CNBC: Matt Simmons Discusses a Plateauing Oil Supply with Maria Bartiromo
Posted by Prof. Goose on March 18, 2007 - 12:24pm
[Video moved below the fold because of load times...]
This is from March 7, 2007. Also, if you haven't seen Matt's recent appearance on Bloomberg (where he goes into a little more depth than in this video), here is a link. Send these videos around, they're great ways to get people thinking. Hit digg, hit reddit, hit your linkfarms!
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(I liked the animated derrick in the backgound, and the Blackberry interference that occurred halfway through.)
So Simmons does not invest in Exxxon; neither do I.
Look at this math:
http://select.nytimes.com/search/restricted/article?res=F60A10F73E550C7B...
"The chairman and chief executive, Rex W. Tillerson, said that Exxon planned to increase investments in oil and natural gas projects to more than $20 billion a year in the next three years, as it faces higher costs. Exxon's capital expenses have increased more than 30 percent since 2002.
Exxon expects to add one million barrels a day of oil and gas to its current production as the company starts more than 20 projects in the next three years"
So the Exxxon investment will be about $55 per barrel when the expected production eventually reaches steady state. So until then, the investment will be >$55 per barrel. Then consider that since the average price of oil in the last year was $65, just about all profits will need to be sunk back into exploratory R&D. As we always realized, the oil companies are operating on a tight margin and furiously trying to maintain an illusion that they have a viable future business model.
Sooner or later Exxon will need to transition to renewables (if they intend to stay in the energy business), as the shareholders learn the truth about depletion and peak oil. Shareholders tend to get a little touchy about the prospects of diminishing assets. Just curious WHT, you put three XXX's in Exxon, as in XXX rated oil company? Simmons was very articulate with the Money Honey and is providing a terrific service to investors.
I don't know why I did that. I was thinking about the song Joey Ramone wrote called "Maria Bartiromo".
She is a babe, I've thought that since she first joined CNBC. Intelligence, personality and looks all rolled into one. If not for peak oil, I think she would have become what Barbara Walters use to be. Too bad she's a city girl.
My metric for oil companies is market value per barrel of oil/d or per BOE/d. If you do the maths Exxon is about twice the price of BP.
could you detail your calculation (of $ 55/ bbl.)
$20 x10^9/1 x 10^6 (bpd) is $ 20,000 per bpd .
sounds like a good investment to me, if realistic.
of course you could buy wal mart at a p/e of 20 (last time i checked)
for a total of 364=20000/55 days payoff time - not to bad, it sounds like a lot of money, but 1 year payoff on a mult-bilion dollar investment, with 10-20 years production all up of that investment - there aren't too many things that scale that well
Hi ee,
That was $20bn/y for three years, so $60k per barrel/day. Article is paywalled so I don't know how much of that is gas, or whether the increase is just new-project production or net of decline on a company-wide basis. Both these points are vitally interesting of course.
Exxon was going to spend $7bn to build a 150mdb GTL plant in Qatar, which comes to about $42k per b/d; they cancelled it after the costs rose to $18bn.
This...
http://www.247wallst.com/2007/03/exxon_mobil_xom.html
...says their production is going to grow overall, but slower than previously expected.
Investment on the left side, Break-even sales on the right
$20e9/year = 1e6 (barrels/day) * 365 (days/year) * $55/barrel
$20e9 = $20e9 + small profit
But ... don't they then lack that $20 billion dollar windfall per year to invest in the future? It seems to me that they would need price to double, to $110, for them to keep on investing profits to get back their investment. Note then how this turns into a geometric progression of ever increasing costs.
The big assumption in this is that the $20B/year investment over three years only applies to those three years. They will have to repeat it after another 3 years. Does anybody honestly think they will quit making the $20B/year investment after only 3 years? The idea that the investment will last 10-20 years makes no sense from the perspective of the large delta nature of the outlay.
Exxon puts out 2.5 million barrels/day now with an estimate decline of 10% per year, see Stuart's TOD post http://www.theoildrum.com/story/2005/11/16/182053/32 :
You see, 1 million barrels per year increase compares to 2.5 * (1 - 0.9^3) = 0.68 million barrels per year for a 10% decline rate. Make the decline rate 15%, which is common for off-shore and you get 2.5 * (1 - 0.85^3) = 1 million barrels per year. Which is exactly what they are trying to get back after 3 years of investment!
