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Matt Simmons on Bloomberg: Peak Oil is Now and Oil Is WAY Too Cheap
Posted by Prof. Goose on February 25, 2007 - 3:07pm
Matthew Simmons, chairman of Simmons & Co. International in Houston, talked yesterday with Bloomberg's Rhonda Schaffler about the need to address energy use, his view that global supply has peaked and the likelihood oil prices could reach much higher prices. (Source: Bloomberg)We've discussed this once before, but it's worth passing around again. Send the link to friends. Hit reddit and digg with this new post too.
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Some comments I just posted on the open thread:
The Oil & Gas Journal had a list, a few weeks ago, of all new/redeveloped fields that should produce 100,000 bpd or more, including Kashagan (which at best won't hit peak production until after 2010). The total was only about 4.5 mbpd.
ExxonMobil's high estimate of 6% per year for the decline rate from existing wellbores worldwide (their range is 4% to 6%), means that we need about 4.4 mbpd of new crude oil production every single year--just to keep production flat (crude oil = C+C). Or, we need 44 mbpd in new production over the next 10 years, just to keep production flat.
If Ron (Darwinian) and I are correct that Ghawar is in terminal decline, every single field that is or was producing one mbpd or more is now in decline or crashing.
And yet people are predicting higher crude oil production, even as the cumulative shortfall between what the world would have produced at the 5/05 rate and what we actually produced continues to grow; it's now in excess of 300 million barrels of crude + condensate (EIA).
Re: Mexico
If memory serves, Mexico also blamed the shortfall in exports in December on bad weather. In any case, on a month to month basis, overall Mexican production is on track to decline by 50% in 10 years. Oil exports are on track to decline by 50% every three years. Of course, if David Shields is correct, these declines will accelerate as the Cantarell crash really kicks in. This is of course one of those increasingly common “coincidences” where a region starts declining after crossing the 50% of Qt mark (Khebab’s HL plot in this case).
http://www.chron.com/disp/story.mpl/business/4578131.html
MEXICO
Pemex reports oil production off
Re: Saudi Arabia
One of the odd things I've observed is that almost everyone accepts the North Sea decline (the North Sea is now 70% depleted, based on the HL plot) as involuntary, but the conventional wisdom is that the Saudi decline (Saudi Arabia is now 60% depleted on the HL plot) is voluntary, even as Saudi production continues to fall at about a 8% per year rate, as predicted by the HL and historical models.
By the way, if the Saudi Oil Minister reports oil production as crude + condensate, and if crude + condensate is the principal feedstock for refineries, and if the price of oil is discussed in terms of the price of light, sweet crude oil, why do so many people use Total Liquids to talk about production rates?
http://story.malaysiasun.com/index.php/ct/9/cid/b8de8e630faf3631/id/2301...
There's a rather interesting article by Seymour Hersh in latest issue of the Newyorker, which, when superimposed over the current apparent decline in Saudi production levels, the debacle in Iraq, and the coming war with Iran; leaves one wishing that aliens really existed - and there was at least the possibility that one could be one of the lucky ones chosen for abduction by a passing starship.
It would appear that our brave leaders really do have a strategy for dealing with the challanges we face, chiefly, peak oil; and that they aren't the incompetent and criminal loonies they appear to be. That is all just a facade desinged to conceal their true abilities and shocking audacity of their grand scheme. Unfortunately their solution is based on the curious, reckless and frightening idea that one can actually put out a fire by pouring copious ammounts of gas/petroleum on it and hoping for the best! But it's not just hope, you have to have faith as well. After possibly decades of creative destruction, a new and better world will arise like the mythical phoenix from the ashes, or perhaps, given their illustrious track record, there will only be ashes.
Ahhh ... Alas Babylon!!
Speaking of aliens. . .
The WSJ had a good article on Cognitive Dissonance (the facts be damned--people believe what they want to believe) a few weeks ago.
One of the examples they cited was the reaction of cultists--who had been predicting the end of the world, because of attacks by aliens, or that they would be picked up by aliens--to the passing of the predicted dates for the appearance of the aliens. In general, the cultists responded to the failed predictions by redoubling their efforts to persuade people that the aliens would appear at a later date.
Several people have described the "Peakists" as cultists, but the odd thing about such a characterization is that we (the Peakists) believe that a physical world has physical limits and that the world should show the same kind of production curve that various regions--such as the Lower 48; North Sea; Mexico; etc.--have shown.
An interesting question is whether Peter Jackson, with CERA, believes what he is saying about his prediction that world Total Liquids production will increase by about 50%.
I suspect that Jackson probably does believe what he is saying, and that CERA's response to Peak Oil is a combination of cognitive dissonance and a desire to meet the needs of some of their clients, such as major oil companies and major oil exporters.
No matter how much Jackson attacks Hubbert and Deffeyes, two facts remain:
(1) Hubbert accurately predicted the time frame for the Lower 48 peak, and Lower 48 crude + condensate production has fallen by more than 50%;
(2) As Deffeyes predicted, world crude oil production is now declining (EIA data, crude + condensate).
Hi Westy,
Thanks for the info, always useful.
Concerning POers being like cultists, I can understand why many believe and state that opinion. For the majority of my younger life I was deeply involved in a religious doomsday cult. One of those American ones that promised refuge to those who prayed, fasted, and especially tithed to the guru.
The difference with that cult is that it was especially targetted at the middle-class, educated person, not the seething emotion-driven masses. Many called it a 'thinking man's religion'.
The point is, many of the aspects of PO would have been foundational material for the movement - death, destruction, poverty, war: then the coming of the messiah (solar energy! nuclear!) to save us all and give those who truly believe eternal happy lives.
My experience has left me exceedingly sensitive to scams, religious idiocy (of all creeds, colours and political affiliations) and my attitude to PO and GW is heavily swayed by my previous experiences.
As an agnostic (atheism is the same as any other theism: we know the unknowable), cynical, opinionated, middle-aged Australian boomer, I can honestly say:
PO is no cult, it has (to me) no hallmarks of a cult (but if Prof Goose starts requesting tithes...), there is no guru (those some should be careful of their attitude toward their idols Deffreys and Simmons et al), and there is no salvation promised for the true believers (although I feel the many survivalists on here and elsewhere are moving in that diection).
