[Carlhole]

What $300-a-Barrel Oil Will Mean for You

CHARLES MAXWELL, WHO BEGAN HIS CAREER in the energy business in 1957 working for Mobil Oil, is no stranger to Barron's readers. In an article he penned nearly four years ago, Maxwell predicted that oil prices would move sharply higher by 2010, and then higher still. Maxwell, 76, got the timing and trend right, though his top price of $60 a barrel by 2010 proved far too low. "Oil is unique in that when it begins to disappear, there really aren't any good substitutes, which there are for so many other commodities," Maxwell says. "It's that lack of substitutes that ...

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SeekingAlpha

According to a Monday, September 8 Barron's article titled "What $300-a-Barrel Oil Will Mean for You", Charles (Charlie) Maxwell, Senior Energy Analyst at Weeden & Co., thinks $300 oil is "inevitable."

With three or four new Saudi oil fields coming on line soon, Charlie thinks supply and demand are roughly in balance for the next two years. Charlie predicts oil prices between $75 and $115 for awhile. After that, he sees prices soaring again.

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Natural Gas:

• "Its supply should last another 40 or 50 years before it runs into the same problems of peaking that we have in oil. "
• "Natural gas has a very low carbon footprint, meaning it's a cleaner type of energy, and it has wonderful petrochemical adaptability. "
  
  On Hubbert's Peak:
• "(He) said that we would reach the limit of domestic production of oil in the continental United States in the early 1970s.... and he was correct."
• "He thought the American public would never be stupid enough to fall for the concept of foreigners continuing to give us all the oil that we wanted."
  
  More on $300 oil:
• "We will see $300 a barrel -- or roughly $250 in today's dollars -- because oil supply will be so short. "
• "That ($300 oil) will be in 2015."
• "But even earlier, around 2010, more than 50% of the non-OPEC world will have peaked in its production of oil so the dependence on OPEC will become extreme. That will give OPEC a chance, I'm afraid, to lift prices rather more quickly on us than they are doing today."

[DantesPeak]

Maxwell, a well known and respected energy analyst before some readers here were even born, was a little slow to accept the hard realities of PO. He still is a somewhat behind the PO learning curve, but rapidly getting there.

We are not going to have enough oil, and we are going to have to start a huge switch in which we make do with a number of other fuels that are not so easy to convert to our immediate energy needs, mainly for transportation.

At some point, doesn't it come down to lowering consumption or tapping alternative sources of energy?

Right, and we will probably do both. Ten years ago, 40% of the world's energy was in oil, versus 39% in 2006. It should reach 38% in the next five years -- and 37% three years after that. So oil is slowing, and I expect it will stop its growth around 2015, at which point the supply begins a slow retreat.

Then what?

We will either have to reduce our economic growth around the world, which has all kinds of political and social repercussions attached to it, or we will have to find a substitute for oil. But it turns out that oil is a remarkable type of energy, as it doesn't spoil when you keep it overnight in a warm dish. It transports easily. It stores easily. It is very fluid. You can pump it across long distances. Oil has been the basis on which we have made a remarkable economic expansion, and now we may be tested by something a lot more serious, which is a coming shortage of oil and a need to start using other forms of fuels, which are not naturally the ones that we have developed.

Barrons

[Sys1]

He doesn't get it, but he slowly understands that this century will be "difficult" for mankind.
Peak oil will get us to Olduvai.

[timmac]

I dont see how oil can get to $300 a barrel, unless during WW3 for a short spell.

When it was getting close to $150 barrel, demand went down and when it gets to $175 barrel demand will fall futher, many more business will go broke, maybe no airlines at this price.

$200 barrel maybe 40% unemployyed and demand will be so low that it will drag oil prices down,, I just cant see any oil price above $200 for very long,, who will be paying at this price, not very many..

[TheDude]

Linked in another thread: Supply and Demand will remain close in 2008 and 2009...but then...(pdf)

Another Op: Maxwell's Oil Analysis », by Jim Kingsdale, who wrote an excellent analysis of the work being done at TOD on Megaprojects (story linked in this piece if you're interested).

Another old timer is Henry Groppe, who forecasts the peak in 2008. Thinks KSA will sail through it, too, that won't confuse matters now, will it?

