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  • Reply to Finster's thread: "Is It Peak Oil?"

    This post is in reply to all those contributors to Finster's thread "Is It Peak Oil?".

    I express sincere respect for the posters on this thread - who put forward both here and elsewhere extremely subtle and evidently highly educated observations on all topics concerning capital flows.

    Evidently economics is the "main course" on the I-Tulip forums, sometimes leaving many laymen readers somewhat adrift as the discussions can often become fairly arcane. We are grateful for the clarity of laymen's terminology and exposition which Mr. Janszen employs to pull us laymen along in the general discourse.

    However having read through this entire thread - albeit not with the economist training so many here clearly evidence - I'm struck by an impression that a great deal of subtlety has been expended on a central thesis which to me seems specious - that the phenomenon of rising energy prices cannot be attributable, even for the sake of discussion, to critically dwindling resources in the present, but must "evidently" be primarily a monetary phenomenon.

    Given the very high caliber of many of those posting here, I put forward my objection with hesitation, but also with some clarity and conviction - because the issue was couched in the language of analysis, and indeed introduces a lot of brilliant data (the charts not least), but the conclusions are one sided, and therefore not analytical in the full sense of the word. It's also a pretty simple topic, so a major oversight here is quite notable.

    I must observe the following as a critique of what truths you have (or have not) uncovered here - This was quite a long thread. The topic of rising energy prices of the past seven years was thoroughly dissected and analysed. Some of the charts and commentary regarding those charts data is very incisive, and very possibly it's only found on these pages.

    Yet it appears most of those people posting on this thread find agreement that energy price rises are always and everywhere a monetary phenomenon!

    Well, I must observe, if I have not misunderstood this - your collective insights in summary to me appear insular in the extreme - indeed risking the specious despite their sophistication - insofar as not a fleeting mention is made to the fundamental tenet that natural resources are intrinsically finite by definition and that consequently this might be a very rational avenue to include at least for discussion.

    Whether inadvertently or not, it seems everyone on this thread has elaborately omitted from this discussion any acknowledgement that plain old, common-or-garden variety "resource depletion" could even theoretically be the real and primary issue which should have been discussed here.

    This glaring omission, from such long general analysis on the topic "why did energy prices zoom and why did the peak oil hype begin" seems to me to display therefore a fairly widely subscribed intellectual bias (on this one topic, I hasten to add) which runs counter to this website's core thesis, that all points of view are weighed fully and that I-Tulip contributors "keep both feet planted firmly on the ground" to better home in on the truth.

    In the process of honing their very subtle intellectual capabilities, perhaps a goodly number of I-Tulip stalwarts neglected here that sometimes the most obvious and "dumb" explanations are the most probable? That is to say, to put it very bluntly - the price of a thing may even primarily be rising because it is genuinely becoming SCARCER, or that it's production is straining to meet demand?

    What then is so hugely controversial about this rather intellectually stodgy idea, that this entire thread of highly educated commentators skirted determinedly around this observation, although it was eminently the candidate for an opposite thesis?

    I am considerably respectful of the caliber of all contributors here in many, many other discussions - you all run circles around me in virtually all topics and leave me struggling to keep up. But having said this, I must state here frankly, I find the general conclusions on this one topic of the "monetary causes of energy price inflation" - so intellectually brittle as to seem to me untenable. It's merely "plausible nonsense" to me, because I've read a good number of geologists with 30 years in the field who would ask you to explain in empirical geologic terms, how you came to such conclusions.

    These geologists uniformly lament that "economist' analysts are those most frequently talking to them about "demand destruction" resolving the issue, and yet they note these commentators determinedly refuse to study the field data these geologists are only too willing to provide.

    To me the monetarist or inflationist conclusions arrived at here regarding the hydrocarbons depletion story seem contortions of what would be the real probing, open minded empirical inquiry. The diametrically opposite conclusion to your shared idea, i.e. you saying that inflation is the primary culprit - can be arrived at much more briefly, and more easily, by robust and extremely straightforward common sense - by looking at what's in the ground and how many years people have been pulling most of it out of the same few holes using ever more aggressive extraction techniques.

    Deferring to the geologists rather than the economists for a final arbitration of the issue would seem eminently sensible - to an empiricist that is ..

    The topic in discussion is a resource which a very rapidly industrializing world is forcing out of the ground at ever accelerating rates, from deposits that have been running full tilt for 40 - 60 years - yet we do not wish to entertain the idea in these forums which take pride in their questioning of dogma, that it's price increases are tied to anything but an inflating dollar?

    Perhaps what's at play here is only a general predilection in the more distinguished commentators to indulge a reflexive skepticism for any "popular theory" or "popular movement" which seems discredited to a more incisive, intellectual elite by it's very popularity?

