By guest author, Colin Campbell
Soaring oil prices have struck the world leading to food riots and industrial disputes in many countries. There have been far reaching consequences including a collapse in property values, the devaluation of the dollar and financial turmoil.
There have been oil price shocks before. The First Oil Shock came in 1974 when certain Arab countries restricted exports to the United States and other countries as a political gesture related to tensions with Israel. The second followed in 1980 being prompted by panic buying on the fall of the Shah of Iran. At first, people tended to assume that the current crisis likewise sprang for political circumstances in the Middle East, but now there is a growing awareness that much deeper issues are at stake.
Oil and gas were formed in the geological past under well understood processes, which means that they are finite resources subject to depletion. They also have to be found before they can be produced. The world has now been searched from end to end over the past 150 years by an industry always dedicated to finding the biggest and best prospects. The more prospective areas and the larger fields within them were found first for obvious reasons. It should be no surprise therefore that the peak of discovery in the 1960s now delivers a corresponding peak of production. The world started using more than it found in 1981 and the gap has widened since.
All of this would be self-evident if valid data were in the public domain. But as it is, the skills of a detective are called for to collect the evidence. The first step is to define what to measure: some categories of oil are cheap, easy and fast to produce; while others are the precise opposite. No great technical challenges are faced in estimating the size of an oilfield early in its life, but the reporting of its size was substantially a political act. The oil companies tended to report cautiously, being governed by strict stock exchange rules, whereas some of the OPEC countries announced huge implausible reserve increases in the 1980s, when they were competing for quota based on reserves.
Piecing it all together indicates that the world is about half way through the oil age. The first half was marked by the rapid expansion of just about everything, including agriculture which allowed the population to increase six-fold in parallel with oil. Its production today is equivalent in energy terms to 22 billion slaves working round the clock.
The second half, which now dawns, will be marked by the decline of this critical energy supply and all that depends on it. Petroleum Man will be extinct this century, but homo sapiens, if he is as wise as his name implies, can gradually find ways to adapt to the changed circumstances. It might indeed be a better world allowing him to be in greater equilibrium with himself, his neighbours and the environment within which Nature has ordained him to live, but the transition threatens to be a time of great economic, political and geopolitical tension.
Colin Campbell is the founder of the The Association for the Study of Peak Oil and Gas (Aspo)
Bull Crap. Oil prices is up because of speculation. They need to pick the speculators up by their head and throw their stupid ass out the window and tell them no more speculation on a commodity that the world depends on. If they don't stop shoot them in the head.
Joe Blow
Posted by: Joe Blow | Wednesday, 02 July 2008 at 06:23 PM
Joe seems pretty smart. Let's listen to him.
Posted by: Bob | Wednesday, 02 July 2008 at 07:12 PM
"Bull Crap. Oil prices is up because of speculation."
How many speculators are betting that the price will fall?
A large part of the increase is in the falling of the value of the dollar. but also when was the last massive oil find? What major producer can put more oil onto the market? I don't know of any as almost all the main wells are mature. And even if a new field was discovered tomorrow how long do you think it would take for them to get it out of the ground? It took about 10 years for the north sea.
Posted by: Steve | Wednesday, 02 July 2008 at 07:13 PM
Don't we get most our extra oil needs from Canada and Mexico? Did they join Opec too??? duh make up a better
excuse please these old ones are pretty silly
Posted by: stan | Wednesday, 02 July 2008 at 07:22 PM
OPEC says no higher demand in oil world wide, oil prices are from speculation
::cough:: Enron ::cough
mark-to-market
Posted by: Wing | Wednesday, 02 July 2008 at 08:01 PM
The price of the dollar has fallen, because the price of gas has cost everything to cost more. Companies lay off, people can't buy products because no no money from no job. no products being bought so companies aren't hiring. People have no money from no jobs.... over and over, very vicious cycle when you obviously take the energy out of the economic circle.
Posted by: Wing | Wednesday, 02 July 2008 at 08:04 PM
It is quite logical that the world will run out of oil someday. Peak oil seems to be upon us. Luckily there's a lot of coal still left underground. We can make fuel from that like South Africa's SASOL is making it for years now. That will give us some time to adapt to renewable energy and hopefully, birth control.
