Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: riskyinvesting who wrote (129155)	3/10/2010 8:42:26 PM
From: JimisJim	10 Recommendations Read Replies (2) \| Respond to of 206093

No, you won't wake up one morning and find the world has run out of oil... that's not how it works... it's more like a bell curve followed by a dip and if we're lucky a slightly downsloping plateau... But long before that, in fact it may have already happened, we won't be out of oil, etc., but we will have put in a peak in terms of how much oil was produced that day. After that, the amount of oil produced each day will vary, but the overall trend will be down. Also there's a difference between running out of oil, how much how is produced daily and how much easy and cheap oil there is left to produce and each of these issues can and will have a finite peak at some point, probably different dates for each. And you are correct that market forces will affect the rate of decline a lot. Sustained high prices will indeed reduce demand and divert some forms of demand to other sources. Now if we were smart, we'd be building out sufficient nuclear generation to expand the grid right now because we may not realize or know that we may have a severe shortage of accessible and affordable oil in say 5 or 6 or 10 years. But we DO know that it takes 10 years or more to plan, build and get all of the approvals in place to bring a new nuke plant online. Most of the discussion wrt to peak oil is really about the race between finding significant new sources that are economical and sufficiently large to replace production declining in most of the world's existing fields that are much cheaper/easier to get oil from daily than any of the new fields found the past 10 years -- which means it will also take longer and longer time periods between the time such new fields are discovered and when we actually get oil from them... and yes, declining demand due to rising prices will "help" slow the "peak production" decline, but only if we begin making hard, expensive decisions now to ensure we can even meet that lower demand at point X in the future. I don't know about you, but I don't see anyone making policy or even business decisions on that time scale (10-20 years out)... the policy makers have no incentive because it's stuff no voter wants to hear and therefore vote for such a person, and public businesses seem to only plan for each quarter or year for the most part. Now the good news (in a perverse sense, because it is also the bad/high risk news) is that the 10-12 largest oil companies in the world are not public companies. They are owned by non-US governments... some friendly and many, not so much... and those companies all make XOM look like a minnow in a whale tank and answer to nobody but their "fearless leaders". Do you think those companies -- which control way more than half of the known oil in the world, maybe 2/3 or more -- are going to make production/development decisions based mostly on market principals or geo-political considerations? I think it will be a combination of the two, but some are only going to care about geo-political issues and brokering power. So then the question becomes, do you think that the US is going to change its habits sufficiently and in time to avoid having to deal with increasingly expensive oil costs? Do you think our military (the pentagon is the biggest consumer in the US and thus the largest single consumer in the world) will be able to adapt quickly to scenarios where they can get along without as much oil as they want every day? Did you know that right now today, the all-in cost per gallon of gasoline used in Iraq or Afghanistan is approximately $400/gal. when you factor all of the transportation and security, etc. it takes to get that gallon of gas to the front lines? You are correct that there is no such thing as energy independence for the US. Anyone who says doing X will help in any significant way is either ignorant or lying (or both). The only things we have in any abundance (at least for now -- but for how long into the future is still legitimately debatable, but not being debated in any serious fashion) are natural gas and coal. Produced and used wisely, they could substantially ease the inevitable economic pain and suffering our country faces at some point when access to cheap and easy oil runs lower than demand... they are the only hope, really... -- (IMO)-- for any sort of least bad case scenario in the future... but the debates and discussion wrt to either are focused on the wrong things or devolve into political and economic fantasies from all sides of the spectrum in the debate/discussion. And lastly, I think that economic decline actually is inevitable for every country -- name one country that in the history of mankind has avoided economic decline. The only variable (where the choices you mention come into play) is how long any particular country can avoid the inevitable... centuries? decades? years? The fate is inescapable, but the time frame is up to the people of a country to choose... wisely and in a timely fashion. Timing is everything when talking about events that can play out over decades or more. Jim