    The central thesis on this thread appears to have been that when expressed in the price of gold, energy prices have not been rising. Indeed that's so. What's not mentioned is that an innately rising cost of energy, due to supply/demand disequilibrium, which causes general price rises, can quite logically cause the rise in the price of gold, which merely mirrors rising general price levels. To me, this would appear self-evident, but one almost loses one's trust in one's own common sense when faced with some of the dazzling forays into analysis on these pages.

    Enlightened by this rudimentary reasoning, using the price of gold to measure the price of energy and so invalidate energy price rises as "fake" because gold rose too - is a highly imperfect or even potentially misleading presentation of the issue. What it does do, is serve the "Peak Oil is Bunk" hypothesis.

    By my own untutored reasoning, given that the price of energy in an industrial world governs the cost of running that society, if the concept of intrinsically diminishing resources were to be admitted even as a theorem, the consequent rise in the price of gold to match that rising general cost merely confirms that an inflation in costs has occurred. It does not confirm in any way what is causing energy prices to rise.

    Bear with me, I am employing the common man's horse sense here, so it may appear pedestrian to some of you.

    Gold provides an early warning signal of inflation in costs - it in no way points exclusively to fiat currency as the primary agent - rising gold in this case, as it was discussed in this thread, merely confirms rising energy prices, it does not unmask a "phantom event" in the rising cost of pulling scarce oil out of the ground.

    Having uncovered this one rather large "partial" or "partisan" explanation of surging energy prices, which are probably the largest single theme of our young new century, amongst some highly educated commentators on these pages, I will be on my guard to not accept as gospel other pronuncations on matters with which I am as yet less familiar.

    What it seems has been a casualty of this thread's preoccupation with "debunking" peak oil is that that overwhelmingly urgent issue, if it exists, is not squarely addressed. Arguably, a severe shrinkage of the industrial world's available energy is a far more harmful event than even very high levels of monetary fiat currency inflation. I suggest the monetary inflation may have started for other reasons - but it will find it's trap squarely in what will happen in the energy markets in the next brief ten years.

    I-Tulip does not seem to confer much weight to this idea, as "Peak Oil" carries a droll connotation on these pages more often than not among it's more frequent commentators. Peak Oil will be anything but droll.

  • #2
    Re: Reply to Finster's thread: "Is It Peak Oil?"

    Very thoughtful and to me a well-written opinion, Lukester. Probably showed too much deference to some of iTulip's contributors, many who strike me as quite bright, but none who are immune to being wrong about something.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

    Comment


    • #3
      Re: Reply to Finster's thread: "Is It Peak Oil?"

      Hi Luke
      North Sea oil production will end in 6 years time!
      Oil production and gas falling off quickly NOW.
      Mega

      Comment


      • #4
        Re: Reply to Finster's thread: "Is It Peak Oil?"

        Here is an anti-peak-oil argument in laymen terms.

        Rising prices are not specific to the energy/oil business. They apply just as much to any other commodity (copper, moly, iron, aluminum, coal etc.). Does it mean we also have peak-iron and peak-coal? No. it does not. It only means one thing, high inflation. If the rest of the commodities wil stop their meteoric rise, suppressed by increasing production, and oil price is still rising, then, yes, a peak-oil situation is likely.

        I think, we only need to wait for a few more years to get the answer to this question.

        m.
        Last edited by medved; June 13, 2007, 07:59 PM.
        медведь

        Comment


        • #5
          Re: Reply to Finster's thread: "Is It Peak Oil?"

          Originally posted by Lukester View Post
          This post is in reply to all those contributors to Finster's thread "Is It Peak Oil?".

          I express sincere respect for the posters on this thread - who put forward both here and elsewhere extremely subtle and evidently highly educated observations on all topics concerning capital flows.

          Evidently economics is the "main course" on the I-Tulip forums, sometimes leaving many laymen readers somewhat adrift as the discussions can often become fairly arcane. We are grateful for the clarity of laymen's terminology and exposition which Mr. Janszen employs to pull us laymen along in the general discourse.

          However having read through this entire thread - albeit not with the economist training so many here clearly evidence - I'm struck by an impression that a great deal of subtlety has been expended on a central thesis which to me seems specious - that the phenomenon of rising energy prices cannot be attributable, even for the sake of discussion, to critically dwindling resources in the present, but must "evidently" be primarily a monetary phenomenon.

          Given the very high caliber of many of those posting here, I put forward my objection with hesitation, but also with some clarity and conviction - because the issue was couched in the language of analysis, and indeed introduces a lot of brilliant data (the charts not least), but the conclusions are one sided, and therefore not analytical in the full sense of the word. It's also a pretty simple topic, so a major oversight here is quite notable.