[vtsnowedin]

I dont see how oil can get to $300 a barrel, unless during WW3 for a short spell.

When it was getting close to $150 barrel, demand went down and when it gets to $175 barrel demand will fall futher, many more business will go broke, maybe no airlines at this price.

$200 barrel maybe 40% unemployyed and demand will be so low that it will drag oil prices down,, I just cant see any oil price above $200 for very long,, who will be paying at this price, not very many..

Would the world end at 300/bl? I think not. $143/bl gave us $5.00 gas. $300/bl would give us $10.00 gas. some places in Europe pay that now. The guys making SUVs will have to retool and the airline industry might shrink by more than half. It would cause a lot of heartburn as you find a place to live within the new commuting distance of your job or get used to your new carpool buddies but the world will not end.
Consider $40.00 a gallon gas.!! Now that would be a world class cluster frac.

[vilemerchant]

$143/bl gave us $5.00 gas. $300/bl would give us $10.00 gas. s

It doesn't work like that so it wouldn't even be that bad. 12 years ago oil was I think $10 a barrel, recently it hit $140 a barrel. That's 14 times the price, but gasoline did not get 14 times more expensive, it probably only tripled, so doubling the price of oil again is not going to double the price of gas.

The purchase of the actual oil is just one link in the chain of costs to create gasoline products and deliver them to the retail bowsers.

[TheDude]

Would the world end at 300/bl? I think not. $143/bl gave us $5.00 gas. $300/bl would give us $10.00 gas. some places in Europe pay that now.

They take less of a hit on other forms of taxation though. Relatively speaking the price of fuel is about the same as in the US.

[vtsnowedin]

True the direct ratio is an oversimplfication. but at $143 the base cost of crude was $3.40/ gallon and at $300 it would be $7.14. You cant get below that plus refineing and distribution costs including taxes. Also in the brief period of $143 oil some refinerys were losing money having got caught off guard by the price jump. If it had stayed at 143 the price of gas would have settled higher than $5.00 but I dont know how much.

[vilemerchant]

I think a more major concern of $300 oil would be the complete collapse of the US$. It's no secret that the US$ lost value as oil went up and now miraculously made gains as oil has plummeted, despite the local economy in a shambles. $300 oil would see the oil exporters dumping the declining US$ and switching to selling in other currencies.

USA propaganda machine might be able to isolate Iraq, Iran and perhaps Venezuela, one at a time, when they think of switching currencies, but I don't think it can handle all the worlds oil exporters at once.

[JustaGirl]

I dont see how oil can get to $300 a barrel, unless during WW3 for a short spell.

When it was getting close to $150 barrel, demand went down and when it gets to $175 barrel demand will fall futher, many more business will go broke, maybe no airlines at this price.

$200 barrel maybe 40% unemployyed and demand will be so low that it will drag oil prices down,, I just cant see any oil price above $200 for very long,, who will be paying at this price, not very many..

Would the world end at 300/bl? I think not. $143/bl gave us $5.00 gas. $300/bl would give us $10.00 gas. some places in Europe pay that now. The guys making SUVs will have to retool and the airline industry might shrink by more than half. It would cause a lot of heartburn as you find a place to live within the new commuting distance of your job or get used to your new carpool buddies but the world will not end.
Consider $40.00 a gallon gas.!! Now that would be a world class cluster frac.

That by itself wouldn't be that bad, but when you add in the inflation of everything else, a loaf of bread would probably be $10 or more, gallon of milk $10-12, forget about beef, etc etc. People will not be able to afford $10 gal gas & EAT. It will be one or the other. IMO.

[TheDude]

From the EIA's International Energy Prices page. Taxation makes for about $4 premium. That's the Netherlands that's paying a bit more. Note to EIA: increase line thickness.

There have been exceptions where motorists were paying in excess of $10/gallon, in the UK for instance. I heard about some places in Ireland that were above $12 for a time.

