European Tribune - Community, Politics & Progress.

BP CEO: oil markets will save us

by Jerome a Paris
Wed Jun 11th, 2008 at 12:02:57 PM EST

The CEO of BP, Tony Hayward, has published on Op-Ed in the FT, with a pretty explicit title: Let the markets solve the energy crisis. But it's also very devious, as his ode to markets allows him to mix reasonable arguments with highly toxic ones, and it's going to be very hard to make the distinction that he is correct on some respects but not in others...

Basically his arguments boil down to 3 points: there is no speculation (prices are justified by fundamentals, markets work fine), renewable energy is not serious (too small, mostly), and there is no peak oil (plenty of reserves around). and of course, his solution is simple: oil majors are ready to invest and let market forces solve the supply problem, but political obstacles prevent them, and governments must therefore help by removing these.

What is true is that speculation is not to blame, and that there are political obstacles to investment today. The rest is not quite so true. And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil).

OK, here's the text in full.

When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.

Ah, "most people." This could be seen as yet another indictment of the common wisdom of the "serious" people (I don't think he includes anybody else amongst "people") that pontificate day in and day out in newspapers, think tanks and industry fora and, somehow, still have more credibility than those that have forecast current events with a lot more success.

Of course, short term movements cannot be predicted easily, but long term trends, especially such momentous ones as the irresistible increase in oil prices over the past 5 years, can and have been announced by many commentators, which have been too easily dismissed.

While it's easy to crow now, a call for accountability of the pundits would still seem to be appropriate.

Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.

You're fucked, and pissed off, but let me tell you how it really is not our fault!

On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.

Yes, let's not mention that OPEC (and a few other) country reserves have not been independently verified for more than 20 years, and that BP uses official national data from these countries without questioning them. Let others quote them as authoritative, and let the lies be repeated and disseminated unquestioned.

(From an earlier Oil Drum story, using BP numbers from 2 years ago)

It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.

While it is welcome to see climate change mentioned, it is more interesting to note that the energy side of the equation is framed in terms of security and not in terms of scarcity. Hawyard will remain within that "safe" frame for the rest of the article.

The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.
Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and - increasingly - the oil-producing nations themselves.

It is only natural that speculation would come near the top of issues touched upon by Hayward, given the cries we hear around the world, and while oil majors are not the main culprits (financiers enjoy that "honor"), they are not far behind. And of course, given that this is an issue where he is on strong ground (speculation is at best a distraction, at worse a scapegoat) he can score some easy points.

But he actually makes a convincing case, in line with what the IEA has stated yesterday (even if it seems to have been spinned very differently in most media outlets):

Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world's lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.
The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.
Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.

His diagnosis here is spot on, and it is very important that it be made by him (and the IEA) rather than only by pesky bloggers, and that it include a number of points that have yet to make it into the "common wisdom":

demand growth is still very strong, and it is not just coming from China, it is also increasingly coming from oil-producing countries themselves;
production is stagnating overall, and declining in a number of regions: OPEC (despite its apparently plentiful reserves, Russia and, more significantly, in regions that "we" control, like the North Sea and the US (no explanation given);
incremental production can only come from "frontier" areas, ie expensive and low EROEI (although Hayward does not touch that concept, of course). There is no sivler bullet or quick fix like Alaska and North Sea were 30 years ago.

But given the tone used, one can guess what the stage is for: the first two bits are in the "not our fault" category (nasty countries closed to us), and the last one is in the "hey look at what we can do" (we're hre to help). And that does not fail:

Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.

which sets the stage for the bigger point:

Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.

The standard "we're not running out of oil, it's just those pesky governments blocking us" argument, ie the claim that this is just a temporary problem that has an easy fix if a few selfish bureaucrats/nationalists could only get out of the way. This is dangerous on two levels:

one is to think that political obstacles are minor, ie that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even US politicians) to open their door or the spigot. This perpetuates the narrative that other countries in the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary; more generally, it dismisses completely the notion that our economies are acutely vulnerable to political events in these places and that, even if oil were plentiful in the long term, such events can create a lot of pain and disrtutpion in the short term that we are not planning for;
it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis - which is quite scary when you think that this is an industry where investment decisions commit us to infrastructure and patterns of activity for many decades.

Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.

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.

Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.

So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased - in the case of oil, for the first time since 1991.