          I must observe the following as a critique of what truths you have (or have not) uncovered here - This was quite a long thread. The topic of rising energy prices of the past seven years was thoroughly dissected and analysed. Some of the charts and commentary regarding those charts data is very incisive, and very possibly it's only found on these pages.

          Yet it appears most of those people posting on this thread find agreement that energy price rises are always and everywhere a monetary phenomenon!

          Well, I must observe, if I have not misunderstood this - your collective insights in summary to me appear insular in the extreme - indeed risking the specious despite their sophistication - insofar as not a fleeting mention is made to the fundamental tenet that natural resources are intrinsically finite by definition and that consequently this might be a very rational avenue to include at least for discussion.

          Whether inadvertently or not, it seems everyone on this thread has elaborately omitted from this discussion any acknowledgement that plain old, common-or-garden variety "resource depletion" could even theoretically be the real and primary issue which should have been discussed here.

          This glaring omission, from such long general analysis on the topic "why did energy prices zoom and why did the peak oil hype begin" seems to me to display therefore a fairly widely subscribed intellectual bias (on this one topic, I hasten to add) which runs counter to this website's core thesis, that all points of view are weighed fully and that I-Tulip contributors "keep both feet planted firmly on the ground" to better home in on the truth.

          In the process of honing their very subtle intellectual capabilities, perhaps a goodly number of I-Tulip stalwarts neglected here that sometimes the most obvious and "dumb" explanations are the most probable? That is to say, to put it very bluntly - the price of a thing may even primarily be rising because it is genuinely becoming SCARCER, or that it's production is straining to meet demand?

          What then is so hugely controversial about this rather intellectually stodgy idea, that this entire thread of highly educated commentators skirted determinedly around this observation, although it was eminently the candidate for an opposite thesis?

          I am considerably respectful of the caliber of all contributors here in many, many other discussions - you all run circles around me in virtually all topics and leave me struggling to keep up. But having said this, I must state here frankly, I find the general conclusions on this one topic of the "monetary causes of energy price inflation" - so intellectually brittle as to seem to me untenable. It's merely "plausible nonsense" to me, because I've read a good number of geologists with 30 years in the field who would ask you to explain in empirical geologic terms, how you came to such conclusions.

          These geologists uniformly lament that "economist' analysts are those most frequently talking to them about "demand destruction" resolving the issue, and yet they note these commentators determinedly refuse to study the field data these geologists are only too willing to provide.

          To me the monetarist or inflationist conclusions arrived at here regarding the hydrocarbons depletion story seem contortions of what would be the real probing, open minded empirical inquiry. The diametrically opposite conclusion to your shared idea, i.e. you saying that inflation is the primary culprit - can be arrived at much more briefly, and more easily, by robust and extremely straightforward common sense - by looking at what's in the ground and how many years people have been pulling most of it out of the same few holes using ever more aggressive extraction techniques.

          Deferring to the geologists rather than the economists for a final arbitration of the issue would seem eminently sensible - to an empiricist that is ..

          The topic in discussion is a resource which a very rapidly industrializing world is forcing out of the ground at ever accelerating rates, from deposits that have been running full tilt for 40 - 60 years - yet we do not wish to entertain the idea in these forums which take pride in their questioning of dogma, that it's price increases are tied to anything but an inflating dollar?

          Perhaps what's at play here is only a general predilection in the more distinguished commentators to indulge a reflexive skepticism for any "popular theory" or "popular movement" which seems discredited to a more incisive, intellectual elite by it's very popularity?

          The central thesis on this thread appears to have been that when expressed in the price of gold, energy prices have not been rising. Indeed that's so. What's not mentioned is that an innately rising cost of energy, due to supply/demand disequilibrium, which causes general price rises, can quite logically cause the rise in the price of gold, which merely mirrors rising general price levels. To me, this would appear self-evident, but one almost loses one's trust in one's own common sense when faced with some of the dazzling forays into analysis on these pages.

          Enlightened by this rudimentary reasoning, using the price of gold to measure the price of energy and so invalidate energy price rises as "fake" because gold rose too - is a highly imperfect or even potentially misleading presentation of the issue. What it does do, is serve the "Peak Oil is Bunk" hypothesis.

          By my own untutored reasoning, given that the price of energy in an industrial world governs the cost of running that society, if the concept of intrinsically diminishing resources were to be admitted even as a theorem, the consequent rise in the price of gold to match that rising general cost merely confirms that an inflation in costs has occurred. It does not confirm in any way what is causing energy prices to rise.

          Bear with me, I am employing the common man's horse sense here, so it may appear pedestrian to some of you.

          Gold provides an early warning signal of inflation in costs - it in no way points exclusively to fiat currency as the primary agent - rising gold in this case, as it was discussed in this thread, merely confirms rising energy prices, it does not unmask a "phantom event" in the rising cost of pulling scarce oil out of the ground.