[ki11ercane]

Mark the day if you must:

Barring any catastrophic situations (nuclear war, massive terrorist attack, etc., nothing to do with Peak Oil production vs. consumption) oil will never hit $300.00 within my lifetime. (I am 35 so I expect to be around for another 50 years) A 300% rise in $100.00 oil is not the same as a 300% rise in $25.00 oil. The last 180 days are proof positive the market will never allow it. If there is no money to grease an economy people will simply not be able to buy expensive oil. While its a very very "crude" anaolgy, it's a lot easier to add 50 beans to a bag with 25 already in it than it is to ad 200 beans to a bag with 100 already in it. Oil only jumped from $25.00 in 2003 to $92.00 in 2007, and seeing as it is almost the end of 2008, five years later it has only increased $75.00 a barrel, a mere $15.00 per year increase noit including adjustment for inflation. To see oil go from $100.00 today to $300.00 in 2013, or $40.00 a year or 267% MORE per year than it did in the last 5 years could not be handled by any economy.

With oil at $147.00 a barrel, gasoline here in Canada averaged $1.39 a litre. (5.29 a gallon CAD) Today oil is $102.00 a barrel and gas is averaging $1.36 a litre. (5.14 a gallon) Energy markets and the main relations to them (food production and transport, electricity, NG, coal, etc.) all realized we can afford to pay it. It was a good test for them. Now we are stuck paying high domestic energy usage (food, gas, etc.) prices for good. Food prices have not dropped, NG prices will rise in 2009, and so will electricity. As I have said about 1/2 a dozen times here before, there really was no significant change in driving habits, mall population at China Mart, and my grocery store was busier than ever. I was just in California and gas was $4.00 a gallon average and the freeways were packed solid. Demand descruction, bankruptcies, Freddie, his mistress Fannie, forclosures, personal and national debt, inflation. and less economic growth simply didn't equate into people spending less, driving less, eating less, and consuming less. We as a population overall are ok with $100.00 oil and $4.00 gallons of gas.

I think in a basket of world economic problems, the concept of Peak Oil is only one of many issues. I don't think Peak Oil has made it's mark on society yet, and based on what has happened in the past 6 months, will not make a mark for 5-10 more years if not longer. Today alone oil is only projected to be $119.00 a barrel in 12 months. Six weeks ago it was $147.00 a barrel. I think we should be preparing for Peak Debt, Peak Inflation, Peak Federal Bankruptcy, etc.

Before Peak Oil "effects" our economies, we will have gone through a crippling recession, high un-employment rates, massive forclosures, one or two of the major vehicle manufacturers going bankrupt, one more resource war, and possibly federal bankruptcy of the U.S. Peal Oil effects are at the bottom end of this list.

However PREPARING and working to self sustainability is still not a bad thing and contining along that path of prepping for as long as possible is a good thing. But fuel shortages, food shortages, die off, zombies, etc. are nowhere around the corner.

$300.00 a barrel of oil means nothing to me because I am not going to see it in my lifetime.

[vtsnowedin]

Mark the day if you must:



. I was just in California and gas was $4.00 a gallon average and the freeways were packed solid. Demand descruction, bankruptcies, Freddie, his mistress Fannie, forclosures, personal and national debt, inflation. and less economic growth simply didn't equate into people spending less, driving less, eating less, and consuming less. We as a population overall are ok with $100.00 oil and $4.00 gallons of gas.

You could not see it but US drivers cut back consumption 8% and in that short a time that is very significant.



Before Peak Oil "effects" our economies, we will have gone through a crippling recession, high un-employment rates, massive forclosures, one or two of the major vehicle manufacturers going bankrupt, one more resource war, and possibly federal bankruptcy of the U.S. Peal Oil effects are at the bottom end of this list.

Looking at our present position we could have all four of those in ten to twentyfour months.

However PREPARING and working to self sustainability is still not a bad thing and contining along that path of prepping for as long as possible is a good thing. But fuel shortages, food shortages, die off, zombies, etc. are nowhere around the corner.

$300.00 a barrel of oil means nothing to me because I am not going to see it in my lifetime.

I wish you were right on this one but the reasons you base your prediction on are not valid or at least not conclusive. A little run away inflation and $300 dollar oil is a certainty. Let supply run less than world demand for a while , its a matter of when not if this will happen, and the price of oil will rise relative to the price of other things up to the cost of the best available substitute. It might well be $700/bl priced in whats left of our dollar by that time.
I remember when the first energy crisis hit in the seventys. Congress took testimony on the fear that the price of gas would rise to the "Catastrophic" level of $1.00/gallon. We were assured that that would never happen.
$300 dollar oil in your lifetime? I'd say the odds are 3 to 1 in favor of it.

