Finite Resources - investment or collapse?

[veritasophia]

The world's countries are currently dependent on oil for continued economic growth. Could this over reliance on a single resource cause the collapse of today's economy? (ie. oil depletion = another great depression?)

It is estimated that at the current rate of consumption, known world oil reserves will be spent in less than 50 years. Prices will probably rise as scarcity becomes more apparent (supply curve shifts left). Does that mean oil is a good investment?

On the other hand, rising oil prices may increase funding for research into alternative energy sources. Consequently, demand for these alternatives should rise, causing a great increase in the value of these industries' stock (demand shifts right). Are these good investments?

I am asking these questions because it seems to me that following simple supply and demand logic, the upward direction of these investments is very clear (unless the world economy does indeed go into a depression). Anything wrong with this reasoning?

 

[wabmester]

Nobody really knows how much oil is left, but if we're close to depletion, you'll have a lot more to worry about than investment returns.

If you believe the Saudis, we actually have an oil glut right now.   They say that they can't find buyers for their current production levels, and that's why production has been flat for a while.

The time to invest in oil was about 4 years ago.   Now, everybody has the same information you do, and that information is priced into oil-related investments.

If we really have a glut, the price of oil might drop roughly 50% once the speculators are chased off.   That's probably the max downside.

If the price of oil goes up, one economist thinks that the maximum price is about $440/barrel, at which point our demand would be reduced to the point that we'd no longer need to import any oil.    So, maybe that's a reasonable maximum investment upside.

Personally, I wouldn't "invest" in oil for possible appreciation, but I would have a chunk of oil exposure as a hedge.   I have no idea what will happen to price, supply, or demand, but I know that whatever happens will affect my purchasing power, so I just view it as an inflation hedge (much better than gold, IMHO).

 

[dex]

There is one theory that super deep oil wells will have larger reserves then current wells.

There is another theory that oil is actually produced deep within the earth.

http://freeenergynews.com/Directory/Theory/SustainableOil/index.html

 

[Craig]

dex ... quite unusual. I've never heard that theory. I take WND with a large grain of salt, but alternative theories are always interesting. Thanks.

 

[samclem]

- Oil reserves are extensively studied by very knowledgable folks, and yet the estimates vary a lot.
- We'll never run out of oil. As the easy-to-get reserves are depleted, the price will go up, making it economicaly viable to go after the harder to get reserves. There's a tremendous amount of oil locked up in oil shale and tar sands right here in North America, this can be exploited when oil gets to approx $40 per barrel if it looks like it will stay at that level for awhile (building the infrastructure to get the oil out costs a lot, and this industry has been burned before by prices that went down).

As oil gets increasingly expensive, other energy technologies will evolve to take its place where it is economical.

I'm with wab: I wouldn't make a special effort to invest in any particular aspect of this right now. A well diversified portfolio will capture some of the companies that will be winners, and you won't be penalized if we've got plentiful oil for another 50 years. The market knows everything we do.

 

[Mwsinron]

Maybe getting some oil stocks as part of your commodities portion of your portfolio. But it seems like such a volatile industry I certainly wouldnt bet the bank on it.

 

[cute fuzzy bunny]

I just wanna know how all those dinosaurs got so deep down in the earth...

 

[haha]

If you believe the Saudis, we actually have an oil glut right now.   They say that they can't find buyers for their current production levels, and that's why production has been flat for a while.

If this is true, why are prices holding within 5% of their all time highs? IMO, the Saudis are spreading a load of manure with this assertion.

Ha

 

[lazygood4nothinbum]

before we burn up all the oil we'll be burning off all the glaciers. so instead of investing in oil, i'd invest in seawall construction & beach renourishment projects. if you could figure out the resultant changing weather patterns i bet you could make a fortune predicting new land-use requirements. anyone wanna buy this here wheatfield in the middle of death valley?

 

[windsurf]

lazygood4nothinbum said: invest in sea wall construciton.

A most intelligent post.

 

[AltaRed]

so instead of investing in oil, i'd invest in seawall construction & beach renourishment projects.