Using the small drops in demand in the US and Europe ignores the fact noted earlier in the article, ie that demand growth is coming mostly from other countries. And it conveniently ignores the fact that the West is the only part of the world where demand could shrink (given that in many parts of the world, especially the big new consumers in Asia and oil-rich countries, energy is subsidized and consumers have yet to feel the prices hikes in full) - and it took a five-fold increase in oil prices to cut demand by a couple percent!

Pointing to a small increase in US production (why not repeat here the note and the similar hike in UK production last year?) suggests that oil production could be increased by significant amounts at home, with investment. but there are effectively no restraints on investment in the areas already opened to production, and as he noted above "the trend is downwards." Opening up new areas like ANWR or offshore for drilling would certainly create a lot of profits for the oil industry in the short term, but would be highly unlikely to reverse the production decline. and the volumes at stake are insignificant on the global scale (total US reserves, including those in all the closed off areas, are currently equal to about one year of world consumption, or 5 years of US consumption).

But pointing that things are moving (or could move) in the right direction on both the demand and supply fronts suggests that, again, the oil crisis is temporary and easily fixable.

The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market's signals. High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.

Huh? High prices are the signal. What more encouragement people need? Either they respond to the signal, or they don't. That's what markets are about, isn't it?

Of course, he wants more. The solution is always more, not less. Never. and somehow wind and solar deserve a line here, despite having been dismissed as irrelevant just a paragraph above. But it's so politically correct to mention them, alongside the things we really care about: more drilling (and more nuclear too).

In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.

No mention, of course, that BP's investments have been going up because its costs have been goign up, rather than because it is exploring or developing more fields. No mention of the fact that, other than the bump from adding TNK production to its own production, BP's output has been declining over the past 5 years. No mention that majors barely control a few per cent of world oil reserves and have becoming increasingly irrelevant, despite the headlines and hate they generate with their huge profits.

And a conclusion that encapsulates the spirit of our times: there is no problem, however momentous, that cannot be resolved with lower taxes (I presume that's what he means by "modernising" tax structures, right?).

After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.

But maybe this is a good thing, because this is certainly not going to slow the relentless rise of oil prices, and its very real consequences on our economies. and maybe, maybe, at that point, our politicians, keen to save their sorry asses, will stop listening to "serious" people and their unctuous, don't-rock-the-boat talk, and will actually go for policies that work.

. Home
. About
. Contact
. New User Guide
. FAQ
. ET Editorial Guidelines
. Search
. Search (Google)

Username:
Password:

. Make a new account
. Reset password

BP CEO: oil markets will save us | 61 comments (61 topical, 0 editorial, 0 hidden)

Re: BP CEO: oil markets will save us (4.00 / 2)

What do you make of the Gazprom guy (Alexei Miller CEO) predicting barrel oil price to go to 250 dollars?

by Asinus Asinum Fricat (pjmandeville@gmail.com) on Wed Jun 11th, 2008 at 01:22:24 PM EST

Heh (4.00 / 2)

You're asking the guy who's rooting for a spike up to $750 per barrel scenario aka the Oslo Warning?

by Nomad on Wed Jun 11th, 2008 at 02:20:28 PM EST
[ Parent ]

Re: Heh (none / 0)

Ha! I remember this post well.

by Asinus Asinum Fricat (pjmandeville@gmail.com) on Wed Jun 11th, 2008 at 03:16:40 PM EST
[ Parent ]

Degree (none / 1)

Jerome:
You are correct, but so is the head of BP. The issue is one of degree. Speculation is the reason for some amount of recent price rise, shortages in production and refining capacity as well, so is rising demand, etc.

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

by rdf (robert.feinman@gmail.com) on Wed Jun 11th, 2008 at 01:53:17 PM EST

Not quite (4.00 / 2)

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

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 03:36:17 PM EST
[ Parent ]

And Further (4.00 / 2)

Many of the 80's windmills are currently seen as "cash cows." Sure they've needed extensive retrofit, but they've been highly profitable to the owners and operators all the same.

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.

And J deconstructs:

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

by Crazy Horse on Wed Jun 11th, 2008 at 05:59:04 PM EST
[ Parent ]

Oil majors (4.00 / 2)

Shell is exiting the wind business in Europe (including offshore, as shows their sale of their stake in the London Array projet recently), but not in the USA.

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

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 06:12:22 PM EST
[ Parent ]

Re: Oil majors (none / 1)

And yet many major, now global utilities are taking heavy stakes in the renewable world.

