Oil prices to derail recovery?
To understand just how much the goal posts have moved for world oil prices consider that last year was the first in a quarter century that world oil demand actually fell. That’s how severe the recession was in the major oil consuming economies of the world. The last decline, in 1983, ushered in a flood of new relatively cheap oil supply from the North Sea and Alaska. Today, the only new supply we can count on is over five miles below the ocean floor or trapped in tar-like bitumen.
Of course, its always easier to find culprits that to face facts. Congress will blame the speculators, customers will blame oil companies for price gauging, oil companies will blame government for restrictive drilling policies, and traders will blame the falling value of the greenback. But at the end of the day all will have to face the simple fact that conventional oil supply (i.e. the type of supply you can afford to burn), has not grown since 2005 and may never grow again.
That constraint is about to become painfully evident even in the early innings of an economic recovery no matter what shape or velocity. Within a year of any broad based rebound in world crude demand , oil prices will vault once again back into triple digit territory. That much is certain.
What remains to be seen is whether the economy will be any better prepared to deal with those prices than it was the last time around?
I’m Jeff Rubin and I believe your world is about to get a whole lot smaller.
By Jeff Rubin, author of Why Your World is About To Get a Whole Lot Smaller
Jeff Rubin was the Chief Economist at CIBC World Markets for almost twenty years. He was one of the first economists to accurately predict soaring oil prices back in 2000 and is now one of the world’s most sought after energy experts. His book, Why Your World Is About to Get a Whole Lot Smaller, is available in stores now.
Posted by: Truth Seeker | Sep 29, 2021 1:44:39 AM
Instead of analyzing what Saudi minister said or didn't say, why dont you analyze your own mistakes. Why do we have to keep running our planes over Iraq and Afghanistan, when we know those guys didnt do a thing against us. Why do we have to keep bleeding our economy over those wars which has lessened nothing but has incited more hatred for generations to come. If Saudi minister thinks 70+ is the fair price, atleast its a far lesser price than the price you are asking for a safer world - keep middle eastern governments busy in wars and keep sucking their oils.
Nobody is derailing your recovery. Only your wicked and ill intentioned strategies for the world are coming back to haunt you!!!
Posted by: Steve | Sep 29, 2021 5:22:12 AM
At present Oil producers are their own worst enemy. They have failed to explore adequately in the deeper sea regions & haven't been intelligent enough to maintain a stable, workable oil price. In the longer term people will restructure their societies minimizing their dependance upon oil. If the Chinese & Indians begin to dominate the worlds' economies as predicticed, how likely is it that British & American Oil companies will remain the worlds largest most profitable companies?
Perhaps we can elect another Bush/Blair war combo...
Posted by: Chris | Sep 29, 2021 8:28:06 AM
I'm sorry but the content is pretty much old news and the spelling/grammar is atrocious. A count count shows 5 mistakes in 3 paragraphs. Let me know if you need a proof reader.
Posted by: bud | Sep 29, 2021 8:55:43 AM
ANYONE who thinks this is a supply demand issue is poorly informed. OPEC can add 4 million barrels
a day tomorrow.if speculation were eliminated, oil would settle at about 60 dollars a barrel and trade
in that range indefinitely.
Posted by: len | Sep 29, 2021 8:57:17 AM
IT IS THE RICH WANTING TO MAKE MORE AND MORE IT IS LIKE ALL COMPANIES THEY MAKE X AMOUNT DOLLARS THIS YEAR NEXT YEAR THEY WANT TO MAKE MORE AND IF THEY DON T MAKE IT IT IS A LOSS. YA RIGHT IF THEY MAKE THE SAME OR MORE BUT NOT THEY WANT THEY CALL IT A LOSS.... YA RIGHT TO ME IT CALLED GREED.LAST YEAR I MADE 52000 BEFORE TAX I LIKE TO MAKE THIS YEAR 75000 I DON T IS THAT A LOSS TOO.....THE MORE THE COMPANIES MAKE THE MORE WE WANT WE NEED MORE MONEY TO ..WE NEED A RAISE TO IN 9 YEARS MY TAXES ON MY HOUSE IS DOUBLE AND EVERY THING WENT UP LIKE CRAZY MAYBE SOMEONE STOP AND THINK THINGS CAN T KEEP GOING ON LIKE THIS BECAUES WHEN I GET RAISE IT IS 2% MY HYDRO IN 5 YEARS WENT UP 21% JUST THAT IS MORE THAN I GOT AND THEY WANT MORE AND THEY COMPARE US WITH OTHER PLACES I DON T CARE IF OTHER PLACES PAY MORE THAN ME ME... DID HYDRO MAKE MONEY... YES THEY DID ... TO ME TO MUCH LIKE ALL COMPANIES BUT THEY WANT MORE GAS COMPANIES MADE SO MUCH THE LAST FEW YEARS POST BIG PROFITS AND MONEY AND NOW THEY ARE CRYING... GET OVER IT... BE HAPPY YOU ARE STILL MAKING MONEY AND LIVING HIGH ON THE BACK OF EVERY WORKING PERSON YOU ARE STILL AHEAD OF US YOU BUNCH OF GREEDY.......
