Sunday, May 25, 2008

Peak Oil

With the focus on the global warming being the big thing in the news, many people might not have heard the term "peak oil."

I have been watching this and trying to decide if I should be worried.
life after the oil crash is clearly an alarmist site but there is a lot of factual information there. One can discount it but one might want to make sure they at least keep an eye on it once in a while.

Here is what worries me.

-Fact is there is a finite amount of oil in the ground...unless the abiogenic oil theory of oil is true--unlikely but possible.

-Oil demand is growing due to India and especially China ramping up demand. People want cars here and there are a lot of people in both places experiencing more prosperity.

-Peak oil theory says we might have or will soon peak in the production, which means after the peak, it's being depleted faster than it's discovered. Prices are expected to skyrocket.

-Prices of oil ARE skyrocketing. There is debate as to why but if the market is correct, it might be a good indicator that peak oil has hit. People say speculation but maybe it's a foreseen speculation. The bubble might pop but then bulge right up again.

-I ride my bike to work, saving about a gallon of gas per day, but oil affects everything, so I can't just do my part and not drive to work. Energy prices effect all other prices.

-Senator McCain made a slip recently that we were in Iraq for oil. But this follows a game theory scenario that requires us as a oil dependent country to position ourselves to control oil, once peak has passed and the situation is critical. A conspiracist theory for sure, but it's also a game theory solution and game theory is a very valid field of mathematics.

-Progressive countries like Sweden are shooting to be oil free.

On the other hand, if you inflation adjust gas prices to those in the past, the price now is around the same price as in 1982. Thus, there might be some factor that is causing this that will go away. At the time is was the Iran-Iraq war. Prices might finally be catching up to what they should be. Maybe we were just getting a huge break for the past 20 years.

The question I ask myself is whether I should worry and act somehow or ignore this behavior as overreactions by the world? Say all this hype is true, and gasoline will be $10 a gallon in 5 years. What will happen? In Holland, the price in US dollars including the weakness versus the Euro is about $12 a gallon.