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By Robert Rapier on Dec 26, 2011 with 35 responses

Grading My Predictions for 2011

In my list of Top 10 Energy Related Stories of 2010, I made three predictions for 2011. Those predictions were:

  • I believe high oil prices will continue to put a strain on the economies of oil-importing nations.
  • I expect that we will see oil prices once again head above $100 per barrel, although I expect the annual average for 2011 to be below $100 because of sluggish economies.
  • I also expect that the bills are going to start coming due for some of the high profile ‘next generation’ biofuel producers, and that we will see bankruptcies from some of the companies I have discussed in this column.

In hindsight, those predictions look pretty tame. However, bear in mind that oil had spent all of 2010 below $100/bbl, and a number of analysts were predicting falling oil prices in 2011. At the time I made that prediction in December 2010, oil prices had been creeping higher, and had climbed to $90. By the first week of March 2011, oil had reached $100. However, the price did average below $100 as I predicted.

I should have been more specific though. Usually, when I refer to oil prices I am talking about West Texas Intermediate, the primary benchmark crude in the U.S. But it isn’t necessarily the most important benchmark in the world. Brent crude oil is an important benchmark for petroleum prices in Europe, Africa, and the Middle East — and Brent was priced above $100 for most of the year.

When I made my prediction of bankruptcy for some next generation biofuel producers, I was specifically thinking of two companies. One was Range Fuels, and only a couple of weeks after I made that prediction, the news came out that Range Fuels was out of money. The bills did come due, they could not pay them, and they ultimately went into foreclosure. There were several high-profile bankruptcies in the renewable energy sector, most notably Solyndra, and the government began to feel the fallout when these companies could not deliver on the hype they created. (I won’t yet mention the second company I was thinking might go bankrupt in 2011, but I do not think they have a chance of staying in business over the long haul with their current business model. It is a company I have written about several times.)

So, for the second year in a row, I would say that my predictions were accurate. My predictions for 2010 were:

  • China’s moves are going to continue to make waves
  • There will be more delays (and excuses) from those attempting to produce fuel from algae and cellulose
  • There will be little relief from oil prices.

Those predictions, however, leave much more room for interpretation so I tried to be more specific with my predictions for 2011. In the next post I will list my Top 10 Energy Stories of 2011, and I will give predictions for 2012.

Link to Original Article: Grading My Predictions for 2011

By Robert Rapier

  1. By Ramiro Augusto Salaz on December 26, 2011 at 8:20 am

    Excellent simulation of energy consumption worldwide, from the different sources of fuels, renobables and not renobables. In the near future this will change radically, for the benefit of mankind, with the new free energy (gartis), clean, safe, wiht hydraulic power, and unlimited, available around the world, Please, view and extend its publication, to socialize and spread the new news in:
    http://www.calameo.com/subscri…..ns/1052457

    cordially,

    Ramiro Augusto Salazar La Rotta, D.Sc
    Bucaramanga, Colombia

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  2. By art on December 26, 2011 at 12:04 pm

    Hi Ramiro,

    thanks for smile of the day: you publish in an journal called: journal of perpetual motion ?? are you serious ? I suggest some other; journals titles as well;
    journal of unapplied themodynamics laws
    journal of flat earth observations
    journal of irreproducible results

    @ RR careful predictions for 2012…wonder if you foresee a change in 2012 between balance in the worldenergyconsuption balance; according the nice energy ticker the order is oil, natural gas and coal? personally I would state that a symptom of peak oil is that either natural gas or coal are moving closer first place..

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  3. By russ-finley on December 26, 2011 at 1:37 pm

    I have made good judgements in the Past. I have made good judgements in the Future.

     

    Dan Quayle

     

    Prediction is very difficult, especially if it’s about the future.

     

    Niels Bohr

     

    The future ain’t what it used to be.

     

    Yogi Berra

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  4. By rrapier on December 26, 2011 at 3:20 pm

    art said:

    @ RR careful predictions for 2012…wonder if you foresee a change in 2012 between balance in the worldenergyconsuption balance; according the nice energy ticker the order is oil, natural gas and coal? personally I would state that a symptom of peak oil is that either natural gas or coal are moving closer first place..


     

    According to the BP Statistical Review, the order is oil, coal, natural gas, and in 2010 the percentage of coal increased slightly to 29.6% of the world’s energy mix, while oil’s share declined slightly to 33.6%. Usage of both, however, increased relative to 2009.