Posted by: Pieter Theron | Wednesday, 02 July 2008 at 08:08 PM
"throw their stupid ass out the window"
How could you know they keep an unintelligent donkey? I say "arse" to your theory.
Posted by: Gareth | Wednesday, 02 July 2008 at 08:39 PM
The reason why people aren't and will not buy this BS is that something like this should take place over years and years of time. Not happen basically overnight. Gradually raise the price if these excuses are true, don't hit us with this right smack in our faces. People aren't going to be able to survive. I totally disagree with their excuses because there were times WHEN OIL DROPPED IN PRICE BUT WE "NEVER" SAW IT AT THE PUMP!!!!!! EXPLAIN THAT OIL PEOPLE!!!!!
Posted by: H.A.V | Wednesday, 02 July 2008 at 08:39 PM
YOUR GREED WILL END THIS WORLD!!!!!!!!!!!!!!
Posted by: H.A.V. | Wednesday, 02 July 2008 at 08:43 PM
ok guys, no one can really tell whats going to happen, because of the falling dollar, the price of gas going up, sub prime crisis, if all of this continues and oil continues to spike, were in for a depression that will make the 30's look like paradise
Posted by: A.M. | Wednesday, 02 July 2008 at 08:59 PM
Dear Mom
My job at the Commodities Exchange here in America is going wonderfully. I have made lots of money here for Uncle Abdul. I have learned much from these speculators here in America. They taught me how to make tons of money. You see my friends here in America want to buy all of Uncle Abdul’s crude oil. They only pay 35 dollars for a barrel of oil. You know It cost Uncle Abdul 10 dollars to ship it to them and he wants that new house in Dubai so I will do aleverything I can to help him out of course. I found out that I can buy 80 barrels for 5% of cost. That's less than 2 dollars a barrel on the commodities exchange. He doesn’t even have to pump it out of the ground or ship it. They buy it with guaranteed pension and insurance funds so uncle Abdul’s money is not in danger. There is no risk at all. And when I buy it's so easy to hide. You see they are without transparency so I can buy and sell barrels of oil raising the price each time and know one knows its me. It gets better Mom, you see these purchases are called contracts and I get paid for each one of these contracts . This is such a great scheme.. Sometimes I buy and sell barrels as many as 50 times before Uncle Abdull’s ever gives one barrel to the oil company. I have to go now. I will write later Mom.
Buy now!
Osamabalah
Posted by: MOM | Wednesday, 02 July 2008 at 09:12 PM
Blame the fools who elected (twice!)the biggest idiot the world ever produced, who was first and foremost a puppet of the American oil crowd. Then add in his rear end lickers: Blair, Howard et al. Of course I won't mention the war on you know what, someone has to pay for that too.
Posted by: Declan | Wednesday, 02 July 2008 at 09:29 PM
joe blow and H.A.V, you are partly right i think- oil price is up in part because of fear and speculation, however no-one can deny that it is a finite resource. At the point that supply cannot meet demand at any time, the price will rise sharply as a result of market forces, as with anything. With oil the trouble is demand is always increasing, supply WILL decrease at some point as resources become more scarce. Whether or not we are reaching that nobody really knows, but if we aren't yet- we will. Believe it
Posted by: steve | Wednesday, 02 July 2008 at 09:35 PM
Steve, your right!!!!!! Me and everybody I know are just rushing out to buy gas, oil and whatever else has to do with oil. Come on, I personally have cut back my oil consumption by almost half and I know for a fact a lot more people are doing the same but NOTHING is going to work until the GREEDY are gone and that will never happen. Where are all of those GREEDY A-holes going to go and enjoy their GREED. They seem to come up with A NEW EXCUSE everytime now. What's next? We need to raise the price because "WE THINK" not "WE KNOW" this is going to happen. Anybody could say "WE THINK"= SPECULATION!!!!!!
