The Long Good Bye
September 16, 2009 1:05 PM   Subscribe

Foreign Policy has an interesting double in the latest issue: Oil's very future is being seriously questioned, debated, and challenged. Just as we need more oil than ever, it is changing faster than we can keep up with. An article by the often controversal Pulitzer prize winner Daniel Yergan.
This article is complimented by: Subpriming the Pump; Oil wealth used to hurt only those who had it. Now, it's hurting everyone. By Mahmoud El-Gamal and Amy Myers Jaffe both of Rice University.
posted by adamvasco (9 comments total) 7 users marked this as a favorite
In 2007 and 2008, the belief system built around peak oil helped drive prices to $147.27.

Yergin, you're less trident than you used to be, but you're still a dick.
posted by adamdschneider at 1:16 PM on September 16, 2009

Anyone in L.A. or near should also check this upcoming evant at the Skirball on Oct. 7th.

"The Curse of Oil"

It will be archived after Oct. 7th... In fact, Zocalo (organization hosting the event above) has archives are full of good stuff.
posted by IndpMed at 1:20 PM on September 16, 2009

"...belief system built around [a fact, immutable and unavoidable]..."
posted by sonic meat machine at 2:09 PM on September 16, 2009

I wonder if Yergin would actually deny that maybe the volitility had something to do with oil getting, at least temporarily even if you insist on denying 'peak oil', to the steep part of the supply curve. Easier to not mention it I guess, and point vaguely at the usual financial market suspects.
posted by sfenders at 2:31 PM on September 16, 2009

Peak Oil is real and will obviously happen, but I suspect the predictions are early and Yergin may be right that it's further out than many pundits believe.

Follow the money: the Saudi's have a bigger vested interest in PO than anyone on the planet. They have access to secret data no one else does about the biggest oil deposits on the planet. If they thought PO was imminent, would their current behavior make any sense? Instead of business as usual, they would be cranking back the supply to raise prices to milk it for what they have left knowing peak was around the corner, the world economy be damned, knowing it is damned anyway. Plus one doesn't spend money like a drunken sheik when one knows hard times are ahead. The Saudi's have not changed in their behavior or trajectory which is a sign that they don't see any reason to change strongly suggesting they think the situation is working as it is further suggesting they don't see PO as an imminent threat.
posted by stbalbach at 3:01 PM on September 16, 2009

I agree with this: Saudi's have a bigger vested interest in PO than anyone on the planet.

but am skeptical about one doesn't spend money like a drunken sheik when one knows hard times are ahead
posted by cell divide at 3:18 PM on September 16, 2009 [1 favorite]

Those Saudi Arabia guys who control so much oil have always (by all appearances in recent times at least) been worried about the price getting too high, and thereby encouraging the world to switch to some other crazy thing like electric cars, or else crashing the world economy, again reducing the amount of oil it needs. Maybe due to their experience of the 1980's, I imagine. Not sure which they were more worried about, but plenty of evidence around that they were not entirely unjustified in being concerned. They like the price high, but not *too* high --- as it would have been very quickly if they'd somehow made the decision to cut back on production a couple years ago. Instead I rather suspect they were working hard to increase production, which they finally accomplished just in time for the financial crisis.

they would be cranking back the supply to raise prices to milk it for what they have left

Anyway... once the price recently went lower than that to which they'd become accustomed, OPEC did indeed cut back production to support prices. They now have non-zero spare capacity, we can be pretty certain of that at last.

The Saudis may also know that their own production will not decline at all quickly, whether or not world production is past its peak. Beats me. But if you're into divining the future of oil markets from the behaviour of one government, you might watch for signs that they're trying to diversify the economy to eventually become less dependent on oil exports. But yeah, it does seem possible that some national oil companies will in the future join OPEC in being less eager to produce as much oil as fast as possible. The temptation to grab as much cash as possible today, never mind what happens tomorrow, is still rather ubiquitous, a deeply ingrained habit.
posted by sfenders at 4:06 PM on September 16, 2009

One of the considerable risks to oil supplies is that less and less a percentage of oil is being traded on the open market. China, particularly, is signing exclusive supply deals with producing countries.
Combine this with the sharply increasing growth of domestic consumption in oil producing areas, the supply actually reaching the market where the developed world shops for oil is likely to become more limited.
The Saudi Royal Family may well figure that staying in power now is better than squeezing the western oil consumers so hard that either alternatives to oil are developed, or saudi regime change becomes a favoured policy in Washington.
posted by bystander at 1:21 AM on September 17, 2009 [1 favorite]

Great post, although Yergin is not spelled with an 'a.' Yergin's "The Prize" is an excellent read if you want a comprehensive history of man's addiction to petroleum.
posted by gen at 3:53 AM on September 17, 2009

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