This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.

Post

Timing of Oil Shock Hits Exactly as Predicted in Article of Last Year

Tom Therramus's picture
Researcher, Self-employed

Tom Therramus writes on instability in the oil markets and its impacts on economics, politics and climate change. He believes:  1. Peak Oil is real; 2. Climate Change is real;  3. And...

  • Member since 2021
  • 16 items added with 4,392 views
  • Mar 8, 2022
  • 742 views

A major spike in price volatility surged through the oil markets last week.

In my article of last October posted at EnergyCentral.COM https://lnkd.in/dzX2NDzw. I wrote:

""In the short term, I am concerned that the coming wave of volatility will correspond to a sharp ramp-up and crash in oil price – perhaps similar to that which occurred in 2008. A tight sequence of such ramps and crashes may also give rise to spikes in price variance that mark one of these recurring bouts of instability. If such a period of intense volatility does occur it may be a moment of reckoning for the oil industry... and for us all.”

It looks as if the first of these scenarios may be starting to play out i.e., “...a sharp ramp up and crash in oil price…”. albeit, that this latest spike in price variance is occurring for reasons I could not have possibly anticipated last October. Obviously, the proximal cause is the war in Ukraine. 

This being said, my view is that Mr Putin may be well aware of the long-term pattern of cycling instability in the energy markets that I have been describing now for more than a decade. Furthermore, I’d speculate that he grasps that this moment in the cycle (i.e. the period between the winters of 2021 and 2022) is a phase of elevated vulnerability for the West, and whether by hook or by crook, he has timed his actions to take advantage of our susceptibility. It is not clear to me whether this is a matter of intuition or whether he has advisors around him who encountered the idea and then became persuaded of its veracity. If it is the latter, it would have been a trivial matter for an adept to check my numbers. I have described my methods in detail in my articles (e.g. see footnote in https://lnkd.in/dzX2NDzw) and Russia has many fine mathematicians.

We are all inspired by the brave Ukrainians and their courageous leader Mr Zelensky. In this thrall, I believe that we are in grave danger of underestimating Mr Putin's imperial ambitions. He appears to be an unusually gifted strategic thinker and actor - historically, aspirational parallels to tyrants like Napoleon and Hitler come to mind. For all those who value democracy and individual freedom - I fear we may have the fight of our lifetime on our hands.

Discussions
Matt Chester's picture
Matt Chester on Mar 8, 2022

Interesting you were right on the outcomes, but understandably not on the causes. But the idea that the gas and oil prices can be so volatile for any number of reasons is exactly the point of needing to move away from these fuels!

Tom Therramus's picture
Tom Therramus on Mar 8, 2022

Tx Matt... and agreed. This being said, energy transitions are made on generational time scales, as is the process by which Peak Oil is playing out. What we've seen over the last 20 or so years is that we are not smoothly gliding up and down the crest of oil production depletion curve. It turns out there is meat grinder churning at the top of the Peak Oil mesa. This latest shock should be seen in this context IMO - not simply as an isolated product of the Ukrainian invasion by Russia - heartbreaking as it is. I also view that Putin has cynically exploited the 3-4 year cycle of instability that my data suggests emerged after the turn of millennium in the energy markets. Indeed, he appears to have timed his actions to precisely coincide with when this Peak-Oil related phenomena will have its maximum bad effect on our stock markets, commodity prices, inflation and political polling. 

Rick Engebretson's picture
Rick Engebretson on Mar 9, 2022

I disagree with most of your statements. I agree, however, peak oil and climate change are real. And I agree we are in for a "meat grinder" era.

Ukraine's military ambitions were too close to Hitler's do or die Stalingrad ambitions. We've seen energy tensions since WWI. Always tragic never new.

The winners will be those societies that find meaningful, innovative paths to peace. Here is a good background;

https://www.eia.gov/energyexplained/us-energy-facts/

Even in the US, , biomass leads all forms of "renewable energy." However, countries like India are putting science to work to use it well.

Tragically, it sounds like agriculture fertilizer and food production is also going to take a big hit. War is a foolish substitute for science.

Tom Therramus's picture
Tom Therramus on Mar 9, 2022

Thanks for your interest Rick. I always appreciate when someone reads something that I've written and puts effort into thinking about it - even though one might disagree. Seems that we do agree on the big things all the same viz: 1) Peak oil is real;  2) Climate change is real. Wonder what you think about my third proposition that Peak oil is a more immediate and important threat than climate change ?

Rick Engebretson's picture
Rick Engebretson on Mar 9, 2022

I prefer to learn from people like you with math/science skills than pass judgement on their conclusions. I actually never use the term "climate change" but I know plant growth is dramatically impacted by excess CO2.

Registering for the draft during the VietNam war made me a better college student. Ultimately a Biophysics grad student at the U of Mn. where the head guy, Otto Schmitt, is best known for inventing digital electronics. I started a company Lightronics, Inc. when politicians promised to lead the world in supercomputers. FiberOptic networks and microelectronics worked. Most of my lab work was in "the Laboratory for Biophysical Chemistry."

So now I live in the boonies and have more fuel of the wrong kind than I can possibly use. And as many here know, persistently advocate "copy fire" to photo-chemically transform abundant biomass into higher energy fuels, "solar biofuels." I simple inform of science and keep as far away from politicians with guns as possible.

Thank you for your presentation. We would all like to hear more from you.

Jim Stack's picture
Jim Stack on Mar 9, 2022

With the talk of Oil prices I would think most would be telling about going Electric. A gas car makes deadly pollution, it is very inefficient 20% or less. It is full of polluting  gas and Oil which is even more deadly in an accident. Many homes also have natural gas but mine is 100% Electric and 120% Solar, We make more than we need. I did that 22 years ago . Why does everyone wait for a crisis before acting ?

Tom Therramus's picture
Tom Therramus on Mar 9, 2022

Hi Jim, Thanks for your comment. Congratulations on your use of solar power - it makes total sense in your part of the world to take advantage of the abundant sunshine.  My view is that there is no easy or quick transition away from fossil fuels -  over 60% electricity generation in the US relies on coal, oil and natural gas. Energy transitions take at least a human generation and history teaches that to date there has always been a higher energy density source to move up and on to. Nuclear seemed to be that option for a good while, but recent decades have seen declines in its prospects. We humans are resourceful species and I suspect that we'll learn to make do as our brave new future unfolds - even though it may with a lot less than many of us have become accustomed to.

Tom Therramus's picture
Thank Tom for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »