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)
Some awfully silly ideas expressed above.
One character thinks that since oil production has leveled off in recent years this is proof that “peak oil” is here. As though the oil industry should be pumping unmarketable oil from the ground into endless storage capacity.
Another thinks that human industrial capacity is somehow maxed out and that we could never muster the wherewithal to increase infrastructure. As though China is going to soon quit manufacturing pipes and ships.
As many commentators above have noted, energy of many types is not only abundant but our technologies for producing them, especially oil and gas, are making them less costly to produce.
One important element has not been commented upon; the price of oil has been set by what the market will bear, not by an operational supply and demand relationship.
Over the decades oil pricing has shifted from administrative, to cartel influenced, to manufactured strategic glut, to manipulated speculative bubble.
The cost of current marginal production is well below the current market price of oil. This shows that production capacity is being withdrawn so as to maintain higher prices.
There simply is no energy “crisis” at all.
Here’s an economist’s take on the question:
The Recurring Myth of Peak Oil
http://alethonews.wordpress.com/2009/12/03/the-recurring-myth-of-peak-oil/
Just posting again because I forget to check the Notify box. Sorry.
Amino Acids in Meteorites says:
November 9, 2010 at 8:16 pm
Freeman Dyson is a great scholar, though a “lukewarmist” octagenarian with a relatively open mind, but his is not the last word on AGW or futurism. His focus recently has been on removing CO2 from the atmosphere, whereas many scientists, in increasing numbers, have turned this premise on its ear, asserting that we are CO2 starved compared to an optimum environment. He is not open to this side of the issue, at all.
In spite of his overall position, that CO2 is a threat, his agnostic stance on oil abundance vs. peak oil speaks volumes. I suspect, as he is a physicist with a thorough knowledge of thermodynamic processes, that he skews his agnosticism toward the abiogenic oil position, simply because if it were not plausible, he would be able to state that without equivocation.
Anyone ever read History books! When Adolf Hitler”s oi8l supply was cut off, the Germans made synthetic Gasoline from coal (The totally politically incorrect black chunks of carbon dug out of the ground.) Long before the oil runs out there will be an abundance of ways to make it
So it takes 90 years to start converting coal to oil?
Funny. The Germans did it in less than one.
Are we less capable technologically than Germany during WWII?
Did none of these “experts” and “professors” behind this “study” know about this?
Stuff like this makes me wish the college bubble would pop. I would like to see all college related government spending, assistance, and aid withdrawn. I would like to see the law changed so that all student loans past, present, and future could be discharged in bankruptcy. And I would like to see professors working at McDonald’s or standing in soup lines.
There is so much idiocy and wasted time and money in higher education that we could close half the schools and fire 3/4ths of the professors and the country would be better off.
Let’s make it so simple that even an “economist” can understand it.
1) Oil hit $147.00/barrel in 2008, and crashed the global economy.
2) We don’t have any more oil now than we had then.
stephen richards says: November 9, 2010 at 8:30 am
“and how many reports have we seen like this since the ’60s….”
Well Hubbert predicted US oil production would peak about 1970, that was a pretty good ‘guess’. No matter what you think the consequences of peak oil are, we are almost certainly near/on the production peak now. As pointed out even with new reserves being found there is a limit to how quick you can get it out. It is a lot easier to dig down a few metres in Texas than drill in miles of water in the Atlantic (EROEI again).
Anthony Anthony Anthony..
How can you be an oracle of common sense on the global warming issue.. and yet.. be ‘just another alarmist‘ on the oil issue?
On a previous post I have asked that you look into this issue so that that ridiculous phrase ‘fossil fuel’ could be at least be used with an asterix on your site.. but here you are being a drama queen over nothing.
But just because we will never run out of oil.. that doesn’t necessarily mean that we should continue to use it.
Just because we can.. doesn’t mean we should.
So as for alternatives.. Zero Point Energy is a fact.. I have seen lectures in universities about this subject.