Pony up your 10%, b*tches!
heh. just kidding.
while your correct in that there is no salvation. you also have to realize that ultimately, due to the limits imposed by the finite world we live in. going back to the tribal life is where the journey will end, some survivalists and neo-primitives are just jumping the gun leaving themselves open for stuff they don't see.
It's this "it'll happen this time for sure!!!" attitude that I suspect underpins the apparent similarity between cultists and some peakists.
There is a litany of failed predictions by people who have nevertheless remained some of the guiding lights of the peak oil community. Campbell, for example, has predicted:
He has consistently predicted that "the peak" will occur in 2-3 years for nearly two decades!
An outsider looking at that track record - and then at the attention paid to this man's current predictions - can easily be forgiven for drawing parallels between such curious devotion and the actions of cultists as noted by WT.
Oil production will eventually peak, but repeating a mantra of "2-3 years, 2-3 years, 2-3..." for decades until it finally happens is no more "prediction" than is the guy shuffling down the street shouting "the end of the world is coming!!" In fact, it may very well do more harm than good - I presume you're all familiar with the story of The Boy Who Cried Wolf.
Neither of those facts means a stopped clock is a sensible way to tell time.
Pitt: Total nonsense. There is no such thing as a "peak oiler" and references to religious cults are illogical. In fact, the persons that have concluded that global oil supply has peaked are such a diverse group of individuals that one could conclude that the only thing they had in common was an ability to recognize reality even when the MSM is working hard on a smokescreen.
A peak oiler is one who talks about peak oil.
a) Not to some people, apparently.
b) Take it up with WT - I didn't bring it up.
c) If the shoe fits...
One could conclude that. One could conclude many other things as well. Even things that don't involve dragooning the world's news outlets into some kind of vast conspiracy.
The question is not what can one conclude; the question is what conclusions are supported by solid evidence.
Hi Brian,
Sorry, can't agree. In any cult you will find a very wide array of individuals. In fact, in the cult I was in they were (generally): well educated, not overly emotional, demanding of 'proof' of anything that was said, stuck in the 'reality' of the world as we saw it.
You can't define a cult by the type of people that adhere to it.
By many definitions PO could be seen as a cult; but the main aspects of a cult are missing: no promise of the Kingdom of (heaven, nirvana, paradise etc), no espousing that those who 'believe' are somehow better (or more called) than those who do not, no worship of the guru (except by a few), and no 'fleeing' to a safe compound or Petra or Babylon, or wherever to escape the wrath that is to come.
Once you've been in a cult, you'll never be confused again - join one today! Experience the difference.
Note that Peter Huber is literally promising that we can increase our energy consumption--forever.
That he is wrong does not automatically make people who disagree with him right, and pointing out that some of the people who disagree with peak oilers are wrong does not make a compelling case that peak oilers are right.
In fact, if criticisms of peak oil arguments are answered with attacks on "cornucopians" - as seems to be the trend - then it gives the impression that those criticisms can not be effectively responded to. That is not a very encouraging impression to give of peak oilers (and is not, I think, necessarily true, either - there are reasonable responses to many of the criticisms I've seen raised, and it would reflect very much better on the peak oil community to develop those answers rather than to say "but the cornucopians are wrong!" and "you just don't get it!")
Best comment I've seen all day.
From what I can tell, the primary complaint against the "cornucopians" comes from the mistaken belief that world population will grow exponentially past 2050 or so (evidence does not support this) and that it will only be stopped by massive "bad stuff" like nuclear war or starvation, evidence does not support that either. If one is willing to accept the idea that population won't grow forever, then there is no reason why all resources must NECESSARILY be exhaused, and the cornucopians (as they are called) might be largely correct.
Sort of.
The "cornucopians"--or at least the serious ones who put their beliefs into empirical practice--are commonly known as the Ecological Modernization theorists. Their basic premises revolve around the Kuznet's Curve, which essentially posits that a country/society will denigrate its environment until it reaches a certain point of economic and technological development, at which point it will begin (for a variety of reasons) to reduce its ecological footprint.
The dominant counter position to this is found in neo-Marxist political economy theories, which include the "treadmill of production," the "metabolic rift," and O'Connor's "second contradiction of capitalism".
We have about 30 years of data to test the propositions of each major strand of theory (i.e. Ecological Modernization vs. Political Economy), and the evidence overwhelmingly undermines the EM crowd (i.e. nuanced cornucopians). Don't take my word for it though--I'm in the politcal economy camp--go out and search the literature and tell me what you find (again, one of the best overviews of the debate was published in "Organization & Environment", Vol. 17, Number 3--Sept. 2004).
Interesting, so who has the cleaner environment, the US or China? How about East or West Germany? Japan or India?
Doesn't seem so overwhelming to me, but I will take a look at the papers.
Come on, you know that argument is totally bogus. For at least two of the pairs you have cited, one party is able to export most of its environmental degredation elsewhere. For example, I was struck recently when I re-read Diamond's account of forestry in Japan - for one or two milliseconds, until I remembered that they preserve their forests by logging native forests in my own country. Whatever you want to say about India, at least those people are destroying their own environment and not some distant one.
East Germany and West Germany? Same argument I think. West Germany was a major economic powerhouse, East Germany was a small nation of little world consequence except in the Olympics and the manufacture of funky little motorcycles (ah, my MZ250!) How much has the environment of the East been destroyed since the Wiedervereinegung? (the reunification - my apologies to all German speakers for mangling that word). This is a question where I bow to those who know (Expat?)
And China's environment is becoming ever more rapidly screwed since that country's integration into the capitalist system. However much of a nightmare it might have been in the past, it is worse now, and there is unlikely to be any salvation from the destruction as long as the Chinese economy is tied to manufacturing most of the world's goods (for the profit of foreign companies), and taking a large fraction of the world's rubbish.
Almost right - Wiederverein i gung.
Cheers, Expat II
Can you give me a link to that article or one that discusses the matter in full? Would be great!
Reducing the ecological footprint is good PR, but really its about reducing ecological dependance.
Also, you've watched too much nightly news, it's wrecked your ability to reason. This whole A vs. B thing just doesn't work. Just because I'm not a doomer doesn't make me a cornucopian. Even if I was a cornucopian, that doesn't make me an EM guy. It's not the case that either EM or whatever else must be correct, you're setting up a false choice.
