Peak Oil – Do YOU Buy it?

Source: Rebel Traders

The nearly daily rise in crude oil prices and the cost of fueling up our cars and trucks going up virtually in tandem has brought with it a vast amount of discussions of why, who is the blame, and will it impact the economy.

While watching Sunday Morning with Charles Osgood (CBS) this morning I was taken to the point of yelling at the television when they interviewed a Wall Street analyst who claimed that the economic recovery was strong and the “wind was at our backs”. When asked about the recent rise in gasoline prices and its impact on the economy the analyst stated it was not an issue, that the economic recovery was way too strong to be hurt by any rise in gasoline.

I was going to jot down the name of this Wall Street analyst after the I finished watching the segment but my fat fingers hit the wrong button on the dvr and I was unable to rewind the segment to get his name and the company he worked for. Perhaps later if the segment appears on the CBS web site I can update this post. But for now lets just call this wall street analyst “Bozo the Clown”, because irrespective of what his real name is it does not change the garbage that spewed from his mouth.

This analyst is either living in a box with no real world exposure since birth or he simply is pushing the standard Wall Street / Government form letter response to any and all matters that concern the economy. Either way he is an idiot in my humble opinion.

So lets get back to peak oil. Most of us here at Rebeltraders know what this term means. Unfortunately the general public has no clue of what it means, or worst yet what its implications are.

From wikepedia:

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.^[1] This concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells[...]

The black goop that we so much need to power our world is nothing more than the remnants of ancient organic matter which by the way is where the term ”fossil fuel’ comes from. A chemical process that took tens of thousands of years to do transformed ancient organic matter into what today can be refined into gasoline to run our engines.

The term ‘peak oil’ is simply the application of logic to a supply source that is NOT being replenished when we extract it from the ground. Crude oil is a finite supply, it does not magically reform once we pull it out of the ground. While I’m sure there are many more deposits of oil around the globe still undiscovered the cost to find and exploit those yet to be discovered reserves will grow exponentially as the ‘easy’ oil has already been tapped.

While the recent rise in crude oil has roots in geopolitical events and the beginnings of inflationary pressures it is still the longer term that needs to be discussed, and discussed with an open mind.

A guest post over at Zero Hedge hits this topic square on the head and it is one of the best I have read in a while.

The political class and their mouthpieces in the corporate controlled mainstream media are desperately trying to spin the oil price surge as a temporary inconvenience that will not derail their phony recovery story. Brent crude closed at $116 per barrel yesterday. West Texas crude closed at $104 per barrel. Unleaded gas has risen by 22% in the last month and 60% since September 1, 2010. I’m sure this slight increase hasn’t impacted Ben Bernanke or Lloyd Blankfein. Their limo drivers just charge it to their unlimited expense accounts. Joe Sixpack, driving his 15 mpg Dodge RAM pickup, is now forking over an extra $1,200 per year in gas expenditures, not to mention more for everything impacted by oil such as food, utilities, and anything transported to their local Wal-Mart by truck (everything). Luckily, the Federal Reserve and crooked politicians only care about their comrades in the top 1% elitist society, for whom oil is an investment, not an expense.  [...]

[...]The United States controls a full 1.58% of the remaining oil reserves in the world. We have 21.3 billion barrels of reserves versus 264 billion barrels in Saudi Arabia. We are currently producing 9 million barrels per day. At that production rate, the U.S. will deplete its proven reserves in the next 6 to 10 years. New discoveries will not be able to keep up with depletion of existing wells. The good news just keeps coming. Mexico’s oil production has been dependent upon one giant oil field since 1976. The Cantarell oil field produced 2.1 million barrels per day in 2003 at its peak. It is currently producing 464,000 barrels per day. Peak oil has arrived in Mexico. By 2015, the country that currently supplies 13% of our daily oil supply will become a net importer of oil. [...]

I highly recommend reading the entire article posted at Zero Hedge. Peak oil… Do you believe it?

Peak Oil – Do YOU Buy it? is a post from: Rebel Traders – Stock Market and Economic Analysis

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