Cold Fusion is a fact.. they have had conferences each year for over 10 years on this technology.
Energy from sea waves is also another fantastic option.. especially for coastal cities. (most big cities are coastal anyway)
Please let this site not become just be a one trick pony.. please let the site grow and learn so that all of us that have enjoyed the intelligence of this site can continue to enjoy it for many years to come.. thanks
PS.
Thomas Gold’s website as it was before he died.. and before Cornell took it down.
http://trilogymedia.com.au/Thomas%5FGold/Thomas%20Gold.htm
It is supposed to be here too.. but I cannot access it due to the robots.txt file apparantly.. can anyone else see it?
http://web.archive.org/web/20021004123112/www.people.cornell.edu/pages/tg21
I’m 58 years old and my memory tells me that this peak oil theory has been banded about since I can remember. End of society had been predicted for 1970, then 1980, then 1990………
There are two types of people: The optimist and the pessimist. I bet it was the optimist ape that went down of the tree and started walking upright and I bet it was the optimist who went out of the cave and discovered the world. The optimists are always discovering things while the pessimists are watching fearfully, afraid of that explosion that may be caused by the unknown. Greenies are like that and worse. Having seen the optimist discover technology, they would want to destroy that technology to ‘save the planet’.
Someone once wrote: ‘The stone age era did not end because man ran out of stone’. Similarly, the oil era will not end because we would have run out of oil, coal or gas, but because we would have dicovered a CHEAPER WAY TO PRODUCE ENERGY.
Then there’s the biotic/abiotic oil discussion. I look at it this way: Carbon, in the form of CO2 gas, has been emanating from volcanoes/geological activity since before any life forms existed on or below the surface of this planet: THERE’S A LOT OF CARBON DOWN THERE. So why cannot carbon be coming out of the planet’s bowels under other chemical compounds? There’s a lot of pressure and temperature and humidity down in those depths that may be causing the right chemical reactions to produce hydrocarbons besides CO2. From where does the oxygen atoms that combine with the carbon one come from? And the hydrogen atom? Think about it. It’s simpler to conceive mentally than believing that all that oil and gas is a product of dead amoebas.
And I forgot: Besides peak oil supply theory, then there’s also peak oil demand theory. And the combined theory goes like this: Which would come first?
aletho says: November 9, 2010 at 9:08 pm
Why did the US decide to cut down what it produces 40 years ago while continuing to burn more oil?? You would have at least thought ‘big oil’ would have extracted more during the middle east oil embargoes of the 70’s.
James Allison says: November 9, 2010 at 5:58 pm
“Peak Oil – Yeah Right. Here is a fine example of “experts” inability to accurately predict the future.”
Hubbert, an oil expert did predict the future, especially if you give him a bit of slack with 2000 as world peak. I’m not sure if everyone understands what ‘peak oil’ is, it is just the amount of oil we get out of the ground every day which from these conventional sources hasn’t increased since about 2005. You can add in whatever biofuel gas to liquids etc you want. It is hard to see how these conventional extraction rates can increase significantly now.
I haven’t read this article though, which does sound a bit nonsensical..
IEA predicts possible peak oil for 2035 in their latest report.
http://www.theoildrum.com/node/7100
Could be another scare story, of course..
Fred says:
November 9, 2010 at 8:54 am
Be afwaid . . . be vewy, vewy, afwaid.
Kripke!
For second there I thought it said that they were predicting peau oil by studying investor patterns. Wait, not that IS what said.
So did they validate their model? Use it to hindcast the collapse of the tech bubble? The collapse of the Dutch tulip craze? How about the stock market crash of 1939? What? Hanson adjusted it based on temperature adjustments?
Well I suppose. There’s no reason you can’t replace studying actual reserves and actual consumption and actual efficiency programs with a chart from the DJIA. Why would you study something when you can study a prosy instead? Way cheaper, less work, and if it stops giving the information that supports your theory, you can just switch to something else. Don’t know what you would do with the left over data though. I’d suggest hiding it but those financial dudes keep retty close track of where their stuff is. I heard something about diggin a hole that they let you decline into, and just when you think it is a trick, it turns out it is just a clever way of burying you in cement. Then again, they might want to investigate this technicque the climate dudes have of adjusting number downward in the past. My work for investors too.