EdF with all it's EdF-Renewables investments, including the brilliant purchase of enXco.
EdP of Goldman Sachs' Horizon.
Iberdrola's incredible list of purchases
E.on, Scottish and Southern, Vattenfall and a host of others jumping into offshore with significant project investment.

Certainly, the oil majors must have some respect for their colleagues on the utility side, and the decisions they make. Yet they ignore these decisions... unless they know something we don't know. Or unless their skulduggery goes as deep as Chris Cook suspects here.

Skennah Kowa

by Crazy Horse on Thu Jun 12th, 2008 at 01:42:09 AM EST
[ Parent ]

Re: Oil majors (none / 0)

Or maybe because oil and utilites are different lines of business, and the majors want to stay working with their core compentency. Maybe they think there will be more projects after all. Or maybe they are just planning to extraxt maximum value for their shareholders while liquidating themselves.

At least Total is going into nuclear energy.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Thu Jun 12th, 2008 at 03:14:06 AM EST
[ Parent ]

Re: Oil majors (none / 0)

Iberdrola started in Hydropower. EdF nuclear. Scottish and Southers, Vattenfall, also hydropower...

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

by Migeru (migeru at eurotrib dot com) on Thu Jun 12th, 2008 at 03:43:03 AM EST
[ Parent ]

Re: Oil majors (none / 0)

puny is right....last i heard, 0.01 of italy's energy is produced by solar, and 75% of italy's energy is bought from abroad.

this is like whoring out family members, or selling children into slavery while sitting on a goldmine in your backyard.

going for darwin award...

"Two wrongs don't make a right, but three lefts do." Jim Hightower

by melo (melometa4(at)gmail.com) on Thu Jun 12th, 2008 at 03:27:48 AM EST
[ Parent ]

speculation (4.00 / 3)

I keep hearing that "speculation" is a big part of the current oil price, but I don't really understand what that means--other than some mysterious set of evil people out to screw the world.

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?

by asdf on Wed Jun 11th, 2008 at 05:00:14 PM EST
[ Parent ]

Re: speculation (4.00 / 6)

I don't think that it's "speculation" involved but in fact sophisticated market manipulation by a few oil traders and investment banks.

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.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Wed Jun 11th, 2008 at 07:07:04 PM EST
[ Parent ]

Maybe so (4.00 / 3)

you know these markets from the inside, so I'll defer to your knowledge on this, and I'm sure these bigplayers won't hesitate to cut corners to make a quick buck.

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

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 12th, 2008 at 01:51:26 AM EST
[ Parent ]

Re: Maybe so (none / 1)

My problem here is that you seem strongly predisposed to discount the influence of speculation entirely - which isn't what Hayward said, btw - because you don't want it to be having an influence. You want US$135 to be the "real" price.

by Colman (colman at eurotrib.com) on Thu Jun 12th, 2008 at 03:07:15 AM EST
[ Parent ]

Re: Maybe so (4.00 / 2)

When the casual speculators are getting burned for underestimating the price, it's unlikely their kind of speculation is important.

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.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 12th, 2008 at 04:20:25 AM EST
[ Parent ]

Re: Maybe so (none / 0)

When the casual speculators are getting burned for underestimating the price, it's unlikely their kind of speculation is important.

That doesn't mean that they're not pushing up the price, does it?

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.

by Colman (colman at eurotrib.com) on Thu Jun 12th, 2008 at 04:59:12 AM EST
[ Parent ]

Why not? (none / 0)

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

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 12th, 2008 at 02:54:55 PM EST
[ Parent ]

Re: Why not? (none / 0)

Well you're claiming that the financial crowd have suddenly decided not to create a speculative bubble in circumstances where it appears possible to make a profit ...

by Colman (colman at eurotrib.com) on Thu Jun 12th, 2008 at 03:06:28 PM EST
[ Parent ]

Re: Why not? (none / 0)

On the one hand, after a couple of years of a trend, you would expect speculators to create a bubble.

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

by Migeru (migeru at eurotrib dot com) on Thu Jun 12th, 2008 at 03:20:51 PM EST
[ Parent ]

A bubble (none / 1)

is happening when people think the price will go up because it is going up and people buy only because of that - ie the price increase is the core story.

This is definitely not what is happening with oil and commodities.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 12th, 2008 at 04:00:02 PM EST
[ Parent ]

Re: Maybe so (none / 0)

Are they not closing short positions?