The primary position of doomers is that unbounded population growth (which they think we have) automatically causes resource exhaustion. That would be true, if we had unbounded population growth, which we do not. Noting that they are wrong doesn't mean I think the EM crowd (whoever that might be) is right.
The worst mistakes come not from faulty logic, but from faulty premises. Put another way, it isn't what we don't know, but rather what we know for sure that just aint so.
Some cults do not need the promise of heaven, only the promise that all unbelievers shall be consigned to the flames. That aspect is certainly present here in many cases. 'The human race must die because everyone is f*ing dumb and can't stop breeding like rabbits.' This attitude goes along with 'It's only all those brown people who will buy it.' Yeah, cognitive dissonance: the human race is incorrigibly stupid, but it's only everyone else who deserves to die, not me and mine.
I started off considering this site as devoted to science and knowledge, but I now recognize many cult-like aspects to the thinking of many people here.
I do not deny Peak Oil. But much that people believe about it seems to follow from a kind of faith.
Guys, I'm a misanthrope myself: I understand. But let's keep it real.
First off, almost no sane, rational person or group denies that global Peak Oil will happen if it hasn't already happened, not even CERA.
The debates here are over when, at what decline rates and at what impact on society.
I have not seen anybody here adopt a faith-based unquestionable belief in one answer over another.
At the end of the day nobody (not the doomers, not the cornucopians, not the "moderates") can tell us with absolute accuracy how much "economically recoverable" crude lies underneath the ground/oceans precisely because it is hidden underground.
Yes, some people are more pessimistic than others about how society will respond (or fail to respond). This is not pure "faith" though, but rather something grounded in historic experience. M.K. Hubbert warned the Texans in 1956 that their oil was going to peak.
They "stayed the course".
It is not that much of a speculative stretch to expect homo sapiens around the world to behave pretty much as the Texans did.
Why wouldn't Texan's have stayed the course. Oil markets globalized, the price experienced a couple of political spikes and then trended down. The problem with the circulation of petro-dollars was worked out.
It is a large speculative stretch to expect homo sapiens around the world to behave pretty much as the Texans did. Circumstances are undergoing a radical change.
Of course, the wolf did appear in the end, but in any case as you know, I have hung my hat on the mathematical HL model.
Insofar as I know, no one using the HL method (with recent production data) was predicting a peak before the 2004 to 2008 time frame. Note that Hubbert made some estimates for the world peak, but he didn't have nearly enough data to accurately predict a world peak, whereas he did have enough data to make some accurate estimates for the Lower 48. (Deffeyes observed that the world may have peaked in 2000, but he always noted that this observed peak did not fit his model.)
In effect, Hubbert made two "If, Then" statements in 1956 regarding the Lower 48:
Also, using only the Lower 48 production data through 1970 to construct a HL model, the actual post-peak cumulative Lower 48 production through 2004 was 99% of what the HL model predicted.
With all of that as a backdrop, Deffeyes, using HL, put the world crude peak between 2004 and 2008, most likely in 2005.
As I noted, the all time crude + condensate record so far is 5/05, and the cumulative shortfall so far is in excess of 300 million barrels (EIA)--between what we would have produced at the 5/05 rate and what we actually produced--while the average Brent monthly spot crude oil price after 5/05 is close to two-thirds higher than the average in the 20 months prior to 5/05 ($62 post 5/05 compared to $38 prior to 5/05).
Meanwhile, Yergin (on 11/04) predicted that oil prices as of 11/05 would be back down to $38, because rising crude oil production would force oil prices down.
So far at least, Yergin has been dead wrong and Deffeyes, following in Hubbert's footsteps, has been correct. As Yergin has been proven wrong, his associate, Peter Jackson, has redoubled his efforts to persuade us that this time around they are right about rising oil production--even as world crude oil production is consistently below the 5/05 level.
Edit:
I missed it last week, but Bob Brinker had Kenneth Deffeyes on his show. You can listen to the broadcast, but you have to pay a fee for Money Talk on Demand (I think it's about $5 per month): www.bobbrinker.com
BTW, Bob Brinker has an interesting track record. He recommend that everyone get out of equities in 2000, and then back in, in March, 2003. It's pretty interesting that he seems to be accepting the Peak Oil viewpoint.
I would probably describe myself as a 90% "Peaker" but a couple of things do bother me, to wit:
1. Just a few years ago oil was at historic lows. No doubt drilling slowed as a result. I just watched the latest video with Matt Simmons where he repeated that all of our drilling rigs are 25 years old. That demonstrates that for a fairly long period of time that not much drilling has taken place. Is it possible that we are on the cusp of all of this recent drilling activity will produce yet another spurt of production which will push us back into the "cry wolf" arena?
2. I've heard a lot of discussion about reserves and the HL plots demonstrating that we are over 50% in several important areas. But I have also seen pretty convincing argruments that reserves are too tied to the price of oil to be meaningful as a measure of when peak will occur. Reserve growth is the rabbit that has continually been pulled out of the hat. What is the likelyhood that the CURRENT price of crude is going to increase substantially the amount of reserves and thereby delay the inevitable peak for a few more years?
Please don't get me wrong I'm not trying to debunk anything. My real concern is that yet another boost in production will delay the necessary responses to both peak oil and climate change.
The Lower 48 (1970) and the North Sea (1999) both peaked (right at 50% of Qt) when oil prices were relatively low. In both cases, oil prices rose in the years after the peaks.
The UK rig count rose from 1999 to 2002, then fell, then rose again.
The Lower 48 in general, and Texas specifically, had the biggest drilling booms in history in the Seventies.
In both cases, the pattern that we have seen post-50% of Qt is the following:
Higher Oil Prices + More (or at least stable) Drilling = Lower Oil Production
These two case histories directly contradict CERA's case for higher conventional crude oil production.
The function of oil companies in a post-peak environment appears to be to slow the rate of decline of conventional crude oil production.
And the result was worse than if the boy had only cried "wolf" when it truly was there.
What is your view in Laherrere's argument, that "it is not possible to draw one Hubbert curve for present world oil production"?
