Volatility

May 4, 2010

Deepwater Event Horizon

Filed under: Disaster Capitalism, Law, Peak Oil, Tower of Babel — Tags: , , , — Russ @ 9:13 am

 

The event horizon metaphor is being widely used among the more dystopic commentators, and it looks appropriate. This is the kind of disaster we can expect to see more often, and worse every time, as Peak Oil drives us to greater extremities to extract ever lessening oil reserves, requiring ever more complex technology and logistics, these being provided in an ever more shoddy way by ever more corrupt corporations. But we can expect the whole mess to be treated and bailed out as Too Big to Fail.
 
Although it’s tough to penetrate the fog of corporate/government/MSM misinformation, the basic facts seem to be that Transocean, contractor for BP, was drilling into 30,000 feet of rock beneath 5000 feet of sea, seeking an oil reservoir variously projected to be 20-50 million, 100 million, or 1 billion barrels. BP’s own estimate is 100 million, which is probably around the minimum necessary to render the project economically viable in the first place even with taxpayer assistance. The cement casing was installed by Halliburton. The equipment was rated to handle 20,000 PSI but hit an unexpected high pressure zone of perhaps 60,000 PSI. This ruptured the Blow Out Prevention device, allowing natural gas to separate from the oil, concentrate, and explode. This destroyed the rig, killing 11 workers and sending the wreckage to the bottom a mile down. The rig lacked a simple $500K backup “acoustic switch” which is standard safety equipment around the world and could have prevented the explosion and subsequent leakage. The Bush administration decreed that backup safety measures didn’t need to be required, that “the market” would voluntarily do whatever was necessary. Obama  endorsed this deregulated status quo.
 
Since the blowout oil has been leaking into the Gulf. At first BP, the NOAA, and the Coast Guard closed ranks to claim the flow was 5000 barrels per day, 210K gallons. BP called that a “guesstimate.” The MSM was still repeating this figure as late as yesterday. Meanwhile the official estimates now concede it’s been around 25000 barrels per day ( > 1 million gallons). This is the equivalent of an Exxon Valdez every ten days. Perhaps as much as eleven million gallons have spilled already.
 
According to BP’s own prospectus, if the pipe system eroded completely, the leakage could escalate to 163,000 barrels per day, a cataclysmic figure.
 
They’ve been trying without success to stanch the flow with remote control submarine robots. Burning the oil on the surface doesn’t work well, and spraying chemical dispersal agents also looks insufficient to the magnitude of the problem. They’re now building three large containment boxes which they hope to place over the flow, channeling it up through a funnel where it can be controlled. They plan to deploy those by the weekend. If that doesn’t work, the next idea is to drill a relief well to the busted one, using the new conduit to pump in heavy fluid to plug it up. That would take at least three months.
 
(Some, but so far as I can see no one in “authority”, have also discussed or advocated using nukes. The idea would be to seal up the hole by exploding an atom bomb near it. What could go wrong?)
 
Other rigs are being shut down as the slick reaches them. Just weeks after flip-flopping on offshore drilling, Obama has flipped again and now wants the old moratorium back. BP says it will pay all “necessary and appropriate clean-up costs.” (Um, that would be all of them.) Meanwhile the fishermen whose livelihoods have just been destroyed, perhaps permanently, have rushed to join the clean-up effort. BP tried to force them to sign waivers relinquishing in perpetuity all right to sue in exchange for the $5000 payout they were offering. They’ve since retreated on that one, but it seems that legally they don’t have much to fear. Apparently federal law itself restricts BP’s liability for damages to the absurd figure of $75 million.
 
Now we see why BP doesn’t have insurance. Why bother – the law itself winks at you and says, Go ahead. Obviously we have another moral hazard situation here. Obviously BP calculated that if anything ever goes wrong the government will socialize the losses and bail them out. (It looks like a foregone conclusion that it’ll be impossible to get effective insurance in the future. But we can expect governments to formally guarantee the costs, I guess.)
 
This example of corrupt, renegade law is extreme even by the standards of this criminal government.
 