    RR

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  5. By takchess on December 26, 2011 at 5:10 pm

    http://www.goodreads.com/autho…..ert_Rapier
    I linked your authors page to your blog.
    I look forward to seeing your book in my local library.

    Jim

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  6. By rrapier on December 26, 2011 at 6:30 pm

    takchess said:

    http://www.goodreads.com/autho…..ert_Rapier

    I linked your authors page to your blog.

    I look forward to seeing your book in my local library.

    Jim


     

    Thanks Jim. Greatly appreciated.

    Now back to writing. :)

    RR

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  7. By rufus on December 26, 2011 at 8:11 pm

    My guess is that, barring a serious economic contraction, 2012 is going to look pretty similar to 2011. There; how’s that for a “Brave” Prediction? :)

    Obama found that he could dip into the SPR without much blowback from the other side of the aisle, and that, when coordinated with other countries, the strategy is pretty effective. I figure he will do that again in the late Spring, early Summer (or, whenever gasoline prices get high enough that he feels it’s starting to hurt his chances for reelection.)

    For some reason, I just have a feeling that 2012 might be kind of a boring year (that means there’s probably a monster of a shit-storm coming.) :)

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  8. By rrapier on December 26, 2011 at 10:59 pm

    Rufus said:

    Obama found that he could dip into the SPR without much blowback from the other side of the aisle, and that, when coordinated with other countries, the strategy is pretty effective.


     

    How so? Prices started rising again a week after the release was announced, and today — in the slowest demand time of year — prices are higher than they were when the release was announced. That doesn’t seem all that effective to me. Looks to me like the market asked “Is that your best shot?”

    RR

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  9. By rufus on December 26, 2011 at 11:20 pm

    I don’ think so, RR. At $3.23/gal, nationally, prices are lower than at any time since around the first of Feb.

    I think if you’ll look back, prices topped at $3.96/gal, and started dropping when the Admistration informed Saudia Arabia, Kuwait, UAE, et al of the impending release, and have pretty much been dropping ever since (until about a week ago, anyway, when they bottomed at $3.20.)

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  10. By rrapier on December 26, 2011 at 11:30 pm

    Rufus said:

    I don’ think so, RR. At $3.23/gal, nationally, prices are lower than at any time since around the first of Feb.

    I think if you’ll look back, prices topped at $3.96/gal, and started dropping when the Admistration informed Saudia Arabia, Kuwait, UAE, et al of the impending release, and have pretty much been dropping ever since (until about a week ago, anyway, when they bottomed at $3.20.)


     

    Here you go. At the time of the release, oil prices were at $90. Today they are at $100. So the SPR release did not lower oil prices — and therefore it can’t be the reason gasoline prices are lower.

    RR

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  11. By rufus on December 26, 2011 at 11:49 pm

    Come on, RR, you know better than that. Gasoline prices have tracked Brent all year, not WTI. And, Brent prices started heading down when the SPR, and the other IEA Reserves, were cracked.

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  12. By rrapier on December 26, 2011 at 11:57 pm

    Rufus said:

    Come on, RR, you know better than that. Gasoline prices have tracked Brent all year, not WTI. And, Brent prices started heading down when the SPR, and the other IEA Reserves, were cracked.


     

    Once more, here you go. The price of Brent fell when the move was announced, then went up higher than it was before the announcement, bounced around, and now ends the year at a level much higher than is normal for this time of year. You will be very hard-pressed to show a statistically significant impact from the release.

    RR

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  13. By rufus on December 27, 2011 at 12:06 am

    That little “this data available for sale” almost disguises the secondary peak on Jun 23, when the release was announced (you can see just an itsy bitsy tip of the peak if you look carefully.)

    Prices are well down from there, and well down from the May 1 Peak (at about the time we were informing Saudia Arabia, et al of the coming release.

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  14. By rrapier on December 27, 2011 at 12:09 am

    Rufus said:

    Prices are well down from there, and well down from the May 1 Peak (at about the time we were informing Saudia Arabia, et al of the coming release.


     

    Read into it what you will, but I think most people would say $100 oil at Christmas means the move was ineffective.

    RR

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  15. By rufus on December 27, 2011 at 12:14 am

    Well, I wouldn’t say it was the most monstrousist earthquakie that ever hit the oil market, but I wouldn’t use the word, “ineffective.”

