy. A higher oil price is good for the economy–though not as good as higher natural gas prices –and there is the distinct possibility that if prices stabilize in the $60 range, the oilsands projects that were put on hold might be put back on the active roster.
…
Of course, no one really knows where oil prices are headed long term, but it’s getting harder to ignore the growing body of analysis pointing to a supply crunch as a result of the 15 per cent drop in investment and continued declines in the big fields around the world.
The smart money looks like it’s on prices going up, not down.
“Both Rubin and Hamilton hold the view that the current recession is the result of a spike in oil prices and not the collapse in the U. S. housing market.”
I actually do buy the argument that high oil prices were a cause of our current economic woes. People who were living on the edge of what they could afford, had bought too much house or whatever, were getting by until they had to start paying more for transportation fuel. Then they had to choose between going to work or paying their full mortgage payment. It pushed them over the edge and exposed the problems in the mortgage market.
I agree on the contribution that high oil prices made to the economic train wreck. I think this is a classic case of root vs. proximal causes. The incredible level of stupidity displayed by the banks and investment houses set up the situation, and the consumer pullback and lack of money to pay their bizarro loans was simply the inciting event. Had oil not pushed us over the edge, I suspect something else would have come along and triggered pretty much the same set of events.
The big worry now is what does even a slight increase in oil prices do to an already battered and reeling economy? That one worries me.
And to return to the point in my post, I think this will be yet another reason why peak oil won’t get anywhere near the attention it deserves. We’ll have on gigantic, long term problem (climate change) to deal with, plus one gigantic relatively short term problem (the economy), and news departments that are already stretched too thin won’t have the resources or the inclination to add another huge, long term issue to the mix. If we ignore, it will go away, right… ?