This explains why we think the $60B/3years is going to be a routine reinvestment to make up for the 1 million barrel loss every 3 years due to declines. Therefore, the declines will resume after 3 years unless they put another $20B (+inflation+higher costs+making some profit) in another 3 years. I wouldn't call it quite a death spiral, but they are just running in place right now.
When you apply these types of numbers to the NOC's with their social investment needs you see things get ugly fast.
A NOC like Aramco? I suppose they subsidize everything in a place like Saudi Arabia. Can anybody even see what their financials are?
Yes like Aramco. I would think a estimate of how much of the current oil revenue is being used for social programs is not hard to find. We know for example for Mexico its basically negative. I'd guess that only a small percentage of current revenue is re-invested. Taking billions out of social programs to re-invest will I think eat up a lot of the gains from higher prices.
This can be coupled with WT export land model. The combination means that at some point the amount of money going for social programs begins to decrease. I'd say that Iran and Mexico are already in this boat. I'd not be surprised to see Venezuela join them one reason I think GW is not really messing with them right now. Venezuela because it is rapidly increasing the amount of social programs it funds and gutting its oil industry at the same time.
I've actually got nothing against Chavez trying to reinvest in Venezuela but he has set the stage for a disaster. And it could come quickly if they have another strike.
KSA I don't know. I'm not sure how to find out how they invest their oil revenue's. At some point it seems certain that all the NOC's will face peak social spending.
At some price point demand destruction/reduced supply will
result in a maximum revenue condition for the NOC's.
I think this might be the most destabilizing aspect of peak oil. You would have to run some numbers and its different for each country but you would have to guess that 5-6 years after peak oil is behind us these issues will become important. Maybe sooner in some cases like Mexico.
I found this.
http://www.country-studies.com/saudi-arabia/oil-industry.html
This is not a lot of reinvestment. I think the numbers are a bit old but you can see that as expenses increase investment must increase at the cost of social programs or the price of oil has to continue to rise steadily.
Also the oil industry itself is used as a social program.
Right... slightly more sophisticated analysis, and of course the correct one for a company that wants to continue as a going concern. So now the question arises, what is all that investment for? It's either much too high (disgorge cash to stockholders, shut up shop a few years down the line) or much too low (carry on as before). And that's before any frank symptoms of global peak production. Sorry, I'm going to have to sit down in a quiet room with pencil, paper, calculator and a very large Scotch. See ya...
ok, correct $ 60k/bpd but compared to ethanol, the figure i have heard is on the order of $ 100k to $ 150k/bpd. of course the government is subsidizing some of it (as the govt is subsidizing , and taxing, oil production).
the gtl plant, at $ 18b, would be about $ 105k per bpd (plus the value of the gas). so we can conclude that exxxon's threshold is over $60k and under $105k (plus the value of the gas) per bpd
i'm not so sure that $ 60k/bpd is a good investment or not >> 3 yr payout
incidentally, companies have been trying to evaluate the economics of that qutar gas since at least 1982.
There has been a trend towards LNG projects as LNG demand grows and the use of LPG in transportation is cheaper than the use of gasoline or diesel. There were natural gas buses in the US. Natural gas/LPG cars were used in Australia, Egypt, and elsewhere. There is a Conocco Pnillips LNG project in Qatar seeming to be going towards completion.
The Chinese calculated that they might build coal to liquids plants that could produce diesel for about 40 dollars a barrel in operating costs. They purchased some licenses. SASOL is involved.
Has anyone noticed, the math.
20 billion dollars a year for R&D. 1 million Bbls/day
times 365 times $60./Bbl equals about $21.9 billion
A nice return of about 10%. But what about reduction of other well output and cost of bringing the 1000 Bbls on line?
analt
A commenter over at reddit:
Amen brother! Get 30 more diggs people, and about 5,000 people see this video.
I notice this morning, that something we've touched on before - namely the possibility that Saudi Arabia is 70% depleted [and maybe more] is making headlines again.
http://www.urbansurvival.com/week.htm
http://graphoilogy.blogspot.com/2007/03/could-saudi-arabia-be-more-than-...