          Having uncovered this one rather large "partial" or "partisan" explanation of surging energy prices, which are probably the largest single theme of our young new century, amongst some highly educated commentators on these pages, I will be on my guard to not accept as gospel other pronuncations on matters with which I am as yet less familiar.

          What it seems has been a casualty of this thread's preoccupation with "debunking" peak oil is that that overwhelmingly urgent issue, if it exists, is not squarely addressed. Arguably, a severe shrinkage of the industrial world's available energy is a far more harmful event than even very high levels of monetary fiat currency inflation. I suggest the monetary inflation may have started for other reasons - but it will find it's trap squarely in what will happen in the energy markets in the next brief ten years.

          I-Tulip does not seem to confer much weight to this idea, as "Peak Oil" carries a droll connotation on these pages more often than not among it's more frequent commentators. Peak Oil will be anything but droll.
          We are not experts in oil so we are going to soon interview a heavyweight (more than 30 years in the oil industry) who can help us sort it out. I can say he told us yesterday that oil prices are now driven by paper oil traders not "wet oil" traders, that supply and demand have nothing to do with short term price moves today. Medium term price changes, such as over the past fives years, are driven by a combination of inflation, supply/demand, and security risk. He agrees with our position that peak oil assumes no price elasticity of demand. Prices are likely to rise and rise, more or less in line with inflation. This gradual inflation will allow alternatives to become economical, as they will rise in price more slowly in real terms.
          Last edited by FRED; June 13, 2007, 03:45 PM.
          Ed.

          Comment


          • #6
            Re: Reply to Finster's thread: "Is It Peak Oil?"

            Originally posted by Fred View Post
            We are not experts in oil so we are going to soon interview a heavyweight (more than 30 years in the oil industry) who can help us sort it out. I can say he told us yesterday that oil prices are now driven by paper oil traders not "wet oil" traders, that supply and demand have nothing to do with short term price moves today. Medium term price changes, such as over the past fives years, are driven by a combination of inflation, supply/demand, and security risk. He agrees with our position that peak oil assumes no price elasticity of demand. Prices are likely to rise and rise, more or less in line with inflation. This gradual inflation will allow alternatives to become economical, as they will rise in price more slowly in real terms.
            The Yom Kippur War was all about getting oil sold on the spot market on Wall Street and away from long term contracts sold by OPEC. Russia is going back to selling by contract, Saddam's problem wasn't that he was selling in Euro's, he was selling by contract as well. Things are about to get interesting now that starting next year much of Russia's production won't shut down for the winter.
            "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
            - Charles Mackay

            Comment


            • #7
              Re: Reply to Finster's thread: "Is It Peak Oil?"

              ____________________________

              Prominent CERA official – ‘Peak Oil theory is garbage’

              I-Tulip is planning to set up an interview with an oil industry specialist with 30 years experience. The question then becomes – which specialist? If this specialist adheres to the viewpoint of CERA - Cambridge Energy Research Associates, you will get one conclusion, wherein they largely agree with the broadly accepted view on these pages that energy depletion will obediently bow before market mechanisms for renewed demand equilibrium.

              If instead I-Tulip interviews one of the analysts listed below, they will probably get a fairly different view. One of those analysts is Henry Groppe who founded his firm in 1955 and is still going strong. He has 60 years of hard nosed credentials assessing the markets for risk, and is probably one of the most authoritative voices in the industry, consulting for decades to the bluest of blue chip institutional clients.

              Interviewing someone of this stature leaves little room to question his fitness to make a shrewd and realistic assessment. Groppe, (who after 60 years in the business is no ingenue), suggests oil depletion is not only real, but is going to be acute, and is upon us now or very soon – Such an interviewee might be a less agreeable read to members of the I-Tulip forums who find this idea fanciful.

              I-Tulip’s selection of an industry analyst therefore may determine the interview's insights. If I-Tulip chooses to call upon the opinions of an industry specialist with whom they largely agree, that interview will be an experience of consensus. If they choose instead to select an interviewee among those listed below (just as examples), they may find themselves having to disagree with someone of the formidable stature of Mr. Henry Groppe.

              Mr. Groppe flatly states peak oil production now is 'very much in the cards', cusping either now or by the end of this decade, and notes that the widest segment of observers greatly underestimate it’s consequences.

              Who are we to disagree with one of the most senior financiers and consultants to the industry? He provides these opinions not to a sensational tabloid press, but to the bluest of blue chip institutional clients.

              Much discussion occurs on these pages concerning inflation, crippling economic distortions by central banks, etc.– I note that the ‘skeptical views’ expressed here all suggest an economist’s approach to things such as ‘supply / demand equilibrium’ in the energy markets – yet what seems quietly dismissed is whether the simple extent of remaining resources has any relevance.