The effects of this are hard to predict. At best the destruction is likely to be very bad. The Gulf shrimp fishery has already been all but written off. All other fisheries are likely to be severely affected if not completely wiped out. Tourism is probably already being harmed, and will be destroyed to whatever extent the oil fouls the beaches of Florida and elsewhere. Even if the containers work, they won’t completely contain the leak until June. By then the economic damages all around the Gulf are likely to be in the tens of billions of dollars, while the physical mess will take years to clean up. The effects on ecosystems and endangered species like sea turtles would be incalculable. Wherever the wind and sea carry the toxic fumes and residues, bringing poisons like benzene, toluene, and xylene, they’ll bring illnesses ranging from headaches and nausea to cancer and other severe organic diseases. If the containers fail, and the new well has to be drilled, taking three months, and that works, by then the damages might be in the hundreds of billions, with the entire Gulf economically devastated for years to come.
 
All this is leaving out of account the hurricane wild card.
 
So far Gulf shipping is being diverted around the spill, but if the affected area got big enough it could choke off Gulf seaborne trade completely.
 
So far most of this is still hypothetical, and the mood among the establishment is mostly guarded optimism. (But not at the Offshore Technology Conference, where the attitude is Party On!, and everyone’s psyched about potential disaster capitalist opportunities. The NYT reports this in the blandest of tones. This is reminiscent of a pro-nuke NYT piece some years back which argued that because Three Mile Island wasn’t as bad as Chernobyl, we should take that not as a caution and an example of receiving good luck and a second chance, but rather as the green light to plunge ahead. So the NYT is propagating the same party line today regarding offshore drilling: We should take this disaster as an encouraging sign, not a discouraging one. It’s as if you drove home one night badly drunk, miraculously didn’t kill anyone or wreck your car, and your conclusion is not to be appalled and vow never to do that again, but to say, “I did it once and got away with it, so let’s keep doing it.”)
 
[Just for the record, even the Bush administration conceded that offshore drilling would never have more than a miniscule effect on imports or gas prices. The fact is that anyone who was sincerely concerned about America’s foreign oil dependence would oppose “Drill Baby Drill” because he’d want to save that oil for a day when we might lose access to foreign markets.
 
The push to drill every domestic drop is intended to accomplish nothing but the liquidation of American public property for the private profit of the oil rackets.]
 
So there’s where we are today, and there’s the more likely, “less bad” effects we can look forward to. But the disaster can become far more severe. If both the containers and the relief well fail, some other “solution” would have to be found. No one can say what could be done, how long it would take, how much it would cost. The Gulf’s environmental and economic devastation would be complete. It would be an economic dead zone for a generation or more. If the winds and currents coincide with the right malevolence, the oil could leak out into the Gulf Stream, which could carry it up the Atlantic seaboard, strewing coastal destruction all the way. In principle, if enough oil leaked it could affect all the world’s oceans.
 
Beyond the direct evisceration of the Gulf economy, the knock-on effects could be extraordinary. It could constitute the tipping point to bring down the whole Debt Tower.
 
What will this do to oil prices? In theory the effect so far shouldn’t be severe, since relative to the global production this well is a drop in the barrel. But if the spill’s advance shuts down other rigs, and if it interferes with imports from Mexico and Venezuela, and if the industry looks ahead to the possibly chilling effects on deepwater drilling in general (always being touted as one of the industry’s great hopes), who knows how it might rattle the futures market, with who knows what reverberations through all the markets. If speculators decide oil is going up, that’s always a self-fulfilling prophecy (and of course civilization learns nothing each time, and these criminals continue to be allowed to prey upon us). And if in turn they decide that means trouble for the rest of the economy, we might already think we hear the sucking sound of investment rushing out of Obama and Wall Street’s pride and joy, the stock bubble. Stocks must also tremble in general at the jitters over how bad the damage will be and who’s going to pay for the cleanup.
 
On the level of the real economy, the devastation of Gulf businesses could reverberate. There could be a domino effect through all their bank loans as they’re forced to default. The already wounded CRE market could take another hit. At the same time the federal government is spending tens or hundreds of billions to deal with the crisis, tax revenues from the region would plummet as a regional Depression sets in. This probably would be the end of any Fed plans to further raise interest rates. Insurance claims would be astronomical. Unemployment would spike even further. The disruption of oil production and imports could lead to spot shortages, with commensurate effects on gas prices. I already mentioned the questionable future of Gulf shipping. All the alleged “green shoots” would be stomped out once and for all.
 