@ur momisugly Bubbagyro
Thanks for confirming my suspicions!
On Freeman Dyson – he was a friend of Thomas Gold’s and wrote the foreword to Gold’s book “The Deep Hot Biosphere” on abiotic oil. I can’t remember his exact words, but he left the reader in no doubt that he believed Gold’s and the Russian abiotic theory was likely to be correct.
@Ben Klijn W
got here too late to read the bulk of the thread…but thanks for the link http://www.gasresources.net/
This is more like my field and I really appreciated some of the very elegant papers on that site. I can’t refute them with my own knowledge and experience. The opposition seems quite mute really. Then again I haven’t had time to read the whole thread – pressure of work! Lol!
What a silly “report”. Unlimited nuclear power is already available any time society wants it. Bio-oil grown from algae will be available in quantity & cost matching conventional oil in 10 yearsso the surprsiingly specific 90 year forecasr is nonsense.
Beyond that it shows an ignorance of how the supply & demand curves work in economics – if oil really was becoming scarce the price would go up so less would be used & it would last longer & the higher price would mean more investment would be available for hurrying up replacements. Like so much of eco-fascism it depends on a total ignorance of the price system combined with an assumption that government can organise everything better.
The problem with studies like this is they only take into account what is today, and have a devil of a time figuring out what will be. The people doing the study can only work with what they know, but going out decades or centuries what they don’t know will, inevitably, be a much bigger factor than what they know now.
What will be the next breakthrough? Super-efficient solar? Algae? Fusion? Do the authors of the study really claim to know, and know when? “Hubris” is the word I’m looking for.
“L Nettles says:
Same thing happened when we ran out of whale oil for lamps.”
No, we did not run out of whale oil, the successful production of drilled petroleum caused the price of whale oil to crash and the industry quit whaling just for oil for lamps.
If you think about it for a moment, that is what really saved the whales!
Well spotted Anthony, that prediction goes to the opposite extreme to some of the greenies. You can’t use the stock market to forecast like that. The stock goes up after that idiot Ben Bernanke speaks. The market is good at dealing with some mid term capital demand fluctuations but that’s all its good for. Long term oil projections are based on those who don’t understand the alternatives. Short term fluctuations are always quick fools taking money from slower fools.
Most of the best alternative energy projects are privately traded and so don’t show up. To work they need finance at the share issue: random trading of the stocks a year later is irrelevant. The current banking crisis has that messed up borrowing but not ventia capital. One shot in the straights of Hormuz and millions will poor back into biofuels and the solar hydrogen economy.
All most all the technical barriers to solar hydrogen are now gone. We have very good hydrides and carbon based storage, so expensive and dangerous liquid hydrogen is not needed. Honda is selling a home hydrogen system for fuelling the car.
solar and wind need 16% storage. We have many basic storage systems blocked by cap and trade. The cap and trade stands in the way Governments wont price power with hourly demand making buy low and sell high electricity storage viable. Grid Storage companies don’t get certificates to trade.
I know of dozens of projects that will be competitive with oil and coal in 5 to 10 years. If we get rid of the subsidies then the solar and wind capital will go to the technology that can be as cheap as oil and coal not to the stuff that’s “almost ready some of the time”. If the financial crisis is still going by then forget energy prices; you’ll be burning barrow loads of dollars but there wont be anything left to cook.
Any prediction of future technology for the next 100 years is nonsense.
http://en.wikipedia.org/wiki/Technological_singularity
The Singularity is a postulate that as technology advances exponentially, from our perspective, looking towards the future, there is a cutoff point at which the rate of rise of technology is so steep, the consequences, for us, are unimaginable. Depending on who you talk to, that cutoff point is probably around 50 years into the future.