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

by Migeru (migeru at eurotrib dot com) on Thu Jun 12th, 2008 at 03:36:32 PM EST
[ Parent ]

Re: Maybe so (none / 1)

I'm with you on that, of course, 100%.

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.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Thu Jun 12th, 2008 at 03:08:19 AM EST
[ Parent ]

Weasel words (none / 1)

The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast.

There is no Peak Oil, just "maturity".

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 02:06:13 PM EST

Maturity (none / 0)

is an undulating plateau.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 03:38:39 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 1)

The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.

Nice sleight of hand, equating light crude from a shallow continental plate with the tar sands.

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 02:26:56 PM EST

Re: BP CEO: oil markets will save us (none / 1)

Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.

At 3% year-on-year growth in consumption, 40 years of oil at current consumption is gone in 27 years, 60 years of gas is gone in 35 years, and 130 years of coal is gone in 54 years. And that's not counting the fact that once oil is gone, gas and coal will have to pick up the slack and so will be depleted faster.

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 02:31:49 PM EST

Re: BP CEO: oil markets will save us (none / 1)

Myth number three is that we can switch quickly to a low-carbon economy.

If we have to switch to a low-carbon economy inside 27 years, we'd better get cracking.

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 02:33:07 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 0)

Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.

And the faster coal comes back the less than 54 years (not 130!) the reserves will last.

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 02:34:31 PM EST
[ Parent ]

A few decades of coal (none / 0)

And all coal reserve numbers have been described as highly suspicious in a number of recent studies which have been discussed here but have not made it into the BP report...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 03:37:29 PM EST
[ Parent ]

Re: A few decades of coal (none / 0)

Actually, the number I remembered is 200 years, so I thought BP was being conservative.

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 04:17:43 PM EST
[ Parent ]

Re: A few decades of coal (none / 1)

200 years is for the USA alone.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 05:47:12 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 1)

European Tribune - BP CEO: oil markets will save us

After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.

Can we have a [Lower Taxes - Clap Louder!] alert?

I got three sentences into this and thought 'So where's the pitch for lower taxes?'

Serious People are nothing if not predictable.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 11th, 2008 at 02:40:41 PM EST

Re: BP CEO: oil markets will save us (none / 0)

What's the clapping about?

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

by Migeru (migeru at eurotrib dot com) on Wed Jun 11th, 2008 at 04:30:56 PM EST
[ Parent ]

This I think (4.00 / 2)

Tinker Bell - Wikipedia, the free encyclopedia

Barrie's fairies are dependent on the belief of others to survive. In one famous scene, she is dying, but will survive if enough people believe in fairies. In the play the characters make a plea to the children watching to sustain her by shouting out "I believe in fairies," and clapping, an example of "breaking the fourth wall."

Wait this is important. Someone is wrong on the Internet.

by generic on Wed Jun 11th, 2008 at 05:40:40 PM EST
[ Parent ]

Now on dKos (none / 1)

http://www.dailykos.com/storyonly/2008/6/11/152214/324/826/534126

Thanks for your support, as always. This one is pretty important, I think.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jun 11th, 2008 at 04:02:45 PM EST

Re: Now on dKos (none / 0)

Fell through the list like a hot knife through butter. If it isn't about Obama/McCain nobody's interersted.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Wed Jun 11th, 2008 at 05:17:04 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (4.00 / 3)

"Renewables, We have not tried yet to make them big. "
This should be obvious.

This may sound silly, but i think the energy market may well work like what happened with tv sets. LCDs and Plasmas were around for a long time, not as a great and cost effective alternative to CRTs.

But, at a certain point, quality/price became good enough and the savings in storage space for retail made them flood the market and phase out CRT's even as these were still the best, when in came to picture quality/price.

This is just to say that if a significant part of the chain has a real interest in a technology, things move a lot faster to promote it.

by Torres on Wed Jun 11th, 2008 at 04:03:12 PM EST

Re: BP CEO: oil markets will save us (4.00 / 6)

Not a good analogy. Plasma are - I'd guess cheaper than CRTs, so the margins are higher, so there's a solid incentive to bring them to market.

Also, the same companies were making CRTs and plasmas.

Energy is very different. The oil people are tight with the political machines, and the sustainables people lack equivalent leverage. This is about two power blocs, not about a technology transition.

