Topic: [Poll] Oil speculation (Read 1457 times)

I've been meaning to make a blog post to educate all the libertarians in my family, but you guys get to see it first:)  Believing that oil prices will continue to go up is perfectly reasonable for average consumers, because everyone has just experienced a decade of 9% price increases.  In addition, demand is expected to increase by around 1% per year, and we have all seen the ridiculous "peak oil" charts that show a 2% decline in supply per year over the next several decades (the IEA shows increasing supply over the next several decades however).  But the bottom line is that in order to believe that oil will see another decade of 9% oil growth, you have to be ignorant of the radical breakthroughs that have happened in the last 5 years with natural gas and solar.  Here is why competition from these energy sources will cause oil prices to go down, not up:

1) Natural Gas
The supply of natural gas has gone way up due to new extraction techniques and the discovery of new sources while drilling for oil.  In the last few years the price of natural gas has plummeted by 72%.  The US has so much of it now, they are just venting 40% of it off, building export facilities to sell it in liquefied form (LNG) to Europe, building facilities to convert it into oil, and converting the trucking industry to run on it directly.  As this infrastructure is built, demand for oil will take a major hit.
http://www.tradingeconomics.com/commodity/natural-gas

2) Solar
The price of solar has dropped 75% in the last 3 years, making it suddenly financially viable.  In addition, governments around the world have huge tax breaks for solar, resulting in tons of installs even in places like Germany where the sun does not shine optimally.  Solar has grown at an average of 59% since 2001, 110% in the last 3 years, and 193% in 2011.  Keep in mind that one decade of 50% growth means 58 times more solar power. Lots of people don't even realize yet that if they are going to own a house for more than 10 years, they may save money with a solar install, and it will continue to get cheaper.  Right now, solar is only .04% of global energy, but it won't take long to make a dent with these growth rates.

With a largely inelastic supply, even a tiny decrease in demand makes a huge difference in the price.  In 2008 we saw demand decrease by a fraction of 1%, yet the price dropped by 60%.  These two competitors will take large chunks out of the demand for oil, and the price is going to go down.  Both of these factors will only be relevant to the cost of energy until the cost of space launch is lowered enough to put solar panels in orbit.  This is not science-fiction. Space-based solar panels are much more efficient as the sunlight is 5.5 times stronger in space, and the panels always operate at 100% with no night. The power will get beamed to earth in the form of microwaves.  With private space launches happening already, it is very likely that launch costs will be low enough by mid-century to generate most of our electricity from space.

Other reasons why oil isn't going up:

Any increase in the price of oil has a dampening effect on economic growth, decreasing the demand.  It also causes new oil fields to come online that were previously unprofitable, increasing supply.

Conflict between major powers over resources, causing an oil price spike, is unlikely due to the current unprecedented level of US military dominance over the rest of the world.  Both the US Navy and the US Air Force are several times more powerful than the rest of the world's navies and air forces combined.  But with only 4% of the world's population, the US is oriented heavily towards dominating the world's oceans to ensure the flow of international maritime trade, rather than invading and occupying resource rich areas to secure them. (Iraq and Afghanistan are insignificant occupations with <5000 US casualties total)

Electric vehicles shift energy demand from oil onto natural gas and coal, although about 5% of world power generation is from oil.

Innovation is allowing us to mine harder to get oil, but it isn't at the cheap price it once was and it is only getting more expensive. It used to be that oil had a 100 barrel return on every barrel of energy used to get it. Now, we're pushing under 3 barrels energy return on energy invested. This is with mining the most amiable geologic sites for kerogen. The US and Mexico continental shelf only has enough oil in it for 6 years of present day usage, and the demand for oil is only increasing.

Peak oil isn't just the hubert curve. It's when the increases in demand outpace the ability to increase supply. And we are already seeing that effect.

I'd favor bitcoins. Peak oil forecasts have been proven wrong as innovation continues to suck more oil and natural gas from the earth. It now appears fossil fuel production will continue unabated in the near term. I'd favor bitcoin outperforming oil in the next 5 years.

Ive digged in USA-Russian-Chinese diplomatics, every party has a personal interest to avoid war or politcal problems with iran what would result in indeed skyrocketing oil prices.
China has an interest to hold good diplomatics to russia to have a balance to the USA and its allies. Russia wants to keep selling weapons to iran and the USA of course have other problems then going to war right now.
China is very energy hungry and the demand outpaces the supply, they indeed need iranian oil.

I dont know if this is true but i have read on wikipedia that 1/3 of isrealian population is of russian origin (If thats true i find it somewhat ironic russia to sell weapons to iran)

However, as long as israel does not attack iran oil should stay calm.

EDIT:
Then there is this, goldman sachs projecting the usa to become the biggest oil producer by 2020 because of new techniques fro mgas drilling called fracking.
There are also companies interested to get LNG export licenses in the USA, exxon has an LNG import station and as i have read already waiting for a license to rebiuild it for export.

Of course i have no proof for this but these are things i have read in the recent past.

Higher real oil prices create a resistance on itself because at a certain point (presently around 140 a barrel) they cause a severe dampening effect on the economy, which then lowers demand for oil. Because of this, without inflation increasing the nominal price of oil, I'm doubtful that oil could outpace bitcoin.

