Pakistan and the Price of Oil

It should come as little surprise that the price of oil jumped a dollar today on the news of the Benazir Bhutto assassination in Pakistan. This event qualifies as a geopolitical event with sufficient magnitude to cause a geopolitical premium in the price of oil. How long the premium will last and when it will subside owing to actual supply and demand pricing forces is an inexact science.

Powering Down to Power Up

A few days ago, someone came by the neighbourhood distributing a single free energy-saving light bulb to households. The woman cheerfully delivered the bulb saying it was paid for by the Ontario government in partnership with a community organization. The bulb is supposed to last 9 years. It was a good marketing idea as the box was labelled with the word "Porchlight" suggesting that the bulb should be used on your porch. Like the Ancient Chinese Gods of Wealth placed near front entrances, people will be reminded as they go in and out of their homes that less energy costs less money and that money saved is money earned. They will also start about thinking about the various ways they can save energy and produce energy to sell.

Oil Intelligence: How to Do It

Readers of this site should watch for future posts where I will make available a paper I wrote on the conduct of Energy Intelligence. The basic theory of the paper is that oil supply and demand are very close at about 86 million barrels a day which means that slight changes in either demand or supply world-wide usually have very predictable effects on the price of oil and other hydrocarbons.

Matt Savinar and Life after the Oil Crash

A Salute to Matt Savinar
For several years now, I have followed the website created by Matt Savinar, called lifeaftertheoilcrash.net. Matt's site is probably the best one I've seen on making peak oil understandable to the widest audience. Matt is a lawyer like myself and I appreciate the way he uses documentary evidence to build his case for proving the validity of the peak oil hypothesis. Matt's breaking news service on his site is a very useful tool for getting up to date on the latest evidence which suggests that world oil production has peaked.

The purpose of this blog
The purpose of my blog is to figure out how peak oil, if the hypothesis is correct, will work its way through world economies so that individuals can start new businesses or adjust old ones to an economic environment of higher energy costs.

Send me email
I welcome email from anyone who has ideas about what future businesses will look like. I also welcome leads to sources of excellent information on the Internet which will help businesspeople benefit from the possibility of higher energy prices.

Googoil?

Google getting into energy

I read with interest today in VOA news that Google announced on Wednesday that it was going to be making a large investment in altnernative energy to produce enough power to supply a City the size of San Francisco. My compliments to Google. I think we will more and more see technology companies, especially ones in information technology and Internet search, get into energy.

Why you may ask? In short, world hydrocarbons have likely peaked in their production which means to keep energy-dependent industrial expansion going, we need to find alternative sources of energy which can be produced economically. Many High-Tech companies now have the capital to make such investments in research but it is also in their own self-interest. Without expanding economies, there will be less use for their services. Interestingly, web technology and the Internet can be used to use existing hydrocarbons more efficiently and new sources of energy more efficiently as well. This is why I firmly believe that some Hi-Tech Industries, particularly information technology, are going to boom again within the next 10 years.

Future Businesses in the new energy environment
In a world of tighter energy resources, a changing economy, and the rise of intensified use of information technology, I believe that there will also be a demand for and supply of both broad and specialized news from around the world from new sources not associated with the corporate-dominated media. This is why I believe that new newspaper and media outlets created on an on-demand basis by customers is just around the corner. New networking and file-sharing technology are soon going to make this kind of media a reality.

Oil Production Holding Steady

Over the last couple of years, world oil production has held steady at about 86 million barrels a day. Although OPEC and individual countries have said, during times of high prices, that they will raise production to bring down prices, production has not increased in the last two years. This suggests that we have hit peak oil production and now entered a plateau of production or decline. Demand will determine what the shape of the plateau or decline will look like as will the realities of supply.

How I got interested in Peak Oil

I got interested in peak oil quite by accident.

In the winter of 2004, I was taking a business intelligence course while finishing up my MBA at Wilfrid Laurier University. I had been following the financial news throughout the year and noticed that oil and gas prices were rising substantially.

