[extropy-chat] Re: peak oil debate framed from a game theory standpoint ?

Mike Linksvayer ml at gondwanaland.com
Tue Sep 6 18:01:42 UTC 2005


On Sun, Sep 04, 2005 at 07:56:21PM -0700, "Hal Finney" wrote:
> Probably the biggest question mark
> is the state of the Saudi Arabian oil fields.
[...] 
> The Peak Oil
> situation is highly sensitive to what happens in the Chinese economy the
> next few years.
[...]
> Of course the further out we go, the more the chances
> that some kind of wild card will appear, a new technology or some such,
> that could change the nature of the situation we face.

Nice summary of three big unknowns.  I suspect that radical peak
oilers will claim that the first two don't really matter, as they
only change the date of the doomsday scenario, and the third is
irrelevant, as technology can't save us, can't make up for the
depletion of our free energy endowment built up over billions of
years, and wouldn't be allowed by the oil company conspiracy anyway.

It will be interesting to see if and how quickly
http://en.wikipedia.org/wiki/Non-conventional_oil sources ramp up
(an interesting idea future claim might be whether each of these
produce some level of oil-barrel-equivalent output by some year)
and how quickly hybrid and other drastic oil-conserving technologies
are deployed (another interesting claim may be something about %
of new cars sold in some year that use one of these).

However, the reason I'm writing here is this:

> If Peak Oil were widely seen as a likely scenario in that time frame,
> we would see increasing oil prices out in the 2008 to 2011 time frame.
> For technical reasons, these markets tend not to have large price
> differentials across the delivery years (basically because it is easy to
> move oil deliveries backwards and forwards in time), so we would expect
> high future prices to drag up present-day prices.  This is actually
> one of the great services of commodity markets, that they make the
> high prices of future shortages felt in the present day, encouraging
> conservation and searches for alternatives well in advance of an actual
> supply/demand mismatch.

I'm not sure I understand how deliveries are moved backwards and
forwards and how this affects present day prices.  Put another way,
if futures markets have a levelling effect on prices over time, I
don't grok the mechanism.  Anyone have a brief explanation or pointer
to a non-brief explanation?  My guess is that a change in future
prices changes the expected return on holding on to current deliveries
and selling at a later date, increasing or decreasing current supply
if future prices are lower or higher than current prices respectively.

-- 
  Mike Linksvayer
  http://gondwanaland.com/ml/



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