Right now on Aera's (Exxon & Shell limited partnership) Bakersfield Cali property there has been testing of a new in situ process that takes heavy oil, tar sands, vacuum bottoms, etc and turns it into light oil with an excess heat that can be applied towards steaming(no NG needed) the tar sands, heavy oil, shale, etc. If the process proves to be as cheap and clean(no solents) to implement and to produce oil from areas that weren't even reservable it should just about double the worlds reserves over night. Tar sands, tar lakes, shale, etc now become cost efficient at about $25 a barrel and makes Canada the equavalent of Saudi Arabia in reserves. There is a finite amount of oil on the planet same as drinking water but if you were told there was a cheap and simple way to convert seawater to drinking water on a huge scale it alters the supply and demand equation. Then as this "new" supply enters the market lowering the price of oil it makes alternatives seem less reasonable.Of course this just postpones the oil problem by about about 50 years and does nothing about global warming.
Matthew Simmons:
I wonder who he means by "we".
I wonder who he means by "we".
We Earthlings
Really? I don't see society looking back a year from now and and agreeing peak happened no matter how strong the evidence.
what? you don't? could you please explain why you see it that way? with references please!
I don't know that I disagree with Mark on this. Imagine if we are still hanging around 84-85 mbpd...prices will have gone up unless demand is destroyed somewhere (US recession, housing bubble, etc.). If that is the case, we'll still be on the plateau, even if KSA/Cantarell/insert your big field of choice here is declining...when you're on the plateau, you can go up or you can go down.
That's why I am starting to hate the term "peak oil." It implies a symmetric bell curve...that's not what we're gonna have due to circumstances.
Hi,
And not to mention that people may not understand the underlying cause ("peak") of different "peak" effects, even if production declines.
And even if down, "...you can go up or you can go down." And there will be many willing interpretors, most likely.
*sigh* it's late...but there's no excuse for my being that trite. :)
the term "peak oil" refers to the point where world oil SUPPLY does not meet world DEMAND. I do agree that MANY people think peak oil means "no oil".
But, you and I know, (as well as many TOD'lers) It's not the end of oil, it's the end of "easy oil". Matt Simmons is well respected, his message is strong. He has a message to convey, we are "getting it" The main stream media just isn't "gettin it". I just filled up at $2.28 a gallon. thats 14.25 cents an cup.
also, dont forget hurricane season is coming soon. May 1. Just one hurricane entering the gulf will likely disrupt production. I think by mid summer, late July, we see a hurricane mess up our mojo! and our gasoline price will go up. where? who knows. but a wild ass guess (WAG) would say $3 maybe $3.50 a gallon! Then that would be the "new" base price for the rest of the year.
throw that in the mix with subprime mortgage debacle and we are headed for a serious train wreck!
IMO the problem of tight supply is coming closer to being 'addressed' through an involuntary collapse in demand. You mention the subprime mortgage debacle, which is very close to spilling over into the Alt-A and prime sectors. IMO the trend in the stockmarket has also turned and we are on the verge of a very sharp acceleration lower. The impact on the economy is unlikely to lag far behind.
My view is that we have recently passed 'peak liquidity', and as liquidity concracts (very quickly IMO), purchasing power will decline substantially as well. I would expect prices to fall, but those lower prices to be less affordable than at present.
Collapse in demand? Leigh, demand just hit an all time high in December.
I know. IMO demand either has peaked or is peaking. We have yet to see the effect on demand that the problems brewing in the financial sector will have, but I doubt if we'll need to wait for long.
I think peak means maximum production regardless of demand. If demand goes down because of price or whatever you might have a peak that lasts for a long time. CERA calls it an "undulating plateau" but somewhere in there is a maximum.
Near San Francisco we are already paying about $3.25 a gallon.
I thought it meant the moment of maximum production rate.
Anyway, ¿how do you define "demand"? It varies with price.
But I guess I agree with you. The important moment in all this was when demand (at "reasonable prices", AKA the OPEC price band) grew over available supply, including any spare capacity in Saudi Arabia or anywhere else. The result is that oil left that price band.
So now we are out in uncharted territory. Let us hope that the photovoltaic cavalry rescues us before anything really bad happens.
