Ahh, wikipedia knows:
The "b" may have been doubled originally to indicate the plural (1 bl, 2 bbl), or possibly it was doubled to eliminate any confusion with bl as a symbol for the bale. Some sources claim that "bbl" originated as a symbol for "blue barrels" delivered by Standard Oil in its early days; this is probably incorrect because there are citations for the symbol at least as early as the late 1700s, long before Standard Oil was founded.
In the early 1860's, when oil production began, there was no standard container for oil, so oil and petroleum products were stored and transported in barrels of all different shapes and sizes (beer barrels, fish barrels, molasses barrels, turpentine barrels, etc.). By the early 1870's, the 42-gallon barrel had been adopted as the standard for oil trade. This was 2 gallons per barrel more than the 40-gallon standard used by many other industries at the time. The extra 2 gallons was to allow for evaporation and leaking during tranport (most barrels were made of wood). Standard Oil began manufacturing 42 gallon barrels that were blue to be used for transporting petroleum. The use of a blue barrel, abbreviated "bbl," guaranteed a buyer that this was a 42-gallon barrel.
That quote doesn't explain why the abbreviation was used about a hundred years before stabndard oil introduced the blue barrel, as claimed by the wikipedia quote in the comment you ansered to. In fact, your quote just reiterates the claim that wikipedia said was probably false, so to make your argument you should instead show that the citations from the late 1700s are wrong.
EDIT: This will be difficult, as it is quite easy to find citations for "bbl oil" from before 1850 using google books, the first I found was on p. 239 of a book called "Railway engines and cars" from 1832. So the blue barrel legend can be firmly laid to rest in peas.
Ha! The doubled b in bbl is likely an outmoded typographical convention - as in book citation p437, and also pp495-500. I like such archaisms but agree it's a bit confusing and inconsistent with other conventions - eg we don't talk of $5 bbn to mean five billions.
government intervention is of course a euphemism for rationing. Rationing creates shortages which in turn causes steeper rationing, with the result being the economy slows to whatever pace is consistent with the limited supply of energy. For the USA that looks to be a lonnnng way down from here.
Not just rationing. TFA talks about price controls, nationalization of oil companies, and even outright invasion of other countries to obtain "cheap oil".
Tax oil, subsidize renewables and nuclear construction (but not operation). That'll do a lot towards building in the incentives that are currently being lost to free-rider and tragedy-of-the-commons.
Renewable and nuclear power today, consume more energy in the making of them, then they produce (over 10 to 20 years).
Subsidizing them won't help - there isn't enough energy available.
If you take the long view, more then 20 years, the picture changes, but few renewables last that long. Only nuclear does.
But since no bank wants to loan money with a payout of longer than 20 years, nuclear doesn't get built. That's why they talk about loan guarantees for nuclear power.
There is no free-rider or tragedy-of-the-commons going on here.
> Renewable and nuclear power today, consume more energy in the making of them, then they produce (over 10 to 20 years).
I don't think that's true. [1]
> But since no bank wants to loan money with a payout of longer than 20 years, nuclear doesn't get built.
That's an oversimplification. There are numerous reasons why nuclear isn't being built, not the least of which are the various NIMBY and other environmental concerns, and the fact that things like Thorium reactors have yet to regain popularity due to the push for weapons-grade-yielding nuclear technology over the last several decades.
> Market demand for oil collapses (read: recession) long before it gets anywhere close to $500/bbl.
Above $80 a barrel, alternative fuels (such as liquid fuels from coal) becomes profitable. I sincerely expect that this will expand extremely rapidly in the next 15 years.
When demand becomes tight, the price driver is not so much the cost to produce as it is the rate of production. Can we produce five or ten million barrels of oil-from-coal a day? Can we replace a two or three percent annual drop in oil production rates through some combination of conserving and replacement without recessionary demand destruction? I'm not so sure.
We'd switch to more mundane substitutes long before oil got to $500/bbl.
Just the spike to $130/bbl in 2006 saw people switching away from SUVs to Priuses in droves. If that were sustained for any length of time, everyone would be driving a plug-in hybrid to work. The technology exists today, and the production capacity would ramp up pretty quickly.
If every switched from a 20mpg car to a 50mpg car where the first 100 miles of each trip was free, it'd more than make up for anticipated oil production declines over the next 50 years.
That might work if the developed world was driving the increase in fuel consumption, but that hasn't been true for quite some time. North American oil consumption is already going into decline, but global demand pressure is coming from the developing world - China, mainly, followed by India - as well as all the oil-producing countries with nationalized industries and artificially low domestic prices (Venezuela, most of the Middle East).
Those consumers will not be buying plug-in Priuses; and with consumption growing rapidly in the oil exporting countries, once they pass their national production peaks their export rates will decline faster than their own production rates.
