The problem arises when one wants to quantify these effects. The same is true for how long fossil fuels will last. The time frame depends upon two unknowns: how fast demand will increase and how fast substitution efforts can become replacements.
Certainly, even if the world was really focused on cutting demand, say by doing a crash program on vehicle development, it would take a decade to replace a substantial portion of the existing rolling stock. With less than desperation motivation 20 years is more likely.
A nation can mobilize when threatened and do remarkable things such as the production of planes and liberty ships in the US during WWII from nothing to thousands in a year or two, but we are talking about thousands of vehicles, not millions.
There are two problems right now, as you well know: lack of interest in going into crisis mode and a lack of appropriate technology. Just look at your area, windmills being installed today make an earlier generation (less than a decade ago) uneconomic. The same thing may be true a decade hence. Critics will say that the ramp up was rushed, but without the demand there wouldn't have been the push for innovation.
Unfortunately the innovation is being driven by market demand and thus ignoring the needed government-funded basic R&D that could produce longer-range advancements.
It all boils down to the same thing, those enjoying life now don't want to shake things up and push the problem into the future when they won't be around, or at least will be enjoying the golden parachutes.
Everyone assumes that this crisis (food, population, fuel) will be limited like other such issues in the past. They can't visualize a global catastrophe. I don't know whose fault this is, certainly those claiming the sky is falling aren't been temperate in their warnings.
As things stand change will happen slowly and the BP projections will probably not be too far off for the next 5-10 years at least. Too bad. Policies not Politics ---- Daily Landscape
Just look at your area, windmills being installed today make an earlier generation (less than a decade ago) uneconomic.
This is true of windfarms built in the 80s, but not those built since the second half of the nineties, which benefitted pretty much from the same incentives than we have now (the feed in tariffs in Germany and some other places go down by a few per cent each year for new projects).
With the cost of material and equipement going up, today's windfarms probably produce power at a cost which is not that much lower than those built ten years ago - but lest that sound bad, the increase has been much less than for other power sources in recent years, so wind has still become more competitive, relatively speaking.
Plus, wind turbines built 10 years ago have been amortised by now and produce essentially free electricity today. In the long run, we're all dead. John Maynard Keynes
In northern Europe, the vast majority of the machines installed from the 90's on are still running in the same cash cow mode. (I can't speak for Spain.)
Now, let's get to one of the key hidden points of the BP "serious analysis," regarding renewables. Hayward states:
While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production.
The usual silly argument that renewables are still small and therefore will remain so. We have not tried yet to make them big. To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense). As I've argued many times, wind is cheap, understood, and able to provide a lot more of our energy than generally admitted, but that idea has yet to sink in, and Hayward's argument is typical of that.
From the policy side, it has been obvious for decades that the battle against renewables is not on the merits, but rather on the social aspects; centralized generation and delivery vs. decentralized, widening of the profit field and the invasion of new players, and a general lack of social control that comes (mostly undiscussed) with decentralized renewables.
Had many of the utilities not swept windpower aside, they would have already been the controlling players of the industry, instead of as currently fighting for position. Though it's impossible to prove, one must suspect that the major oil players suffer from the same myopic disease. They have been involved with renewable projects for at least a decade, at least haltingly, and have been on the fringes of the industry for far longer.
So they already know the true value of renewables, and that they are not going full force forward shows their underlying unwillingness to drive the train.
In the specific case of BP, they have had a poor marriage with windpower, as they have chosen Clipper Windpower as their major investment. I know personally how closely they are following the technical development of the company, the turbines and the projects. This can not be a good experience for them.
But they are a significant enough player to have had detailed discussions with many of the other majors, and are well aware that the Clipper experience is not typical of the rest of the industry.
I say they are compromised when they are involved in renewables, and it shouldn't take a genius to figure out why. I know of decisions they could have made for significant advancement of the industry, and they chose to withhold.
It will not be the oil majors who lead us to a renewably powered civilization. Skennah Kowa
BP has never been a player
Total has ignored the market, as have the Americans.
The Europeans seem to be looking more seriously at solar, and some at second generation biofuels, but altogether the effort seems puny. In the long run, we're all dead. John Maynard Keynes
At least Total is going into nuclear energy. Peak oil is not an energy crisis. It is a liquid fuel crisis.
I think Jerome had it right above with the "Areva sells carbon-free energy". That's what all these companies have in common Also, they are used to high capital investments and low running costs, as opposed to the low(er) capital investment and high(er, from fuel) running costs of the other companies. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
this is like whoring out family members, or selling children into slavery while sitting on a goldmine in your backyard.
going for darwin award... The person who says it cannot be done should not interrupt the person doing it. Chinese Proverb.