              Everything else is introduced and discussed as a factor – futures speculation, geopolitics and nationalizations, demand destruction, market psychology, etc. Why then not carefully examine the remarks of people like Henry Groppe, who suggest that’s all largely secondary, and ‘what’s left to pull out of the ground’ is what begs the hard questions?

              We already know Cantarell in Mexico and the North Sea are just beginning to pencil in some sharp declines. These two are some of the most blatantly obvious. These two major oil fields enjoy highly reliable reserves documentation, (unlike many others!), so that data is not in discussion.

              If we look up any of the analysts below, and read even a fraction of what they report, they all patiently reiterate at conferences that the ‘demand destruction’ recognized from previous oil market inflections may have little historically comparable mechanism to match what they observe very matter of factly is approaching.

              I include just a short list below of "a few" of the most high profile and senior candidates for an alternative assessment of what all the action is about in the energy markets. As mentioned, Henry Groppe, of Groppe, Long and Littell comes to mind as a paradigm of scolarly and unimpeachable objective reporting on the state of the industry. He founded his energy consulting and finance company, believe it or not, in 1955, which today maintains an extremely conservative list of large institutional clients.

              If this man’s opinion is not considered sober and acute enough, I’m not sure who’s would be. He is regarded as one of the tiny handful of most senior commentators on the state of global energy reserves.

              Certainly CERA’s (Cambridge Energy Assoc.) Mr. Daniel Yergin or Mr. Robert Esser – of "Peak Oil is Garbage" fame, seem to offer breezy and facile conclusions. Not my opinion. It's the opinion of practically all those in the list following. CERA flatly refuse to acknowledge any merit in the long list of Federal, State, NGO, and reputable private firms and individuals ranked against them. According to them, T. Boone Pickens doesn’t know what he’s talking about! Is this hubris or mere foolishness?

              Some of the analysts below listed are calling CERA all wet on it's research integrity - in no uncertain terms. Several refer to CERA’s report as a most egregious exercise in fantasy numbers - with everything from "vast methane hydrate beds" at 50,000 feet below sea level - to trillions of hypothetical barrels of oil from tight shale, all lumped into CERA’s estimates of "vast presently available energy reserves".

              Matt Simmons paid $1000 + to buy the CERA ‘intelligence’ report debunking "Peak Oil as Garbage" so he could actually read what they were so opaquely touting – He is citing it as an example of great irresponsibility in disseminating dangerous, poorly assembled flim-flam on global depletion, at a moment of considerable international risk.

              If one could make a recommendation of an interviewee for I-Tulip’s investigation of "Peak Oil", one could merely point to ANY of the eminently well qualified list of commentators below. Would the opinion of Saudi Aramco’s former head of production be sufficiently reputable ?

              Each and every one of those below would sincerely question any self assurance within this community that the oil market’s price action going forward will be primarily governed by inflation.

              I cling to common sense trying to reach out for some clarity in consensus here – when greeted with such a line up of top authorities all saying the same thing.

              I trust Mr. Groppe, Mr. Simmons, Mr. Sadad al Husseini of Saudi Aramco, and Mr. T. Boone Pickens’ unanimous assessments – oil depletion soon will be the dog, wagging the inflation tail.


              Meanwhile, here is a refreshingly obscurantist quote from CERA regarding "Peak Oil":
              ____________________________

              Prominent CERA official – ‘Peak Oil theory is garbage’

              Cambridge Energy Research Associates (CERA) is a widely touted US-based energy advisor firm. They bill themselves as a source to ‘help decision makers anticipate the energy future and formulate timely, successful plans in the face of rapid changes and uncertainty.’

              One aspect of our energy future about which CERA appears certain is the concept of peak oil.

              "Peak Oil theory is garbage as far as we’re concerned", said Robert W. Esser, a geologist by training and CERA’s senior consultant/director of global oil and gas resources, according to Business Week online national correspondent Mark Morrison (Sept 7).

              ____________________________


              Apparently, CERA thinks that’s all a waste of time and, in some cases, tax-payer money. By inference, CERA completely discounts the considered opinions of dozens of sober individuals and firms looking into the peak oil issue. Consider just this partial list of informed (mostly US-based) commentators:

              A wide range of very serious organizations are looking at and/or have commented upon the concept of peak oil, including the National Academy of Sciences (10/05), the US General Accounting Office (11/06), and the National Petroleum Council (2/07), working at the request of US Energy Secretary Samuel Bodman.