They have the same price constraints that the developed world does. If oil goes up to $500/bbl, we'll see one of three things happen.
1.) They'll substitute more efficient yet more expensive cars for gas guzzlers, as the TCO of a gas guzzler goes up.
2.) Efficient, cheap, yet small cars will start being developed for emerging markets. (This is already happening a bit - consumers in Beijing tend to drive much smaller cars than consumers in Houston.)
3.) They won't buy cars at all.
There's no innate reason beyond price why consumers in developing companies can't buy plug-in hybrids. And if price is the governing factor, they simply won't buy cars as well. Either way, it puts downward pressure on oil demand and hence serves to limit prices.
the price driver is not so much the cost to produce as it is the rate of production.
Neither of these are ever what determine the price. Price is determined by the intersection of what buyers are willing to pay and what sellers are willing to accept in payment.
Now, the cost to produce, as well as the production rate (in relation to the consumption rate at a given price) may well feed into the seller's decision about what they're willing to accept. But that's a second-order effect. Sellers charge what buyers are willing to spend. They'll make more of it if there's a good profit to be made; if nobody will pay very much, they'll invest their money in producing something different.
The price that a buyer is willing to pay is influenced by how important is the goal for which he wants to use the product, but also how readily he use an alternate product in substitution for this primary one.
Thus, he may be willing to forgo the purchase of a vacation trip, because it's just not worth the money.
He might also, in the longer term, substitute different goods. So in a longer time horizon, he might change jobs to one that allows him to telecommute, in order to circumvent gas prices. Or car manufacturers might see that they themselves are having trouble selling gas-guzzlers, and change production to alternate-fueled cars, like electric (whose power is ultimately generated by coal or nuke), or maybe engines fueld by natural gas, or something.
So in the big picture, there are many safety valves allow this pressure to be dissipated.
And resources such as natural gas are at very low prices right now, due to recent development of huge deposits such as the Marcellus Shale. In the medium-to-long term, I think that substitutability between oil and natural gas would go a long way, once oil prices get to a point where oil looks less attractive.
While I'm not entirely unconcerned, I don't think there's any reason to panic.
It could certainly get to $500/bbl, but it's unlikely that it would. Before reaching this point, it would have wrought misery on the world economy, as you've described (and "recession" is an understatement).
“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” Sheikh Yamani, Saudi Oil Minister, 1962-1986
My prediction, is that like before, science will solve the problem and this will all disappear into the memory. Man's capacity to wipe itself out is far outpaced by it's ingenuity to sustain itself.
b) Demand destruction doesn't preclude $500/bbl crude, it just means that when oil hits $500 there won't be nearly as many products that are dependent on it.
I got pretty into peak oil circa 2006, when peak was supposedly already occurring or was going to occur by 2008. It will happen eventually, but I'm not going to get into playing this guessing game again.
Demand has been lower due to the global recession -- there is no indication that oil production can't go higher than ever before, once demand starts picking back up.
Which has the higher bound -- the amount of oil we can pump out of the ground in a given day, or the demand for that oil given that we have 1 billion new members of the middle class over the last 25 years alone?
Wrong question - 25 from years from now, our aggregate energy needs will certainly have increased, but we will have had ample time to adjust for the decline in oil reserves by substitution and per-capita demand reduction, which is relatively elastic over longer terms.
If we wanted - and anyone who questions the existence of political will is right to be worried - we could replace our oil fuel use almost entirely over that timespan with nuclear power. I know, there's a peak uranium issue as well.
On the other hand, Europe and the US now find themselves awash in natural gas, which is a pleasant reversal of where we expected to be a few years ago; and renewable power generation is becoming price-competitive and deployed in sufficient volume to yield economies of scale, so we can reasonably hope for that trend to continue over the next 25 years too. I don't think we need to resurrect Thomas Malthus just yet.
The political will issue is a tough one, since 45% of the electorate is adamantly opposed to any attempt by government to alter the incentives in play on principle. That means we need perfection from the remaining 55%. I'm not holding my breath.
And what do you think triggered the global recession, if not an oil price that spiked to an economy-busting $147/bbl in the two years after production peaked at 85 mbpd?
Ummmm... I kind of thought it was the combination of a US housing bubble in combination with poor risk management in the financial industry particularly respecting mortgates.
In many ways it was a final inflation of the bubble, as profit-takers getting out from a structurally unsound housing & CDO market looked for somewhere to park their excess cash and found a delightfully under-regulated exchange on which to do so. A great number of the oil future contracts were traded on an exchange called ICE, which had managed to set itself up in such a way that both US and UK financial regulators each thought the other was supervising it, when in fact neither were. It's a rather convoluted story that hasn't really been told yet, as it was overshadowed by subsequent events. the reasons I don't think it directly caused the full-scale market collapse are that a) no big banks got massively exposed to the oil price inflation - they could see it was speculative, and it inflated and popped so quickly that they never structured their positions around it; and b) the subprime market and all the other distortions (zero down, stated income, etc.) were already looking ropey by then.