It's not a choice the consumer is going to be allowed to make in an open market.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 11th, 2008 at 06:33:37 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 1)

I knew it was silly...

When i thought of it my hopes were mostly deposited on the automotive industry. Some big players (PSA, for one) will have full hybrid ranges in their line-ups, in the next 2 years. A fully electric land transport system (maybe excluding still long range hauling) could be around the corner in the next.. say, ten years, maybe? There certainly is a sense of urgency building up.

That is only 20% or so on total energy needs, transportation, and of course, that energy must still be produced.
But what impact could it have if the common people on their everyday life stopped being direct polluters? Could it mean a sort of entitlement to demand other actors to follow the same high standard?

This is the optimist in me, of course. The realist sees mostly chaos in the foreseeable future.

by Torres on Wed Jun 11th, 2008 at 07:46:22 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (4.00 / 3)

With you on the chaos.

But it hasn't really sunk in yet that this almost entirely a political problem. It's a failure of democracy and open government. Most Western governments have had genuine popular representation replaced by a cynical and compliant corporate statism, and this is the result.

A few years from now it's going to start becoming obvious that distributed regional generation is the only option that can work reliably, and that in spite of contiunuing security spasms, the centralisers will be becoming irrelevant. Regionalisation and the demise of central government may do more to make change possible than any technology.

Unfortunately not all regions will make it, and the ones which don't won't be good places to be.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 11th, 2008 at 09:38:56 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 1)

Will we remember the times when infrastructures and services were quite efficiently provided by the state: roads, energy, communication... This market cult is quite a restricting exercise, as common problems "have" to be solved only throwing money at private contractors. Didn't markets seem to have worked better with a healthy competition from the state ;-]

by das monde on Wed Jun 11th, 2008 at 06:52:26 PM EST

In other news... (4.00 / 2)

BP Plc Chief Executive Officer Tony Hayward is putting money on the line to dispute the theory of peak oil, according to his counterparty in the wager Kjell Aleklett, a professor at Sweden's Uppsala University.
Hayward bet Aleklett the price of one barrel of oil in 2018 that global crude production will be greater than the current daily output of 85.5 million barrels, the professor said during his speech at the Asia Oil and Gas Conference in Kuala Lumpur. Total supply was 86.8 million barrels a day, including natural gas liquids such as propane.
I am upset that the bet is so low, only the price of one barrel of oil, Aleklett said to laughter from the audience at the oil conference in Kuala Lumpur.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=akmFgc4ikBDk

I think Hayward could have afforded betting at least 100 barrels... ;)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Wed Jun 11th, 2008 at 07:22:17 PM EST

Re: BP CEO: oil markets will save us (4.00 / 9)

"Modernising the tax structure". I think Mr Hayward is right. Hear me out.

History tells us:

The dominant wood-fuel companies did not become significant coal suppliers.

The dominant coal suppliers did not become dominant in whale-oil supply.

The dominant whale-oil suppliers did not become the dominant rock oil (petroleum) suppliers.

And so on for other technological transitions: horse/ox/canal transport to rail, vacuum tube to transistor, transistor to integrated circuit, paper mail to email, fixed-line phones to mobile phones ... (Of course, the last two transitions have just started. But I don't want you to think that history all happened in the past. :-) )

The dominant companies in the 'sunset' technology nearly all failed, after lingering on for a few decades. A very few survived as shadows of their former selves. Very, very few ever went on to become significant players in the new technology, or in anything else. This despite massive efforts by some of these companies --firstly to increase production and lower costs in the old technology, and when this had no effect, to transition to the new one.

Conversely, almost none of the eventually-dominant players in the new technology started life in the old one.

The lessons from history are that 1) BP and its ilk will slowly fail, thrashing like dinosaurs trapped in a tar pit, and 2) their replacements will not come from the small fry in the fossil fuel industry.

The question is, what do we do in the mean time, while BP and company are failing? Do we subsidise them to spend ever-increasing sums of money futilely chasing ever-diminishing returns?

Or do we accept the reality of the transition, tax the sunset industry heavily to prevent this wasted "investment", and use the money to ease the pain of the transition for those most at risk - the very poor and the poor?

I vote for "modernising" the tax structure in this way.

by gregvp on Wed Jun 11th, 2008 at 08:20:37 PM EST

Thrashing Dinosaurs (none / 1)

I've always like the image of the majors as dinosaurs thrashing madly as their world dies around them, and used it in speeches from the early 80's onward. But i always extended it to major governmental efforts as well. I agree that they will not be the next generation players, assuming a next generation.