I went on the Internet and started doing some research on oil and started to come across a school of analysts who bought into the peak oil hypothesis. The hypothesis seemed like it was based on solid statistical analysis and the experiences of countries that had already peaked in their production.

I subsequently wrote a paper on how oil intelligence is conducted and developed a simple theory to help predict price fluctuations in oil. Basically, I posited that demand for and supply of oil were both hovering around 86 million barrels a day which meant that any slight change in either that demand or supply would have noticeable market effects on the price of oil. I have turned out to be correct.

A number of websites that provided data and updates regarding the unfolding relationship between supply of and demand for oil exist. They are all very informative in their own way. I note that many of them emphasize their projections that a shortage in the supply of oil relative to demand could cause massive economic disruption. Some do offer avenues and advice for softening these posited disruptions and they deserve a great deal of credit for doing so. Anyone interested in learning more about peak oil should google the subject and they will be well-informed as to the hypothesis.

What I am seeking to do is establish a website and forum for the discussion of ways in which humans can use their genius to develop businesses that will respond positively to the needs of people should world oil production start decreasing. I welcome posts from other individuals interested in pursuing ideas and business models which will make money while helping people meet their energy needs for economic expansion.

$300 Oil? What opportunities will it create locally?

Oil prices have nearly touched $100 and there seems to be no end in sight for the rise of oil prices. Unless there is a serious world-wide economic downturn, I don't see how prices could come down, although lower oil prices would certainly be better for world economies.

High energy costs spark new businesses in cities
Once prices rise to a certain level, if that is indeed what happens, electricity prices may rise substantially as will gas prices for cars and natural gas prices for heating homes. One may, therefore, expect to see opportunities in electricity resale, natural gas resale, and transportation services within cities. The question is, how can these new markets be satisifed with businesses?

High energy costs and business opportunities in Waterloo, Ontario
In Waterloo, I beleive we already have electricity resale services going door to door as well as natural gas retail services. What these services will be offering at the moment is fixed hedged prices on expected future prices or fluctuations in prices. If prices rise substantially, however, I believe that we will see people, mostly higher income people, start moving on a fad basis to alternative forms of energy like solar. With regard to higher gasoline costs, we may see community cabs or co-operative motor pools develop with drivers hired by communities to keep individual transportation costs down. In the short term, however, I believe that individuals will simply pay higher gasoline bills to have the convenience of their personal cars.

The Vital Role of the Internet in the Post Oil Economy
The Internet could be a valuable tool in the introduction, if not launching, of these energy-saving services as people may go on-line to learn more about the services, compare prices, and pay for them.

The Geopolitics of Oil: What's Ahead?

Look Behind the Headlines
One need only look beyond the headlines of the corporate-dominated media to see where the centre of gravity of world geopolitics will be for the next few decades: the middle east. Indeed, General John Abizaid's comment that the U.S. military would be in the theatre of the middle east for the next 50 years should come as little surprise.

What if Oil Production has peaked?
By looking at a few widely-accepted statistics about global oil supplies, it should become clear what kinds of challenges states will have along the road to finding alternative energy sources to fuel the economic growth that has allowed civilization to grow geometrically.

OPEC Oil Production to surpass NON-OPEC Production in 2008
In 2008, it is widely accepted that OPEC oil production will surpass non-OPEC oil production to make up 51% of world oil supplies. This percentage will increase rapidly as non-OPEC production continues to decline. The problem is that OPEC oil production will peak around 2020 and by 2012, world oil production is expected to decline precipitously and then every year at a higher rate of decline. Overstatement of oil reserves might result in a peak in middle eastern production much earlier than 2020 which will mean that the slope of decline in production will be even quicker.

A Chain Reaction of Demand for Oil
For world economies to continue their growth, they will be placed in growing competition for access to the last remaining reserves of oil in the world which are found in the middle east. If the U.S. were to use only its own oil to meet its needs, it would run out of oil in 3 years. Relying on it own oil, Europe would be the next to run out of oil, then Russia, and finally China.