Better yet. Get all that development off the beach in the first place. That is the real problem. The coast got along quite nicely for a long time before man came along and messed it up. BTW sea levels have risen about 320 metres (or feet - I forget the actual quote - remember the land bridge between Siberia and Alaska?) since the height of the last ice age and are still rising...and will do so until the last ice age is completed in 100 or 1000 years, depending on the degree of acceleration caused by man made emissions.

 

[2B]

It sounds like its time to sell everything, buy 40 years of MREs and some good firearms. Then, we all head off to the mountains to build our fortresses.

We have several generations (at a minimum) of fossil fuels left that are readily accessible. These include existing oil, unfound oil, coal, oil sands and trees. This makes about the 4th end of world scenario in just my lifetime but I may have forgotten a few. History is full of others.

 

[cute fuzzy bunny]

Oh dang it, nobody told you? The world ended 6 years ago and the lights have already been turned off and the doors locked. I'm sorry, but you will have to leave your purchases and exit the world.

Whoops...is this the transient thoughts thread?

 

[windsurf]

"We have several generations (at a minimum) of fossil fuels left that are readily accessible.  These include existing oil, unfound oil, coal, oil sands and trees.   This makes about the 4th end of world scenario in just my lifetime but I may have forgotten a few.  History is full of others."

But you're missing the point, or ignoring it.  It's not the end of the world; it's an era of accelerated change with uncertain outcomes.  Scientific concensus says we should try and mitigate our effect on the rapidity of the change.  The probelm is not finding new fossil fuels but using science to find alternatives to them. 

 

[samclem]

Posted by 2B
"We have several generations (at a minimum) of fossil fuels left that are readily accessible. These include existing oil, unfound oil, coal, oil sands and trees. This makes about the 4th end of world scenario in just my lifetime but I may have forgotten a few. History is full of others."

But you're missing the point, or ignoring it. It's not the end of the world; it's an era of accelerated change with uncertain outcomes. Scientific concensus says we should try and mitigate our effect on the rapidity of the change. The probelm is not finding new fossil fuels but using science to find alternatives to them.

- Well, the point (of the OP) was about running out of oil, not about climate change
- But, if it's climate change you're worried about, I think the challenge isn't prinarily one of science or technology, it is more fundamental--how do you encourage the development of energy sources with lower environmental impact (total) than fossil fuels? Or, maybe, "is it possible to use market forces to reduce the carbon burden in the atmosphere?" I don't think regulation is the answer, especially if the regs allow developing countries to add a lot of carbon and developed countries have to be cleaner. One of the ongoing themes here is the ongoing reduction in US wages as we increasingly compete with foreign workers in a global economy. If US factories/powerplants need to install expensive carbon reduction technology and other nations do not, we'll be even less competitive. I don't have an answer, but a market-based soluton seems like it might work best (e.g. some type of "carbon emission market" might work, if the playing field is level).

 

[2B]

- Well, the point (of the OP) was about running out of oil, not about climate change
- But, if it's climate change you're worried about, I think the challenge isn't prinarily one of science or technology,  it is more fundamental--how do you encourage the development of energy sources with lower environmental impact (total) than fossil fuels? 

1. I'm not convinced there is this impending disaster due to a dramatic shift in climate. I'm not convinced there is even a long term "warming" going on.

2. If there is, there is no data to link it to the use of fossil fuels which is a pathetic dribble in the world carbon balance. One of the key principals of statistics is that "correlation does not equal causation."

3. Back in the 70's we were causing global cooling by the use of fossil fuels. Obviously, that didn't pan out so we're going another route.

 

[jeff2006]

1.  I'm not convinced there is this impending disaster due to a dramatic shift in climate.  I'm not convinced there is even a long term "warming" going on.

2.  If there is, there is no data to link it to the use of fossil fuels which is a pathetic dribble in the world carbon balance.  One of the key principals of statistics is that "correlation does not equal causation."

3.  Back in the 70's we were causing global cooling by the use of fossil fuels.  Obviously, that didn't pan out so we're going another route.

By any chance, do you work for the tobacco industry?

 

[bosco]

- We'll never run out of oil. As the easy-to-get reserves are depleted, the price will go up, making it economicaly viable to go after the harder to get reserves.