Suppose I think the price is going to go up because the U.S. is going to invade Iran and set the Middle East on fire. So I buy oil futures for 12 month delivery, say, and so do all my buddies. So the price of those futures goes way up, which eventually finds its way back to the 6 month futures and then the 1 month and then the current pricing.
But one of these days I'm going to have to either take delivery of that oil or sell the contracts to somebody else. So there is risk in my plan, and somebody is holding the risk. Given the way bankers operate I doubt if it's them, so who is it?
Who is providing the gigantic amount of money that is supporting the purported speculators?
In all likelihood, BP and Goldman Sachs - who have been joined at the hip these last 10 years and have made an inordinate amount of their profits from energy markets - are central to this, so Hayward's comments are ironic.
The bottom line is that two thirds of global oil is priced against Brent Crude Oil. But not against the ICE Futures (formerly IPE) Brent contract, which is "cash settled" and therefore not deliverable at all.
The actual market price/ benchmark is that of "Dated" Brent, which is the market price - as assessed by Platts - of actual "spot" cargoes of North sea oil.
There are increasingly few of these cargoes, and I believe that it is not beyond the bounds of possibility that traders like BP and Goldman Sachs - acting opaquely in concert on the ICE platform they own and control - could not keep the price levels of Brent artificially high using forward "15 day" Brent contracts and CFD's (contracts for difference) as leverage, and buying up whatever level of stocks are necessary to keep the price up.
This is especially so if the market perception is that the price should be at those levels - and Goldman has been assiduous in its forecasting of "spikes" and ever increasing prices.
The US West Texas Intermediate ("WTI") contract on the other hand - which affects the US more directly - is of course deliverable, and there is a massive regulatory furore about the fact that while there are speculative limits on the number of NYMEX WTI contracts, the trading in London on the ICEFutures platform - which now accounts for 30% of WTI trading, has no speculative limits.
Personally I think that focusing on this is irrelevant. In fact we recently saw how speculators had swung to net short positions and then got "burnt" by a rapid rise in price.
The bottom line is that upon the expiry of deliverable contracts the futures price converges on the physical price and NOT vice versa. So the only way to manipulate the WTI market is to hoover up the storage and pipeline capacity and play games with forward contracts.
In other words, I think that speculation on futures markets has nothing to do with the market price and gyrations: the skulduggery is going on among the players who trade and control the physical market.
So I smile when I read BP's Hayward advocating market solutions, when IMHO BP has been busily "acceptably" (it must be "acceptable" because unacceptable manipulation is a felony) manipulating global oil markets generally, in all probability in cahoots with Goldman Sachs.
But the whole talk of speculation, in general, smacks of a desperate attempt to blame some nasty intervention by evil players for oil prices (which would otherwise be 'normal' and all could go on as before) rather than fundamental changes that will require us to actually change our behavior significantly. In the long run, we're all dead. John Maynard Keynes
I think the kind of structural speculation Chris is describing is much more likely.
Don't forget that gas prices miraculously dropped in the run up to the 2004 election, and started picking up soon after. So I think we can take market manipulation for granted. And given that prices are partly based on futures, it has to be entrenched and systemic manipulation.
So if the 'physical price' - which is an odd concept - is being set deliberately by systemic manipulation, it becomes an input and not an output variable. Prices will stay high because the monopolists want them to, and 'physical price' becomes an irrelevance.
When the casual speculators are getting burned for underestimating the price, it's unlikely their kind of speculation is important.
I'm agnostic about what types of speculation are driving things, but lets not pretend that this is all just about simple demand and supply.
lets not pretend that this is all just about simple demand and supply.
On whose side should the burden of proof be? In the long run, we're all dead. John Maynard Keynes
On the other hand, Jerome rightly points out that on more than one occasion a rally has been caused by speculators rushing out of big bets that the price will go down. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
This is definitely not what is happening with oil and commodities. In the long run, we're all dead. John Maynard Keynes
There is a big element of denial here in the attempt to blame "speculators".
Clearly we are seeing a "phase transition" here - and accompanying turbulence - in a move from a structurally over-supplied "buyers' market" to a structurally under-supplied "sellers market".
But don't forget that while the sell side have an interest in higher prices, and the buy side in lower prices, the trading intermediaries make more money from high prices (assuming constant margins) and also have an interest in market volatility (where they profit at the expense of hedgers).
So I think the tendency will in future always be towards excessively high prices, with occasional lurches back to the "reality" of the "true" market clearing price whatever that is.And never ending excessive volatility of course.
We need to entirely reconfigure - and dis-intermediate - global markets, and such dis-intermediation is a logical consequence of the Internet in any case.
This would mean a transition - which is already visible - of oil companies to service provision.
It would also mean a market architecture where speculators and intermediaries are structurally unable to participate in physical market price formation.
I believe that this is possible too, and it would involve a market where "deficit-based" time constrained (ie dated) futures contracts are superseded by new forms of (undated) "asset-based" security.