I'm interested to see what kind of curve will eventually develop. Do you think it might have any impact on the rate of decline?
Lately I've been wondering if the extraction rate curve for the logging industry is asymmetrical. If so it has nothing to do with price or demand destruction. When a logistical peak is suspected the extractive industry backs off as a form of conservation. Before suspected logistical peak the thinking is 'go for it'; afterwards it is 'save some for the future'. See the green and yellow curves in
http://en.wikipedia.org/wiki/F-distribution
not that there is any connection in theory, just similar asymmetric curves.
And then there's the KSA and whether or not they can increase production this summer. I'd guess that the Saudis almost always have reserve capacity (with rare exceptions). Thus they may well increase production this summer for a couple of months to create the illusion of increasing production capacity and that they are not experiencing a geologic limit.
This may assure the oil market that all is well when actually the runner is beyond his anaerobic threshold. And perhaps the Saudis will annouce that the new floor for oil is maybe $75? and once again cut production?
In other words, increasing short-term Saudi production increases might be all about smoke and mirrors (or not).
I work in the medical field and many of my coworkers have advanced degrees. There's nary a word of a pending liquid energy emergency. Some of my friends drive 35,000 miles a year and just expect that they are going to pay through the nose for gas but that they will always be able to buy the stuff. Each time we start up the gas and push the pedal to the metal, that fossil fuel is gone forever.
B.W.
Prof. G.,
Looking back at this someday we will see a tiny few year blip against the history of mankind. Whether that blip is 1 year, 3 years, 10 years is really irrelevant. Even against the backdrop of the age of oil, a 10 year plateau would be less than 1/16th of the period we recognize as the age of oil. It may seem interminably long to those of us in the plateau but for students of history it will be a passing nod.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
geewiz questions a posters disagreement with the assertion that a year from now, we will all be looking back and agreeng that this year was peak, saying ...
"what? you don't? could you please explain why you see it that way? with references please!"
-------------------------------
O.K., let me have a crack at that one.
First, I want to commend Prof. Goose on his sentence, "That's why I am starting to hate the term "peak oil." It implies a symmetric bell curve...that's not what we're gonna have due to circumstances. He then seemed to backtrack a bit in a post a short time later, accusing himself of being "trite".
Well he may be trite but he is also right. This is the argument I have made since my first days here, that being essentially "Peak what?"" and "What is peak?" So far I have seen ongoing discussion of variously, "Peak OIl", "Peak Oil and Gas", "Peak all Liquids", "Peak Conventional and Condensate", "Peak EROEI of oil extraction", and then further confusion to which I have helped add by mentioning the critical difference between "Logistical Peak" and "Geological Peak".
For someone to be able to authoritatively call Peak now, they must first tightly define what they are saying is "Peaking". Many groups have been switching and swapping back and forth between "Peak Conventional", " Peak oil and NGL" and "Peak Oil and Gas" that attempting to get a baseline to work with is now all but impossible, and this before the new catch all term "Peak all liquids" became fashionable.
As my first reference, I will give the definitive one: History. I personally would not dream of accepting a global peak until we have AT LEAST matched the 1978 to 1982 period of roughly 5 years straight down at a full fifth of production down. That's what happened then, and it was the ultimate "false peak", as oil production rebounded at a speed and to a level that had been thought until then completely impossible. The so called "Plateau" we are seeing now borders on nothing more than measurement error compared to the massive and long decline of the 1970's.
The second issue is of course whether this is a "logistical peak" or a true "geological peak". In 2006, Christophe de Margerie, the head of exploration for Total, the French oil giant, set the "peak oil now" crowd all a tingle with an interview in which he said "120 million barrels a day, never." Many in the Peak community assumed that they had found an ally, but they failed to read all of De Margerie's words.