This is a replay of the way the banksters crashed the economy. Just like with the finance sector, today’s vast expenditure and risk for the sake of drilling to extract a few measly drops of oil serves no social function, but only extracts looted profits for a few gangsters. All the cost and risk is socialized. It’s the same greed, the same recklessness, the same ideology of deregulation and moral hazard. It’s the same game of profiting during the run-up, and then being bailed out during the crash, while hunting for disaster capitalist opportunities. The costs of this will be very high even in the best-case scenario, and BP has no way to pay the costs, nor does it intend to. Just like all the oil rackets, it was always planning to socialize the costs of the inevitable disaster. The only question is whether it’ll also get a bailout. As I said, there’s already a bailout law absolving it of responsibility for the damages it inflicts. Presumably that’s only the beginning. 
 
Obama sounds like a complete idiot trying to talk tough, saying “we’ll keep the boot on BP’s neck”. (They say that’s not his line, but ripped off from Interior Secretary Salazar.) That rhetoric, coming from him, is even more pathetic than his squeaking about “fat cats” in December. When Obama talks that way, I take it as evidence that he’s psychologically preparing himself for another looting expedition. he wants to assure himself, through pseudo-tough talk, that he really did intend to fight for the people this time, but that some mysterious circumstance beyond his control prevented him. Of course in the same breath as his pipsqueaking tough-guy talk he continues with his pro-corporate backpedaling, saying we shouldn’t blame BP for the whole disaster. That’s not only morally absurd but a direct logical self-contradiction. If they’re really not such bad guys, why the boot on the neck? Wouldn’t the situation call for a collegial exchange of views toward a mutually beneficial solution? We know by now that’s always what this corporatist really thinks, no matter what the level of crime. (I’d be more likely to think Obama was getting serious if he dropped the tough guy talk, which doesn’t become him, but instead maintained his professorial demeanor while purging his talk of all pro-corporate amicability, instead calmly declaring his resolve to impose justice. That would be a completely new message, while delivered in the real Obama tone. I don’t expect to ever hear it.)
 
He sure picked the right time to throw in his lot with “Drill Baby Drill”. He said the issue of oil spills was a “tired debate”. Heckuva job. My opinion of his vaunted intelligence and political skill just keeps soaring… 
 
I won’t bother hoping people will learn a lesson. Since I became a Peak Oiler I’ve believed mankind will liquidate all fossil fuel reserves, for as long as it’s physically and economically possible. I gave up on the idea that political resistance will ever stop it.
 
At most, maybe there can be an indirect political effect. While I can believe that the cowardly Obama will flip-flop again after his first flip-flop of three weeks ago, that would only be a temporary respite. If this disaster really could kill offshore drilling (and I’m not saying I think it can), it would only be because everyone perceives the economics including their political aspect, namely the government’s political ability to extend an implicit or explicit Too Big To Fail guarantee to these drilling projects, to be impossible.
 
Is offshore drilling Too Big To Fail? The establishment believes it is. I’d bet the farm Obama thinks so too. Now they’ll try to bail out its future, no matter how much of the future the bleeding oil is already destroying as we speak.

April 3, 2009

Oil Prices and Peak Oil

Filed under: Peak Oil — Tags: — Russ @ 9:33 am

 

I wanted to try to get a basic understanding of how oil prices work. I’m not from the industry, but there has been plenty of expert commentary on the subject, so I thought I’d survey a few of these arguments, and try to distill a few basics.
 
I used the following pieces for this analysis: 
 
Robert Rapier The Next Five Years: Peak Lite and the Current Oil Picture
 
Jeffrey Brown A Simple Explanation For Oil Prices
 
Phil Hart The Economics of Volatile Oil Prices
 
Gail the Actuary Why Are Oil (and Gasoline) Prices So Low?
 
Why Are Oil (and Gasoline) Prices So Low – And Where Are They Headed?
 
Jeff Vail Predator-Prey Dynamics in Demand Destruction and Oil Prices
 
Mechanics of Future Oil Price Volatility (A Flubber Cobweb)
 
Dave Cohen The Price is Not Right
 
(There’s plenty of other good writings out there, but these seem like a good cross-section of what’s being written in Peak Oil circles.)
 
All commentary today is informed by the economic crash. During the price run-up of the last four years there was considerable debate over to what extent this was being driven by supply-demand fundamentals, as opposed to above-ground factors, especially speculation. (Thus we had the spectacle of conservatives, who normally deny on principle that there’s any such thing as “speculation” as opposed to the genius of the rational market, suddenly claiming high oil prices were completely the result of nasty speculators. This was because conservatives must obey their higher principle that there’s no such thing as resource limitations.)
 