Posted by: H.A.V. | Wednesday, 02 July 2008 at 10:38 PM
Personally I couldn't care whats pushing the price up, whether geological realities, speculators, political issues, jet-propelled cats, or whatever other reason someone else pulls out of their arse to make it seem like they are the victims for driving a car the size of a freight container, farting out enough crap to suffocate a household pet and running over pretty little flowers and birds and children; the bottom line is, oil is done. Over. Obsolete. Fin. Please can we slap the people holding the world back in the face and pull ourselves out of the most wasteful, polluting, selfish, unenlightened, poorly planned out ages in all of the history of humanity? Me saying this on an internet comment page won't get anything done, but maybe 6 billion people screaming it into the ears of the world's political and business leaders will.
Posted by: Ross | Wednesday, 02 July 2008 at 11:01 PM
George W Bush called the tune when he invaded Iraq.
Now we all have to pay the piper.
Posted by: Frankie | Wednesday, 02 July 2008 at 11:06 PM
did they not discover a trillion barrels of oil in colorado? the united states has more oil than the entire worlds reserves combined. i dont think that we really have to worry about running out very soon. there will always be an oil industry because without it we wouldnt have plastic. plastic is almost as necessary to our daily lives as oil is. renewable energy is coming to the forefront more and more, so oil energy will start to be phased out in the next couple decades. it might take a century or more to make the switch completely to renewable energy, so while the price of oil slowly climbs to $500 why dont you all get on the speculation bandwagon and buy some contracts and make some money before the whole shit house goes up in flames
Posted by: ricky bobby | Wednesday, 02 July 2008 at 11:07 PM
"The reason why people aren't and will not buy this BS is that something like this should take place over years and years of time. Not happen basically overnight."
The speculators are indeed responsible. In the beginning, the speculators didn't believe what Colin Campbell has been saying. So in 1999, oil was below $15/barrel. But gradually, demand continued to increase, and supply only inched up a bit. As the price began to inch up with it, thru' $30, $40, $50, $60, $70, the speculators started to believe that maybe this 'Peak Oil' theory was right, and Peak was, if not on us, just round the corner. As more and more 'speculators' began to believe in PO, so the price really started to rocket. (Now remember, the 'speculators' include your own pension fund managers. The pensions of tomorrow may be paid from the increasing value of oil.) Actually the early Peak Oilers thought that prices would start to go crazy in 2007, so they were a year out.
I think we're now in an era where we're moving from a price of oil based on cost of its extraction, to one based on its value to the end-user. Some of us might reckon that it's sensible to keep a little oil back today to provide for our own children (and their children , and so on). Translated into economics, that would mean the price of oil would continue to rise until a drastic cut in consumption occurred. So far, no drastic cuts have occurred, only a slowing of growth, which must in my estimation move to to a steady reduction in the coming years.
How we cope with that is up to us all! Some scientific breakthrough in the understanding of the nature of energy will undoubtedly occur within the next 100 years, when our mastery of the universe will increase spectacularly. But exactly when that might occur, no-one knows.
Posted by: Stephen Lawrence, Cambridge | Wednesday, 02 July 2008 at 11:26 PM
Joe Blow you are an idiot.
Posted by: The voice of Reason | Thursday, 03 July 2008 at 12:11 AM
Seems to me that the root cause is people are having too many kids. More kids, more mouths, more driving lessons, more consumption, then more kids of their own. Kids are expensive to the parents and the planet's resources. China realised it but didn't use the best methods to control it. Maybe everyone should be "reversibly" sterilised at birth and only have it reversed when we've paid enough tax. Harsh, I agree. Feel free to offer better methods...
Posted by: Vitchling | Thursday, 03 July 2008 at 08:22 AM
"WHEN OIL DROPPED IN PRICE BUT WE "NEVER" SAW IT AT THE PUMP". Erm, so you're saying that gasoline always cost $4 a barrel? If the answer is no, then gasoline used to be cheaper, back when oil was cheaper. Try thinking before you post.
If you think this is all due to speculation, you are fools. Wake up. Read a book. You might notice that there are a couple of very big countries that are getting rich very quickly, and using large quantities of oil. Meanwhile, reserves are not being replaced at the same rate, and the new oil is often much more expensive to extract, because it's in deeper waters, or trapped in sand.
