April 12, 2009

Think the oil crisis is over? Think again. It was just taking a siesta.



Just when you thought that whole silly oil crisis was over.... you find out it was just taking short mid-afternoon nap.

$100 oil will be back. Then $150. Then $200.

And then, FINALLY, Americans will ditch the pick-ups and Hummers and urban tanks, and get their butts into Fiats and Smarts and hybrids and oh, dear god - maybe even buses and trains, while getting serious about green energy. Finally.

And it's not Saudi Arabia that will be the root cause of the upcoming US oil crisis.

No, it'll be Mexico. And probably Venezuela too.

It hath been foretold.


$200 Oil Is Coming While We Waste a Perfectly Good Crisis

Mexico has ridden this pony hard. They have not done any serious exploration in the Gulf of Mexico in 30 years. A newly discovered deep water well takes 10 years and billions of investment to bring on line. There is no doubt that Mexico’s oil output will collapse in the next five years. They will not be capable of exporting any oil to the U.S.

With the rest of the world having no spare capacity and demand higher than 2008, prices for gasoline in the U.S. will soar. In the meantime, we will ponder higher gas mileage requirements, not allow offshore drilling, and make no effort to convert our transportation fleet to natural gas. Congressmen will be outraged and indignant at the oil companies, when the writing was on the wall for a decade.

14 comments:

Anonymous said...

Siesta, that's Mexican right?

yoski said...

But the oil reserves are unlimited!
The earth has a creamy nougat filling (kind of like an Easter Egg) that will produce any amount of oil the market demands, not?

Sir David said...

question

if the US, China, Russia cut oil demand by 90% how can oil go to $200 ?

we all have electric, hybrid cars
we are going green all the way, not to mention that in my town the electric grid is now on wind and solar power, and I hear many other towns are doing the same thing, so in a few years oil will be worthless

so again how can it go up to $200 ?

Anonymous said...

We Americans love doing things the hard way. Someone else will pay for this right? Our economy is about to take a long siesta. Austerity measures galore coming up.

Anonymous said...

and who is gonna milk my sewer water to methanol to hydrogen fuel producer in my home garage for fuel every day??????????????/

Saul said...

Visit the oil drum to find out a lot more on this topic.

There are a lot of smart people predicting that any recovery will be muted by declining global oil production. We are not feeling the effects now because of a few percent of demand destruction. That's all the buffer we have between $50 and $150+ oil. Given time, we will regain this demand and hit this issue hard. In fact, we are going to keep hitting it for the rest of our lives....

Sir David, you need to learn more about the probabilities and practicalities of your proposed solutions.

yoski said...

Sir David:
"we all have electric, hybrid cars
we are going green all the way, not to mention that in my town the electric grid is now on wind and solar power, and I hear many other towns are doing the same thing, so in a few years oil will be worthless"
Are you being sarcastic or just delusional?
For the last 3 month the Chinese have been buying more cars than Americans. It's a pretty safe bet that those cars are running on gasoline, not wind or solar power. Consumption in India, South America and the Middle East keeps on increasing.
Our untapped reserves in Alaska, the Gulf and of the California coast are enough to delay disaster for maybe a decade but they most definitely don't provide any long term solution. But of course, short term fixes is what America is all about....Drill baby drill!
Oil shale has a very low energy density, less than a Captain Crunch bar, but nobody has the idea of having Quaker Oats provide our future energy.
Sadly our biggest resource is our wastefulness. With low tech solutions ranging from light bulbs to insulation and smaller vehilces we probably could cut our consumption by 50% without it affecting our standard of living too much.

Peaking said...

Mexico is finished. We should all hope their government can hold on, because we do not want to become de facto owners of Mexico like we are in Iraq.

Saudi Arabia appears to be limited in their ability to increase production beyond the 2008 level, so don't go looking for help there.

Canadian "tar sands" are unlikely to ramp up too much because of water issues.

The death of the hummer is at our doorstep. It hath been foretold. But is anyone listening?

Anonymous said...

Happy motoring Americanos? Ha Ha Ha

Paul E. Math said...

You have been reading seekingalpha, Keith - good!

Did you check out the Elizabeth Warren video? This woman deserves to be an S&A hero for taking on the thankless and likely self-destructive leadership of the Congressional Oversight Panel.

In a calm, straightforward, respectful manner she stuck it to Geithner and Summers and sent the message that she will be watching them every step of the way, ready to let everyone know when their programs are failing.

As a Harvard law prof, I wonder if she played any role in the ouster of Larry Summers from his position as Harvard President. That would be hot.

Anonymous said...

if the US, China, Russia cut oil demand by 90% how can oil go to $200

Sir David. You are spot on. IF US, China and Russia cut demand by 90%, we gas for a buck again. But since that AIN'T GONNA HAPPEN...

Put the bong down.

Anonymous said...

we all have electric, hybrid cars
we are going green all the way, not to mention that in my town the electric grid is now on wind and solar power

Without a strong oil economy you can't even build a wind turbine. Wind turbines will never be a solution to the energy problem.

Anonymous said...

Take a look at BBEP, folks. They have a legal problem w/ Quicksilver and taxes are a nightmare with an MLP, but this puppy has potential. Seth Klarman likes it.
So do I.

Anton Chiguhr

LOL - perhaps Math can find a position for commie Warren @ McGill U.
The sooner the better.

Roccman said...

been saying this FOR YEARS.

enjoy the dieoff because we all eat oil.