Posted by: Robert | Sep 29, 2021 9:42:24 AM
"But at the end of the day all will have to face the simple fact that conventional oil supply (i.e. the type of supply you can afford to burn), has not grown since 2005 and may never grow again."
This comment goes to the heart of the matter. We are indeed living in the world of 'global post peak oil' production. The age of cheap oil (and cheap energy) is over. Each and every one of us should take the time necessary to understand what that means for our way of life.
There is no other energy source available to us that will be as cheap and plentiful as oil has been for the last hundred years or so. Oil provided the means to fuel our modern world, everything from transportation to manufacturing, fueled the growth in the global economy and underpinned the amazing, but apparently temporary gains in agricultural productivity which resulted in the tremendous growth in human population on this planet.
We have now used up approximately half of our original endowment of oil but that doesn't mean that we will have another hundred years like the last hundred. Our use of this resource has been growing steadily decade over decade which means that most of what we used up of the first half of all the oil available was used up in only the last few decades.
The growth in per capita energy usage can not continue indefinitely for the obvious reason that we don't have an unlimited amount of oil.
The real problem is that much of our way of life is predicated on the idea of growth. We expect it and consider it a good thing and when it doesn't happen (ie recession) we think that's a bad thing.
Every one of us should be thinking about what it will mean to have per capita energy usage heading in the other direction - contraction instead of growth.
Posted by: Tyrrell Findlay | Sep 29, 2021 9:43:03 AM
One thing we should all be aware of by now, is that the world is suffering from too much expert opinion.
How long ,or what will it take for the average Joe to understand that these " so called experts" are only
stating a particular view. None of it is factual. They cannot save us from ourselves, to get along in todays
world does not take much.
Live within your means, understand that too much debt is not prestige, and is only good for the Banks and
other lenders. Educate your kids or do your very best, because they are the future. Not too hard to do and
all the world would be better off.
Posted by: jojo | Sep 29, 2021 9:49:34 AM
they have just found over 200wells and counting, oil is coming down as the supply increases and the demand decreases. Stimulus money has created this so called 'green shoot' effect, evntually the economy and the people will need to stand on their 2 feet without being propped up, I dont see that happening, therefore low oil prices are here to stay a while longer.
Posted by: Mike M | Sep 29, 2021 10:31:47 AM
Does anyone listen to Jeff Rubin? Why don't you write a book on all the predictions you've made that didn't materiallize? Attention everyone! Here's a free Public Service Announcement: If Jeff Rubin is talking, don't listen.
Posted by: Chris Gillis | Sep 29, 2021 10:46:21 AM
Has it ever occurred to anyone that the U.S is using other oil reserves before they use their own?They have vast reserves of tar sands ...and that's not including their other gems....The worm will turn in their favor once again.....its only a matter of time.
I can see California moving ahead with Geothermal in a big way and should end up being self sufficient if they play their cards right.Electric cars will be the future in California and Geothermal energy will or should in my opinion power it.You can create a market with anything if you can bring value to it, and renewable energy will be a valuable emerging market changing the landscape and spurring a new frontier in business opportunity.The thing about this is...its real and it cannot come fast enough to a world or economy that desperately needs a new workable, continuing opportunity.
Posted by: Sy Mytting | Sep 29, 2021 1:52:59 PM
In 1966 the front page of the Province said that the population of BC would be 10 Million at the turn of the century. They took a moment in time and extrapolated that data into the future with no regard for logic. The Peake theory is just such a load of crap. Nothing grows at an exponential compounding rate forever. China just purchased a piece of the oil sands for one thirtieth of its previous valuation. Virtually every country in the world has oil. China Oil continues to find more and more oil within its own borders. It is sad that a bank should put its name behind your obviously manipulative attempt to help sell some latest issue of oil stocks your bank has taken on. Shame on you.
Posted by: Sow What? | Sep 29, 2021 2:23:45 PM
With the increase in population and increased need for food products, the amount of available crop land is diminishing. If OPEC etc. want to charge $70 plus (maybe eventually $200) then lets price our wheat and other grains appropriately that we sell to them - $70 to $200 per bushel - peg to the price of their oil. Grains are also becoming a diminishable resource as are fruit and vegetables. We may need to find food alternates also? Some freeze to death and some starve - nobody wins.
Posted by: Robert | Sep 29, 2021 2:47:28 PM
The idea of a global peak in oil production is not some conspiracy theorist's wet dream. No credible petroleum geologist (academic or industry or otherwise) would dispute the idea that conventional oil fields, over time, display production levels that increase to a peak and then fall off.
