Gail Tverberg's Contributions

While the US oil supply situation may be a little better, the world supply situation is still very bad, and oil prices are still very high around the world. In the past month, three major peer-reviewed journals have published articles relating to limited world oil supply. I'll tell you why all three are significant.

Our economy has a high level of debt. We need economic growth in order to repay that debt with interest. If oil supply remains flat, or worse yet, falls, it will be difficult to produce the level of economic growth needed to prevent debt defaults.

Our economy runs on oil. Most of the tractors used for growing food run on oil. Nearly all of today’s cars and trucks run on oil. It is popular to talk about changing to some other fuel, but the practicalities are that any such change will be very slow. There is a huge cost associated with replacing cars and trucks with vehicles using other fuels, assuming we could figure out the technology to do this.

Once this decline starts, it is hard to see a natural “stopping point” for the decline. On the “way up,” businesses, governments, traditions, and even religious beliefs are built that reinforce the processes in that are in place.

We know high oil prices have an adverse impact on the economy, often leading to recession. According to Economist James Hamilton, 10 out of 11 of US recessions since World War II have been associated with oil price spikes. But where do continuing high oil prices lead us? How will economic contraction “play out,” if tight oil supply and high oil prices continue?

Even as nations continue to prop up banks and the Fed plays games with trillions of dollars, the general feeling seems to be that the “pothole culture” or its equivalent is spreading, that the benefits of what economic growth there is are not being shared equitably, and that many places cannot even maintain what they have in terms of infrastructure.

In this post, I discuss a few of the obstacles facing wind energy in the United States, and their implications for the expansion of wind energy.

The world has many ideas for solving our energy shortfall, but they all seem to involve investment: Drill for more oil and gas, develop alternative energy sources, build more efficient gas-powered cars or electric cars, fix homes and offices so they are more energy efficient.

The results of OPEC’s latest meeting to set oil production quotas were announced this morning. Instead of production targets for individual countries, a group production ceiling of 30 million barrels a day was set.

Saudi Arabia recently announced that it had halted a $100 billion oil production expansion plan to raise capacity to 15 million barrels a day by 2020. At this point, the country claims to have capacity of 12 million barrels a day. What does this mean for its future? Let’s take a look behind the figures.

For many years, Brent oil (a European grade) and West Texas Intermediate (WTI) oil, a US grade, sold at close to the same price. Starting in January 2011, WTI price dropped below Brent, at times by more than 20%.

Any change, including pipeline changes, has indirect impacts as well as direct impacts. These indirect impacts can be more important than the direct impacts, but it is difficult to know precisely what they will be.

In recent years, we have heard statements indicating that it is possible to decouple GDP growth from energy growth. I have been looking at the relationship between world GDP and world energy use and am becoming increasingly skeptical that such a decoupling is really possible.

The following is a presentation given at a recent meeting of the Association for the Study of Peak Oil (ASPO) forecasting the severe impact of high oil prices upon the economy and related short-term financial impacts.

Both financial and physical factors suggest that we cannot enjoy a resumption of Business As Usual. Credit availability must contract to sustainable levels and natural resource availability is unlikely to materially expand. Together these factors have a profound impact on societal features we have taken for granted.

It seems to me that we may be reaching “Limits to Growth,” as foretold in the book by the same name in 1972. The book modeled the consequences of a rapidly growing world population and finite resource supplies.

While I agree that we need more oil production, I think we are kidding ourselves if we expect that 90% of the needed growth in global oil production will come from MENA countries. In this post, I will explain seven reasons why I think we are kidding ourselves.

When I write about high oil prices having an adverse impact on the economy, quite a few readers respond by saying, “No, most (or all) of the problem is a debt bubble.” They seem to think that poor underwriting of mortgages a few years ago allowed a debt bubble. Once this bubble is past, or some similar bubble, our problems will be over.

A new report sets priories based on a distorted view of the future. One issue is that it is trying to set priorities based on an overly optimistic view of energy supply presented in the EIA’s International Energy Outlook 2011 (IEO 2011).

On Monday after the WSJ ran Daniel Yergin’s essay, There Will Be Oil, I submitted this rebuttal. They ask to have the exclusive right to any submission for 10 days. At this point, they have neither printed it nor responded back, so it seems OK for me to post it here instead.