Oil production stagnated in 2005, and from there we’ve seemed to be on the “bumpy plateau”. Oil prices were therefore rising on account of rising demand and the growing perception of constrained supply in the face of this rising demand, especially in Asia. It was feared that soon demand would reach the supply limit, the economic “growth” needed to fuel exponential debt would stall out, and first the financial system and then the economy at large would crash. This was the position of those emphasizing fundamentals (i.e. Peak Oilers).
 
Those who seem ignorant or in denial of supply fundamentals (most politicians, pundits, the MSM) were more likely to ascribe the price surge to speculators and war profiteering by the oil companies.
 
For Peak Oilers there were several questions. How far off is the acute Peak? Or have we already experienced it? What can producers do in response to the strong price signal they’re receiving? Will the Peak trigger an acute crash or a gradual economic descent?
 
What actually happened confounded most prognostications. There will be debate for a long time over the proximate cause of the mortgage defaults which triggered the avalanche. Perhaps we’ll never have an exact answer (historians tend to wrangle over such proximate causality forever). Among Peak Oilers the question is to what extent constrained supply, by driving up fuel and food prices, helped generate defaults. We can leave aside that question for now (I attempted a short answer in an earlier post, The Bailout War III: Corporatism and Finance). Certainly the exponential debt run-up was unsustainable and highly unstable in itself and could easily crash on its own from any number of things. Fuel prices didn’t help the stability of the situation, but right now it’s not very important to figure out precisely how big a role they played.
 
What’s most important is that whereas Peak Oil expected a supply crunch to trigger the financial crash, and that demand would be forcibly destroyed by the two in synergy, instead the crash came first and accelerated the existing demand response to high prices. Supply ended up having to meekly constrain itself in demand destruction’s wake. So the acute Peak ended up being enforced by above-ground factors after all, and did not dictate the crash but rather was dictated by it. 
 
No sooner had producers, especially Arabia, been able to increase capacity and production to a small extent, than amid financial turmoil the price topped out at $147 in July and began a steep, steady descent. Financial woes and fears drove an unexpected level of demand destruction in the West and even in China. This fed into a bearish perception among traders which further encouraged price descent.
 
This price decline combined with the fierce credit crunch to cause independent and national producers to mothball or cancel many future projects. The first victims of this were alternative projects like the tar sands and some ultradeepwater developments, as well as refinery and pipeline expansions. So while projects already underway will largely be brought to completion, and for a few years new capacity coming online should counteract depletion from existing capacity, in five years or so the lead times will run out, we’ll be up against a void where new capacity was supposed to be, depletion will overtake spare capacity, and the Peak Oil effect will finally shine through, sending prices permanently upward, and in terminally downsizing economic activity.
 
That much seems to be the consensus. The mystery is in how production, demand, and prices will behave during this interregnum between the exponential debt civilization (that is, where pretty much everyone believed in its permanence, and called it the “Great Moderation”) and the post-Peak descent. Can the economy temporarily recover, and even artificially electrify itself into some residual zombie “growth”? How much more debt can the dollar take on? (I don’t think any sane person still believes the debt tower can be salvaged or manageably wound down, let alone keep building. I think they’re just helpless to change course. This might make sense if they were using their last debt push to build a new relocalized economy. But instead they’re using it for the Bailout War and the Global War on Terror, two utterly worthless imperialist projects. Economically speaking, two pure ratholes. So by now the federal debt binge is just a Dance of Death.)
 
It seems that Peak Oilers don’t believe there’s much chance of anything more than a temporary anodyne recovery of growth. There won’t again be enough economic mojo to drive demand up enough for another heroic production push. So it seems that we did see the acute Peak for conventional crude in July at 75 mpd. Whether or not all-liquids might still exceed its current peak of 87 mpd is more questionable, but also seems unlikely. It looks like the bumpy plateau is confirmed, and the only question is how bumpy it will be for the next five years or so, and then how steep and volatile the descent will be.
 
I’ll now give a brief summary of the pieces listed above, each an attempt to figure out where we are now and what’s happening.
 
