Tuesday, May 15, 2012

Peak Oil is a Trite Truism; Peak Oil Doom is a Religious Cult

Peak Oil -- the idea that eventually it will not be economically viable to extract and utilise crude oil for fuels, chemicals, polymers, etc. -- is a trite truism. Everyone understands that humans will move away from dependency on crude oil eventually. It is unclear whether humans will be forced to give up their oil dependency or whether they will walk away from the large-scale use of oil voluntarily.

Peak Oil Doom -- the popular movement typified by the setting of dates and the drawing of peaking curves that collapse and take civilisation down with them -- that is the stuff of cultists and dull-witted disciples and believers in poorly documented prophecies and predictions.

It is important not to confuse the two concepts, since most intelligent people accept the fact that humans will eventually find it expedient to move away from crude oil dependency. That type of peak oil approaches the cliche'd meaning of "common sense," although it is more complex and has more possible variations than most people understand.

The Peak Oil Doom Cult and Religious Hysteria, is actually dangerous to those who take it seriously, potentially causing them to make ruinously stupid economic decisions. Their families also tend to suffer the malignant effects when believers submit their own minds to the cult. Not that you can talk such cultists out of their religion. Their doomerism is one of the things -- perhaps the main thing -- that makes them special, after all.

Peak oil cultists tend to believe that oil production has irrevocably peaked. That "fact" combined with another "fact" -- the exponential increase in demand for oil into the indefinite future -- leads them to be assured that oil will grow ever more expensive and less available into the future.

So what is a peak oil cultist to make of situations suggesting an apparent drop in demand? These disruptions in what was supposed to be a monotonic increase in the price of oil stretching well into the future, accompanied by an unexpected buildup in crude stopckpiles? Many of the fund traders of JP Morgan, Goldman Sachs, Citigroup, and the rest of the funds on Wall Street are being pushed into a tight spot by current contradictions to the post-peak narrative.
In April and especially May, plunging Brent and WTI prices are likely to have inflicted significant pain on many hedge funds. Month-end performance letters are likely to reveal some big casualties.

While prices continue to slide (September WTI is down another $2 already today) the remaining longs will continue to haemorrhage cash and face tough margin calls.

The key question for traders still trapped in old longs, as well as others thinking of re-entering the market on either the long or the short side, is whether the liquidation has run its course, or is there more to come?

For the time being, momentum clearly favours the downside. _Reuters
It is easy to get greedy when you believe you are in on a "sure bet."

Some peak oil doom cultists go beyond betting what they can afford. Some bet on margin, or on borrowed funds. If their belief is strong enough, they are apt to do just about anything to prove their faith, beyond the obligatory circle jerk deposits to discussion groups.

There is an old saying, "Trust, but verify." At the Al Fin Advanced Energy Institute, we say "Don't ever trust, always be sceptical until you can verify."

But try telling the cultists that. Heh.



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