The relative need for oil of these 4 consumers and the timing of their running out of reserves if they were to rely solely on their own supplies suggests possible timing of their efforts to secure supplies of middle eastern oil. The U.S., one could argue, has acted first by occupying and attempting to stabilize Iraq. Europe may be expected to play a bigger role in the middle east attempting to secure its energy needs next, then followed by Russia, and finally China.

The speed of movement of Europe, Russia, and China toward attempting to secure its interests in the middle east may rise after 2012 when world oil production may begin contracting substantially. The intervening 5 years may provide a period of relative international calm in which states may be able to come up with alternative energy schemes to extend this period of relative calm and possibly take the middle eastern oil issue off the table with the discovery of energy sources that can fuel global economic expansion without reliance on a non-renewable resource like hydrocarbons.

Here is a great video that shows a world map and the rise and fall of oil production and consumption in major producing and consuming areas. It may be helpful to you in forming your own opinions.

$100 Oil: What's Next?

It should come as little surprise that we are now approaching $100 oil. There is now a growing consensus that world oil production has peaked at approximately 86 million barrels a day, never to increase again except by more rapid production through the introduction of new technologies.

We can absorb Higher Oil Prices
If it is correct as many of the economists claim that oil use as a percentage of input into industrial production has declined since the 1970s, then world industrial economies should be able to absorb even higher energy prices before economies start to suffer recession from the increase in the prices of this vital input. Some experts, such as Matt Simmons, believe that oil at $300 a barrel is still cheap given the energy production and economic utility of one barrel of oil.

With the industrial economy's ability to absorb higher oil costs, I beleive that we may see $300 oil within the period of three years with little effect on industrial output and gross national products. As world economies begin to face the forces of economic contraction from oil prices beyond $300 a barrel, the possibility of recessions and "demand destruction" are a definite possibility which could have the effect of lowering oil prices temporarily. Lower oil prices would soon reignite suffering economies and thus send oil prices up again past $300 a barrel.

Geopolitical Competition
The stresses placed on individuals living in economies with the possibility of such variances in economic growth may create demands on states to ensure physical supplies of oil, the largest of which are in the middle east. This could result in intense geopolitical competition around the middle east.

Alternatives to hydrocarbons must be found as soon as possible in order to maintain global economic expansion. Almost everyone agrees that the world only has hydrocarbons enough to last the world for another 4o years at current levels of economic growth. There is wide skepticism that a replacement can be found in the short run owing to the high energy and economic costs of converting abundant geothermal and solar energy to individual and inustrial use.

Brown Outs in Waterloo

Grocery Store Saving Electricity
Today I was at a local grocery store which I understand uses a lot of electricity for refrigeration. It is a great grocery store and very popular with local citizens. I was visiting around 3:30 p.m. today and there was an announcement on the public announcement system for the store that there was going to be some kind of temporary reduction in the use of energy in the store.

I asked a worker in the store what the announcement was and she told me that it was to avoid brownouts (In the store, I believe). I find it very interesting that a store would take such measures to prevent brownouts. It is commendable that the store is taking steps which I believe must "smooth out" its energy use during the day. I believe it is also a sign that energy issues are here to stay. Today is a very hot and muggy day in Waterloo and I would not be surprised if air conditioning is taxing the local energy grid.

CREW: COMMUNITY RENEWABLE ENERGY WATERLOO

I have been very impressed with the work of an organization that has sprouted in Waterloo, Ontario. The Organization is called CREW, or "Community Renewable Energy Waterloo."

The first time I was introduced to the organization was by Derek Satnik, Managing Partner of Mindscape Innovations, based in Kitchener. Derek's website is http://www.mi-group.ca/. He spoke to the Kitchener Rotary Club a few weeks ago and I was very impressed with his understanding of Hubbert's Peak and the energy challenges we are facing and going to face into the future.