Back in October Gail the Actuary (Gail Tverberg) asked, “Why are oil (and gasoline) prices so low?” Her answer was an attempt to itemize the factors fuelling demand destruction. She provides the basic rule of oil’s supply-demand fundamentals: that where supply and demand are very close, and supply is tight, such that their curves are nearly vertical, this makes for extreme price volatility, and a small change in either can have a huge effect on price. Until last summer Peak Oilers tended to emphasize the supply curve starting to shift left, but as we saw it ended up being the demand curve instead.
She adds in the effect of slowing Asian growth and demand. Since this has been such a dynamic force driving demand upward, any reversal here is likely to have significant effects.
 
Tverberg also emphasizes the above-ground effect of the credit crunch on intermediaries like suppliers and shippers. Where these become less able to get credit, producers are less confident about doing business with them, and the industry becomes further deflated. (This sounds similar to the banks being “unwilling to lend”.)
However, she also focuses intensively on speculator unwind (indeed 5 of the 8 factors she lists involve trading), to the point that it seems she’s attributing a significant role to speculation in the price run-up and subsequent decline as the speculators have to unwind their positions.
She says this speculator effect is likely to fade away as they are chased out of the market by low prices and the strong dollar.
 
Her predictions in October: continued volatility, while a weakening dollar over the long term, a shakeout of the smaller market players (mostly from inability to borrow money), and supply constriction as a result of the credit crunch and OPEC production cuts, all lead to rising prices in the longer term.
 
In December Tverberg revisited the question and offered a somewhat different prognosis. She says the debt unwind specifically, more than the recession per se, is what’s been driving prices down. This is because according to charts she shows, except for debt-enabled activity, the economy itself has been stagnant for the last ten years, and the alleged GDP growth of that period was really “debt-based pseudo-growth”.
(I highly recommend this chart as an excellent refutation of all the lies about trickle-down and tax cuts and growing wealth for everyone. Clearly the only wealth that was “growing” was financiers’ rent.)
Therefore as America must now try to unravel its debt it faces the end of growth, and from there the end of the wherewithal to keep the oil machine going (here again we see a reversal of cause and effect from what was expected, finances and demand destruction limiting supply rather than the other way around).
 
So here Tverberg says the above-ground factors of demand destruction and the credit crunch are for the time being firmly in command, and therefore we shouldn’t expect the oil price to trend upward again until depletion reaches down far enough to overtake depressed demand (i.e. five years or so).
 
Writing in February, Phil Hart focuses on the same fundamental dynamic of near-vertical supply and demand curves which prevailed up until last summer, and the price volatility which arises under that circumstance. He’s not as concerned with how demand destruction is functioning but rather takes it as given in order to ask, what will be the future effect on supply as new capacity coming online trails off, while demand possibly increases (in the event of a recovery). He sees the supply curve moving to the left with each iteration of the boom-bust cycle, so that Peak Oil will result in extreme oil price and economic volatility for the short to mid-term.
 
Jeff Vail has a similar idea with the “flubber cobweb”. Following up from his analogy of a predator-prey population relationship (with predator populations oscillating in sympathy but at a lower amplitude and lagging behind in time) with that between the oil price and that which it signals (producer investment, political policy, consumer behavior), he sees the boom-bust price cycle causing investment patterns to become ever more conservative, so that the next price boom has to “overexaggerate” in order to induce investment (for example, if in one cycle the producer required a $100 price in order to feel confident in investing such that he’d be able to profitably sell that oil at $50, the next time around, after having seen price crash below 50, he’ll have to see 150 before investing, and so on). Meanwhile, even as investments are made, the overexaggerated price is encouraging overproduction as well as destroying demand and provoking real or perceived policy change such that demand is likely to fall enough below production to overexaggerate the floor where a descending price eventually bottoms out. The result is a vicious circle, such that investment is further restrained each time around, less future capacity becomes available, each demand and price surge sooner runs up against the supply wall, from which it crashes again and finds it harder to recover.  
 
Vail envisions a boom bust cycle continuing however long and at whatever frequency, combining with depletion and growing geopolitical volatility to produce a price volatility which “rapidly accelerates over the next decade”.
 
The feature common to all these boom-bust model concepts under Peak Oil conditions is that each iteration will see higher ceilings and floors, no matter how much the oscillations overexaggerate.
 
This is true of Dave Cohen’s take. He sees continuance of the boom bust cycle; but where he believes the most recent crash was triggered mainly by factors extraneous to the oil price, he thinks in the future this price, along with the strength of the dollar, will pay the major role.
 