In the Times interview De Margerie expressed no doubt at all that the oil needed was out there, so he is NOT in agreement that we are at geological peak. His perception is one of political and logistical peak, a completely different kettle of fish. In an article in 2003, Iraqi reserves alone are given by Total oil as "There might be 250 billion barrels under Iraq, good for $3 trillion." This extracted from a Forbes article July1, 2003, a fascinating long article called "The French Connection" describing the corruption of the French oil industry in Iraq, Burma, and other places, and why the stakes are so high. De Margerie was quoted throghout the article, and has no belief that the we are anywhere near peak oil on a geological basis, but is convinced that nationalism and political/logistical issues are at play, a completely different scenario than the lower 48 U.S. faced when it peaked geologically in 1970.
http://six.pairlist.net/pipermail/burmanet/20030701/000197.html
Lastly, I want to repeat some extractions I did on a post the other day, that was for all practical purposes, ignored, quoting the recent ASPO Newsletter.
As many of you may know, the ASPO holds a special place in the Peak Oil discussion. It is the intellectual home stomping ground of Colin Campbell, the heir apparent to King Hubbert as the geological sage that is most responsible for the popularity of Peak Oil and the public forum for the likes of Peak oil popularizer Kjell Aleklett. Below is an extract of the post I did the other day on TOD:
2004:
http://www.exitmundi.nl/oilproblem_2004Scenariovan_deaspoassociation_for...
(Downslope shows world producing as much oil and gas in 2045 as it did up to any year including 1967, top just barely topping 30 Gb/a at Peak before dropping to 12 Gboe in 2050 (!)
2005:
http://www.energybulletin.net/image/primer/aspo_oil_and_gas.png
(Downslope shows world producing as much oil and gas in 2045 as it did up to any year prior to 1997, top just touching 50 “Gboe” at Peak before dropping, but not coming back down to the old “projected peak” of the 2004 scenario of 30 Gb/a until 2050, or the end of the chart (!!)
2007:
http://www.aspo-ireland.org/newsletter/en/pdf/newsletter75_200703.pdf
Downslope-flatter, showing as much oil being produced in 2040 as in any year up to 2000, and then a steep “tail” drop to as much oil in 2045 as in any year up to approx. the above 1997, top now at approx 52 “Gboe” before dropping, and not coming back down to the 2005 scenario projeceted peak of 50 Gboe until approx. 2017, and now ending the chart in 2050 at approx. 32 Gboe, or 2 Gboe above the once projected “peak in 2004 scenario (only 3 years ago) of 30 Gb/a in the approx. year 2048 (!!!!!!!!!!!!)
What we now see, USING CAMPBELL'S OWN MODELS, is more oil/gas barrel equivalent being produced in 2048 in the world than was projected would EVER BE PRODUCED IN ANY YEAR in the scenario published only 4 years ago.
It absolutely staggers the imagination that such a set of data could be published, and be considered useful in any way.
NOTE: I am using only ASPO's own projections and not the words, statistics or conjecture of their detractors.
Now this would definitely be a Peak, but a completely different type of Peak than the "symmetric bell curve" that Prof. Goose took to task in his "trite post.
So, you say, what the helll does all this matter? Simply this: With each ASPO Newsletter, Peak is moved forward, Saudi/Middle East peak is moved, and most importantly, the slope of the curve on the "downslope" are modified. Right now, if we freeze the game where it is, the world will endure a downslope of about one fifth drop in production, but it will take until year 2045 to manifest itself. This is bad enough, but what it means is that we will see a drop in production of oil taking some 37 years that will roughly match the drop we saw occur in only 4 years in the 1970's on a percentage basis....and recall, in the 1970's, the U.S., Europe and Japan were far more relient on oil a percent of gross national product and even grid based electric power production. And this is not the model of some optimistic group like CERA, but instead, the model as adjusted just this last month by ASPO, at the very heart of the Peak movement.
So, will we be able to say with authority next year, that peak occured this year?
Maybe you will, but I sure won't, and I sure won't bet my retirement fund, my house or my belief in the American way of life (as much as it is hated here, I kinda' get a kick out of it!), on it. Like I said, give me a one fifth drop in production in 5 years instead of the almost 40 years as foreseen by ASPO (and that's if they don't adjust the numbers forward again, which if history is any indication, is highly unlikely), and then I will consider it.
Am I denying peak? Of course not. It will occur, the question is when. Will we be ready? Not if we don't start work now. Energy diversity and reduction of waste is a good thing, a critical issue, peak now or peak later. Am I denying the "doomer" scenarios and mass dieoff collapse scenarios? Well, I always have, and based on the numbers that even the Peakers are using now, I will continue to do so.