              ____________________________

              Prominent industry analysts who may conclude instead that "CERA is garbage":


              1-A. Fellow industry analysts like PFC Energy; Groppe Long & Littell; and Petrie Parkman & Co. Last fall, Tom Petrie said he expected peak oil by around 2010 and that he would be ‘shocked’ if world oil production didn’t peak by 2015. In PFC Energy’s 2004 presentation on peak oil, they show world oil production peaking in the 2014 time frame; their 2006 study, likely points to a slightly earlier date.

              1-B. Henry Groppe, of Groppe Long & Littell, sees world petroleum liquids production peaking by 2010.

              2. T. Boone Pickens, oil industry entrepreneur with a background in geology, has stated several times that peak oil may have already arrived.

              3. The Hirsch Report: with funding from the National Energy Technology Laboratory, Robert L. Hirsch and Roger Bezdek were lead authors of a 70+-page report entitled ‘Peaking of World Oil Production: Impacts, Mitigation, & Risk Management.’ The authors’ key concern: ‘Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort.’ CERA’s statement trivializes their report.

              4. Senior geologists like author Walter Youngquist (OR), Craig Hatfield (OH), Joe Riva (MD), and Jeffrey Brown (TX) have drawn attention to issues like long-term depletion, the limits to growth by unconventional oil sources, the problems with declining net-energy return, etc.

              5. Financial analyst Jeffery Rubin’chief economist for the respected CIBC World Markets’foresees a peaking in world oil production between now and the end of the decade.

              6. Eric Sprott, Sprott Asset Management, has over $1 billion of his firm’s assets invested in areas that will benefit from peak oil.

              7. Matt Simmons, chairman of Simmons & Co Int’l and author of ‘Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,’ speaks more frequently about the peak oil story than any other respected executive in the country.

              8. James Mckenzie, in his work for World Resources Institute, published a study in 1996 showing a peaking in world oil production in 2014 (plus or minus about five years, given three different scenarios).

              9. Editorials and features in newspapers and major magazine cover the peak oil story. If, as CERA asserts, that story is ‘garbage,’ why did a respected publication like Bloomberg Markets devote eight pages to this story in their September issue’

              10. Richard Rainwater, a Texas-based billionaire investor, made piles of money by foreseeing, back in the mid-1990s, that oil prices were eventually headed strongly up due to long-term limited production vs. demand. Now he worries in the pages of Fortune magazine about the potential social costs and consequences that he believes peak oil could precipitate.

              11. Sadad al Husseini, Saudi Aramco’s former head of exploration and production, wrote last fall that world oil production would peak and plateau by 2015, at between 90 to 95 million barrels a day.

              12. French oil firm Total’s CEO Thierry Desmarest has broken ranks with other CEO’s of major oil companies by forecasting a 2020 peaking for world oil production. (From 1996 to 2000, several BP players forecast a 2010 peak; since 2000 they no longer mention a peak.)

              13. Chris Skrebowski, editor of Petroleum Review, uses an analytical technique similar to that of CERA’ following production trends and projections vs. following stated reserves. He sees a peaking in world oil production around 2010-2011.

              14. Pang Xiongqi, professor at China’s University of Petroleum in Beijing, expects Chinese production to peak in 2009 and world oil production to top out in 2012.

              Comment


              • #8
                Re: Reply to Finster's thread: "Is It Peak Oil?"

                This article/newsletter has very interesting charts on oil production and exports.
                http://europe.theoildrum.com/node/2651
                For most industrial countries, the heart of the matter is Peak Exports and not Peak production. A single digit decline rate in production often means double digit decline in exports. Many exporters have increasing consumption: Russia, Iran, Saudi Arabia, Mexico....

                Comment


                • #9
                  Re: Reply to Finster's thread: "Is It Peak Oil?"

                  I don't know if anyone can answer anything "definitively", but I tend to deeply distrust "peak oil" and such dogmatic theories. There was an editorial somewhere recently that quoted King Hubbert and he was really a nutcase, not surprisingly. I think the theory is nonsense and like others it is "peak cheap oil" rather than "peak oil."

                  I do think there will be much more expensive oil and the reason I say this, is that over the last 20 years, oil exploration and production has shifted into oil companies controlled by sovereigns rather than by free market companies.

                  Just look no further than, say, Venezuela for how a populist government "leader" taps oil profits for vote-buying and further socialist programs. Rather than reinvesting a good percentage of profit into new exploration and maintenance, the tendency is for government monopoly producers to exploit their resources for the short-term, which is all they care about.

                  This is what is will cause increased energy prices.

                  Of course, high oil prices, provided they are stable, are a wonderful thing in that they will increase conservation and production.

                  Eventually, expensive oil won't actually contribute much to "profits" of these sovereign producers because their costs will be so high at that point.

                  Comment


                  • #10
                    Re: Reply to Finster's thread: "Is It Peak Oil?"