More importantly, if HL did turn out to be substantially flawed as a predictive tool, how much evidence would need to accumulate before you stopped using it? (Not saying you wouldn't, and not saying it's flawed, but noting that any tool or dataset must be considered expendable for proper objectivity.)
When was it first used? The earliest I've seen a reference to is circa 2000 (Hubbert's 1982 paper didn't seem to be online, so it's not clear what's in it), which would make a prediction for a 2004 peak fit the observed pattern of "we'll peak in just a few years". It would be much more impressive if HL had been used to predict a 2004-2008 peak some 15-20 years ago.
Note the two key words there - "predict" and "used". It's important that HL not only show a 2004-2008 peak with 20-year-old data, but that it was believed 20 years ago; switching to a new form of analysis that "just happens" to continue the trend of predicting peak "in a few years" is likely to be a form of confirmation bias (i.e., choosing an analysis method that gives the desired answer).
That's not an effective answer to criticisms about the predictive track record of prominent peak oilers. That "the other guys" are wrong does not automatically make "your guys" right - Law of the Excluded Middle fallacy. Peak oil is rather more complex than a yes/no question.
I agree with your general sentiments, but there is a point lying in there.
Consider continuous arugmetns between two sides:
A: (perma-imminent-peaker) "Peak oil will be in the next 2 years"
B: (perma-cornucopian) "Kibosh, we have tons of oil, if it's high now price is about to go down soon"
Continuing through time, A will be wrong and B right for a number of years running.
And then, close to the actual underlying peak, A will start being right, and B will start being wrong.
So, the fact that the cornucopians who were pretty much right for a long time, started being pretty wrong in a big way, and the peak-is-nigh-ers who were wrong for a long time, suddenly started being right..... well isn't that consistent with what would happen at actual peak oil production?
And immediately after the peak, you'd certainly have the situation where (some) peak oilers had historical track records of being mostly wrong and cornucopicans historicla track records of being mostly right---and yet, the truth, at that moment was the reverse.
Then there's the issue that the typical range of serious predictions for peak oil didn't include 1990, but it does include 2005-2015.
Is this really a case of a fallacious 'excluded middle', anyway?
If the two sides are, "peak has not happened" and "peak has already happened", what improperly excluded alternative exactly is there?
Apparently global crude+condensate peaked 5/05. We're approaching two years later, with sustained historically high oil prices, strong worldwide economy, and yet production is still not quite there again.
Obviously it is still possible that oil production will once again exceed 5/05 production, but given that 2005 was an early included date of a reasonably justifiable peak, current evidence is not inconsistent with that hypothesis.
Doesn't matter - they're both still stopped clocks, and hence neither is a useful source of information.
The issue I raised is. Different issues that you raise may or may not be. They are, after all, different. :)
they're both still stopped clocks, and hence neither is a useful source of information.
True. But meta-analysis that a third party can see: one stopped being wrong, and one stopped being right, may be useful.
My point here is is that in the current situation there is some significant logic to being "on the same side" as the perma-peakists, even though they have usually been wrong.
In a noisy curve there are always local maxima, and the curve on the current
home page showed a previous peak in 2000.5 or so which was not exeeded until late 2003.
is there a difference now? Well, yes, the price is now high and economic growth strong, whereas neither were the case starting in 2000.5.
I have some agreement with you Elder Pitt (despite me being a 'doomist') and would glibly generalise further: peakists will be wrong until they are right; cornucopians will be right until they are wrong.
The crux is the consequences. There will be a relatively marginal cost for making changes now that will improve outcome whenever PO happens, that cost would have been even smaller if undertaken a few decades ago. If we wait until after PO has clearly happened then the cost will likely be the (probably total) collapse of our current economic system. That may preclude a large proportion of the changes we are currently capable of making, the implications of that could be significant at the (human) species level.
A major problem is assessing the date of PO due to the paucity of reliable data. It could be virtually now, it could almost realistically be as far as a decade hence, some extremists think even later.
We are well past that point when the precautionary principle would advise that we must have started serious action to mitigate and mandate full data disclosure. It almost seems that we, as a species, have wilfully chosen to rationalise away this problem until it forces incredibly drastic action upon us.
I happen to think the most probable PO date is 2012, +/- 2 years for a 60% probability, but I expect a significant global recession to intervene to delay it that long. I also think there is a significant possibility it will happen as early as late 2008 and think that probability more likely than any time beyond 2015.
Given that, there is almost nothing I can say to someone who holds the perspective of your post - my perception seems so different. I can think of nothing I can say to bridge the gap save this: if I am wrong I will have a high probability of still being alive, but if you are wrong you will have a markedly increased probability of being dead.
Agric, you have that exactly backwards. We have been on a plateau for about two years with the peak, so far, in May of 2005. Right now the peak oilers are right until they are wrong and the cornucopians are wrong until oil production heads back up again, if it ever does.
But the actual month of the peak is not that important. What is important is the plateau that we have been on for two years. The odds are high that this is the peak!
A significant global recession is a possibility but this would in no way delay the peak. A recession would not make it possible for nations and oil companies to pump more oil. If we are at peak right now, and I believe we are, even a global depression would not put more oil in the ground.
As Matt Simmons is fond of saying; "Data trumps all theories."
Ron Patterson
CERA must be right: "an undulating plateau". I guess how long it undulates determines if its a peak or happy cornucopia. My guess is "not very long".
Some would argue the system requires growth. Being at the plateau is catastrophic enough. I think this much is obvious; we have seen the first wave of demand destruction. May we live in interesting times.
They could argue it, but all available evidence disagrees with them.
World energy use declined for about 5 years at the start of the 80's, but the world economy kept growing. Germany has practically been at an energy-consumption plateau for 15 years (IIRC), and yet has seen economic growth despite huge disruptions due to Reunification.
What is the evidence in favour of the theory that a lack of growth in energy consumption will lead to economic collapse? Is there any?
Do you - daniel morris - know any? If not, why did you swallow such a sweeping theory without a shred of support? Did it just "sound right", like "there's lots of oil left" probably "sounds right" to many other people?
Follow the evidence. Wherever it leads.
Pitt: Now you're talking heresy.
Germany has practically been at an energy-consumption plateau for 15 years (IIRC), and yet has seen economic growth despite huge disruptions due to Reunification.