Posted by: David Pritchard | Thursday, 03 July 2008 at 09:41 AM
I cannot believe the parochial idiocy of some of these people. Isn't the "Indie" meant to be a quality paper?
Yes, there is speculation but it is based on rising economic demand in the face of inelastic supply. Some of the inelastic supply is due to producing countries not wanting to empty their oilfields too quickly since that oil is their future income. They, like the speculators, know that the price is going to stay up.
In any case, other - more sensible - posters have pointed out how long it takes to ramp up oil production.
What has happened is that China, India and many other countries are using oil at a rate similar to US and Europe. Consumption has gone up dramatically.
Whoever "H.A.V." is must be a very greedy man since that is all he can see around him. He claims he has cut his oil consumption - so what - three billion people in Asia, Africa and Latin America are doing the opposite.
Posted by: Erik Pattison | Thursday, 03 July 2008 at 10:13 AM
Quite right, Erik. We might expect more from the readers of this newspaper (but probably shouldn't).
Another factor we haven't mentioned is resource nationalism. Many countries with big reserves, like Russia and Venezuela, are pursuing self-defeating nationalist policies which discourage investment and thus crimp output. Venezuela's output has almost certainly fallen in recent years (although the government, with zero credibility, claims otherwise). Iran is subject to sanctions. Iraq has barely reached pre-war output levels. Nigeria is a mess. We should remember that it takes a lot of investment just to maintain output, let alone increase it. I doubt that countries like Venezuela are consciously choking off their production, it's mostly the consequence of stupid policies.
Posted by: David Pritchard | Thursday, 03 July 2008 at 10:48 AM
Err... To Joe and any others out there.
I am afraid Dr Campbell is absoloutley correct in his analysis. We are fast approaching global peak oil and have quite possibly already passed peak light sweet oil.
Google these sites for more information:
The Oil Drum
ASPO
Energy Bulletin
Believe it / Dont Believe it - I no longer care -its now down to you
But if I were you, I would fill my loft with dried foods and rice
While you still can
Posted by: Mike Core, Geologist, Aberdeen | Thursday, 03 July 2008 at 11:03 AM
30 years ago a Frenchman named Francois Cornish developed a hydrogen-powered car at the International Energy Commission. The fact that we are still '10 years away from production' sums up the reason why the West in particular has been so hard hit by the rise in oil price. Laziness, stupidity, apathy and of course, vested interests have all served to prevent the development of viable alternative energy sources to oil. This car, apparently generated it's Hydrogen from Seawater, thus effectively removing a nice little earner in the form of taxation from the various Governments. Until we let loose the creative abilities of Man without restraint, we will forever be shackled to those among us who only see monetary gain in everything.
Posted by: Mike Randall | Thursday, 03 July 2008 at 11:13 AM
"we will forever be shackled to those among us who only see monetary gain in everything".
Well, dream on if you think that's going to change. "Those among us" are called, in general parlance, human beings, and are not known for sacrificing personal advantage for altruistic motives.
The good news is, the high oil price is exactly the spur needed to get alternative energy sources and efficiency back in vogue. That is just what has happened in the last few years. It is precisely the urge for "monetary gain" (or the urge to limit losses) that is driving companies and consumers to look for alternatives to oil, and to cut consumption. I am personally happy to see oil prices rising, because it is the only way to maintain this momentum. A self-interested response to market signals, not altruism, will ultimately solve this problem.
Posted by: David Pritchard | Thursday, 03 July 2008 at 11:45 AM
Hummers and SUVs = threat not only to cyclists and small efficient cars, but are now a big threat to the economy, national security, world food supply, global climate and environment.
Tax the gas-guzzlers off the road and put the money into public transport and tax-breaks on electric vehicles.
