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Posts Tagged ‘Peak Oil’

How Long Till Gas is $12 a Gallon?

It may be the mother of all doom and gloom gas price predictions: $12 for a gallon of gas is “inevitable.”

Robert Hirsch, Management Information Services Senior Energy Advisor, gave a dire warning about the potential future of gas prices on CNBC’s May 20 “Squawk Box”. He told host Becky Quick there was no single thing that would solve the problem, due to the enormity of the problem.

“[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” Hirsch said. “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing.

In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.”

Oil Shortages Loom Within Five Years

Fears of a shortage within five years propelled long-term oil futures prices to almost $140 a barrel, further stoking inflationary pressures in the global economy.

The spot price of Nymex West Texas Intermediate hit a record $130.30 a barrel on Wednesday. On Tuesday investors had rushed to buy oil futures contracts as far forward as December 2016, pushing their prices as high as $139.50 a barrel, up more than $9.50 on the day.

Veteran traders said they had never seen such a jump and said investors were increasingly betting that oil production would soon peak because of geopolitical and geological constraints.

Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.”

Anne-Louise Hittle, of Wood Mackenzie, added that investors were shifting their focus from the short-term to the medium-term, where supply fears played a bigger role. Since January, long-term futures oil contracts, such as those for delivery in 2016, have jumped almost 60 per cent, while near-term prices have gone up 35 per cent.

That trend was exacerbated by T. Boone Pickens, the influential investor who believes world oil production is about to peak as aging fields run dry. He warned that oil prices would hit $150 a barrel by the end of the year.

“Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m,” Mr Pickens told CNBC. “It’s just that simple.”

The Coming Crisis

The issue is not simply a concern that we will have to pay outrageous prices for a gallon of gas. If that were the worst of it, the situation would be difficult but manageable.

The reality, however, goes deeper and is much more troubling. There are multiple problems affecting the world that are having a decidedly negative net effect: a global rise in demand for crude oil, the plateau in the production of crude oil (which may indicate the peak has already been reached) and continued global population growth.

Together, these three factors are serving to shove the world into a crisis that has ominous possibilities.

As Oil Concerns Mount Profits Roll In

Against the backdrop of consumer protests and rising tensions, Royal Dutch Shell and British Petroleum (BP), two of the world’s largest oil producers, announced record profits for their first-quarter earnings this past Tuesday.

With oil currently priced at an unprecedented $120/barrel, the announcements underscored the clear division between consumer concerns and what many activists and environmentalists perceive as corporate exploitation.

While company executives were no doubt basking in the good news, commercial truckers in both the U.S. and Europe staged vehement demonstrations, bringing traffic to a halt in some cities. Given the strife, BP’s 63% profit growth seems obscene, not to mention unlikely to hasten the move to clean and sustainable alternatives, and considerable handouts in the form of government subsidies further abet this inequity.

According to the Center for American Progress, the big five oil companies – BP, Chevron, ConocoPhillips, ExxonMobile, and Royal Dutch Shell – received $1.3 billion in tax breaks last year despite $123 billion in profits.