Posts from — July 2014

A Carbon Bubbble in 2015?

The bubble caused a market crash in 2000, a housing bubble almost brought down the global economy in 2008, and today’s gushing excitement over new US oil and gas discoveries could also prove to be a bubble that is likely to collapse about 2015 – a “carbon bubble.”

My TechCast Project ( has been cautious about the new energy discoveries, and the following trends suggest good reasons for thinking the bloom is off the rose. Yes, abundant optimism abounds, but that’s how it always looks at the top of a bubble – endless opportunity and other exaggerated promises. Our forecasts reported below suggest it would be wise to consider the prospect of a major oil shock to the global economy in the next few years, triggering a global downturn.

LIMITED     The new discoveries are a boon to Americans, but they only add a few percent to global supplies. The US’s 3 million barrels/day output pales in comparison to global demand of 90 million barrels/day, which. is increasing rapidly as China, India, and other nations industrialize. The new oil in the Dakotas, for instance, is considered the greatest find ever in the US, yet this is only 0.5 percent of global reserves.

DECLINING     It is also clear that the supply of carbon is declining. The International Energy Agency reports that four million barrels are being depleted every day, and the rate of loss is increasing. The US Energy Information Administration thinks oil and coal seem to be flattening and gas is likely to peak in a decade or two. (MIT Technology Review, Jul 3, 2013) Shale gas only produces about 1 percent of transport fuel, even while the first gas mines are now declining. Some think gas will peak in a decade. (Atlantic, May, 2013)

OVERSTATED    There is also evidence that energy companies are overstating the supply to discourage competition from alternative energy. Shell’s head of exploration stated: “I am sick and tired of lying about the extent of our reserves.” Because of low output, Shell’s $24 billion investment in unconventional oil and gas in North America has been disappointing. The outgoing CEO said “Unconventionals did not play out as planned.” (Guardian, Mar 28, 2014)

ENVIRONMENT BACKLASH   This imbalance between growing demand and declining supply is likely to worsen as environmental limits press back. With climate change becoming serious, our Social Trends cite dozens of major protests as people demand environmental protections, carbon taxes, and other changes to curtail carbon use. Economist Jeffery Sachs predicts the next spate of big hurricanes, droughts, fires, and sea level rise will foment a revolt against coal, gas, and oil. (Washington Post, Nov 17, 2013)

IN THE FOOTHILLS NOW    Other new carbon sources are coming online as fracking spreads to some nations, potential deposits in the Arctic Circle become available with global warming, and energy efficiencies keep increasing. But these are like foothills in the huge mountain of carbon we have exhausted over the past century.

The result is that a serious energy shortage seems to be growing. Consider the following conclusions by global energy institutions and authorities:

* The UK Peak Oil Task Force reported: “Global peak production for oil would likely occur within the decade, very likely by 2015.” (Markpg, Apr 4, 2013)
* The International Energy Agency finds “Global oil production will drop 1% a year from 2015 on… supply would fall short in 2015.” (IEA, May 12, 2014)
* Geologist and energy expert Dr. Jeremy Leggett thinks “systemic energy risks could trigger a global crash sometime between 2015 and 2020.” (Guardian, Mar 28, 2014)

If the carbon bubble were to burst, this new oil shock would likely coincide with an overheated stock market that is also heading for a major correction. Equity prices are reaching the same atmospheric price/earnings ratios that preceded the crashes of 2000 and 2008, and the piercing of this carbon bubble could serve as the trigger for the next global downturn.

On the other side of the bubble, what seemed an endless supply of oil and gas may be viewed more accurately as limited, costly, and dirty remnants of a fading energy past. The declining cost of alternatives is even now disrupting markets for carbon fuels. See our recent breakthrough Solar Taking Off. In our forecast on Alternative Energy, TechCast experts estimate that 30 percent of global energy will come from alternative sources in one decade, about 2025, taking renewable energy mainstream.


July 24, 2014   1 Comment