(Cohen also takes the most close-in view of day-to-day shifts and finds that here “market sentiment”, market psychology, is the decisive factor. Expectations rule the price, and the market sentiment of the traders dictates the expectations. If the mood is bearish, confirmation bias will tend to operate in selecting the evidence which confirms that mood. Thus last fall, where the mood was that oil prices are down and will keep going down, things like the hurricane shut-ins and announcement of OPEC production cuts, which seemed to indicate future supply restrictions, didn’t phase the mood, while the fall of Lehman was taken as big news, because it confirmed the mood. This dynamic prevailed throughout the rest of 2008 and into 09. Only with the recent news of actual OPEC cut compliance has the sentiment shifted somewhat, and the price showed some signs of life.)
 
One more analysis along these lines is Robert Rapier’s “Peak Lite” concept. Rapier thinks a sustained intermediate term recovery is possible in principle, and that perhaps we will again see a time of increasing demand and supply. But because of investment mothballing, it’s extremely unlikely that future increasing production will be more than at a trickle rate, while demand may temporarily resume robust growth. Under those circumstances Peak Lite is the scenario where demand overtakes even a still-increasing production with the same price effect as is theoretically expected from Peak Oil proper, a permanent rise.
(Rapier expects the historical boom-bust price and investment cycle would end at that point.)
 
There’s one last idea to consider. The foregoing examples, implicitly or explicitly, discount the likelihood of finding a single indicator with a strong correlation with oil price. But Jeffrey Brown claims to have found such an indicator in the export figure for the top five exporters: Arabia, Russia, Norway, Iran, and the UAE, who together represent around 50% of world exports. His figures show this correlation over the last decade, and from that his construction of the 08 price crash is that demand destruction overtook long-term export decline. (Exports, like total production, being largely stagnant since 2005.)
 
Brown predicts that exports from the top 5 will now decline from 24 mpd in 2005 to 12 mpd (middle scenario; range of 7-18) by 2015. This, he thinks, may have a more pronounced effect on prices than the general depletion from cancelled investment (of course these cancellations would play a significant role in export declines). From this he makes the most specific short term prediction which runs counter to the consensus – that on account of diminishing exports 2009 may see a higher average price than 2008’s $100.
 
So that’s a basic rundown. There’s a basic agreement that for the time being, at least during what seems to be the Depression we’re entering, that above-ground factors are playing the more important role, and that supply fundamentals aren’t likely to stand out from the above-ground volatility signal until c. 5 years, at which time new production coming online during those 5 years is overtaken by depletion from existing fields not being replaced on account of all the projects now being mothballed or cancelled.
 
The most important of these above-ground factors are demand destruction from the economic downturn and the related asset deflation and credit crunch. The ability of these to be temporarily reversed depends upon the economy’s ability to experience reflated debt and “growth”. There’s unlikely to be much of an inflationary force coming from this quarter.
 
There’s also the tendency for commodities prices to rise or fall in inverse proportion to the strength of the dollar. If (when) the dollar again weakens, toward its eventual devaluation, this may spur the price upward. Market psychology is the strongest day-to-day factor, and once it has momentum it’s hard for new evidence to change its inertia.
 
There’s also the relation with exports, which may soon be heading inexorably downward, ahead of supply per se. This, according to Brown, will be an upward influence on price.
 
As for supply-demand fundamentals themselves, demand is now further below capacity than at any time in years, and so long as this holds there won’t be as much fundamental-driven volatility or likelihood of a spike (although if an acute event confirms existing market psychology, it can trigger a short-term price spike or plunge).
 
Whether demand recovers (Rapier thinks it possible) and again runs up against the capacity barrier, or stagnates, seeing only an anemic rise at best, while depletion brings supply limits down to it (Vail, Hart, Tverberg), the result is still a price spike. Then the question is whether this spike is permanent (as Rapier thinks) or intensifies the boom-bust cycle through further iterations (Vail and Cohen consider it possible).
 
So to conclude: it’s likely that in five years depletion will exceed production, and the Peak will be complete. From there on price will likely remain permanently high. For the next five years we’ll see more or less volatility in demand and price, depending upon each other, and upon any temporary debt reflation (or further deflation) or dollar crash. If there are more “business cycles” during these five years, they’ll likely run concurrent with boom-bust cycles of oil price and demand.