John Mauldin commented that he was a believer in peak, cheap oil. I think he meant that there is a point at which other energy sources will become better alternatives to oil. Other than aircraft, I can’t hink of any machine that is dependent on liquid fuel. Everything else can run on gas or electricity generated by whatever means. The stone age did not end because they ran out of stones - bronze replaced stone implements. If motor vehicles move en masse to gas or electricity over the next decade or so then the demand for oil based hydrocarbons will surely decline. I think we will see an oil price decline to the $20-30 price region within the next few years from an ElliottWave chart analysis point of view. I don’t think there is much utility in the peak anything concept. I think there is far more value in looking at the energy in / energy out equation done in an honest accounting fashion so that all externalities are accounted for as well.
Doug,
Mauldin is right to a degree. We are running out of cheap oil, but that, also, means we are running out of easy to get to oil. Aren’t they going to have to drill down around seven miles in Brazil? It’s back to EROEI. We are loosing around 3m b/d per year to depletion while I have read with best efforts, and a lot of money, oil sands may finally get to 3m b/d in at least a decade. There are other projects coming online but will take time that we don’t have and will be low EROEI projects. I loved it when Mauldin, basically, said, "Drill baby drill." He is of that mindset. They just don’t understand EROEI and the other aspects of drilling…
From the things I’ve read about shale oil those wells deplete very quickly and you have to keep drilling at a rapid rate. Back to EROEI. The Alaska pipeline will have to be shut down soon becasue they don’t have enough oil going through it to pump. I’m not sure of the timing, but it’s all part of the big complicated picture of depletion.
How expensive oil can an economy run on and grow? I don’t think above $100 to maybe $150 if you conserve from what I have observed so far.
Cheers,
Ernest
Right on Ernest, and after EROEI comes Global Warming. None of the financial writers talk about it but the scientific reports steadily worsen. To get the full picture read "Limits to Growth, The Thirty Year Update" by Meadows,Randers, and Meadows.Best, Walt
…we have to do the math. OK, the US has 250 million internal combustion engines on the road today. We sell maybe 11 million cars a year. To convert the fleet then, that incidentally uses 70% of all the oil we refine we would first have to only sell electric cars (try getting an uninformed public to buy into this idea, Additionally no infrastructure yet after you leave home). That means it would take roughly thirteen years just to cut by 50% the oil usage. Plus electric cars that are not scaled up costs more to purchase. In addition, you have a car/truck that may already be paid off. So adding a new payment to an already strained budget gives pause to what you would like to do, to what makes economic sense. In addition, building out a new car takes a tremendous amount of oil from shipping raw materials, making parts, tires, etc…The car you own requires nothing more than to just fill it up, A new car expends a great deal in barrels of oil to build and ship. To finish this, I would argue that Oil in 13 years would be so much higher than today. Maybe 20% (plus) because of the depletion rate that is estimated at 5 to 7%. I just don’t think we get there. Prudently, we should look at mass transit, and leave the cost of Oil to the very rich because their the ones who will be able afford it. I really could go much further with this but I hope you have some perspective on the complexity of this issue with this example. It’s daunting, it really is. Two books I recommend, "The Impending World Energy Mess" by Hirsch, and "Why Your World is about to get A Whole Lot Smaller", by Jeff Rubin. Anything ever written by Matt Simmons is always a good read. Then re-visit the crash course. Respectfully Bob
I agree with you completely and the comments following your post. I have been receiving John Mauldin’s newsletter for a couple of years now and I find he has an interesting take on the state of affairs from an economic perspective, but he completely misses the physical world as someone else mentioned in these posts. Economists and analysts rarely put all the pieces together.
Which is one of the reasons the CC is so remarkable.
The <a href="http://eurorate.org/">Euro Rate</a> is not just the same thing as the former European Currency Unit
(or "ECU"), which used to be listed in our services as "XEU".The ECU was
a theoretical "basket" of currencies rather than a currency in and of
itself, and no "ECU" bank notes or coins ever existed. At any rate, the
ECU has been replaced by the Euro, which is a bona fide currency.
US energy independence in 4-5 years? Say wha? Right…punching more holes in the ground…right…He’s as right as right all right! I like Newt? WTF does that have to do with this topic? Oh right…rights are in bed with big oil…i forogt. RIght…
This guy has a bad case of normalcy bias and has no clue about macro as it applies to the other two E’s. Interestingly, there are so many people that have great insights into the Economy but either haven’t a clue or haven’t connected the dots with the other E’s which BTW, completely dwarf the economy in terms of impact on modern civ as we now know it.
I find it disturbing that Mauldin referred to "Richard" Fisher in the podcast, when he spent so much time discussing the real IRVING Fisher in his book. It makes me wonder if its his co-author that is the real thinker and he has not read Fisher or Minsky or Keen.
Its more disturbing that this site would "correct" his faux pas by publishing an inaccurate transcript with the name "Irving" superimposed instead of Mauldin’s obvious "Richard" on the recording.
I know Mauldin is a big marketer and identifies himself more as an "entrepeneur" than a thinker. But let’s call a spade a spade if he can’t get his names right.
Where do you guys (the purveyors of this website) stand on that? Are you more entrepreneurs and marketers or thinkers? I suggest integrity is the best policy and "fixing" oral statements by rewriting transcripts is the exact opposite of living in truth.
That’s what Congress does, for goodness sake!
We made the fix because it was obvious from the context that he intended to refer to "Irving" Fisher, but made an honest verbal mistake. Our hope was that by making the fix, we would reduce confusion for those reading the transcript (it’s much harder to ‘fix’ the audio after it’s been recorded!)
Every once in a very rare while, we will make similar corrections to transcripts when we deem it will materially improve comprehension and/or reduce confusion without violating the integrity of the point the speaker is making.
If folks here have a problem with that or have a preferred treatment they’d like us to use when doing this, we’re all ears.
We are living in Germany,and we hope to move back to the US for reasons regarding my boys’ educations (we were a homeschool family before and that is a better fit for us,) and our aging parents. However, I find endless irony in the fact that I am living in Germany and am fearful to be in the US because of the police state it has become - and is becoming more so. I mean really, one could just call it a military dictatorship at this point. Isn’t that what it is when the "leadership" can use the military against the people? Things aren’t great anywhere, but Germany is still the strongest western economy, and I feel like we’ll be stepping onto a sinking ship. The evidence is so overwhelming now, that you pretty much have to believe in David Icke’s shape-shifting lizard people for anyone to call you a conspiracy theorist wacko these days. I had heard about the FEMA detention camps many years ago. Infact, I was beginning to think it was a bunch of hogwash because nothing ever came of it. But now, in just a few short months we’ve made it illegal to assassinate US citizens and to "disappear" them? You are right, things are happening really fast now.