petrol prices – the future

So we’re nudging $100 a barrel. Again. Don’t worry folks, it’s just speculation (like last time) nothing to see here, move on.

Well actually – without the oil, we won’t be moving on for long.

This is a case of several things coming together – compounding – concurrently. First is the fact that cheap oil (pressurised, light sweet crude, close to the surface, close to a port or terminal) is plateauing – has since 2005.

Then there’s demand – even in the recession, we only dropped a couple of million barrels per day, and that base-line has now ramped up to where we were in mid 2008. In the interim, the average quality of the oil has dropped. Can’t not have. The reason is that we cherry-picked the best, first, leaving the rest in descending order. Quality is measured in profit energy too – the energy left over after you used whatever energy you had to, to produce the new energy. For instance, the oil from the floor of the Gulf of Mexico takes more energy to obtain, than a Texas gusher of 100 years ago. Pike River coal was more expensive to produce than Strongman – and so on.

Then there’s increased use in producing countries – thus, less left for them to export. To us.

Add demand – rising steadily, if not quite exponentially.

So petrol prices have nowhere to go but up – until the economies they drive haemorrhage, then demand drops a bit, for a while. then we go again.

The problem is that oil (energy, if you must) makes everything happen – food, water supplies, fertiliser, plastics, roading, transport. So everything will get more expensive, even as the ability to generate income decreases.

The crossover will be quite quick.

Expect a bumpy ride, and don’t take anything for granted – including the safety of bank accounts or ‘investments’.

Tangibles will get harder to come by, and have to be the best investment possible – and if you can guess which will be more desirable, so much the better. I’d leave Falcons and Commodores off that list (and I’ve owned several of both) but I’d include insulating your house, growing some food, and aiming for energy efficiency/self sufficiency.

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One Response

  1. This run-up to high oil prices and where it might head is an excellent test of the catabolic callapse model of Greer, Aangel et al.

    If oil prices spike up to $150 – $200 a barrel and thereafter some part of the global economy goes “bang” followed by a precipitous drop in all commodity prices (a la 2008 and Lehmans crisis), then we have a good indication of a repeatable (iterative) pattern of staircase decline. If on the other hand, the oil price and global deflation staus does some thing different, I suppose we’ll need to come up with another theory?

    Interesting to watch. Best I get the electric vehicle back on the road …

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