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  16. By Benny BND Cole on December 27, 2011 at 12:14 am

    It seems to me that the Peak Oil Scare Mongers are either suffering from hysteria fatigue, or have changed their minds about the universal and immediately pending catastrophe facing mankind.

    Could it be the huge oil strikes everywhere, or the huge natural gas strikes everywhere? Or 40 mpg cars everywhere? Or that there is a bona fide PHEV on the market (Volt)—and it doesn’t sell well as oil prices are so low? And that’s in 2011, well into the era of supposed $200 a barrel oil?

    RR is not scaremonger, but his tone is markedly different from just a few years back, when he opined that cross-country driving by car may not be possible in the near future, and worried about gasoline stations closing for lack of product.

    Instead we have plenty of oil, plenty of new strikes, plenty of conservation and alternative fuel possibilities, and CERA is positing that America could become energy independent again. The Bakken oil thing could go nationwide, and we have shale gas for 100 years. Some say would could make gasoline from coal, other from natural gas.

    And we have plenty of oil globally, even with most major oil-producing nations either intentionally or unwittingly cutting production, as in Saudi Arabia, Iran, Iraq, Nigeria, Libya, Russia, and Venezuela. There could be 12 mbd in Iraq alone, and who knows about Iran?

    Oil is now at $100, and that is probably a speculative price. I sense gluts are developing, in five to 10 years.

    If there is Peak Oil, it will not be for geologic reasons, at least not in our lifetimes.

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  17. By rufus on December 27, 2011 at 12:33 am

    Benny, prices have doubled since 2005, and production (C+C, not NGLS, Biofuels, Refinery Gains, Cow Pee, etc) is has actually slight fallen.

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  18. By Wendell Mercantile on December 27, 2011 at 12:35 am

    If there is Peak Oil, it will not be for geologic reasons, at least not in our lifetimes.

    Especially since we are now finding large swaths of the North American lithosphere is saturated and squishy with methane ~ and we have figured out how to get at it.

    The questions are how much it will cost to extract, and whether we will let a fractured political process and irrational fears stop us from doing it?

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  19. By rufus on December 27, 2011 at 3:35 am

    What does “Methane” have to do with Peak Oil?

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  20. By Ben on December 27, 2011 at 10:02 am

    What a ramble we have here. Makes one ponder why we’d even own a television:) A closer reading of the record confirms that RR has, like it or not, been consistently right, as his cautionary impulse about future energy supplies appears more grounded in a willingness to set aside the hype of would-be producers choosing to stick instead to the words of Sergeant Friday: ” just the facts, maam, just the facts.”

    Tinkering with the SPR, was and will remain, much like the gentleman who relieved himself while wearing dark trousers; he may get a warm feeling, but few others even notice. Simple math of the action belies its actual impact on the global marketplace.

    Oil, gas and coal are supplies that matter most for the immediate future with every expectation that investments by the energy majors (along with some investment funds endeavoring to make a name/fortune for themselves) will significantly raise the bar in the years ahead. Given anemic performance of national economies over for the past several years we have still witnessed the annoyance of historically high energy prices. It requires no leap of faith to anticipate an upward bias on prices until such time the combination of alternatives can achieve a scale commensurate with rising global energy demand. Again, it’s that pesky thing called math that aims to frustrate a contrary
    (call it wishful) opinion.

    Waste-to-energy seems to offer a win-win for those advocating a measure of conservation (this is the ultimate in recycling) and alterantive energy supplies
    based on a practical financial model. Combining the application of demonstrated thermochemical technologies with a continuum of feedstocks offers a pathway to scaling capacities to a level that could help impact pricing in local markets and introduce even broader dynamics. An acceleration in the transitioning of utlility power generation in the next few years will be a harbinger of what’s ahead.

    Happy New Year

    Ben

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  21. By Benny BND Cole on December 27, 2011 at 3:03 pm

    More good news—and this is a production car.

    Toyota Motor Corporation (TMC) launched the Aqua gasoline-electric compact hybrid—to be marketed as the Prius c in the US—in Japan. The Aqua features a small 1.5-liter Toyota Hybrid System II (THS II) with reduction gear, which achieves fuel efficiency of 35.4 km/L (83.3 mpg US, 2.8 L/100km) under the Japanese Ministry of Land, Infrastructure, Transport and Tourism’s (MLIT’s) JC08 test cycle and 40.0 km/L (94 mpg US, 2.5 L/100km) under the MLIT 10-15 test cycle.