Perhaps true, but let's remember that economics individual nations can prosper even as they shift energy-intensive production outside their borders. Germany likely benefitted from changing highly energy-inefficient Communist processes and industries into more efficient ones as well as globalization.
When global oil peaks, as opposed to local energy consumption, things will be harder, because we don't have trade relations with e.g. hydrocarbon rich Titan. :)
What is the evidence in favour of the theory that a lack of growth in energy consumption will lead to economic collapse? Is there any?
It is hard to generate empirical evidence for a situation which few would voluntarily submit themselves: halt energy use and have no trade which might outsource energy use to a non-counted category.
There are a few rough examples, showing that things can get very bad when energy is scarce, mixed in with of course enormous confounding factors: Cuba, post USSR cutoff of oil, and North Korea, today. North Korea has virtually no trade, and a severe overall energy shortage. Its living conditions are quite dreadful of course.
Cuba's better now--but in large measure because of resumption of oil imports and the generosity of Venezuela.
Then perhaps it's fortunate that OPEC's second embargo gave us just such a data point - albeit only a 5-year one - to look at.
Perhaps things will be terribly horrible if the world stops increasing its rate of energy consumption, but that is a theory that must be supported, not a given that can be assumed.
While I agree with your latter paragraph, the former is completely off-base. A five year period in the middle of an era of expanding energy supply, and relatively stable EROI, is essentially irrelevant, except to the extent that it revealed a tendency to adopt efficiencies as opportunity costs increased. Some of the efficiencies gained then, such as shifting oil from electricity production, are no longer available. As with oil extraction, much of the low hanging fruit in the conservation orchard has been picked.
I would be interested in knowing what you consider adequate support for a theory.
Energy supply - very abruptly - contracted, mostly due to a sharp oil shortfall, and continued doing so for a period of years. Societal collapse did not ensue. That's the closest we've come to peak oil, and the world didn't come remotely close to ending.
What do you suggest are the key differences for a "peak oil" scenario?
That energy supply will not start expanding again after a few years? Not only is that largely begging the question (with the large deposits of coal available, there's no reason near-term energy supply could not continue to expand in a functioning economy), not only is it not clear that people in 1980 knew when energy supply would start expanding again, but how would that make a difference? Without answering that question, it's merely an observation rather than a criticism.
That some of the efficiency gains have already been made? A comparison between the EU and US shows that there is tremendous scope for efficiency gains, and a comparison between the EU now and EU or Japanese plans for 20 years from now shows those gains are hardly the end. Unless energy supply is falling by 5% per year - and even oil supply is usually not seen as falling that fast, much less overall energy supply for which the (large majority) non-oil components are seen as growing well past peak oil - just the efficiency gains we already know about could see us through for decades.
At this point, it would be a pleasant surprise to see any support for some of the major theories, such as "declining oil supply will lead to global economic collapse".
One approach would be to explicitly address the implicit assumptions in such a theory, breaking the problem down into smaller and (presumably) simpler sub-problems that could be addressed more easily.
Another approach is to point to related circumstances in world history and argue based on similarity. That's the approach I take when bringing up the 1979 oil shock, for example.
Fundamentally, though, my argument is simply that support must exist in order for an argument to be taken seriously, and all too often we see sweeping claims boldly made as if they were so self-evident as to be unquestionable.
They're not.
One of the key reasons peak oil is still fringe is because too many of the arguments related to it sound like most conspiracy theories - the evidence is "right there" but most "sheeple" are too "brainwashed" by the "MSM" to understand. Arguments like those sound like hogwash to 90% of the world, and rightly so. Detailed, logical, quantitative, and above all calm arguments are much more convincing. RR provides some of the best examples here.
World primary energy production climbed steadily until 1979. It then dipped by about 4% over 3 years, before beginning to climb again in 1983. By 1984 it exceeded its previous high in 1979 by 2% and then continued to climb. From 1980 to 1983 it never declined to its 1978 level.
You are going to have to go elsewhere for your 'related circumstances', since the supply drop was neither abrupt, nor particularly significant, nor enduring. Some scholars, such as Homer-Dixon, look to the Roman Empire. Try 'The Upside of Down'.
When you're not pontificating about who makes good arguments, you might spend some time studying the data. Westexas is a pretty good source. And one of his main sources is the EIA:
http://www.eia.doe.gov/aer/txt/ptb1101.html
Also, US Peak production actually scared a lot of people so that US Automobile production shifted from my heavy body 1970 Pontiac Catalina with a 400 cubic inch V-8 to a 1975 Chevy Vega with a 4 cylinder aluminium engine.(They stopped refering to cubic in. with regard to engine size.)(When they say 2.5 liter engine, are they talking about the amount of oil the oilpan will hold or what?) After 1972 those huge heavy body vehicles were not produced. Soon car commercials were talking about those "powerful V-6 engines", yeah right. People who were'nt around back then haven't a clue what a real automobile was. I'm sure it made a mega difference on consumption.
For starters, read "A Forest Journey" by John Perlin.
-best
1. Which system do you think requires growth?
2. What kind of growth do you mean?
Pitt obviously assumed you mean growth in the use of Energy.
The version of the assertment that I'm aware of (I think also that suggested by Hubbert, for instance) is that our economic system requires growth to function properly. Economic growth (see Pitt's example of Germany) does not necessarily require growth in the use of primary energy sources. This can be replaced with a increase in efficiencies and/or a growth in effort (achieving the same output by working twice as long), for instance.
Our monetary system (at the moment) requires positive interest rates. The easiest way to keep rates positive is with a growing economy.
The easiest way to keep the economy growing is with a growing population and an increase in resource use (in this case primary energy).
Since it is pretty impossible to separate the "economies" of the word (national/local/monetary), it is very important to look at the world economy. Population will more than likely continue growing well past mid-century. If we "peak oilers" are correct, it will be quite difficult to increase our energy base and therefore our resource base in general. Does this mean system collapse?
Pitt's point in this whole debate is:
1. Pay attention to the logic of what you are claiming.
2. Don't claim more than you can logically construct.
3. If we all took a class in logic, the whole debate with CERA, for instance, would be much easier.
That depends on the dataset you look at. IEA world all-liquids production figures, for example, show a significant increase since May 2005, and all-liquids will be the determining factor in how big of a problem we run into.