My view has evolved, however. I can give examples of major players who are committing at least partly to a renewable future. We don't need to make a list, because most of these companies probably have ulterior motives.

AREVA comes to mind. They've purchased a majority share of Multibrid, one of the stellar technologies on the offshore wind horizon. (After they were forced to sell their stake in REpower wind, because of a far too aggressive takeover by Tulsi Tanti's cash rich and technology poor Suzlon.) Since their major future business, do you agree J?, would likely be the provision of nuclear plants globally, what are the driving reasons for their investment in offshore wind?

Skennah Kowa

by Crazy Horse on Thu Jun 12th, 2008 at 01:32:03 AM EST
[ Parent ]

Areva (none / 1)

sells "carbon-free" energy. It makes a lot of sense to me, and thankfully to some smart people within that comapny.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 12th, 2008 at 01:48:48 AM EST
[ Parent ]

Re: Areva (none / 0)

Not to mention it's a good branding strategy. No matter how small fraction wind is for Areva, the company can claim not to be a nuclear energy company but a "carbon-free" energy company. Using this sobriquet instead of renewable will in itself increase support for nuclear energy.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Thu Jun 12th, 2008 at 03:13:34 AM EST
[ Parent ]

Re: Areva (none / 1)

That's exactly my point. Windpower needs companies committed to significantly emphasizing the scale-up necessary to make it a major energy source globally. Companies whose prime goal is development of their nuclear components are not the companies who will bring us a sustainable future.

Unless of course, one believes that nuclear power is a part of that mix, which i don't, but that isn't the topic here.

To be clear, i welcome AREVA into a highly risky portion of the windpower biz, with capital, expertise, contacts, and cheaper financing. They have shown to be a very well-managed company, forward-thinking, and competent. But i see them as compromised when it comes to energy strategy.

With all that, given today's reality, i would place my own expertise in service of their windpower program. When i built the first utility-scale project, my partner was the manufacturer of the UK's nuclear plant cooling systems.

Skennah Kowa

by Crazy Horse on Thu Jun 12th, 2008 at 03:36:45 AM EST
[ Parent ]

Re: Areva (4.00 / 2)

As we are talking about Areva, I just have to repost this great ad.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Thu Jun 12th, 2008 at 04:20:55 AM EST
[ Parent ]

Re: BP CEO: oil markets will save us (4.00 / 2)

Very sensible comment. Welcome to European Tribune, gregvp!

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char

by Melanchthon on Thu Jun 12th, 2008 at 04:24:24 AM EST
[ Parent ]

great diary, Jerome (4.00 / 3)

i watched that guy on tv the other day saying how they just needed to invest 22 trillion into the oil business, (presumably for shale), and everything would be hunky dory again.

i think the only reason they're being allowed to reap such obscene profits right now is that it's their last hurrah, governments know it, and late to the party, the public are finally getting it, because the elephant is now not just standing menacingly in the room, it's starting to break the furniture...

the clueless sense of entitlement exhibited by the truckers and fishermen is the front end of a wave of rage that will be so much more dangerous for social stability than it would have been, had there been intelligent planning for this entirely predictable turn of events.

instead of prolonging the agony with subsidies to sunsetting, buggywhip industries, that money could be used to convert the trucks to electric, and ramp up the solar, stirling, wind, tide and biogas as if life depended on it.

the governments have colluded in the artificial rigging of energy markets and monopsonies for decades to fill the pockets of fatcats, and their lobbyist-footsoldiers, creaming cheap soundbites from pious homilies about alt. energy, then going right back to the trough and rooting for the truffles of any kind of power we can keep centralised.

this is a kind of treason on a different, and more cruelly impersonal level and scope than any in human history, seeing as its effects are rampaging through communities worldwide, climate chaos, starvation.

this anger ascendent will need a place to vent, and 'sanitising' a few romany camps and agitating at sports events will not suffice for long.

the weakest link in the chain, ironically, is the police and army security that will inevitably be used to batter and hose the first few hundreds and thousands into submission.

but when other supply lines fail, and people have missed 9 meals, then the myth that we are somehow more privileged and entitled to the world's diminishing resources than the other 4/5ths who have been downwind from our imperio-colonial resource grabbing, election-meddling, dictator-propping, carbon-spewing, human rights-trashing, torture training for a good while now, will crumble like a betty crocker cake in the rain.