Posted by: ruckrover | Thursday, 03 July 2008 at 01:40 PM
People like Joe Blow will make the next three years very interesting as we are forced to move to a low carbon economy here in the UK. (max carrying capacity 30 million people)If they don't stop shoot them in the head.he says. Very helpful NOT
Can he imagine how many speculators it would need to raise the oil price to 144$/barrel? We use over 1000 barrels/second worldwide. Look at the cars on the road and the amount of money spent. Speculators can benefit from that, but they can,t affect it
Posted by: Pete Teasdale | Thursday, 03 July 2008 at 01:54 PM
I'm not paying the piper. I never asked for that tune! Oh and by the way Max mosley is getting his house done up.. well I think so.. I heard he already paid £20,000 for DE basemant
Posted by: Ron | Thursday, 03 July 2008 at 02:30 PM
Frankie's mumblings about Iraq have nothing to do with this topic whatsoever. Some people seem to imagine that putting "Iraq" and "oil" in the same sentence makes them clever.
Iraq is almost totally irrelevant to rising prices, because its production is now more or less at prewar levels, no more, no less. Recall that, before the war, Iraq could only sell limited quantities of oil under oil-for-food. Now there is the possibility of increasing production beyond that level, but it hasn't happened yet. The effect on supply, and therefore prices, is zero for the moment. In the future it may contribute to cooling prices somewhat.
So how you blame the Iraq war for high oil prices is a mystery to me. I doubt it will stop people trying, as the frantic search for scapegoats continues.
Posted by: David Pritchard | Thursday, 03 July 2008 at 02:58 PM
Hey David Pitchfork when I said oil dropped at market price WHY DID IT NOT DROP IN PRICE AT THE GAS STATION? VERY SIMPLE QUESTION!!!!!!!!!!!!! Come on mr. smarty pants lets hear what you have to say!!!!!!! Or let me say what they PROBABLY SAID. OIL (SPECULATION TALKIN) IS MORE THAN LIKELY GOING TO GO BACK UP SO WE WON'T CHANGE THE PRICE. WHAT FOR, THEY ARE ALREADY GETTING USE TO BEING GOUGED!!!!!!!!
Posted by: H.A.V. | Thursday, 03 July 2008 at 08:24 PM
Of course oil prices will keep rising, the oil producing countries in Opec have a monopoly and have no interest in investing money in increasing the supply while demand is strong, they are benefiting from the high prices. It is simple economics. They are getting their own back for the way they were exploited by the West from the 30s to the 60s.
Posted by: Chris Norman | Friday, 04 July 2008 at 07:58 AM
Why hasent anyone of you posted any 3rd party link (website etc) its all word of mouth, if your point is correct, send a link (though by hearing news and being a student of economincs-though at early stage i agree with speculators, and doller's decline thing...and the dear mom guy is also correct actually.
Posted by: khaleel | Friday, 04 July 2008 at 09:03 PM
Wow, I expected better discussion here at the Independant. The overwhelming weight of evidence suggests that Dr. Campbell is 100% correct. It's impossible to educate one self on this topic (e.g. become less ignorant) and conclude anything else.
Here are some little factual tidbits to get people thinking:
Question One: What country on planet earth started with the largest endowment of oil? (hint: It's NOT Saudi Arabia!)
Question Two: What does the production graph look like for oil extraction from the North Sea?
Answer to #1: The United States started with more oil than any other country in the world! It's nearly all been burnt now, but its use did make the USA a (soon to be former) superpower. Detail: Saudi Arabia CLAIMS to have far more oil than it ACTUALLY has.
Answer to #2: UK North Sea oil production looks like this:
http://home.entouch.net/dmd/UKoilproduction.gif
Global oil production has roughly the same shape. UK North Sea oil production is well past peak and falling fast. Global oil production is slightly past peak and falling at about 3% per year.
************************************
Finally, I'd like to point out one especially insightful comment. "I think we're now in an era where we're moving from a price of oil based on cost of its extraction, to one based on its value to the end-user." --- YES!!!!!!
This is EXACTLY what happens when one moves from a BUYERS MARKET to a SELLERS MARKET. Which is exactly what happens when supply of a commodity is less than demand. Which is exactly the meaning of peak oil.
Posted by: Bruce Stephenson, aka EnergyScholar | Thursday, 31 July 2008 at 03:36 AM