What's the difference between the EIA and IEA all-liquids figures over the last 18 months, anyway? They seem to be diverging - does IEA include a category that EIA does not?
Pitt, I chart only oil. Of course alcohol from corn or sugarcane is important, so are palm oil and liquefied coal as well as propane. But crude oil is what we are trying to gauge here, not coal or agricultural products. Peak oil will be when crude oil peaks. Agricultural products and liquefied coal may soften the blow but only slightly.
I get all my data from the EIA.
Ron Patterson
So, crude + condensate could go to zero, but as long as "Total Liquids" grew, we would have no problem?
The approximate two-thirds increase in the average monthly crude oil price after 5/05, compared to the 20 months prior to 5/05, is strongly supportive of the EIA data showing a growing shortfall between what we would have produced at the 5/05 rate and what we actually produced--now in excess of 300 million barrels of crude + condensate.
As Ron said, until we get some data showing rising crude + condensate production, Deffeyes' prediction--which was based on crude + condensate--appears to be accurate. Yergin, who was predicting rising crude oil production, has been wrong so far.
I - and most of the rest of the world, I suspect - would be rather more interested in hearing from realists, who are approximately right all along, and who - crucially - are willing to look skeptically at their own arguments, rather than pre-judge data based on whether it agrees with their beliefs.
Extremists - on either side - just muddy the waters.
May I presume that you concur with the remaining paragraphs in my previous post since you did not take issue with them?
I think I am a realist, and that my perception, assessment of probabilities and conclusions are based on an objective analysis of the hard data available to me. Perhaps the degree of agreement between Freddy and me a couple of weeks ago is an indicator of that. I am very skeptical, probably more so of my own thinking than I am of others'.
My main point remains: significant mitigation is mandated by the precautionary principle now (and even now may be too little, too late) otherwise there is a significant risk of major disruption and possibly economic and societal collapse.
Of course, a realist is realistic until reality determines otherwise.
And then the realist should change to match - following the data is what distinguishes him from the dogmatist.
Good advice. You might take it yourself.
Well, the North Sea always had proper accounting, therefore people HAVE to believe the inconvenient truth that this area is declining.
Saudi Arabia always said everything is great, therefore people LIKE to follow this view and agree... basic psychology there. And in addition to that, the more expert people feel that there might be some more potential in the Saudi smaller fields than is publicly known, and they CHOOSE to believe as well.
We demonstrated this in Texas from 1972 to 1982, when the biggest drilling boom in state history resulted in a 14% increase in producing wells and about a 30% drop in production, as:
Higher Crude Oil Prices + Increased Drilling = Lower Crude Oil Production
All three of these factors--Oil Price; Rig Count; Lower Production--are now present in Saudi Arabia, which started declining at the same stage of depletion at which Texas started declining.
with regards to discoveries vs production, and the posibility of a steep crash, the purple production curves in the top part of the following graph has to eventually reach somewhere near the yellow graph (discoveries).
yes i know this ignores other sources of liquids such as condensate and the 'other liquids' fraction which are increasingly contributing to the total production curve, but there isn't much room to move, other than down, and by the looks of the discovery curve, there isn't much more oil out there to be discovered.
(the black curve is a quadratic curve fit to Koppelaar, and it seems to intersect about the right place)
That's a bit hard to read (on my monitor anyway).
Here's the direct link to the graph (much easier to read)
http://www.itee.uq.edu.au/~ahill/p_o/production_curve.gif
Which illustrates a potential problem with one of the common data transformations done by peak oilers, namely back-dating reserve growth. If reserve growth is sufficient to keep reserves at reasonable levels, then there may be little or no incentive to search for truly new sources of oil. This can result in a misleadingly pessimistic picture, where "discoveries" tail off despite "reserves" staying high or even growing.
If, for example, a new technology came out next year that allowed 50% more of the oil in a reservoir to be extracted, that would massively increase the amount of available oil...but would all be back-dated and not change the "we've stopped discovering new oil" picture one iota.
Back-dating provides one way to look at the data - and a useful way, certainly - but one needs to be aware of the possible weaknesses of transforming the data in that way.
do you happen to have a source of non-back dated data, with reserve growth counted in the year in which it happened?
(i've had a look and the only non-back dated data i have is to 2003)
Gotta love that subtitle:
I didn't hear Simmons say that in the clip.
cfm in Gray, ME
I think he said something at first about trying to stabilize production for as long as possible.
And then he went on to talk at length about lifestyle changes and conservation and calling for the ends of globalization. We have Bloomberg, Inc. to thank for cherrypicking and putting one minor comment Out Of Context In Big Font For A Long Time while Matt Simmons was trying to talk through the words in front of his face.
I think that Bloomberg's reporting in this case isn't exactly neutral.
Chances are that the oil companies are worried about diminishing sales if the peak oil message gets out. So they are actively trying to squelch the PO message.
I wish Simmons would stay away from predictions about the price of oil and stick to predictions abouth the flow rate, where he is an expert. I think he's right about we being past peak but wrong abut his prediction of 300$ a barrel oil. And this will be used against him as many will, intentionally or because they're just plain dumb, argue that if Simmons is wrong about the price of oil he must also be wrong about peak oil.
Adjusting for inflation the time the price of oil hits 300$ a barrel could be some 50 years into the future simply because the world economy will collapse long before that happens, and that will lead to some major demand destruction. No matter how scarce oil becomes the price can never get higher than what people are able to pay.
Given the recent fascinating and somewhat esoteric discussion relating to evolutionary psychology and that we apparently need to galvanize an emotional response from the public, perhaps Simmons' tactic is the right one to adopt. Flashing neon letters - not the subtle fountain pen.
In order to get a response and push the debate right, smack into the middle of the great media circus, Matt is, apparently, using language ostentatiously as a rhetorical device to shake things up a bit. Maybe he's concerned the message isn't getting across quickly enough, so to hell with it, go for the jujular and get the concept of peak oil out and into the heart of the maintream corporate media and away from the periphery like TOD.
What's he got to loose? Credibility? Who the hell would recognize "credibility" in the corporate media if it came up and bit them in the ass? Simmons seems to be a guy with a conscience, whose prepared to sacrifice "credibility" in order to get the message across now, while we still have a slim chance of taking remidial action before it's too late, and all we're left with is an irrelevant and perhaps comforting debate as we go down with the Titanic.
