Oil Hits $50/Barrel: Era of "Cheap" Energy Over?

[NoPretentiousCodename]

Thanks, Kimstu, for outlining a specific proposal, as I was beginning to believe that nobody would.

For the trickle-down bit, the point I was making was that the money and resources of rich people don’t only benefit the rich. Most situations in which they do are either (a) illegal, or (b) money-losing propositions to the wealthy. Since we can count on the rich to act in their own economic interest, any new solution that counts on this tendency should be at least as reliable.

As to taxation, I can agree that the rich should bare a greater tax burden than others. Perhaps, even as you suggest, they should be taxed in proportion to the disparity between themselves and others. I personally am disheartened by certain politicians repealing of the estate tax (or death tax if you listen to their rhetoric), as it benefits very few at the expense of very many. Why should we reward those people who didn’t actually create the wealth and productivity that earned their parents fortunes? We can probably agree that doing so makes little sense.

I still hold the view that the best way to improve the situation of a countries citizens is to increase the overall productivity of the economy. More productivity means more of everything to go around, whether by normal economic activity or by government allocation (welfare, etc.).

Again, my respect for answering my questions directly. I think we better understand each others position as a result.

How the conversation got here from oil… well it’s a long and meandering explanation. JM & SS were arguing that government needn’t get involved, and I jumped in to concur, but to add my own pro-environment perspective that I like high oil prices and that the economy will affect what gets developed more than any government regulation could.

From there, some of us were accused of spouting “let the market solve it” without any other rational thought, and furthermore we wanted big business to solve all our problems. At this point I chimed in to say that “the market” includes all participants, buyers and sellers… and the hijack was in full swing.

To restate my position on the original debate: I personally can’t wait for either (a) the era of cheap oil to end, or (b) the development of technologies which finally make alternative clean energy sources cheaper (more economically viable) than oil.

I’m and environmental idealist, and an economic realist.

[John_Mace]

Oil Falls Below $42 a Barrel.

Getting back to the OP-- good thing we didn’t overreact last week and make government policy based on $50/barrel oil.

[Blake]

http://www.alertnet.org/thenews/newsdesk/N30206303.htm

Mexico’s Pemex has detected vast new oil deposits in the Gulf of Mexico that could double the country’s total reserves and boost its oil output to rival Saudi Arabia’s, the state oil monopoly said on Monday.

The deposits – located mainly in deep waters for which Pemex will need hefty investments and technology-sharing agreements to access – could total about 54 billion barrels of crude equivalent (bce), which would boost Mexico’s total reserves to 102 billion bce.

…

“This will put us on a par with reserves levels of the big players like Iraq, United Arab Emirates, Kuwait or Iran,” Ramirez said.
“What’s more, we would be in a position to reach production levels like those of Saudi Arabia, which produces 7.5 million barrels per day, or Russia, which produces 7.4 million.”

[NoPretentiousCodename]

@John Mace

Oil Falls Below $42 a Barrel.

Rats!

[BrainGlutton]

From http://www.kunstler.com/mags_diary11.html:

