It's been an interesting week for peak oil watchers. Russia has played its energy card against the Ukraine and impacted Western Europe in the process. Forbes trumpets the goodness of consolidation in the energy industry while From The Wilderness predicts gloom from the same events and Truthout.org decries the deregulation of the electric grid (with good historical reason, I might add).
Meanwhile we have Stuart Staniford over at The Oil Drum pondering the plateau in world oil production since July 2004. He's followed that up with an assessment of the IEA's "corrected" production numbers. Then he dismantled Freddy Hutter's suggestion that it was a refinery bottleneck that has caused this plateau. And today he went further and examined the year over year changes in refining capacity over the last 40 years to see if the last few years represent much of an aberration or not. His conclusion is that they were not that much of an aberration, and further, they can be explained only one of two ways - either a global oil cartel (which does not fit all the facts) or the imminent peak of global oil production. The evidence comes down nicely in favor or the global peak, despite Freddy's insistence otherwise.
Energy prices across the board are also spiking and generally showing high volatility, something to expect as we approach peak as previously predicted by Professor Kenneth Deffeyes.
So where do we stand as we enter 2006? We see a Europe in fear of its future because lack of energy means no future. We see catastrophic production decline rates in many major oil fields worldwide. And we still see the major governments of the world focusing on getting more oil even when the last 18 months have sent the economic message that there's not much more to get. This all makes me considered "Agric's Law", which was the observation that, for 2001-2005, the average price of oil for any year was within 5% of the peak price of the previous year. If this holds true for 2006, then the average price should be between $67 and $75 per barrel this year. And indeed, as we watch oil prices spike up towards $63 per barrel already early in the year, this might come to pass. It certainly seems unlikely that the constant predictions of oil returning to $30 per barrel will happen anytime soon.
Meanwhile the US stock market was flat for all of 2005, ending at roughly the same point it began the year. Add inflation to that mix, and the stock market was a general loss, though some stocks did gain, obviously. Add in the softening housing market, the huge current levels of consumer credit, the balance of trade deficits, and the federal deficit, and you have the makings of a less than healthy economy. What happens when that economy gets bludgeoned by $70 per barrel oil for a year?
It doesn't look like 2006 is going to be a good year. I think we're going to continue to slide in a generally downward direction and that Richard Duncan may yet have the last laugh.
Notes for Sunday – May 29, 2016 - As we approach Memorial Day this year, it is fitting that on May 29th, 2003, 35 states declared it to be Bob Hope Day, as he turned 100 years old. Bob Hope...
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