The price of fuel..: what is going on..?

11 01 2017

Yesterday, I went to the big smoke for a medical appointment. I’m fine. But when I went to fill up to ensure I could make it home, I realised that the price of petrol had gone up by a whopping 20c/L in one hit. That’s a 14% increase……… in one day.Petrol price hike in Hobart

In the news, “Mr Moody (of the Royal Automobile Club of Tasmania) said prices were being driven up by increases in the global oil price, but he said the price should level out in Tasmania at about $1.40 a litre in about a month.”

Except that when I investigated this, the price of oil had not skyrocketed, it was still around $52 a barrel. Last time petrol was this expensive, oil was at $147 a barrel….. so what’s going on?

My take on this is that the oil companies must be finding it harder and harder to pay their interest bills. If they can’t make profits with oil, they’ll have to find them upstream at the pump.  Furthermore, maybe Peak Oil is on the cusp of getting really serious, and this might be the tip of the iceberg……. Nafeez Ahmed has just written the following article about how dire the oil situation is becoming…….

Brace for the oil, food and financial crash of 2018

80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy

New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century.

The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil… unless we choose a fundamentally different path.

Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.

The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply will in coming years be insufficient to sustain rising demand.screenshot

Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about ‘peak demand’: it vindicated what is routinely lambasted by the industry as a myth: peak oil — the concurrent peak and decline of global oil production.

The HSBC report you need to read, now

INSURGE intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest.

Read and/or download the full HSBC report by clicking below:

HSBC peak oil report

The HSBC report has a helpful, ten-point summary of the key arguments the bank makes, and what is going on right now. These arguments are summarised below…:

  1. Oil’s oversupply problem, which has caused most of the trouble in the markets in recent years will end by 2017, and the market will return to balance.
  2. Spare capacity will have shrunk substantially by then “to just 1% of global supply/demand.” This HSBC argues, will make the market more susceptible to disruptions like those seen in Nigeria and Canada in 2016.
  3. Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently assessed see oil demand peaking before 2040.”
  4. 81% of the production of liquid oil is already in decline.
  5. HSBC sees between 3 and 4.5 million barrels per day of supply disappearing once peak oil production is reached. “In our view a sensible range for average decline rate on post-peak production is 5-7%, equivalent to around 3-4.5mbd of lost production every year.”
  6. Based on a simple calculation, HSBC estimates that by 2040, the world will need to find around 40 million barrels of oil per day to keep up with growing demand from emerging economies. That is equivalent to over 4 times the current crude oil output of Saudi Arabia.
  7. “Small oilfields typically decline twice as fast as large fields, and the global supply mix relies increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40 years ago to only 75mb this decade.” — This will exacerbate the problem of declining oil fields, and the lack of supply.
  8. The amount of new oil discoveries being made is pretty small. HSBC notes that in 2015 the discovery rate for new wells was just 5%, a record low. The discoveries made are also fairly small in size.
  9. There is potential for growth in US shale oil, but it currently represents less than 5% of global supply, meaning that it will not be able, single-handedly at least, to address the tumbling global supply HSBC expects.
  10. “Step-change improvements in production and drilling efficiency in response to the downturn have masked underlying decline rates at many companies, but the degree to which they can continue to do so is becoming much more limited.” Essentially HSBC argues that companies aren’t improving their efficiency at a quick enough rate, meaning that supply declines will hit them even harder.

Here is the chart showing the decline in production post-peak:

Oil peak production

As usual, the mainstream media is spruiking loads of rubbish, probably trying to not scare the children…… unless you peek elsewhere like this blog, or follow other bloggers who keep abreast of the truth, you could be forgiven for thinking America will be great again…. or some other such rubbish.