Thank you for your interest.
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
Roger: Since you are discussing 2048, 2050, I have a question. If current trends continue, what % of world GDP will the USA contribute? A guesstimate would be 7%. Even if all the oil is around in 2048, the USA will not be able to consume 25% of it, probably more like 7%. It makes a big difference to your assumptions.
BrianT asks,
"Roger: Since you are discussing 2048, 2050, I have a question. If current trends continue, what % of world GDP will the USA contribute?"
Guessing U.S. percent of world GDP, that is a real shot in the dark! :-)
O.K., I might as well have some fun and really send some folks off the rail at me, what the helll....
If we assume China and India growing at the pace we have seen over the last couple of years, you would have to believe that U.S. percent of world GDP would drop from current, unless we could grow very fast. If U.S. GDP can hold at 7% of world, it would be a very good period for the U.S. What would keep us from it?
Well, one problem is of course the energy required and the Greenhouse gas production....but here's the rub: The Europeans, Chinese and India (and the world) face those problems too. So what would make their situation better than ours comparatively?
One thing is natural gas. The natural gas problem in the short term is essentailly a North American problem. The world still has a fair amount of natural gas available, and in fact, many markets in the world are in pretty good shape on natural gas. Europe is in a bit of an exceptional situation: If they can reach a sustainable arrangement with Russia and the former Soviet republics, they are not hurting, but they will have to be willing to accept a somewhat "dependent" relationship with Russia, something they are not used to. Europe is also benefitted by it's great technical and educational establishment. The work they have done in wind and solar is pioneering, and they are probably ahead of anyone in the world (Japan excepted) on hydrogen from renewables (an industry that the U.S. doubters completely dismiss, I think much to our disadvantage, but more on that on another post :-)
Next, the big area is demographics: The U.S. has an aging population. But Europe suffers on this one to an even greater degree. The Indians and Chinese are in better shape, with an influx of young talent still coming to them, but later in the century, the Chinese one child policy will create a heavy demographic oddity, skewing the curve very rapidly to the higher side of the aging range. This has not been talked about much, but they are leaving themselves in a bad demographic position late this century, post 2040-2050 (it won't matter to us, we will all be gone by then!)
Lastly, that often scoffed at, but always important area, technology. It is almost impossible now to foresee the nature of batteries, controllers, materials, solar panels, windmills, advanced agriculture, and (BIG) bio-engineering and nano technology that will be available in 2040. Even in a resource constrained world, there will be more than enough raw material to create technology now undreamed of....take a look at the difference in available technology between 1900 and 1940, or 1940 and 1980 for examples. (and with a better educational/political system in play, it could have been much, much greater in advancement....the technology right now is far, far ahead of the political system)
A huge potential area of development will be space and deep sea exploration. The current discussions of not having the "rare Earth" material available for fuel cells or solar cells may seem very silly by 2040.
And we must not forget nuclear fusion. We know that it is theoritically possible, but can humans do it on a cotrollable, affordable basis? One or two well timed advances or breakthroughs here throw all energy related conjecture right out the window.
We are at a decisive time, perhaps THE most decisive time in history . Carl Sagen once said we may be right now at the moment that decides whether it is possible for advanced technology civilizations to continue forward. His argument was that this is the moment that humankind really has the means by which to commit suicide as a species, or move forward, past relience on the Earth, and become dispersed in the future to the point that would be impossible for any single planet event to end us. We are getting ready, RIGHT NOW, to either move forward, and leave our origins behind, just as a child leaves it's upbringing behind and moves away, or to stop, and begin our slow and steady (or perhaps fast and violent) descent, into atrophy and eventual demise.
Of course, the individual demise of each of us means that we on Earth now will not directly be affected by the outcome. We are discussing the fate of our offspring, and their offspring. We must deal with the ,mundane issues of our life, how to provide shelter, food, heat and a meaningful life for ourselves and our living family. So: If we hold 7% of world GDP, I hope to have some funds invested in the future of America....if we drop much below 5%.....stock up the Hobbit hole for a long, long winter.....