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  22. By perry1961 on December 27, 2011 at 4:10 pm

    That’s about 54 MPG real world mileage Benny. It’s a Prius for the younger generation.

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  23. By Optimist on December 27, 2011 at 4:46 pm

    Well, I wouldn’t say it was the most monstrousist earthquakie that ever hit the oil market, but I wouldn’t use the word, “ineffective.”

    Wow, Rufus, you are immune to data, aren’t you? (A requirement for being an ethanol booster?) The real pity is that it is becoming par for the course. In a nation of lawyers, the only truth is the one I choose to believe…

    Or that there is a bona fide PHEV on the market (Volt)—and it doesn’t sell well as oil prices are so low?

    Or maybe the Volt is just an overpriced POS, that makes no sense, even at $4/gal.

    Oil is now at $100, and that is probably a speculative price. I sense gluts are developing, in five to 10 years.

    Wow, Benny, that conclusion is in NO way connected to the facts. Still blaming the speculators (and sounding like a certain clueless Occupy the White House protestor)? How come the clever SPR release did not send them running for the hills, as it was supposed to do? And again: if speculators are in complete control, why ever let the price of oil go down?

    Here’s a simple fact: oil at $100/bbl suggests a shortage, rather than a glut. Good thing too: tar sands would not be feasible at $30/bbl. And as oil keeps going up, eventually GTL and CTL starts to make sense. Who knows? Maybe there is a (truly) renewable fuel out there that can be compatitive at $150/bbl…

    Admit it Benny: >$100/bbl is good for America, and good for Benny!!!

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  24. By Optimist on December 27, 2011 at 5:07 pm

    Those predictions, however, leave much more room for interpretation so I tried to be more specific with my predictions for 2011. In the next post I will list my Top 10 Energy Stories of 2011, and I will give predictions for 2012.

    I’d say that the events of 2008 shows how dangerous a sudden spike in oil prices can be, complete with useless suggestions from the ruling class (gas tax holiday, etc.). The events since show how a gradual increase allows for quiet adaptation, even gradual transformation.

    The question then is this: Will Peak Oil lead to a spike and suicidal stupidity out of Washington? Or will Peak Oil quietly go on transforming the way we do everything, until someday we look at the numbers and see, wow, we’re using half as much oil as we used to?

    In theory there is a third option: a spike, but with common sense prevailing we adapt, survive and thrive. For that to happen we need serious leadership. There goes that option…

    Luckily for us the odds of a sustained peak is low: as the events of 2008 showed, a spike leads to some pretty immediate demand destruction, which in turn undercuts the spike.

    I have no doubt that America can thrive at $500/bbl. You may not recognize that country, but it can (and will) be done. Even for all its flaws, there is no other country that can lead when it comes to the innovation that will be needed to adjust to sustained higher oil prices.

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  25. By rufus on December 27, 2011 at 5:51 pm

    The average Gasoline price in 2011 was higher than in 2008.

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  26. By Wendell Mercantile on December 27, 2011 at 8:17 pm

    What does “Methane” have to do with Peak Oil?

    Sorry about that typo Rufus. Of course I meant “methanol” — the alcohol motor fuel of the future made from our natural gas feedstock. The alcohol fuel that will quickly displace corn ethanol were we to have a true Open Fuels Standard and free market.

    Methanol is also the chemical feedstock for dimethyl ether (DME), a very good compression ignition engine fuel.

    Methanol is also the fuel of the future for fuel cells. Much easier to handle than the daunting logistics and handling problems of either high-pressure of cryogenic hydrogen.

    If you think the methanol we could make from natural gas would have no effect on how Peak Oil plays out, you have probably been harvesting too much “ditch weed” along those long, Tunica County highways.

    The idea of all that methanol coming onto a true open market should be scaring the crap out of the corn ethanol boys.

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  27. By rufus on December 27, 2011 at 8:54 pm

    I don’t know; I’m sitting here watching the frackers pulling out of the Marcellus, and heading for the oil plays, and the LNG guys building export terminals, and I can’t imagine nat gas not, at the least, doubling in price in the next couple of years. We’ve seen these nat gas boom/bust cycles, before, with the last one ending with $13.00 + nat gas.