[timmac]

But things are different now than the 70's by far.

Our goverment is now in trillions of $$ in debt, housing prices are droping faster and higher % than any other time, millions more in bankruptcy, big 3 about to go under, now freddie mac/fannie may was so big that a bail out alone was not good enough, food cost have soared and every thing else with it.

I do beleave that if oil would have still kept climbing to 175-200 a barrel are economy would have been broke but it went down and this has stoped the serious economy problems. [for now]

250-300 a barrel any time from now till 2015 will stop our economy and Europe as well,, dont tell me what Europe is paying now for gas what would it be at 300 a barrel, can they afford that.

Can China pay 300 a barrel I dont think so, so who will pay 300 for any length of time,, if no one pays than price has to drop, its that simple.

Think how much food and other staples will cost at $200 a barrel,, its either gas or food.......

[timmac]

America is not like Europe,, we can not for now pay $6-$8 per gal for very long,, we are a large driving country, to many people are employyed in the auto industry system from factories to road side motels, tire companies, mech shops, parts people, car washers and ect, ect.

The airline companies allmost went under at 147 a barrel, how many would go under at 250 a barrel, can we change our country to similar of Europe in 5 years,, I dont think so.........

[vtsnowedin]

America is not like Europe,, we can not for now pay $6-$8 per gal for very long,, we are a large driving country, to many people are employyed in the auto industry system from factories to road side motels, tire companies, mech shops, parts people, car washers and ect, ect.

The airline companies allmost went under at 147 a barrel, how many would go under at 250 a barrel, can we change our country to similar of Europe in 5 years,, I dont think so.........

Yes we are not like Europe. We are fatter and lazyier then they are by a long shot. But times can get a lot harder and we will have no choice but to live with it. $6-$8-$10 dollar gas we would pay it but we would soon not be a, driving everywhere alone all the time culture. Teenagers driving to highschool would be gone as would most trips to the mall. Commuting to work with less then four people in the car pool will be considered nuts. And it wont take five years to switch over. One paycheck after the price goes up and people will start to rethink their energy consumption. The stupid will go bankrupt and the clever will prosper and the winners and losers will be apparent by the next tax filing date.

We have lived a privileged life from the end of WW2 fed by cheap oil and loose credit. the party may soon end and we will face the much harder realities of the rest of history. High oil prices will of course be tramatic but our revulsion will do nothing to bring the price down. Indeed the price will have to stay up to keep demand depressed enough to match supply. America can and probably will cut its per capita oil consumption in half in the next few years. No home will be heated with oil, truck freight miles will be cut by more than half, suburbs will be reordered to make them viable and served by mass transit. But 300 dollar oil will not be avoided in fact it may be an important first call that change is apon us.

[JoeW]

I think in a basket of world economic problems, the concept of Peak Oil is only one of many issues....

Before Peak Oil "effects" our economies, we will have gone through a crippling recession, high un-employment rates, massive forclosures, one or two of the major vehicle manufacturers going bankrupt, one more resource war, and possibly federal bankruptcy of the U.S. Peal Oil effects are at the bottom end of this list.

You don't think that high energy prices are related to any of those economic problems at all?
It's the Wizard of Oz and Peak Oil is the man behind the curtain. Those other problems have been partly caused by, exposed by, or exacerbated by the high energy prices the world has been enduring of late.

[timmac]

Oil diped below $100 a barrel today, Why because world demand for oil is down.

Oil cant go to $300 because demand will fall by about 1/3 at $200+ a barrel and this will drag down the price.

When oil hit $147 it almost killed the big 3 automakers,, put many airlines out of business,, and food cost went out of site and many 3rd world goverments almost went under.

So with this said, how could any goverment economy afford oil above $200 let alone $300 a barrel for very long..

If oil hits $300 a barrel and stays above for 3 months or more I will eat my boots.......[ ww3 or other major disasters not included ]

[timmac]

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