Via press release: a forecast study of investor patterns from UC Davis.
Stock prices suggest a 90-year gap
At the current pace of research and development, global oil will run out 90 years before replacement technologies are ready, says a new University of California, Davis, study based on stock market expectations.
The forecast was published online Monday (Nov. 8) in the journal Environmental Science & Technology. It is based on the theory that long-term investors are good predictors of whether and when new energy technologies will become commonplace.
“Our results suggest it will take a long time before renewable replacement fuels can be self-sustaining, at least from a market perspective,” said study author Debbie Niemeier, a UC Davis professor of civil and environmental engineering.
Niemeier and co-author Nataliya Malyshkina, a UC Davis postdoctoral researcher, set out to create a new tool that would help policymakers set realistic targets for environmental sustainability and evaluate the progress made toward those goals.
Two key elements of the new theory are market capitalizations (based on stock share prices) and dividends of publicly owned oil companies and alternative-energy companies. Other analysts have previously used similar equations to predict events in finance, politics and sports.
“Sophisticated investors tend to put considerable effort into collecting, processing and understanding information relevant to the future cash flows paid by securities,” said Malyshkina. “As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate.”
Niemeier said the new study’s findings are a warning that current renewable-fuel targets are not ambitious enough to prevent harm to society, economic development and natural ecosystems.
“We need stronger policy impetus to push the development of these alternative replacement technologies along,” she said.
Additional information:
Full text of study, “Future Sustainability Forecasting by Exchange Markets” — http://pubs.acs.org/journal/esthag (paywall)
How stupid are these people? The reserve of oil will increase as the price goes up. They don’t know when it will run out. Other alternative technology may be available in 10 years or next year for all they know. It doesn’t explain the 90 year gap like they know how long it would take to develop alternatives. It is so stupid that it is hard to believe that it isn’t intentionally misleading. I guess they don’t understand the concept that necessity is the mother of invention or how free market economies work.
“To assess time T when technological innovations are likely to appear, we apply advanced pricing equations, based on a stochastic discount factor to those traded securities whose future cash flows critically depend on appearance of such innovations. […] This formula gives T ≈ 131 years for replacement of gasoline and diesel.”
I wonder what time constant these advanced pricing equations would give for the replacement of traditional telephone networks by a packet-based network if applied to prices of publicly traded securities in 1920.
This kind of madness surely belongs to the not even wrong category.
[What was the stock in cell phone companies worth in 1980? 1990? 1995? 2000? 2005? Robt]
Be afwaid . . . be vewy, vewy, afwaid.
At the current pace of research and development, global oil will run out 90 years before replacement technologies are ready, says a new University of California, Davis, study based on stock market expectations.
That’s okay, it was expected to run out 100 years beforehand due to Green obstructionism and NIMBY syndrome preventing construction of the facilities that would have made the replacements for fossil petroleum.
If oil ran out next year, I wouldn’t be stuck, and neither would you. No new technology is needed either. We have enough natural gas to last … depends on how you count it but it is a rather long time. The conversion for an automobile is a tad expensive. On the other hand, if the price of gasoline doubled or tripled, I would save money doing the conversion. (My wife drives way less than I do and converting her car might not pay off.)
Yes, I realize that the cost of natural gas would go up if we suddenly ran out of oil but it is really plentiful and it wouldn’t take much price increase to bring a lot more reserves on line.
Yes, I realize that all of the above is hypothetical because we aren’t going to run out of oil very soon. By the time it becomes a problem, NG and dual fuel cars will become available at a reasonable premium over gas models.
Guys,
Are you missing something here? The authors’ method for projecting fossil-fuel runout and the gap before other forms take its place is INVESTOR SENTIMENT?
What investors think right now is based on their analysis of the opportunities and may include anticipation of what other investors may do, aberrations due to the economy, how they liked breakfast this morning, etc. To suppose that they can anticipate the effects of supply and demand far into the future is NUTS.
Is there no limit to this craziness? Or maybe the review above isn’t accurate.
What the study actually says is that today’s expectations are that such gap will occur. But today’s expectations are often wrong. By 1870 some eminent scientists were (wrongly) predicting the end of coal, and nobody forecast the appearance of oil or the widespread difussion of electricity. Nobody predicted personal computers.
If only the authors had limited themselves to say that they found investors BELIEVE certain things to happen in the future, instead of going as far as suggesting that those things WILL actually happen. The latter tells you something about future reality, which nobody knows and they didn’t investigate, while the former just tells you something about investors’ current beliefs and behaviour, which is the actual subject matter of the research.
If there is a price for the biggest piece of garbage ever written, they have just earned it.
I enjoy reading nonsense conclusions such as this article reaches. Makes me real sad, though, seeing all those tax dollars being spent on university educations. And those that make such statements wonder why the people who actually do real stuff for a living, as most of us do, look sideways at ‘epidemics’ and understand why places of learning are frequently built on hills outside of town – so they are safe from the citizenry!
“market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate.”
Except when they aren’t. Sub-prime mortgage, anyone?
There really should be a “truth or consequence” associated with academics who engage in spouting scare stories. I can think of a bunch of appropriate penalties….
Same thing happened when we ran out of whale oil for lamps.
I don’t know how to post a chart. However, anyone can plot known oil reserves against annual production (the data is available from the IEA or BP) and they will find that the known reserves to production ratio has fluctuated around 40 years for well over half a century. This factoid illustrates a fundamental truth: companies don’t invest in developing reserves until they are reasonably sure there will be a market for those reserves.