Under the current supply glut driven by rising unconventional production, falling oil prices have damaged industry profitability and led to dramatic cut backs in new investments in production. This, HSBC says, will exacerbate the likelihood of a global oil supply crunch from 2018 onwards.
So how do you improve profitability? You put the price of fuel up. Given that petrol is the single biggest purchase made by households on a weekly basis, the lift in petrol prices may lead to less household activity — a potential concern for retailers and the economy generally. High fuel prices combined with large debts is what broke the camel’s back in 2008, causing the GFC. Things are not only not different today, debt levels are even higher….. how long before GFC MkII kicks off is anyone’s guess, but it can’t be too far away now….
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18 responses

11 01 2017
John Turbek

Wow, this report says everything that the Peak Oil Folk have been saying for the past decade! 5-7%/Yr decline compounded will be a disaster. My Guess, we will try and frack the rest of the world next. If successful that will delay the end for 5-10 Yrs, with 10x the disaster. Lets hope that doesnt happen.

11 01 2017
Blue Peter

Peters Rule:
Beware of stable dynamic complex systems becoming UNSTABLE dynamic complex systems due to feedforward of one or more components within the system.

Define Stable: as moving in a direction of known consequences.
Therefore Unstable as moving in a direction of unforeseen consequences.

Define Dynamic: as free to move in any direction.

Define: Complex: as a system made of many interacting subsystems each separated in time.

Define System: as Weather. Fire. Political. Financial. Energy supply. Fill as you please.

Define Feedforward: Sub systems become shifted in time by different rates.
Therefore becoming out of phase with each other.

What say DtheM readers to this rule?

11 01 2017
Eclipse Now

It’s a good thing you can drive from Brisbane to Melbourne on Tesla super-charger stations then.
http://www.teslarati.com/tesla-completes-1000-mile-long-australia-supercharger-corridor/
“Oh, but Eclipse, those batteries just don’t have the ENERGY DENSITY of oil!” And my answer 12 years ago? They don’t NEED IT!

11 01 2017
mikestasse

NOBODY needs cars…….. but we sure need trucks.

And what if you want to drive from Brisbane to Cairns…………? And what if the roads turn into disrepair from lack of bitumen and money…..?

11 01 2017
Idiocracy

Or… what if China buys up all the big Cobalt deposits and Tesla simply can’t produce enough batteries competitively?

https://techcrunch.com/2017/01/01/no-cobalt-no-tesla/

Maybe Elon will just start smuggling it directly from “Artisnal” (I just love the use of this word) children miners of the Congolese?

Lithium Batteries… what a fantastically clean, green, ethical technology!

12 01 2017
gbell12

Fallacy deployed: straw man

Eclipse, you’d be a lot more persuasive with your important information from the “other side” if a) You weren’t always on the one side as if you are an ideologue, and b) You didn’t often try to distort the conversation by deploying a logical fallacy.

You know as well as anybody that driving cars, is just one aspect of our energy consumption, and our supply predicament.

I will read your reply but will not engage when you try to draw me in with more fallacies, ad hominem attacks, or any of the other tricks you routinely pull.

11 01 2017
Andrew Jeeves

Hi there.

If you haven’t already, check out Gail Tverberg – I think she has the best handle on what’s going on. Not so much peak oil but economic factors and energy factors and limits to growth factors merging to keep oil prices down and economies failing: Latest blog: http://ourfiniteworld.com/2017/01/10/2017-the-year-when-the-world-economy-starts-coming-apart/.

Take Care,
Andrew Jeeves

11 01 2017
Brendon Crook

I miss Fast Eddy there…………………………………………….

11 01 2017
rabiddoomsayer

We are looking at catastrophic, cascading, failure of a stressed, highly interrelated, very complex, system with no resilience (resilience is inefficient). So many factors, so many bullets out to get us, that it is impossible to know what will be the final trigger.

Regardless of which theory of collapse you use, we are in the manure. Studies that give us ten years before collapse, are assuming everything will go as right as they can for ten years. Each year that normality continues is a surprise to me. Each October I expect the big financial crash and everything to spiral from there. But instead of Wall Street, it could start with Main Street or maybe an Occupy movement will morph into something else. A planned war might become something else or a solar storm at the wrong time. When does UNIX time run out? Peak phosphate is close.