From my perspective you are parroting US-propaganda. And that you may not even realise it might be interpreted that we are closer to war than you think.

You cannot substitute oil for any other technology we have, perhaps thorium, one day but that's a long shot.
So that 1% figure might start becoming significant once you only consider oil and include the needs I mentioned and others. If you then factor in the increasing difficulty of finding new oil sources (yes I am aware of various a-biotic oil theories) that can become pretty damn significant.

Developments into alternative energy sources are also greatly exaggerated, doing that is the motto of both the US and the EU, but as mentioned that is largely irrelevant for oil consumption.
The only real factor which could negatively influence oil prices are a wide-spread use of electric vehicles. But that won't be for another decade or two, at the very least.

The fact that the oil is located in unstable regions is most of the reason that the US and other first world countries have poured such a huge amount of money into alternative energy development.  It is risky for a nation to be so dependent on this commodity, as the US has faced several embargoes and crises that have been economically detrimental.  So it appears that all the research money is paying off.  Solar will only get cheaper.

According to this, the DoD is only 1% of total US energy consumption, despite being the single largest consumer in the world, so your second point is insignificant, especially relative to the third point, which is quite large, especially after world wars.
http://www.energybulletin.net/stories/2007-05-21/us-military-energy-consumption-facts-and-figures

I don't see what relevance this has though.  The supply of oil is relatively inelastic, so having even a small percentage of the demand get shifted to natural gas or solar will drop the prices a lot.  Unless you are expecting World War 3.  But this seems very unlikely since the US has grown so militarily dominant in the last few decades.  The US Navy is several times more powerful than all other navies in the world combined.  The F-22 stealth fighter can achieve a 27-1 kill ratio vs Chinese aircraft.  etc....

You guys forget one important factor related to Oil Prices. War.

It contributes to higher prices in thee accords: At first it is concentrated in strategic regions where there is oil in the ground. This will create artificial scarcity and drive up prices.
Second all those drones, jets and the whole marine fleet consume an increasing amount of fuel.
Third Oil is an important raw material for war machinery, there is fuel consumed by constructing it and every time an actual hot conflict takes place the destroyed infrastructure needs to be rebuilt.

And finally all of the above makes oil a big target for the pump & dumpers on wall street.

Good points.
So to consider the long term perspective, oil is a limited resource. At some point it will become increasingly difficult to extract it. So there is clearly an incentive to substitute oil by something different. All of this is generally known and accepted now since about one generation, yet still the usual inertia prevented any substantial change. So this is an argument to support rising oil rates: we need the pressure of the market to realise its really happening. Another effect, also working in the direction of higher rates is as follows: assumed we make good progress with converting to other energy sources, then there is less and less incentive to invest in elaborate technology for extracting oil -- the market is slowly drying out, and those still into oil production won't gain much from increasing supply. On the other hand, if humankind does extremely well, oil simply gets superfluous way before the existing ressources are exhausted. Then the oil rates might even remain moderate.

On the other hand, short to mid term, the oil rates are much more related to the global economic activity, and also show some seasonal variation. In some years we migt realise there are also seasonal variations on the BTC rates, maybe even variations related to the rest of the economy? Anyway, for now BTC is clearly just living in its own separate world, where the reward halfing is a groundbreaking event.

loool! I wonder why comments are disabled on that video. ahahahaaaa! funny, thanks for that link, dude.

EDIT: I'm assuming they're using oxyhydrogen (at least in the second link). In the first one everything is very vague.

It seems oxyhydrogen is not water, but a mixture of H2 and O2 (if 2:1 mix, it's also called "Brown's gas"): https://en.wikipedia.org/wiki/Oxyhydrogen

At least the motorcycle-dude doesn't say "it runs on water", but "it runs on water-based fuel". Funny comment on the video stream: "He says it's water based because he doesn't want us to think it's that easy". nnngnghihihih.

Cars can actually run on water, but I have few hopes for any major manufacturer to put that into matter before we are all out of oil. I pressume they calculated a lot and in the end found out that there is not so much money to be made without a combustion motor inside that continouesly brakes and needs spare parts. Also the petrol companies have a vested interest in keeping the world on drip feed. Maybe Wikispeed will pioneer??

JAPANESE WATER POWERED CAR!!
http://www.youtube.com/watch?v=CrxfMz2eDME

A Motorcycle that runs on PURE Water.
http://www.youtube.com/watch?v=POJQKg9CRJc

So if you could bet on a OIL/BTC exchange, you'ld with no matter if it goes up or down ... compared to being on the wrong side of OIL/USD.

Incidentally, you can trade OIL/BTC on ICBIT.se
 - https://icbit.se/CLG3

Speculating on the development of Oil / BTC is interesting, but certainly also risky; since the "official" oil market is mosly rooted in USD, both the BTC/USD and the general market situation are implicitly factored into this rate.

Long term the Oil price is likely to go up, maby even skyrocket. And BTC will go to tha moon, well eventually.  
But the most interesting question is of course what will happen righ now and in the near future, since the global economy isn't running so happily and we're about to face even more difficult times....