Absolute nonsense. I know I have said this before, but we have methane hydrates off shore that can supply thousands of years of energy. We have pipeline companies that can carry gas all over the US. The only thing we need to do if necessary is retrofit vehicles and build dispensers for the gas. I use natural gas for heating so they could put one at my home and change me for a total bill of heating and driving. Silly people.
Investors do not think 90 years out. This really stretches reality.
This should be interesting considering the Russian input which indicates that oil and gas are largely NOT fossil, but from much farther below, and constitute a renewable resource that is more prevalent than previously thought, coming up from below all over in effect. That would explain why my brother-in -law is drilling in the Midwest and finding gas everywhere and they are currently finding ridiculous amounts under West Virginia.
By the way, I now believe that the reason that our social justice leader canceled our moon plans was because the goal was to develop and retrieve helium-3 from the moon to allow viable fusion power. The race is on to see who controls the most valuable energy resource and he took us out of the race, with the general idea that he does not want us to be dominant or to prosper more than others. So, he thinks we need to be a second class country.
Currently accepted theory for the origin of oil is oceanic microorganisms in shallow seas. Most of the oil we’ve been tapping is only about 100 mya old, or less. Sedimentation started about 2.8 gya, so there is a lot of oil left to find..
If EBI is right, algae biofuel will at least need ten years to be economically competitive, allow thirty years for complete industrial scale rollout, and we’ll be off of petrochemicals in about 40-50 years.
So how much did this drive the oil prices on the market?
Another blow for pseudo-intelligence.
Few academics seem to understand markets, even fewer “liberals”, and then there are “progressives”, who are so steeped in hatred that they prefer equality in poverty to success of the productive, and thus are blinded to every reality in this issue.
As already indicated in posts above, there are many substitute sources of energy and enhanced techniques for production of current sources. The market will price each source competitively according to scarcity and demand. When the price for a source rises above breakeven (income greater than costs of production and distribution) that source will be exploited. We will never run out of energy if the government allows the market to work.
There are practically infinite quantities of oil, gas, coal, nuclear, solar, wind, geothermal, tidal, and who knows what other potential sources of practical energy out there, each with its own ‘supply = demand at a price’ equations, equations that interact with each other in such complexity that, like climate, the energy is a chaotic system beyond the ability of academics, bureaucrats, and other pseudo-intellects to understand and predict.
Ha ha ha! This study seems to say – ‘the market knows best’, but the author then goes on to say – the solution is to DISTORT the market? I mean – really.
Let me tell you – there is a HUGE incentive for an entrepreneur to create the worlds next energy source. It doesn’t need to be mandated by Government….
Once again the price mechanism is totally ignored.
As supplies dwindle, demand pushes prices and supply investment up.
When supplies finally start ramping down, the price increases will lead to voluntary rationing and more innovation and investment in alternatives than Debbie and Nataliya could ever hope for.
I’d also note that many alternate technologies, such as tar-sands and coal-to-gas, won’t get any significant investment while the long-term average price of oil is cheaper. What kind of fool would spend billions of dollars to build a plant that can only operate at a loss?
Frederick Davies 8:35am:
“Another bunch of idiots asking for more money!”
There’s nothing idiotic about asking for money – the idiotic bit is how we’ve allowed our money to be given to them. Best wishes, Dave.
Well somebody better turn out the lights then; because silicon solar cells probably won’t be economically affordable when oil reaches those astronomical levels.
The most annoying thing about having the oil run out; is that to replace it you need sand; lots of sand to make all those solar cells.
Guess who’s sitting on all the sand ?
I saw what purported to be a NEWS bulletin over the weekend; that said that Thorium was the answer to all our energy needs; a piece the size of a ball mouse ball had as much energy as a ton of Uranium; and who knows how many million tons of coal; and it is “almost impossible to make a bomb out of Thorium.” Hey they said it; not me.
Then the pretty NEWS reporter turned the discussion over to an actual Nuclear expert; and he said it is “almost impossible to make a reactor out of Thorium.”
Well you get the idea; hey maybe we can import oil from the moon or Mars; come to think of it we haven’t discovered any dinosaurs there yet.
Hey I don’t know when the oil is going to run out or if it is; but I AM in favor of not wasting it; and also in researching all other CREDIBLE sources of energy.
Water and CO2 are NOT sources of (chemical) energy.
BravoZulu said: “I guess they don’t understand the concept that necessity is the mother of invention or how free market economies work.”
So very true. In every case as resources for particular applications have become too expensive to use any more, we have always found replacements or an alternative strategies to do the same jobs.
With our computing power ramping up and our technology exploding logarithmically, solutions will be coming ever more rapidly. It is truly ingenuous to pretend that we will keep on doing something the same way for very long – we never have and never will.
Overall, there is a segment of the population who hates change. They want to learn something once and relaxt. The concept of having to keep learning and adapting to change all of one’s life scares them, as it means they have to actually do it, and is repugnant to them.
Back in the agrarian era, we were on the flat part of the technology curve, with changes still occurring, but slowly. One could spend their entire life farming and experiencing little in the way of change or progress. In the last 200 years we have clearly left the flat part of the curve and more recently hit the high steep part of the curve—we will see as much change in the next 5 years as we did in the last 10 years.
These predictions are meaningless.
Love the cartoon! Apeakolypse Now That is hilarious! Almost as funny as the study!
Using what market investors have done historically to determine/predict the timing of practical/usable, profitable technology? Is it possible there is a less productive use of ones time? No, not even in academia. If this was paid for with taxes, I want my money back!