The Singularity is an inevitable consequence of the exponential rise in computing power – an exponential curve which has been unbroken for at least 50 years, and shows every sign of continuing indefinitely. http://en.wikipedia.org/wiki/Moore's_law
Consider the Human Genome Project. It took well over a decade to create the first map of the human genome. Now a new genome can be rattled off in about two weeks. This is due to the enormous increase in computing power – a vital resource for knitting the broken fragments of the genetic jigsaw puzzle created by genome analysis machines into a consistent map of the whole.
Consider that the iPhone in your pocket is a more powerful computing device than the computer you had on your desktop less than a decade ago.
But its not just the ability to do things faster. Deep Blue, the chess computer which finally conquered human domination of the game of Chess, when it defeated Gary Kasparov, is just the start.
Many problems in Artificial Intelligence become easy if you have enough computing power to throw at the problem. That power is becomming available, in effectively unlimited supplies. Dont have enough computing power for this year’s problem? Wait a year, and see what the next generation of computers can do.
The DARPA Grand Challenge and Urban Challenge was only possible because of an enormous increase, in just a few years, in the capabilities of artificial intelligence systems. http://www.darpa.mil/grandchallenge/index.asp .
This encroachment of technology into our lives will change our lives beyond recognition, in a time far shorter than we imagine.
Well before we run out of oil.
Much has already been said, but as an investment advisor the above extrapolation seems an overreach. I would agree that a plurality of investor sentiment is as good as any because you get a large number of people voting with something that’s important to them, their money. But I can’t get how you extrapolate that 90 years into the future.
Try to extrapolate Apple Computer’s value 20 years ago based on some model how many Mackintosh or personal computers there will be. If you don’t know what a Mackintosh is, it’s a computer that’s made by the same company that makes IPods and IPhones and IPads. The companies value is also a judgement of Steve Jobs ability to adapt and evolve. Wells Fargo didn’t go out of business when the world stopped using Stagecoaches.
Leaning a little closer to the energy industry, it’s a good bet that GE could be profiting from LED lights, or whatever comes after that, long after Thomas Edison’s Incandescent lights only exist in a museum.
Because of Edison, Proctor and Gamble dropped Candles from their core business and focused on its other core product Soap.
Another problem is that future values far into the future have much less value nearer term future values. For example, what if I told you that you could have $1 million today or $10 million in 5 years. I suspect many would wait five years and rack up those credit cards in the interim. Now what if I told you, you could have a $1 million now or a $100 billion dollars 100 years from now. How many people would actually do the math on that one before they figured out that there kids would be dead before the money came. The current share price of a stock has much more to do with what the company is doing now and in the next five years let alone 20 or 90 years into the future.
Oil Co’s have been rebranding themselves as Energy Co’s. As alternative comes along that can displace oil they’ll switch their tremendous resources of capital, production and brain power to that. That’s just not the case yet and likely will not be for another 20-50 years or more.
“If oil prices raise enough, the EROEI doesn’t mean as much since eventually it could even be worse then 1:1 and you could still make a profit since other energy sources will not go up as much in your scenario. Even if oil costs more energy to extract then it supplies, you can still make a profit if the market will bear it. Son in the end, if we never change, we could end up draining every oil field basically dry. ”
ERoEI isn’t about money, it’s about thermodynamics. Soon as it takes more energy to extract the energy you get from the deposit, you have run out of net energy. Society runs on net energy.
Second, it’s not possible to run a field dry. Oil is held in rock like a sponge. A typical field leaves from 40-60% of the oild behind, that is physically impossible to extract. Unconventional fields can leave as much as 90% of the oil in ground unable to be extracted.
Yeah, the inherent unpredictability of the future.
Some people usually counter, “but that’s no excuse not to use what we know”.
Well, as you say, we know that the future unknowns are the far bigger factor. So let’s use that. Let’s imagine scenarios, imagine what if, but not treat any of it as if it is real.