Oil Effect

Oil factor Stephen leeb & DonnaLeed

Production & Consumption • Production – Oil deposit in Mideast • Laherrere

– US Petroleum production prediction • Hubbert’s peak

• Consumption

Hubbertpeak.com • Hubbert’s law -Hubbert’s curve -Hubbert’s peak – According to this model, the rate of oil production is determined by the rate of new oil well discovery. – The relative steepness of the projected rate of decline of the production curve is the main cause for concern about the economic and social impact of Peak Oil. – This is because a steep drop in the production curve implies that global oil production will decline so rapidly that the world will not have enough time to develop sources of energy to replace the energy now used from oil. ---wiki – His prediction in 1956 that U.S.oil production would peak in about 1970 and decline thereafter was scoffed at then but his analysis has since proved to be remarkably accurate

US prediction •

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Hubbert, in his 1956 paper,[3] presented two scenarios for US conventional oil production (crude oil + condensate): – most likely estimate: a logistic curve with a logistic growth rate equal to 6%, an ultimate resource equal to 150 Giga-barrels (Gb) and a peak in 1965. – upper-bound estimate: a logistic curve with a logistic growth rate equal to 6% and ultimate resource equal to 200 Gigabarrels and a peak in 1970. A post-hoc analysis of peaked oil wells, fields, regions and nations found that Hubbert's model was the "most widely useful"(providing the best fit to the data), though many areas studied had a sharper "peak" than predicted.[6]

US prediction Hubbert's upper-bound estimate, which he regarded as optimistic, accurately predicted that US oil production would peak in 1970. Forty years later, the upper-bound estimate has also proven to be very accurate in terms of cumulative production, less so in terms of annual production. For 2005, the upperbound Hubbert model predicts 178.2 Gb cumulative and 1.17 Gb current production; actual US production was 176.4 Gb cumulative crude oil + condensate (1% lower than the

Widespread application It also used for the predictions of Natural gas , Coal , Fissionable materials, Metals, Phosphorus , Peak

Norway's oil production and a Hubbert curve approximating it.

Oil deposit in Mideast - No answered question • The End of Cheap Oil; March 1998; Scientific American Magazine; by Campbell, Laherrere; 6 Page(s) – In 1973 and 1979 a pair of sudden price increases rudely awakened the industrial world to its dependence on cheap crude oil. Prices first tripled in response to an Arab embargo and then nearly doubled again when Iran dethroned its Shah, sending the major economies sputtering into recession. Many analysts warned that these crises proved that the world would soon run out of oil. Yet they were wrong. – Their dire predictions were emotional and political reactions; even at the time, oil experts knew that they had no scientific basis. Just a few years earlier oil explorers had discovered enormous new oil provinces on the north slope of Alaska and below the North Sea off the coast of Europe. By 1973 the world had consumed, according to many experts best estimates, only about one eighth of its endowment of readily accessible crude oil (so-called conventional oil). The five Middle Eastern members of the Organization of Petroleum Exporting Countries (OPEC) were able to hike prices not because oil was growing scarce but because they had managed to corner 36 percent of

Production(thousand barrels/day)

http://www.eia.doe.gov/ipm/supply.html

Consumption //www.bp.com

-http:

Oil storage is never increased • Hubbert’s Law and argument • Mid-East storage is less than the official published number. • Oil storage and production is decreasing

Real Price & Nominal price

Price history 1973 – 2.9->7

1980 - 40 1986 - 10 1990 - 25 1998 - 10

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1973/9~10 35th OPEC decide to reduce the oil supply and oil price increase 70%. In order to protest the inclination of USA in Arab-Israeli War, OPEC decide to perform oil embargo.

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Energy-saving industry nuclear energy, coal, extra oil field. Reason: 1975-1982 10 times

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Iraq war

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Opec member disagree the production arrangement with each other.

China consumption • 2004- China total consumption=1/2 U.S.A • If china consumption/person=World consumption/person, China total consumption= U.S.A

ANWR-Arctic National wildlife refuge Where-the top east area of Alaska Storage-500000barrel /day

Renewable energy(0.1%@2004) • Solar cell - 5%/year 12%(thin film)18%(amorphous)

• H – BMW 09 mass production • Wind - low cost, (environment cost), potential • Coal and Wind- Combination – Wind

Coal & Natural gas

2006 renewable energy

Debt - house price • The history• • • • •

.com crisis low interest rate @ 00’ low interest rate high house price/house debt high house price inflation Inflation FED increase interest rate (04’-07’) FED increase interest rate House debt increase personal/in bank(‘08)

Bankrupt

• The future• Government will take some action to stimulate economic, and neglect the risk of inflation.(’09-….)

Inflation factor 1. Geology - production reduce 2. Debt - house price 3. Substitute energy

Government expense Government expense contribute to inflation

revenue expen se deficit revenu e

Used for consumption

expen se

Invest in inflation • Real interest rate = Nominal interest rate-inflation rate • Anti-inflation : House, gold, material • Fed’s dilemma House debt & inflation • Gold,energy(Wind,Tar sand,Toyota) • national defense industry