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The Forum > Article Comments > What is the 'Road to Recovery'? > Comments

What is the 'Road to Recovery'? : Comments

By Julie Bishop, published 23/8/2012

The global economy continues to be fragile despite massive government intervention in the form of stimulus, bailouts and increased banking regulation.

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Arjay, imagination is the operative word here. To believe that there is endless energy to maintain current levels of energy consumption requires "the willing suspension of disbelief."

How exactly will gas take over from oil (apart from in power generation)? Gas provides power generation, ethylene for plastics, fertiliser and a very small fraction for transportation fuels such as CNG. It isn't a mainstream transportation fuel. There is hardly a major transition being made to CNG cars nor is there the infrastructure in place. Whilst yes theoretically this transition could take place we are talking about a timeframe measured in decades for it to have any real impact (where is the $$). Gas (and Coal) to Liquids is a very expensive proposition.

Hence why I focus so heavily on oil, it is the limiting factor (Liebig's law of the minimum) currently for the global economy and will put an upper limit on any economic "recovery."

Organisations such as the IEA now talk about all liquids production rather than conventional or crude oil production. Virtually all of the statistically insignificant increase in liquids fuel production since 2005 has come from liquids other than conventional oil, which has reached a prolonged plateau. These other liquids are inferior to oil in their energy density (eg ethanol and Natural Gas Plant Liquids), energy return on investment (biofuels and NGPLs) and scalability (all of the alternates).

It is not courageous to believe in wishful thinking. It is courageous to understand that the current organisation of society is heading to a torrid time so to start developing alternative ways of meeting humand kinds needs!
Posted by leckos, Friday, 24 August 2012 5:54:56 AM
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Hasbeen - obviously you have not listened to or read anything by Art Berman either! Do so and you will understand why gas prices are so low despite the fact that shale gas wells are relatively unproductive (short production life, high initial cost). Go on - challenge your preconceptions - do it!

And ocean acificication is about chemistry, not physics. And it can be measured. They were already talking about it in the news back in 2003.
Posted by michael_in_adelaide, Friday, 24 August 2012 9:26:56 AM
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The road to recovery lies in thinking outside the box. Doing what you've always done and expecting a different result is madness!
Austerity is not the answer.
They all have central banks, which are at least allegedly owned by the people. They retain the power to lend to themselves at 0%? Or write off debt, or buy each others bailout bonds, at very basic rates. [Social credit?]
The size of the total debt is no longer important; but rather, how can we once again grow the global economy so as we can begin to draw down debt.
Others are right on the money, when they say energy and its over pricing, kick-started the current economic malaise. Others tried and failed to compensate, for overvalued energy, [$87.00 a barrel, was the tipping point,] with the overvaluing and over-leveraging of assets?
Those banks that participated in creating illusionary wealth, or kick the debt can down the road via the creation of basically worthless derivatives? Are now basically bankrupt; and, must be first broken up, with those parts still solvent, allowed to continue to trade to see if they can trade their way out of trouble.
The rest have to be allowed to fail and or fall over.
Energy and its cost is still part of the problem, and an anchor that is continuing to hold back any real recovery or improved economic activity/outlook.
They/we need to break the hold of oil and energy cartels, with much cheaper, and or, endlessly sustainable alternatives.
Starting with the conversion of all biological waste into clean green energy and increasingly expensive soil conditioning organic fertilizer.
Just this much, would demand increased manufacturing, jobs, incomes, larger tax receipts/discretionary spending etc/etc.
Which if given sufficient initial impetus, would snowball.
As long as we produce biological waste we can convert it into energy.
And at least enough to power, cool and heat our homes.
Algae farming is also another source of oil/future energy, and a way to, break up the cartels, force them to once again compete for market share; and, impose downward pressure on energy prices.
Rhrosty.
Posted by Rhrosty, Friday, 24 August 2012 11:56:57 AM
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It is quite likely that those who try to use the tired old "continuous growth" model for recovery will just go broke doing it. Eventually we produce far more than the world wants and can afford to pay for, by borrowing much more than we can afford to service and repay. By lowering our expectations, waste and spending but encouraging governments to bring infrastructure up to standard , funded by long term borrowings we have a good chance of slowly recovering. Boom times like these just lead people to lose their homes and businesses when the bubble bursts as it always does.
Posted by Voterland, Friday, 24 August 2012 2:02:00 PM
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Michael, when the facts change I change my mind. I certainly believed that peak oil was an issue, but it isn't now, not if you look at the spectrum of hydrocarbon fuel sources. For every expert you cite there are dozens that disagree. Citations are not a fruitful way to conduct an argument.

Hasbeen is quite right. The reason that BHP had to write down gas assets is because there is so much of it around that the price has collapsed. Because it is expensive to transport the world market for gas is not homogenous in the way that the oil market is, so you can get higher prices selling it into Japan, and at the moment China. The Chinese are likely to have huge gas deposits too, so how long Australian natural gas will trade at the prices it does is anyone's guess.

I'll take the market signals before your experts' opinions on this issue.

As for peak oil causing the GFC, I myself argued that high oil prices were having a dampening effect on economies and that therefore interest rates could be set lower than they were being set, but that doesn't mean the oil price, which is a separate issue from peak oil, caused the GFC.

The GFC was caused by an overstretched credit bubble bursting. The inability to keep expanding credit was the major issue, not the increase in some prices.

If oil prices had caused the GFC you would have expected mortgage defaults to happen before the GFC but they actually tended to happen after. Without mortgage defaults I can't see what your mechanism for transferring oil prices into the financial crisis is.
Posted by GrahamY, Friday, 24 August 2012 6:18:40 PM
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Graham, I have been following the peak oil story since 2005. In that time I have conducted a major review of whether my opinion was supported by the evidence or I was just convincing myself that it was a major problem probably a dozen times or more.

What we can safely say is fact are the following:
1. Global oil discoveries peaked in the 1960s and have been in long term decline since.
2. Since the 1980s we have consumed more oil each year than we have discovered.
3. A large and growing number of countries appear (barring some major new discoveries) to be past their peak oil production.
4. The energy return on investment is showing a major long term decline.
5. Oil exports from oil exporting nations have been declining since 2005 and show no sign of reversing.
6. Despite the significant and sustained rise in oil prices over the last decade oil production increases have been statistically insignficant since 2005 (a couple of per cent rise).
7. Most optimistic predictions of oil production growth have proven to be inaccurate and/or been down graded.
8. Most major new developments (Thunder Horse, Brazil's deepwater, Kazakhstan) have taken longer to develop and been more expensive than planned and underperformed production wise.
9. Decline rates are generally agreed to be around the 4% mark and expected to increase over time meaning more and more new production is required just to maintain current production.
10. The alternatives are inferior to crude oil on a net energy basis (thanks thermodynamics!) and produce less useful energy for the economy than crude oil.

More to follow
Posted by leckos, Friday, 24 August 2012 9:31:28 PM
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