An Energy Crisis Journal: May 2008

May 8, 2008: Thursday

(Vancouver, BC) Yesterday, in what I believe to be the third trading record in as many days, the price for WTI reached $123.93/bbl. Today, NYMEX trading settled on $123.69/bbl. In after-hours trading, WTI then climbed to $124.49/bbl. These are just amazing prices. And the duration of this new "rally" has been quite sustained, starting from $116/bbl on Monday. My gut feeling is that something in the market has changed. Prices are climbing faster. New record highs are being set quite often now. It's almost becoming commonplace. Many analysts, including Daniel Yergin of CERA fame, are now turning around and predicting oil in the $150 to $200 range in the relatively near term. It appears that a growing awareness of limited production is taking hold. Peak Oil is gaining much traction in the news now. It is being talked about more seriously. I have seen those two ominous words in the Vancouver Sun and other local papers on a number of occasions. I am becoming increasingly confident in the idea that 2008 will be the year in which Peak Oil becomes a central discussion world-wide. If not this year, no later than 2009. A sea-change is coming.

I filled up the tank yesterday at a local Chevron station. I paid $1.303/liter. That's Canadian dollars, of course, which are close to parity with the US dollar right now: $1 Can = $0.9831 US at this moment. At 3.875 liters per US gallon, that's $5.04 /gal in Canadian money, or $4.96 /gal in US dollars. Down in the States, prices are, of course, lower. However, a new record high average for the entire country was set today: $3.645/gal for regular unleaded. Diesel also climbed to match its recent record national-average high: $4.25 /gal.

Such is the backdrop for a summer season where I will likely be doing a fair amount of driving. I should be able to cover the costs, especially if I minimize other driving. I am seriously thinking about getting another bike. Might go back to a trike—something with a lot of utility. May place is 7.5 miles (12 km) from UBC. The exercise would be a good thing for me.

May 20, 2008: Tuesday

(Vancouver, BC) As things continue to unfold at a rapid pace, I am feeling ever more confident in using the term "crisis." Over the past few days, the futures market for oil has shifted from backwardation to contango. This has been a dramatic change, starting about a month ago, and is a different kind of contango that in previous circumstances (such as in parts of 2006). This time, the contracts are selling for ever higher prices as they go further into the future. Oil for 2016 delivery is now about $10/bbl higher than oil selling on the spot market! On The Oil Drum, this kind of potential market change has been discussed for many years now. To see it unfold is rather unnerving. It would seem that expectations were on the mark. Now, we will see if this shift holds. I suspect the contango will endure, and it could very well steepen. Contango is going to present all kinds of problems for businesses that are used to locking in lower prices for future oil deliveries. The airlines will feel this new reality bite strongly, I suspect.

The price of WTI reached another all-time high—yet again!—today: $129.60/bbl during intraday trading. At close, the price was $129.07/bbl. This is amazing. The shift to contango has occurred along with these persistent prices above $120/bbl, making the fundamental market shift even more unsettling.

Sunshine is draped warmly on the lushly foliated trees and brightly-colored buildings outside, an inviting scene that reflects not at all my worry about the near future. I think, however, I need to take another break from following the energy situation so closely. The spectacle consumes me too much. However, it is hard to put it aside, especially with so much going on at the moment. CNBC had Hirsch and Pickens on this morning giving their thoughts about the crisis. Peak Oil is beginning to show up everywhere. I think there's a clear reason for this: The crisis is starting to bite, and awareness is really beginning to spread. In a steadily growing chorus, the voices of reason are being heard ever more frequently.

May 26, 2008: Monday

(Kelowna, BC) Last week, by the way, the price of WTI reached a record $135.06/bbl. I believe this was on Wednesday morning. The price then dropped to around $131-$133 and hovered around these values until close on Friday. I don't have an internet connection here, so I don't know what's going on today. The price of gas on my trip was as high as $1.36 CDN/liter for 87 octane, and up to $1.51/liter for 94 octane.

08:36 PDT: The wireless connection is working this morning. Oil's trading around $133/bbl right now.