                    Originally posted by grapejelly View Post
                    Just look no further than, say, Venezuela for how a populist government "leader" taps oil profits for vote-buying and further socialist programs. Rather than reinvesting a good percentage of profit into new exploration and maintenance, the tendency is for government monopoly producers to exploit their resources for the short-term, which is all they care about.

                    This is what is will cause increased energy prices.

                    Of course, high oil prices, provided they are stable, are a wonderful thing in that they will increase conservation and production.

                    Eventually, expensive oil won't actually contribute much to "profits" of these sovereign producers because their costs will be so high at that point.
                    Currently Venezuela is receiving 10K doctors and nurses from Cuba for 90K barrels of crude per day. Does the price of crude on Wall Street change this barter arrangement for doctors? Veneezuela has barter arrangements with Bolivia and most of the Carribbean nations as well. It would seem to me that a formula for exchange could be created for BTU's and a BTU is equal to so many doctors, so many bussels of wheat, so much iron ore or whatever you wanted to barter. I don't see the d0llar's changing value affecting this relationship. Brazil, Argentina and Central America are talking with Venezuela currently about barter arrangements for crude.

                    What is the difference between sovereign ownership of national resources raping and looting those resources and a foreign company raping and looting resources? I would think the foreign ownership sends the profits someplace else. Looks to me like the sovereign ownership is more motivated to expand production than the foreign ownership would be, I would think the foreign ownership is just looking for the cheapest source.
                    "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
                    - Charles Mackay

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                    • #11
                      Re: Reply to Finster's thread: "Is It Peak Oil?"

                      I am old enough to remember all the eloquent rationalization of soaring energy prices in the 1970s. We were simply running out of oil, we were told. Oil depletion was a buzzword. We could look forward to a continuous progression of rising fossil fuel prices until the end of time itself. People waited in lines at gas stations to pay exorbitant prices for a rationed quantity of fuel. Alternative energy was hot. Engineering curricula were packed with courses on coal gasification, gas liquification, ethanol, solar energy, wind and geothermal power, and research in nuclear fusion was very trendy. I know because I was an engineering student in 1980 when oil prices hit $39.50 a barrel.

                      But then a funny thing happened. Paul Volcker at the Fed cut the money supply. Interest rates went to nearly twenty percent. By early 1986, oil prices had broken below $20. By July of that same year, they fell below $12. More than twelve years later - as recently as December 1998 - a barrel of oil sold for as little as $10.73.

                      Nearly two decades after oil depletion brought us to the end of the world, it took barely a quarter as many dollars to buy the same amount of oil.

                      Then another one of those funny things happened. After warning of "irrational exuberance", the Greenspan Fed underwrote a monster financial asset mania with renewed monetary ease. When it belatedly tried to tap the brakes, the whole edifice collapsed. In order to rescue the stock market, it embarked on a prolonged period of "emergency" low interest rates, sending many hundreds of billions of dollars freshly minted from nothing coursing into homeowner's and politician's accounts. Since there was no new domestic production to buy with all that new paper money, it quickly found its way overseas and flooded the globe. As we know from Econ 101, when something is in abundant supply, it falls in value. It now takes more of it to buy the same stuff.

                      Here we are all over again, folks. Unwittingly or not, peak oil enthusiasts are again playing their scripted roles of inflation apologists. They will give us erudite and sophisticated analyses of oil supply and demand "fundamentals" as explanations for why the "oil price" is rising. What they don’t do is consider that the "oil price" is a ratio of exchange between oil and dollars, even as it is quoted in dollars, as if the dollars themselves are a fixed quantity. And their analyses are only half complete because while they consider the supply and demand for oil, they do not do the same for the other half of that ratio - dollars.

                      My challenge is this: When discussing the price of oil in terms of the changes in the supply and demand for oil, please cite the change in the supply of dollars that has occurred. Anyone have any idea how manifold the supply of dollars has increased since 1970? Since 1980? Since 1990? The changes are immense. If one considers the level of oil production in comparison to the level of dollar production, the former utterly pales in comparison. Oil production has increased, but dollar production many times more.

                      In fact, it is this dollar production that is tacitly dismissed when the analyst speaks of "demand". After all, with what does one "demand" oil? Is it merely a coincidence that the US has become the world leader in currency production, that its dollars have been piling up in the coffers of its trading partners by the trillions, and that said trading partners have been using them to "demand" oil with?

                      Finally, if rising oil prices were truly an oil phenomenon, then why have gold prices undergone a similar move? House prices? Copper prices? Stock prices? The possibility that the unit in which they are all measured has itself dramatically shrunk in value seems not to even be considered. We do not hear talk of peak houses, peak copper, peak aluminum, peak corn, yet they have all been undergoing similar "increases in value" when measured in US dollars.