As oil gets increasingly expensive, other energy technologies will evolve to take its place where it is economical.

There is a limit to this type of thinking. As oil gets more difficult to extract, it requires more BTUs (i.e. energy) to extract it. Once the required energy to extract the resource exceeds the energy obtained from it, then REGARDLESS of the cost, the game's over.

 

[samclem]

There is a limit to this type of thinking. As oil gets more difficult to extract, it requires more BTUs (i.e. energy) to extract it. Once the required energy to extract the resource exceeds the energy obtained from it, then REGARDLESS of the cost, the game's over.

Of course. And yet, if the government "helps" by distorting the market with subsidies, etc, they have the capacity to make the situation worse. For example--ethanol production using corn: Since this is the present environmental darling and favored by agricultural interests, we're producing ethanol now that requires just about as much oil to make as the # of BTUs produced. The situation will change if we can figure out an inexpensive way to produce ethanol from cellulose (which s largely a waste product). Plus, with the increased demand on corn, meat prices will rise (for those folks environmentaly hostile enough to consume meat ).

 

[kjpliny]

- Oil reserves are extensively studied by very knowledgable folks, and yet the estimates vary a lot.
- We'll never run out of oil.  As the easy-to-get reserves are depleted, the price will go up, making it economicaly viable to go after the harder to get reserves.  There's a tremendous amount of oil locked up in oil shale and tar sands right here in North America, this can be exploited when oil gets to approx $40 per barrel if it looks like it will stay at that level for awhile  (building the infrastructure to get the oil out costs a lot, and this industry has been burned before by prices that went down).

As oil gets increasingly expensive, other energy technologies will evolve to take its place where it is economical. 

Thought this was an interesting read...although it comes across as alarmist/doomerish, it answers most of the typical fallback theories with some data and analysis.

http://www.lifeaftertheoilcrash.net/

 

[2B]

Any budding authors out there? I might even jump on this one.

Do a history of "disasters" or "end of the world scenarios" that have swept through civilization. I've read about many in my readings but I never saw a single volume that talked about them. If done right, it would be funny and a revealing window into the human soul.

The Aztec's had a good one based on their calendar that they sacrificed untold thousands to avoid destruction but then it made them more easily conquered (and destroyed) when the Spanish did show up -- self-fulfilling! On the previous millenium (1000 AD) we had even more crazy stuff than Y2K. In the 1830s we had several mass gatherings waiting for the world to end. It was a major event that seems to have been lost to our history.

Fact -- We have a long, well documented history of climate change. As hard as it is to believe, we don't really control much about what happens to this planet on a macro level.

 

[rmark]

1. I'm not convinced there is this impending disaster due to a dramatic shift in climate. I'm not convinced there is even a long term "warming" going on.

2. If there is, there is no data to link it to the use of fossil fuels which is a pathetic dribble in the world carbon balance. One of the key principals of statistics is that "correlation does not equal causation."

3. Back in the 70's we were causing global cooling by the use of fossil fuels. Obviously, that didn't pan out so we're going another route.

Impendimg disaster is unlikely. Stopping the thermohaline flow into the north atlantic and cooling Europe incommonly mentioned, but this is driven also by wind and wave action, so unless weather stops, its not likely a serious problem.

Global warming is driven mostly by water vapor (95%), which is generally ignored by man- made global warming advocates, as opposed to carbon dioxide (3%), and other gases (2%). Its hard to blame man for the oceans.

I too remenber the cool chill from the coming ice age, with temperatures trending down between the 1940's and 1970's. We may simply be resuming the upward trend from the trough of the little ice age.

Somewhat like financial history, be wary of starting and ending dates of climate studies.

 

[unclemick]

Hmmmm

We humans are mildly arrogant as a species - tending to think it's all about us.

heh heh heh heh heh heh heh

 

[HFWR]

My thoughts exactly..... The earth will be here LONG after we're gone. Better to save the humans...

heh heh 8)

 

[2B]

Now on the plus side of global warming, climate change and mass disaster -- our SWR can be dramatically increased since we can be sure we won't live as long.