    And, I’ve got a hunch that methanol doesn’t pencil out nearly as well with $8.00 to $10.00 nat gas as it does with the $3.50 variety.

    Like I said, “We’ll see.”

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  28. By rrapier on December 27, 2011 at 10:06 pm

    Rufus said:

    And, I’ve got a hunch that methanol doesn’t pencil out nearly as well with $8.00 to $10.00 nat gas as it does with the $3.50 variety.


     

    But then again, neither does ethanol.

    RR

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  29. By Wendell Mercantile on December 27, 2011 at 11:21 pm

    But then again, neither does ethanol.   Wink

    Rufus should at least exchage his pencil for a calculator.  I think I’ve got an old TI-10 in my garage tool box, shall I ship it to Tunica?
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  30. By rufus on December 28, 2011 at 3:36 am

    The Poet plant in Chancellors, Iowa is powered largely with corn stover. At a certain nat gas price many ethanol plants will be powered by ag waste.

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  31. By Ben on December 28, 2011 at 10:54 am

    With Ng prices decoupled from crude and unlikely to evade the impact of new supplies made available via improved technologies–and the introduction of new, smaller-scale production methods capable of exploiting stranded gas–the efficacy of methanol as a fuel alternative has never been better. The price point need not be $150 bbl, or even $100 bbl, though higher levels only promise to accelerate the transition to alternatives. An analysis of debt service and IRR requirements in combination with ongoing operating costs demand a sustainable crude price level of $80+ for capitalization of a broad range of green fuels without the benefit of capital/operating subsidies; the operative word here being sustainable.

    If I read RR’s ruminations about the data coming out of the energy industry, government and think-tank sources correctly, “cheap” petroleum is history regardless of various theories of Peak Oil. In fact, if one is fair in calculating the value of today’s oil, they’ll discover that current valuations actually place costs fairly close to an inflation-adjusted benchmarks of the Post-War era, again, given the necessity for an IRR that addresses the risks attendant exploration and development. There’s no free lunch in the energy game; unless, of course, you are posturing for an IPO from your latest bag of tricks on turning a sow’s ear into a silk purse. Guess that’s almost inevtable if you spend too much time with West Coast siblings or is that cousins in Washington, DC?:)

    Stick to the math, it tells the story.

    Ben

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  32. By Wendell Mercantile on December 28, 2011 at 11:41 am

    At a certain nat gas price many ethanol plants will be powered by ag waste.

    And what are the logistics of using that ag waste Rufus? “Use the ag waste” certainly sounds attractive, but we can’t do it as they do with sugar cane bagasse in Brazil — using what many would call near-slave or peasant labor.

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  33. By rrapier on December 28, 2011 at 1:00 pm

    Wendell Mercantile said:

    At a certain nat gas price many ethanol plants will be powered by ag waste.

    And what are the logistics of using that ag waste Rufus? “Use the ag waste” certainly sounds attractive, but we can’t do it as they do with sugar cane bagasse in Brazil — using what many would call near-slave or peasant labor.


     

    The other important point about the bagasse is that the logistics are already done. The bagasse is at the plant, washed and pulverized — as a part of the sugarcane process. Even in the U.S. we use the bagasse for powering the sugarcane plants — because otherwise it presents a disposal problem. Having to actually gather up biomass for powering a plant will be a different story from the bagasse.

    RR

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  34. By rufus on December 28, 2011 at 4:01 pm

    The “Spreader” is removed from the back of the combine, and the stover comes out and makes “windrows.” The farmer, or his son, or laborer, follows behind with a “baler.” The bales are loaded by the same tractor driver onto the truck that has been pulled out onto the field. The bales are then delivered the fairly short distance to the biorefinery.

    Much more efficient than having thousands of laborers running around with machetes, and throwing the cane stalks onto small trailers to be delivered to a small refinery that runs only a few weeks/yr out in the middle of nowhere, with no train, or even paved roads leading to the areas where the ethanol will be consumed.

    BTW, most of the farmers in proximity to an ethanol refinery are raising corn behind corn. The only problem with this is you end up with too much stover on the field. Many would actually “Pay” to have some removed.

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  35. By Wendell Mercantile on December 28, 2011 at 6:14 pm
    in proximity to an ethanol refinery…

     

    I must correct you.  You of course meant to say, “a corn ethanol distillery,” didn’t you?  Smile

    As a wise man named Confucius once said, “The beginning of all wisdom is calling things their proper names.”

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