no police force can keep down the people for ever, unless we want europe and the usa to become n. korea, or myanmar, and that's the $64,000 question, how far will a society that has fattened itself on myths of cultural and racial superiority allow itself to resort to becoming what it has villainised as part of its oh-so-proud, loud and avowed identity?

when the security forces look at the people and realise there aren't enough stun guns, tanks and gulags, and it's their families at stake as well....

they spent so much energy demonising freethinkers all these years, but it's not ideas that will bring their virtual global versailles crashing down, it's dumbass greed, too much sampling of their own merch, and hosts of pissed off beefy farmers, truckers, navvies, fishermen who've been told all along not to worry, oil would never run out, and it it did, well, c'est la vie, vote in a new government or two, all righteously seeing just their little part of the picture, and figuring that if they just remind the public that life as we've known it is TOTALLY dependent on them, then politicians can wave a magic wand, and they can go back to worrying about which team is going to win the quarter-final.

this combination of delusion and entitlement, grossly, most wittingly and willingly abetted by corruption and collusion at the highest levels, is a force to be reckoned with, a potent brew of rancor and disaffection that will need to spill over somewhere.

spraying crowds with prozak lies, or talking about talks they're going to have when they've finished talking about why they're still just talking, are tactics that have worked well so far, but this time reality is not going to bend to their will, and the people are going to realise en masse that what's running down their collective leg is not rain.

when they fully grok that it didn't have to be that way, and who's been jiving them....

why then, we may have some kind of revolution. the clock is running out for more rational solutions to the perfect storm of consequences stemming from the cupidity and dishonesty of the last hundred years, and our subsequent failure to cushion the fossil fuel supply decline with good policy.

economic apartheid is the final frontier, combatting racism and sexism are way stations.

ultimately, democracy cannot be held back by orwellian media techniques and authoritarian thugs for ever. it's certainly possible in small countries where the people have never known freedom, but to try and put that toothpaste back in the tube here in the foist woild, i will be amazed if they pull it off.

perhaps after we hit bottom, a new race of leaders will emerge, as has happened in south america.

one thing for sure... we're going over the falls, and the current is way too strong to turn back, what's done is done.

interesting times, adapt or migrate...

"Two wrongs don't make a right, but three lefts do." Jim Hightower

by melo (melometa4(at)gmail.com) on Thu Jun 12th, 2008 at 01:30:44 PM EST

Re: great diary, Jerome (none / 1)

Great post, melo.

melo:

then going right back to the trough and rooting for the truffles of any kind of power we can keep centralised.

hits the nail on the head.

The parallel with the obsessive centralised control of the deficit-based monetary system is exact. This control has now, post Peak Credit, been lost

IMHO a "bottom up" solution involving the networked "monetisation" of energy at local level addresses both the need for a stable monetary unit/system and the requirement - superbly presented by techno - for investment running to many trillions of dollars equivalent.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Thu Jun 12th, 2008 at 02:21:20 PM EST
[ Parent ]

Re: great diary, Jerome (none / 0)

ta, chris

you see a bigger picture, knowing the anatomy of all these murky tie-ups with financial services, oil bourses, currencies and sovereign superscams, kudos to how you remind us how it all connects.

bloggin' and blatherin'

"Two wrongs don't make a right, but three lefts do." Jim Hightower

by melo (melometa4(at)gmail.com) on Thu Jun 12th, 2008 at 03:40:10 PM EST
[ Parent ]

Re: BP CEO: oil markets will save us (none / 0)

Ripped from the headlines:

BP Chairman Rebukes Russian Oil Partners

The chairman of the oil giant BP charged that the company's Russian partners were "raiding" their joint venture TNK-BP and that the Russian government was doing nothing to stop them. "This is just a return to the corporate raiding activities that were prevalent in Russia in the 1990s," the chairman, Peter Sutherland, said in an address at a meeting in Stockholm. TNK-BP is jointly controlled by BP and three Russian financiers. One of them, Mikhail Fridman, reacted angrily, saying Mr. Sutherland's speech "was not constructive and is insulting to Russian authorities, to say the least," the official Russian news agency RIA Novosti reported. BP and its Russian partners have clashed repeatedly in recent weeks, and the dispute is seen as a test of conditions for foreign investors in the Russian oil sector.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Jun 13th, 2008 at 08:56:48 AM EST

Re: Enter the ignoramus, Maracatu. (none / 0)

Running the risk that you may have already covered this ground (and I may be wasting your time), I would like to counter this:

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.