We are so vulnerable, far more vulnerable than any society before us. Everything societies before us needed, we need. But we need so much more, we are utterly reliant upon things that did not exist before.

Will peak energy get us? Yes, if something else doesn’t get us first. This collapse will be quick. Relative normality to complete chaos within a week or so.

11 01 2017
MargfromTassie

Have you read “Last Light” a fictional novel by British author Alex Scarrow. It’s about the breakdown of society in London/England that results from a cessation of the flow of oil from the Middle East due to terrorism and civil war – yes, chaos in a week. A great read and followed by a second book set 10 years later. It’s quite a realistic scenario – no zombies etc. “One Second After” by Fortschen (?) is also a best selling book along similar lines, in this case following an EMP strike, which destroys the electricity grid. Again, a non sensational but disturbing look at what happens in a small town in the USA. Available on Audible too.

12 01 2017
rabiddoomsayer

Have not read either. (you don’t need to get bitten to turn a human into a zombie, just give him an I Phone.) Books ordered.

11 01 2017
Glenn

I dont think anyone can really say what will happen, how it will happen or in what time frame. IMO its a case of ‘it depends’

At the same time a disruption of energy, economy and environment and more so should it happen at the same time could be a major shakeup.

My guess is, at least in the short term, when the great disruption does come, the Aussie debt slaves will really feel the heat and soon after that that, the rich will get a whole lot richer.

I like the ‘opt out option’ or what be called the collapse now and beat the crowd option.

Sound familiar mike?

11 01 2017
MargfromTassie

Speaking of collapse – diminishing resources, financial collapse, bee die-off, climate change, coronal mass ejection etc etc – what does anyone think of the information contained in Guy McPherson’s monster essay? You have his blog linked Mike. What’s your take? 10 years. Is he exaggerating? Btw, in his 2014 talk at Oxford in the U.K, he said that he had been contacted by Steve Wozniak of Apple fame, who asked him about relocating away from the USA. Guy advised him that the best places to be were NZ or Tasmania. Wozniak has since bought property in Tasmania (and mainland Oz) and become an Australian citizen.

https://guymcpherson.com/climate-chaos/climate-change-summary-and-update/

12 01 2017
rabiddoomsayer

The vast majority of us will never know, civilizations collapse will take out 95%(wild approximation) of us.

The aftermath of Toba reduced us to a few thousand individuals, the genetic bottleneck is evidenced in our DNA today. Yuval Harari credits the rise of man from just another African ape due the the development of the language of large groups, could Toba have been responsible for that language development. So many monkey spheres reduced to almost nothing, requiring new monkey spheres?

If we do survive maybe a new man will emerge. But we have so devastated the planet and with so much more climate damage already in the pipeline that our species long term survival is unlikely. The tropics will be uninhabitable, the oceans are dying, large portions of the biosphere cannot cope with a now inevitable rate of change a situation not conducive to our survival. (No dominant species has ever survived an extinction event)

12 01 2017
12 01 2017
mikestasse

The price rise is not a Tasmanian thing, it’s Australia wide……

12 01 2017
Mark

Australia wide it is, our area (hunter valley) went from $1.05 to $1.25 in December, then up another 20 odd cents this week, so about 40% or so in a month.
The increase of 20c is not uncommon but this time it stayed up and never varied (normally goes up 20c, down 5, up 2, down 5, up 5 etc for a couple of months) and then jumped 20cents again 4 weeks later.
As you wrote crude is still down so trouble is on the way.

13 01 2017
mikestasse

It suddenly occurred to me that I used to keep up with Australian production in a series of essays titled “Australia running out of oil by 2020″……

It’s been a couple of years since I followed up on that, perhaps this sudden price jump is due to our inability to produce even 10% of our fuel demand and maybe now we import the lot at exorbitant prices…….. the 2016 numbers should come out next month, watch this space.

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