As we discussed the first time around, in the video Matt pointed out that refined petroleum products in some areas in recent months were selling at about $300 per barrel (with all taxes factored in), I believe as an example of how people were still buying petroleum at high prices.
His specific prediction (and bet) is that crude oil will be at or above $200 per barrel in 2010, in constant 2005 dollars.
That's exactly right. I can't believe The Oil Drum editors would repeat this.... why it's as if they don't read the comments. :-)
He does not discuss even the likelihood of $300/barrel oil prices... only the effective price that some people are now willing to pay or already paying.
Reporting it this way undermines credibility and makes no sense.
Why is this error being repeated, particularly when the video itself makes clear that it is an error?
What gives? Is anyone listening at TOD?
that's the original blurbage from the bloomberg story describing the video on their site. no intent there, just copied it over from the first time around. will remove post-haste if there is a consensus to do so.
I believe that the quote, in the box, was from Bloomberg, but as you said, it is a misrepresentation of what Simmons said.
I changed it. Again, that was straight from bloomberg, not something we created.
Those who want to misinterpret him will only hear the 300$ not the 200$. But 200$ in 2010 adjustet for inflation is just not going to happen. I don't know when high oil prices will bring down the world economy, but I don't think we'll have to wait for 200$ a barrel.
I think that crude oil, in the US, accounts for about 75% of the retail cost of gasoline. So, in round numbers, $200 oil would equate to about $267 per barrel for gasoline, or about $6.40 per gallon.
The total cost per mile for a new sedan, in the US, is probably about 50 cents per mile. At 12,000 miles per year, 20 miles per gallon, and a price of $2 per gallon, gasoline would be about 10 cents per mile out of the 50 cents, with depreciation, insurance, maintenance, etc., accounting for the balance (40 cents).
Assuming that depreciation doesn't change, a big "if," the total cost of driving, assuming the same miles per year at $6.40 per gallon, would go to about 72 cents per mile, from 50 cents per mile, a 44% increase. Or, in order to keep driving the same miles in the same vehicle, our hypothetical driver would go from spending $6,000 per year to spending $8,620 per year.
Obviously, the burden would fall most heavily on poorer households, in much the same way that the forced conservation so far has been in regions like Africa.
But the key point to keep in mind is that this is a dynamic situation. We are going to see a recurring cycle of:
(1) A supply drop;
(2) Increased prices to equalize supply & demand;
(3) And then supply drops again.
Thus, you are ahead of the curve if you downsize now, ideally to a situation that allows you to get by without a car.
people are really unaware, as they moan about what it costs to fill the tank, of what fraction gasoline is of their total cost. When gas was one dollar/g I guessed the price could go up 10x while the overall cost would only double. IMO, price will go up a lot when the amount available to importers begins to decline 3%/year... but, we can actually take this kind of decline forever without doomsday kicking in.
Note that Mexico offers a real life Export Land model, where a combination of a 7% annual (month to month) production decline and rising consumption resulted in a 23% decline in oil exports (which equates to a 50% decline in exports every three years).
Also, the long term increase in US Total Petroleum imports has been about 5% per year since 1990, because of rising consumption and falling domestic production. (Based on HL, the US is about 85% depleted.)
I have actually gotten more concerned of late about the net oil export outlook. I believe that my last estimate showed about a 8% decline in net oil exports by the top 10 net oil exporters (from 11/05 to 11/06).
Americans won't give up their cars... nor should they. Sure we could decrease miles driven per year to 1000 from 12k, through lifestyle changes brought on by high prices, but 80% of people will always need their cars.
Its fine if you live in a vibrant downtown where just outside your front door there are fruit/veg markets, commerce, and public transportation. What percentage of local downtowns have these neccessary characteristics? Almost none.
It may be rough, but when gasoline is $15 a gallon, people who now don't care, will start caring about such things.
Zoning laws etc will stand in the way, and I hope that there may be some flexibility from people who are now 'protect-my-property-value and don't-ever-change-or-develop--anything fanatics'.
More likely, the wealthy will have plug-in hybrids. The poor will be just plain screwed.
If $15 gasoline happens, every car manufacturer will either make plug-in hybrids, EVs, and 100mpg tricycles, or they will be eaten alive by the ones who do.
Why do without a car? Cars don't have to use gasoline for every-day stuff. If I can get myself a Chevy Volt or VentureOne, I will only need fuel for out-of-town travel or moving large/heavy things. My figures indicate that the combination of PHEV's and biofuels is sufficient to get us away from petroleum, and something like the VentureOne would jump me well ahead of the curve even on that.
Of course, as we all know, the problem is getting from here to there, as Yergin, et al, tell us that abundant crude oil supplies are just around the corner--and as Americans are apparently going into debt to maintain their current lifestyles.
I think he did say that given the high taxes paid in the EU on motor fuel that the equivalent price for oil is near that today. So people WILL pay that much to drive.
Speaking of aliens; there has been an increase in UFO sightings around the world.
Maybe they've come to save us from ourselves.
or watch a really good show :P
Communication is difficult. In many respects, written words are dull things compared to the glitz and glitter we're presented with on television. Moving images just Rock!
Orators use their rhetorical skills to communicate on many different levels, many of them have little to do with the actually content of their utterances. What appears to be really important is the way or style of what one says, rather than the literal meaning in itself. A great speaker is almost "singing" to his audience. The words tumble, flow and sail through the air, appealling, like music, to the emmotions first and the mind sometime later, if at all.
Many people who cheered Hitler in something close to religious exstacy were seduced by the sound of his voice echoing through the halls and areas of Germany. Afterwards, interviewed by journalists most of them were apparently unable to actually remember more than a few words from speeches that sometimes lasted for hours. But chillingly, they got the gist of it. We hear what we want to hear, no?
So I suppose what I'm getting to here is that, it ain't what you say, it's the way that you say it! This is becoming increasingly true in our degenerating popular culture and floundering standard of public debate. Fox News, CNN, and News International, should be broken up just for starters. The concentration of power in a handful of multi-national news corporations is destroying us.