Soaring oil prices might have pushed a few consumers over the edge into mortgage default, but even if that hadn't happened I think the market would have imploded within a few months of the 2008 election anyway. Recall that Bear Stearns had to put up $3.2 bn to rescue its two hedge funds in June of 2007, and Merrill Lynch's inability to sell more than about 12% of the CDO assets it seized was the first clue (for the public at large) that the financial industry had a systemic rather than a localized problem - and this was almost a year before the oil price spike. By the time that occurred, the stock market was in decline, Bush had already administered a $145 bn stimulus (remember that $800 tax rebate in 2008?), Bear had collapsed, the NY Fed had underwriting their acquisition by JP Morgan to the tune of $25 billion. So our economy was already in poor shape by March of 08, which was when oil prices suddenly took off like a rocket. At the time, I wondered if the sudden rise was in response to the structural weaknesses in the US and European economies, which shared both enormous housing booms and huge amounts of counterparty risk: it seemed as if traders were looking at oil as a substitute currency (energy is a much better candidate for solid money than gold) and using it to impose a sort of reverse devaluation of the dollar and euro. With hindsight I don't really think so, though - it was a simple pile-in rather than the dawning of a new economic concept.
BTW thanks for that CIBC paper you linked to below - although I don't quite agree with the 'big picture' analysis it's still a great read.
You know that 100 years ago people were panicked about peak coal. And "experts" (mostly environmentalists who have an agenda against industrial society) have predicted peak oil every ten years for the last 60.
I think the Internet will do a lot to lessen the effect of this when it does happen. People who can work from home probably will, when it costs a quarter to half your days wage just to make it to work it will offset any benefit you get by having a team in the same building.
Also online distribution, things like books might become prohibitively expensive in the physical form and drive everyone to ebooks, all creative products really.
But the electricity powering the Internet is also somewhat oil-based, depending on exactly what fuels you local plant runs.
It may not impact the individual homeowner, but the costs of the data centers and network providers will increase alongside oil prices.
True, without any specific knowledge I would guess that power online services would still be more economical than revering back to an offline business model. Sure the costs will go up but freighting costs will go up more.
It depends entirely on pricing. Most "coal" plants switch between coal and natural gas based on current market trends. And even if coal is burned, the fuel to get the coal to the plant is petroleum-based.
There are a lot of complexities involved. Of course, working in the natural gas industry, I only have limited knowledge. :)
I would like to see some sources for the "more than 100 years of oil left" claim. If it's at all based on 'public reserve levels' declared by oil producing countries, those are basically totally fabricated.
I wouldn't be so confident about naming a particular ceiling price, but as oil becomes more expensive demand will fall and individuals and industries will move to other sources of energy. In particular within the next 5-10 years it looks as if electric vehicles are going to be a growth area, mainly driven by rising costs on conventional fuel.
The price of electrons is not necessarily linked to oil production, since electrons can be produced in ways which don't require much or any oil.
There are other eminently practical energy sources available. The main issue is that these have historically not been price competitive with oil. As oil extraction becomes more difficult the economics of energy will change.
I don't think you realize how interconnected, and interchangeable all forms of energy are. Not being price competitive with oil means it costs more energy to make then it produces.
If something made more energy than it costs to make it (over 10 to 20 years), then it would be built. Why not build it? It's guaranteed profit.
But, in actuality there isn't anything like that. Every single form of energy is being tapped to the maximum possible. It's the nature of capitalism.
If the price of oil went up, the price of everything goes up. If the price of raw materials goes up, it costs more to build some alternate form of energy, so you get nowhere.
The idea that capitalism is either a natural or optimal system doesn't stand up to much serious scrutiny. If you're referring to "cost" in terms of energy cost then yes there is always some amount of energy which needs to be put in to get energy out, with the result being the net energy gain.
For other forms of energy, such as bio-fuels, the net energy gain is presently smaller but this does not invalidate these technologies. As the complexity of extracting oil increases its net energy gain will reach parity with other energy sources, and then begin to lag behind them. The economy - with all its foibles - will eventually back the winners out of pure necessity.
Your Qatar and Japan examples, at least, make his point: the complexity of those cultures reflect the resource conditions in which they developed. Not sure about Venezuela. Japan, in particular, was the only place in the world where hunting and fishing could support large settled populations, if I remember my Jared Diamond correctly.
