[Graeme]

Oil prices re-enter the "danger zone": John Kemp

Get ready for a prolonged slowdown in the major industrial economies.

If Brent crude oil prices stay substantially above $100 per barrel, the economies of the United States and Western Europe will almost certainly struggle in the next few months.

At no point in the last five years have U.S. manufacturing and the wider economy managed to expand strongly when international oil prices have been above $100.

In every case, prices above $100 have been associated with a loss of momentum as the Institute of Supply Management (ISM)'s composite manufacturing index has fallen back towards the 50-point threshold dividing expanding activity from a contraction, as the attached chart illustrates ().

This analysis is fairly crude and little more than a restatement of the familiar view that growth slows when the cost of oil in consuming countries (the "oil burden") climbs much above 4 percent of GDP.

reuters

[Plantagenet]

This analysis is fairly crude and little more than a restatement of the familiar view that growth slows when the cost of oil in consuming countries (the "oil burden") climbs much above 4 percent of GDP.

reuters

Oil isn't a burden on GDP growth. Oil is the fuel for GDP growth. If we want more GDP growth, we need more oil-----a LOT more oil.

IF the world wants GDP growth to return, it is going to have to re-arrange its economic system and get used to spending a lot more than 4% of GDP on oil and alternative energy. For instance, right now healthcare in the USA is 16% of the economy while oil is less than 4%. Why shouldn't oil and other kinds of energy rise to be---say---- 10% of the economy, while healthcare, welfare, banking, and other parts of the economy take cuts and shrink a little bit to free up more money for the energy component of GDP.

Just continuing with BAU and hoping the economy fixes itself and oil prices don't go higher so GDP growth can speed up isn't going to work-----we need to re-prioritize our economy and put a much higher priority (i.e. spend more money) on energy growth first.

[Graeme]

Plant, I was glancing at articles on energy and GDP on google and found this one published in 2007. The conclusions are pretty clear. If we rely on fossil fuels as an energy source, over half of the world's population will be poor by 2050. There will have to be a "Manhattan Project" for solar or nuclear if we are to avoid this situation (as the author mentions in the introduction). You should know that as a member of a peak oil forum, we cannot have more oil to fuel our economy. What kind of energy did you have in mind?

[Plantagenet]

Plant, I was glancing at articles on energy and GDP on google and found this one published in 2007. The conclusions are pretty clear. If we rely on fossil fuels as an energy source, over half of the world's population will be poor by 2050. There will have to be a "Manhattan Project" for solar or nuclear if we are to avoid this situation (as the author mentions in the introduction). You should know that as a member of a peak oil forum, we cannot have more oil to fuel our economy. What kind of energy did you have in mind?

I agree completely, Graeme.

I used to be an advocate of nuclear power (hence my avatar) but after Fukushima I don't think current technology is up to the job.

Fortunately, as President Obama pointed out in his SOTU speech, thanks to frakking we've now got a 100 year domestic supply of natural gas. The "T. Boone Pickens" plan lays out a program for using NG to fuel trucks, cars and electrical plants to reduce US demand for oil. I think something like this is very likely to happen, given the huge supply of cheap domestic gas.

President Obama is right on this one---NG will play a bigger and bigger role in the US energy infrastructure over the next 100 years.

[Graeme]

Yes. Natural gas will certainly help the US and other countries as pointed out in this article but it seems that it will not help the poorest countries mentioned earlier. Unfortunately by 2035, global warming could be out of control so natural gas is no panacea.

Birol said the world must continue to invest in renewables, energy efficiency and carbon capture and storage, in order to stave off climate change. If the world fails to invest in renewables, a new generation of gas-fired power stations would have a lifetime of at least 25 years, effectively "locking in" billion of tonnes of carbon emissions a year.

The natural gas industry will have to employ CCS.

[AirlinePilot]

The NG industry had better get cracking on the EPA and DOE regulations concerning personal vehicle CNG use. That plus the infrastructure needed are HUGE costs and barriers to ANYONE using CNG in their private vehicles. I've recently done some study on this and you would not believe how nearly impossible it is for me to convert and use CNG in my honda presently.

[ralfy]

In order to maintain global economic growth (to ensure that most people don't become poor), we will need the equivalent of one Saudi Arabia every seven years, and probably more if depletion speeds up.

Given that, we won't need one but many Manhattan Projects.

And if we see connections between peak oil and avoiding poverty, a JIT economy, disruption from increasing debt and environmental damage, increased availability of weapons and the threat of war, high food and oil prices, employment problems, the effect of floods and drought on nuclear reactors, mining, manufacturing, and food production, then we see new meaning in the phrase "danger zone".