...with this:

Be clear that there is no feasible replacement for oil. An end to world reliance on fossil fuel based energy in the form of renewable energy or other alternative energy sources is at best a supplement but more realistically a theoretical fantasy. In most cases, oil is required to develop these alternatives to oil. (17) For example, oil is required in the mining and extraction of the hard rock minerals required to develop solar power. (18) Moreover, recovering "oil" from oil shale also requires the use of crude oil to convert the oil shale into a usable product. (19) Additionally, the promise offered by fuel cells is questionable due to limited global reserves of platinum. (20) Thus, despite efforts to develop alternative energy resources, petroleum remains the world's primary source of energy. (21)

What do you say? Propaganda? Realism? I notice it doesn't mention energy from wind.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne

by maracatu on Fri Jun 13th, 2008 at 04:57:17 PM EST

Re: Enter the ignoramus, Maracatu. (none / 1)

Call it a lack of imagination

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 13th, 2008 at 06:22:16 PM EST
[ Parent ]

Re: Enter the ignoramus, Maracatu. (none / 0)

I think we have to consider the fact that refined hydrocarbon liquid fuels, as with hydrogen, are energy "vectors" which do not occur naturally.

Whether the "best" and most versatile liquid fuel is Gasoline or Dimethyl Ether I'm not chemist enough to know. I do know that that it is possible to use copious amounts of energy to "fix" carbon dioxide and water back into hydrocarbon fuels in a similar way to the "fixing" of ammonium nitrate fertiliser.

I noticed the other day that there is a new process under development that may permit such a recombinant process for hydrocarbon fuels on an industrial scale.

This would effectively put a "ceiling" on the price of fossil fuels, of course.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Fri Jun 13th, 2008 at 07:22:51 PM EST
[ Parent ]

Re: Enter the ignoramus, Maracatu. (none / 0)

ChrisCook, do you have a reference or link for this new process?

Interested in the reference to MeOMe. A certain person on dKos is a big booster. I too can't assess his seemingly convincing arguments. Put the point is, we may not need fossil fuels to power other industries. We just need fuels, and will have to manufacture them, which means there'll be less available. But not necessarily none. We will need to be more selective about what we mine. More titanium, less gold and diamonds perhaps.

by PIGL on Sat Jun 14th, 2008 at 12:05:26 AM EST
[ Parent ]

Re: Enter the ignoramus, Maracatu. (none / 0)

Sorry, I can't.

It was one or more US academics, and it came from a news item on the ET morning news round, as I recall. It all sounded quite reasonable.

A bit of googling should find it...

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Sat Jun 14th, 2008 at 06:47:26 AM EST
[ Parent ]

Re: Enter the ignoramus, Maracatu. (none / 1)

I call it a strawman. No one is saying deploying non-carbon energy (hehehe, who's an Areva shill? ;) ) means we will no use no oil at all.

Sure, mining uses some oil. But it's so little that it doesn't matter. And much of it can be substituted for electricity. Same with oil shale, if we can ever extract oil from it.

Fuel cells I prefer calling "fool cells" because I'm absolutely sure they will never replace the internal combustion engine in transportation, for technical, materials, cost and infrastructure reasons. Batteries on the other hand might very well be the way forward. They are based on lithium which is very abundant.

Oil will be with us for a long time. But it will migrate from broad use into increasingly high value sectors, like agriculture and petrochemicals and to a degree transportation and away from power heating and industry. But to quote Fatih Birol, chief economist of the IEA:

But on the long run it has to be clear: if oil will be gone by 2030, or in 2040 or 2050 does not change much.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Sat Jun 14th, 2008 at 03:37:30 AM EST
[ Parent ]

Re: Enter the ignoramus, Maracatu. (none / 1)

When they say "oil is required" they mean "energy is required". What we should be doing is using the remaining oil to build an alternative energy infrastructure to the extent possible. Doing no development because oil is needed now is suicidal.

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

by Migeru (migeru at eurotrib dot com) on Sat Jun 14th, 2008 at 07:14:02 AM EST
[ Parent ]

BP CEO: oil markets will save us | 61 comments (61 topical, 0 editorial, 0 hidden)

Go to: [ European Tribune Homepage : Top of page : Top of comments ]