He signed up Rotary Club members for a free newsletter from CREW. The latest Newsletter is available at http://www.crewzone.ca/. I was very impressed with the newletter which reports on a coalition of groups in Kitchener-Waterloo which are introducing new energy-saving building technologies and energy sources in Ontario. I was pleasantly surprised to see a weblink to companies which are using photovoltaic cells at their businesses and actually selling energy back to the electric company.

From a business point of view, it is clear to me from Derek's work and that of the individuals behind CREW that very shortly existing and new technologies are going to be combined, packaged, and sold en masse to individuals and companies in Ontario and around the world to reduce use of electricity from traditional sources and to tap into renewable sources to fuel economic growth.

Ontario's New Energy Conservation Plan

Ontario Government to Save Energy
Today, the Ontario Government announced that it was going to spend billions of dollars over the next twenty years to build more nuclear reactors in Ontario to produce electricity. Plans are also being made to reduce energy consumption in Ontario through a conservation campaign.

Market for Energy-Saving Devices
What this means is that we are going to see an explosion in the sale of energy-saving devices and personal energy-generating devices. In the short term, there is going to be a big business opportunity for people in alternative energy.

In fact, I am thinking about getting into retail sales of energy-saving devices on the Internet. Today, I purchased a Folding Solar Powered Panel that can produce 12 Volts of electricity from Canadian Tire. I am testing it to see who efficiently it can charge electrical items.

I also purchased some of those spiral energy-saving light bulbs which are more expensive than the standard ones but are supposed to save 78% of the energy costs. I plugged on in beside an old light bulb and I cannot notice any difference in light generation. I may put together a website selling these items in bulk so that people who do not have ready access to a Canadian Tire or other store can save energy.

The Energy Conservation Paradox
Nuclear power is so expensive to deliver (owing to construction and maintenance costs) that I don't think any future plants should be built. We must look to other, more democratic sources of energy such as solar, tidal, and wind power. Also, conservation of energy tends to ignore that energy conserved in Ontario is just another unit of energy available for consumption somewhere else. From a purely economic point of view, this paradox suggest that conservation is something that we should look at after we have consumed as much cheap energy as possible.

Canadian Tire is already selling larger solar panels for about $500 a piece which can probably generate quite a bit of electricity to batteries for use when needed. Maybe I'll be experimenting with one of those next.

Arctic Oil Grab: Oil at the Top of the World

It should come as little surprise that the Arctic now seems to be becoming contested in the great game of energy.

If you buy into the Peak Oil hypothesis which suggests that world oil production is peaking or soon to peak, then you will think it logical that states will be trying hard to establish claims to oil and natural gas deposits below the Arctic Ocean.

All the evidence on the Internet suggests that world hydrocarbon production (oil, natural gas, coal, etc.) has peaked and is headed into decline. M. King Hubbard, an American geologist, predicted that oil production in the United States would peak in 1970. He was right. Now most countries in the world have peaked in their production of oil.

This is why energy intelligence experts have fanned out across the world to assess the best way to secure supplies for their clients. The Arctic is just the latest place where the quest for the last remaining oil and natural gas deposits of the world is taking place.

I believe that we can expect energy prices to increase markedly over the next ten years if the world has, indeed, passed peak production. Should demand continue to grow has it has so far, then we can expect prices for energy to rise.

The all means that there will be opportunies for entrepreneurs to find new energy sources and to deliver energy in more efficient ways. In Ontario, for instance, the government is switching homes over to "smart metering" which means that draws on the power grid can be managed more efficiently and offers can be made to individual home owners to manage their energy costs.

There are now more-frequent media reports about companies that go door-to-door offering utility payers the opportunity to "lock-in" their monthly payments to avoild fluctuating or higher energy costs. Companies can offer this opportunity by buying futures contracts for energy production to hedge against higher prices.

To me, there would seem to be an opportunity for web entrepreneurs to resell such opportunities on-line.