Japan, in particular, was the only place in the world where hunting and fishing could support large settled populations
Louisiana was more productive than Japan for wild fish and fowl. (Largely destroyed now by bad planning, pollution, and man-made environmental disasters)
No one with any credibility actually believes he can forecast the price of oil.
Oil is very inelastic in the short term, which is why small drops in supply lead to massive price increases. The long-term effect of unavailable or expensive oil will be "demand destruction"-- many of those who currently use oil will either move to alternatives or go out of business-- and political fallout with unpredictable results.
You can manufacture oil for around 100$ a barrel from coal. So the chances for inflation adjusted oil above 200$ / barrel lasting for more than a few months within 50 years is tiny. The best way for current suppliers to maximize profit is to occasionally spike prices, and then drop them before alternatives start to diminish demand.
What are the inputs into this manufacturing process? The $100/bbl figure is meaningless, unless we know what the specific inputs are and how stable their prices and availability are. Energy of some sort is obviously a major input, and it's unlikely that oil will spike without having a similar effect on the overall energy market.
So the fact that oil could be manufactured from coal at $100/barrel now doesn't mean that we'll be able to do so when we need it most.
The input is energy, and it costs $100/bbl to do it, and the energy comes from coal. All the catalysts etc needed are reused, so availability is not a serious problem.
Of course as the price of oil goes up, the price of coal goes up too, so the dollar amount goes up as well. But if you need oil specifically because it's liquid, then oil's price will go up more than coal, and eventually it will become worth it to use coal. We came close last year - they even started test projects in Pennsylvania.
And we have a LOT of coal. Centuries worth. And liquefaction is not even a serious environmental hazard (like burning coal is) because all the heavy metals are refined out.
"Energy of some sort is obviously a major input,..."
Unless, of course, the chemical process that converts coal to oil is exothermic, which is not impossible in principle. In this case, the energy conversion efficiency would be less than one, but it still might cost less than changing the oil-based infrastructure so that it consumes coal directly.
Whatever happened to that "thermal depolymerization" process, where scrap turkey guts, etc., were being turned into oil and other stuff?
Several years ago I think I read that a pilot plant was being built that was (IIRC) technically successful but ran into problems with smelly emissions.
"...He says the first generation of depolymerization centers will be up and running in 2005. By then it should be clear whether the technology is as miraculous as its backers claim." However, as of August 2008, the only operational plant listed at the company's website is the initial one in Carthage, Missouri. Changing World Technology applied for an IPO on 12 Aug 2008, hoping to raise $100 million. The unusual Dutch Auction type IPO failed possibly because CWT has lost nearly $20 million with very little revenue. CWT, the parent company of Renewable Energy Solutions, filed for Chapter 11 bankruptcy. No details on plans for the Carthage plant have been released.
...which doesn't tell us as much about the technical aspects as it does the business. It may all be tied up in the break-even point for the process, and the amount of government subsidies they've found.
People investing in futures do this every day, and some of them are most certainly credible. Southwest Airlines, e.g., seems to be pretty good at saving a buck with aviation gas futures (though that is a step removed from crude oil).
People investing in futures do this every day, and some of them are most certainly credible.
If it were possible to do significantly better than blind luck in speculation about future prices then there'd be nobody around to take the other side of the contract.
Speculators usually earn a premium over what they would get via blind luck. If they didn't, there would be no speculators.
The reason why trades occur at all is that not everyone is a pure trader. Hedgers (e.g. Southwest) trade futures to reduce business risk rather than to make money. They tend to make a net loss on trading but earn back a greater amount of money via their core business.
There's a difference between buying futures (which may or may not pay off) and reliably predicting the price of oil.
Also: Southwest buys fuel futures to hedge its exposure, which is different from speculation. People hedge because they don't know what the price will do, and want to be OK regardless of price movements.
I keep hearing about how hyperinflation is about to hit. Surely in an efficient market, if this was truly likely, its effects would already be being felt? What is the rationale behind its prediction?
Monetization of massive US debt, particularly due to the present value of the future liability of social programs. If current spending patterns don't change, monetization is the only alternative to defaulting on Treasury obligations, unless we begin cutting programs (ex. military spending) to help fund those liabilities or reduce those liabilities by reducing social program benefits.
Given what just happened in the RMBS and CMBS market, it's hard to claim that we live with an efficient market, particularly with respect to long-term trends.
Ahh, wikipedia knows: The "b" may have been doubled originally to indicate the plural (1 bl, 2 bbl), or possibly it was doubled to eliminate any confusion with bl as a symbol for the bale. Some sources claim that "bbl" originated as a symbol for "blue barrels" delivered by Standard Oil in its early days; this is probably incorrect because there are citations for the symbol at least as early as the late 1700s, long before Standard Oil was founded.