                      We also need to set the record straight. It is unfortunate that a reply to my comments appears as an entirely new thread (why?), because the loss of context has facilitated a distortion of my position. I did not say that peak oil is bunk. To the contrary, I explicitly said "peak oil is real". Anyone interested should see the actual original commentary here: http://www.itulip.com/forums/showthread.php?t=333. But it is a long, slow process that is unfolding over a period of decades. It has very little to do with why oil prices have risen by severalfold over the past few years.

                      My critique is not of the notion of peak oil, it is of the tendency to only get excited about it when inflation is kicking up.

                      ...
                      Last edited by Finster; June 14, 2007, 01:25 PM.
                      Finster
                      ...

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                      • #12
                        Re: Reply to Finster's thread: "Is It Peak Oil?"

                        Originally posted by Tet View Post

                        What is the difference between sovereign ownership of national resources raping and looting those resources and a foreign company raping and looting resources? I would think the foreign ownership sends the profits someplace else. Looks to me like the sovereign ownership is more motivated to expand production than the foreign ownership would be, I would think the foreign ownership is just looking for the cheapest source.
                        Then socialism beats capitalism. The State is a better steward of the means of production than the private sector. :rolleyes:

                        Isn't it obvious that publicly traded oil companies will maximize shareholder value? That means re-investing in their future as the market discounts the future stream of earnings, and re-investing increases this perceived future stream of earnings thus raising share values.

                        A state-owned oil company is a disaster. High labor rates, and profits plundered instead of reinvested, are just two reasons. In short, incentives are to maximize costs through redistributionist vote-buying motives, and to remove as much money as possible to pay out to other voters.

                        I think *that* is the real cause of "peak oil," if by "peak oil" we mean "more expensive supplies and seemingly ending production of cheap oil."

                        If 85% of oil is produced by these state-owned monopolies, then we are truly running out of cheap oil.

                        Comment


                        • #13
                          Re: Reply to Finster's thread: "Is It Peak Oil?"

                          I think its more "Geo-politco"............Not wheres the oil, but who hand is on the tap?...................In a few years it will be Iran,Iraq(bet they be happy to sell it for $...........NOT!) Russia, may be China.

                          They will want paying for it!, not a $ recycle run as we have with Saudi right now. America IS going to have to find REAL money for it.............THat's why all of a sudden we have "Globel warming"...................BTW Mons on the far Northen Scotish Isles used to have vine yards, not too many Ford Mustangs about in the 12th centry!
                          Mike

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                          • #14
                            Re: Reply to Finster's thread: "Is It Peak Oil?"

                            How is Hubbert a nutcase???

                            He stated that exponential industrial growth cannot continue on forever on limited resources. This is plain common sense. And he did predict a US Peak for 1970 correctly. He also predicted world Peak Oil for around 2006. He did this in 1956!
                            Here is a good recent article about him:
                            http://financialsense.com/fsu/editor...2007/0612.html

                            The Peak Oil movement is not based on rising fuel prices. The core experts for the case are geologists not economists. Look at the official reserve capacity of world oil production. In the last few decades this has shrunk considerably.

                            The issue is not reserves, there are plenty of reserves. Cheap oil has not peaked, it is GONE for good. Even the Saudis had to increase their rig count 3 fold to maintain production. They are now considering drilling down to 10000 Ft from sea level to get oil the Persian Gulf. It will not be cheap.

                            The issues are:
                            1. Flow rate. Non-conventional oil sources (deep water, sands, etc) cannot keep the current flow rate. Everywhere around the globe more rigs, more capital, more metals are needed just to maintain production. Canada has even stopped drilling for natural gas, because at the current prices it is not profitable.
                            2. Energy return on energy investment. It is not the price that matters, but energy returned on energy invested. Even now in Canada the oil sands are processed with an eroei of 1:2. The energy of 1 barrel of oil is needed to extract 2 barrels of oil. When this drops to 1:1 there will be NO POINT in extracting the oil for energy. No matter how much you pay, extracting will be an energy loser and totally pointless.

                            Even at the current prices, oil production is not increasing. If it is just inflation, then we should see supply meeting demand at these prices - increasing production.
                            It is not increasing. We may see an increase in the short run and even a drop in prices. It is possible, but it will be short-lived just like the $50 oil early this year. Any excess supply will be sucked up by China and India.

                            And are you really saying that all prices have tripled in the last 10 years, like oil???
                            As for other commodities, it really is the same story. Extracting more copper, gold, nickel and many other materials is getting more and more costly.

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                            • #15
                              Re: Reply to Finster's thread: "Is It Peak Oil?"

                              I think everyone is starting off on the wrong foot, because we are expecting the rise in crude oil prices to be a signal that prodcution is at peak or in decline. Isn't it possible that current prices do not accurately reflect future production as Peak Oil is not widely understood and accepted as "fact" by the market.

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