Whilst TOD is an island of rationality in an increasingly uncivilized world, getting the concept of peak oil across to the great mass of the public will require different communicative skills and another type of language.
In my own small way I'm trying to redress the balance. I'm attempting to do a Dan Brown/Da Vinci code for peak oil, only it's really, really difficult, and I'm afraid I'll fall flat on my face trying. Still, it keeps me off the streets. At the moment it's shaping up as a very violent, perversely sexy, science-fiction, spy thriller, with a heroine who is not only brave, intelligent and beautiful, but is also an agent for the People's Republic of China, locked into existential struggle with the United States which is under the yoke of a Christian/Fascist dictatorship. Homosexuals, Muslims and the ungodly are hunted down like animals. As if this wasn't enough, she has and has a "familiar" in the shape of a gene manipulated, robocat, puss-in-boots, armed with a lazer rapier and a stealth invisibility cape! Literature it really ain't at the moment, which is probably a good thing all things considered.
so, tell me writerman, when are you going to write something for TOD? :)
It is not only the way you say it, but also the willingness to hear. Peak oil will not have an audience until gas prices rise again. Sorry, just the truth.
I missed a point. Sometimes the people who matter are listening when most are not.
From my personal observations, Writerman has a point.
The youth of today don't read.
They You-Tube. They space out on My-Space.
They IM.
if u cnt rd dz, u cnt tok 2 em.
There is a limit to how well the 50's plus population of this site can connect with the young ones merely by use of the written word.
Hello Youth ones, we have a problem!
Simmons didn't neccessarily predict $300 per barrel, he simply stated that there are many places in the world where the consumers willingly pay the equivalent for their gas.
I recently drove my little Peugot 106 from France to Croatia and back. I calculated the gas prices in every country in $/gallon. We paid an average of $6/gal, and believe me they have fully adopted American style car-culture over there.
Without a doubt, Matthew Simmons is the most credible voice in the Peak Oil debate. I drop his name constantly when discussing PO with family and friends (which I do less and less as I find most don't get it). He is articulate, successful and in the industry. Also, it seems to me, he has everything to lose and nothing to gain by alligning himself with the PO is now crowd. I went to Boston to see him specifically. He came to the "conclusion" of Peak Oil from a different angle than the geologists and oilmen. I brought my wife with me to Boston to hopefully convince her I hadn't lost my mind. Although the presentations were excellent, it was Matthew Simmons who started to get her to understand. Watching the video again, what struck me this time was during the introduction the young lady mentioned that, "Matthew Simmons believes the world has passed Peak Oil" and he didn't blink an eye. Without trying to sound too dramatic, I think he is a good father and a good citizen...and I think he is scared. And so am I....
I did some consumer related cost analysis in my factory, (maint mechanic oil filtration systems)
1.Atlas Copco GA4K oil is used in screw type air compressors, our 5 gallon pail costs USD $4.12/cup
2. .FoamBan MS 293 is used in machining operations to reduce foaming in the water coolant tanks, our 5 gallon US pail costs $18.75/cup
Thats right this stuff is $52.89 CDN per L in a 5 gallon pail, it also is locked up for us personel only.
Secondly I wanted to comment on something in regards to the actual oil fields, in separating produced water, we have two scenarios and many different applicable separators. Watery oil is definitely not the same as oily water, and thus when approaching the magical 50% regional cut, physics then takes over with Stokes Law dominating. The start of the oil age machinery 40yrs or more ago had mostly oil wells and some watery oil, however that has changed as fields mature and injector wells create down stream problems. They need to up the flow by changing over the produced water (EOR) equipment.
Regards
Hello TODers,
I find it fascinating, from when this Bloomberg video was originally released, that the other MSM networks were not falling all over themselves to book Simmons for facetime in front of their cameras.
Responsible journalism should morally dictate that Simmons's Peak gets greater airplay than Anna Nicole Smith. IMO, the greater public awareness and ensuing discussion can only serve the public good. I wonder how many TV energy segment producers were overuled by their corporate media execs in profitable thrall of the Iron Triangle. Surely, some Peakoil journalists must be getting frustrated that this topic is not getting more airtime.
Perhaps, as the Thermo/Gene Collision intensifies, we could see journalists going on strike, not over wages or working conditions, but over journalistic ethics. This regaining of credibility could help stem the loss of viewers from mainstream TV and the big print media to the WWWeb thus providing greater long-run job security. But this is just WAG speculation.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I wouldn't hold your breath Bob. The journos I knew in London were frighteningly disinterested in peakoil when I tried to get them interested. I think it is a case of (to paraphase): 'Society gets the journalists it deserves'.
Why would they?
Before he'd be considered important, he'd have to be considered correct, and - fairly or unfairly - that view of him is not all that widespread; most people have never heard of him.
There are thousands of people who are utterly convinced that they have information everyone "needs to hear" - and some of them are even right. But sorting out who truly has such information is neither simple nor swift, and it's almost never self-evident upon hearing the person speak.
So you shouldn't be surprised; sometimes mining information is as difficult as mining coal.
I strongly suspect that Matthew Simmons must have had inside
information from a contact in Saudi Arabia, before he would
risk his business reputation in this way.
It is also inconceivable that the US/British/Israeli intelligence
services are unaware of the true position regarding SA oil reserves.
Many times I have seen it stated that if TPTB knew a very large
meteor was soon to impact with the Earth, they would not advise
the general population in order to avoid the resulting panic and
societal breakdown.
A possible parallel here with peak oil do you think?.
Interesting thought. Worrying about SA would have been a new thought for MS... MS is, of course, an insider himself, and well positioned to hear insider gossip... maybe he did get a tip from an insider, maybe somebody that worked there and then retired.
Whatever, his research into the previously submitted papers apparently convinced him. If SA goes to 12Mb/d in 2010, his credibility will go to zero, hardly useful to his firm. Convincing to me is simply the thought that nearly all of their fields are very old, c1950, and this is really all you can expect from such fields that have pumped their hearts out over such a long period. Meanwhile, there are no new fields... MSM will have us believe that SA fields are special, will continue until they are 80... cera thinks they can go to 100...
IMO, SA is behind us. Next up is russia. Like mexico, and unlike sa, russia is not investing, they are coasting... IMO they have crested... and WT makes a good point that their exports are anyway falling...