August 9, 2004
The only entity in this country last week that seemed to notice something was happening, Mr. Jones, was the stock market, which started what could be a nasty skydive without a 'chute. And what was it that did happen? OPEC announced dryly that they were unlikely to increase oil production. Wouldn’t, or couldn’t? It wasn’t exactly clear. But the price of a barrel of crude shot up and up on the futures markets and our so-called economy wobbled.
What OPEC seemed to be saying, without coming out and stating it, was this: Saudi Arabia, the world’s last “swing” producer, is pumping at 100 percent full bore. Meaning, they have no spare capacity. Meaning, the world has no spare capacity (since they were the last ones with spare capacity). Why does such a dry fact have such ominous overtones? Because it implies that nobody has any spare oil production capacity, meaning the world has arrived at the fateful collective production peak. We will never again in world history produce as much oil as we can now.
Well, you could also translate that to mean: industrial economies will no longer grow.
Since our economy at any given moment consists of sixty million people driving to Walmart to buy stuff made by people 12,000 miles away, on credit (that is, the expectation that they will have money in the future) the markets have reason to worry. Not since the days of the late Roman empire has there been a national economy based so little on true economic exchange of real value. They had the coliseum. We have Las Vegas and reality television.
The national media sure haven’t registered what’s going on vis-a-vis the global oil predicament and its connection with our vaunted way of life. The New York Times opinion writers, for instance, were too busy yesterday inveighing against Kobe Bryant’s defense team. America’s free press is free to snooze. The lead story in today’s Times Business Page: “Young Men Are Back Watching TV. But Did They Ever Leave?”
Nothing John Kerry or George Bush did or said yesterday – with less than 100 days to the election – registered on either the front page of the Times or CNN’s home page. They might start thinking about how Americans are going to feed themselves when the Archer Daniels Midland model of oil-based industrial corn production stops working.
Indignant readers have written back to me that John Kerry would only jeopardize his election chances if he told Americans the truth, so don’t hold it against him. I guess the Democratic faithful have even more contempt for the public’s collective intelligence than I do.

<snip>

August 30, 2004
The past week’s events demonstrate the persistent power of delusional thinking in a nation determined to be misinformed and misled. Oil prices zoomed up near $50 a barrel two weeks ago. When they fell back to about $43 last week, the news media heaved a great sigh of relief, the stock market posted a winning week, and the public concluded that the previous rise in prices was just another hiccup the world will get over and forget. No problemo.
Over the weekend, in two seperate incidents, Iraqi insurgents blew up a total of eight oil pipelines in the region close to the Persian Gulf export terminals, which account for 1.85 million barrels a day, or about three percent of global daily demand. (These incidents were barely reported in the mainstream media, certainly not on Page One of the New York Times.)
This is going to send the price-per-barrel ratcheting back up toward $50 and perhaps beyond. The ratcheting effect will be the recurrent pattern. The price will tick up five clicks, fall back three clicks, tick back up five clicks, and so on, and this is how it will go barring a truly significant event such as an insurrection against the house of al Saud.
A great deal of oil is being produced in the world today. That is the inherent nature of the global production peak. But enormous as the production is, it is not keeping up with world demand. There is no spare capacity. There aren’t any more swing producers who can, at the nod of a head and turn of a valve, flood the world market with product to drive down the price.
Then, of course, once the world passes peak, and we proceed down the depletion arc where demand will always exceed capacity (while capacity steadily falls 2 - 5 percent a year), we will witness the destabilization of all the major systems that support modern economies – a process that will be both preceded and attended by massive sociopolitical turbulence.
If the candidates for president even understand this, they must understand too that our way-of-life here in America will have to change whether Americans like it or not. The single most important thing either George Bush or John Kerry can do is prepare the American public for these unavoidable changes. That is leadership.
I felt deep pangs of sorrow this morning listening to NPR play recordings of Jimmy Carter’s 1980 acceptance speech, the year he ran against Ronald Reagan and lost. Carter was a deeply humane and brave president who didn’t shrink from telling the public the truth about our fundamental predicament in the world – which has not changed in a quarter century. We have invested our national wealth and our national will in an energy-gluttonous infrastructure for daily life that has no future. That future is now here.
Under Carter’s brief single term, real changes were made in federal energy policy, including conservation measures that would be intolerable to the present generation of Americans – e.g. the 55mph speed limit. When Reagan came in, he took the solar collectors off the White House roof that Carter had installed and rewrote federal energy rules so that efforts like small-scale hydroelectric generation no longer paid.
Whoever is elected President this year will be swept away on a torrent of change coming in the next four years. Personalities will hardly matter. Events will be in the driver’s seat. The only thing the president will be able to do is tell the public the truth, and if he has the guts to do it, they will hate him for it.