Oil field production peaking is a well-documented phenomenon that has occurred in fields all over the world. M. King Hubbert, the industry scientist whose name is closely associated with the idea of 'peak oil', accurately predicted the U.S. domestic oil production peak which occurred in the early 1970s. This isn't in dispute. Other well known oil producing areas in the world havealso reached production peaks. Matthew Simmons, oil industry analyst and sometime advisor to the former Bush administration, has made a very strong case in his recent book "Twilight in the Desert", that Saudi Arabia is at or past its own production peak.
I see two main ways in which people try to refute the idea that a peak in oil production will have significant impacts on the global economy (and shrink our horizons as Jeff Rubin suggests). The first argument is that there is lots more oil to be found out there - we just have to let oil companies drill and they will find it. People who make this argument aren't aware that oil companies have been scouring the globe for decades and are finding less and less. The second argument, favored among economists, is that market forces will drive innovation and the global economy will adopt alternate energy sources and newer technologies when they are needed,so growth will continue. People who support this argument apparently aren't familiar with the concepts of 'net energy' and 'energy density', don't know the difference between an energy carrier and an energy source, and maybe haven't given enough thought to how much of the infrastructure in the global economy is based on access to cheap, portable fuels derived from oil.
In case there is any doubt, I agree with Jeff Rubin and many others on the future of our global economy and have been saying the same thing myself for years: when it costs you $50 to ship a toaster from the factory in China to the Walmart in Mississauga, large parts of the global economy will effectively be dead. Someone will start making toasters much closer to home that sell for $45 - manufacturing and transportation costs all in.
Posted by: get off oil | Sep 29, 2021 3:13:54 PM
Chevron controls the patent on the NiMH electric car battery, and is preventing its introduction to the market. Automakers have gotten around this patent by developing lithium ion batteries. Nissan will be bringing its Leaf EV to market next year for $25-30 K. That will be the beginning of the end of the oil industry.
There is no shortage of energy -- the oil industry just wants us to be addicted to fossil fuels which ARE in short supply, so then when the economy recovers we'll all pay through the nose. When we switch to alternative energy sources we'll have more energy than we need.
It's super easy - put solar panels on your roof, use a heat pump to heat your house, drive an electric car covered with solar panels. Most of your energy can be obtained from your solar panels on sunny days; when not, you take it from the grid which can be powered by a combo of wind farms, solar farms, hydro, nuclear, and the remaining relic fossil fuel plants until they are phased out. The solution is quite easy technically; it's politics that's the hard part.
All this technology is here now, we just need the oil industry to get out of the way and stop manipulating patents and allow mass production economies of scale to bring these technologies down in cost so they become competitive with fossil fuels.
Posted by: Spiker | Sep 29, 2021 4:01:24 PM
Ok Jeff, How much are the oil companies paying you to get the public ready for another Oil spike, The wages for the average joe is shrinking monthy and no good paying jobs to go to, If oil prices go up again I can see a very slow and long recovery in the globle economies
Posted by: Chris Gillis | Sep 29, 2021 5:16:39 PM
The amount of people that have read Jeffs book or follow his predictions are negligible in comparison to those who actually don't give a hoot.The oil companies don't need to pay him...and he will have no effect on the outcome at all.One thing he did achieve was to bring out some interesting thoughts in here....well done gentlemen!
Posted by: Ron | Sep 29, 2021 6:34:47 PM
I worked for CIBC for over 30 years where we were constantly changing. During the past 10/15 years the only constant CIBC had was that they could always count on Jeff Rubin saying one thing and the total opposite actually happening. It was always interesting to read his predictions watching for the opposite. I think his prediction of oil hitting a much higher level than it did was the final straw for CIBC and we just could not take his predictions any longer.
Posted by: Tom | Sep 29, 2021 6:59:10 PM
Unfortunately, Jeff is right on the money. People who believe that the oil companies are involved in some vast conspiracy to keep oil off the markets have obviously never worked in the oil industry or owned there own companies for that matter, as they spout illogical and unsupportable statements. In the oil patch, as with every other business, you go for the low hanging fruit first; no one drills poor prospects first, much as they don't develop poor markets first in other industries and leave the better ones for later; it would make no economic sense. Furthermore the oil patch is fiercely competitive, if it can squeeze a drop of oil out of a rock that someone else missed, it will be all over it.
Fundamentally, the oil industry is dominated by engineers and their sense of logic makes "Star Trek's" Mr. Spock look like a manic depressive. The days of cheap oil are over; get used to it.
Posted by: Dwayne | Sep 29, 2021 7:01:13 PM
Was Rubin the genius who predicted oil to reach more than $300.00 a barrel by 2012?Someone working for CIBC said this at some point last year.
The world would stop functioning if oil ever reached that level.
Posted by: brian | Sep 29, 2021 8:50:49 PM
saudi arabia has never allowed third party estimates of its reserves, when ghawar dies so does your life style. peak oil happened in 2005 and unless some miracle of energy pops up expect recession after recession caused by spikes in oil and gas prices.