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
actually it was "when you're on the plateau, you can go up or you can go down" that I was accusing myself of being trite on. :)
"actually it was "when you're on the plateau, you can go up or you can go down" that I was accusing myself of being trite on. :)"
My apology on misunderstanding....but your still right! :-)
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
With each ASPO Newsletter, Peak is moved forward
There's a perfectly logical reason for that. This is an extract from a post on another message board that I like to haunt.
Predictions of a premature peak are always wrong. That's because these are the only predictions that can be falsified, those which come too soon. We cannot falsify a single prediction of bountiful oil before the supply fails. But it is absolutely certain that a peak is coming.
Read the whole thing here http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadvie...
Not quite.
Premature predictions of a peak are - by definition - incorrect (they're "premature"). Predictions of a premature peak, on the other hand, are just saying "oil will peak sooner than you expect", and there's no reason those have to be wrong.
That they are often wrong, though, makes the methodology used to predict them - and peak oil people in general - look unreliable, and that's bad. It's rather like The Boy Who Cried Wolf - his unreliability before the wolf comes makes its eventual appearance worse than it needed to be.
It's one thing to say "wolves exist" - i.e., oil will peak. It's quite another to say "there's a wolf here" - peak oil is now - unless we're quite sure.
It's one thing to say "wolves exist" - i.e., oil will peak. It's quite another to say "there's a wolf here"
The peak is a hapax, a one-off. And no-one denies that the time line we are on includes a global oil peak in it, somewhere. Doesn't that change the logic of the matter? When is the optimum time to buy that zillion-dollar life policy for your wife and wee ones?
How do you get the boxed text effect?
Not really, no.
If one thinks seriously about the situation - which many people have not - then it's clear that a peak rate of extraction must occur at some point. That's not the "wolf" part.
The "wolf" part is that a peak while we're still dependent on oil could cause hardship. If we're saying "the peak is here", we're effectively saying "the wolf is here".
Use the "blockquote" tag.
I can't get the "code" tag to work, otherwise I'd demonstrate.
Roger, you said
"we will see a drop in production of oil taking some 37 years that will roughly match the drop we saw occur in only 4 years in the 1970's on a percentage basis."
The ASPO 2007 chart shows natural gas as well as oil. It shows oil (& NG liquids) production dropping by 54% in the period you mention, 2008-2045.
Therefore I will assume you meant "oil and gas" where you said "oil".
On the ASPO chart, the drop in the 70s looks to me like 11% (from 32.5 to 29), not "one fifth".
The drop from 2008-2045 does indeed look like 20%. But let's consider world population growth during the two intervals. (UN medium variant world population, 1975=4.08B; 1980=4.45B; 2008=6.75B; 2045=9.03B.) On a per capita basis, the 1970s drop was 18%, while the coming 37 years will see a drop of 40%.
To me, 40% sounds pretty tough compared to the 18% "oil shock" of the 70s.
Bob G,
Good points all, and I was roughly eyeballing the chart on a small screen and going by what few numbers I have seen of the 1970's...and of course, as I mention in my post, the flip flopping back and forth between sometimes saying we are talking about "Peak Oil", sometimes "Peak Gas", sometimes "Peak All Liquids" and sometimes "Oil and NGL or condensate" (and of course, if you throw in "peak oil (or oil and gas?) per capita, you have a whole new bucket of snakes to untangle.
I have not refuted that "peak oil" in whatever way you look at it will be tough, very tough. My issue has been that some of the wild scenarios that have been extracted from the numbers simply don't make sense, and that there is great question as to when anyone can call peak (thus, being able to say next year that we "peaked" this year seems to me to be highly unlikely.
I have become more interested in the shape of the downslope post peak, which seems to be even more of a shot in the dark than calling peak timing per se.
I can only express extreme doubt at most scenarios I have seen (not that I have a better or clearer way of visualizing scenarios) and return to my oft stated view that extreme scepticism is about the only path to take.
As much as possible, be prepared for anything, (although that sounds "trite", preparation costs something, doesn't it?)
Thanks for the feedback, food for thought is one thing we seem to have no shortage of!)
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
Campbell's projected NG production is shown separately in the newsletters from 2002, for example:
https://aspo-ireland.org/newsletter/en/pdf/newsletter23_200211.pdf
I don't know if it has changed since then but I doubt as much time was spent on the 2002 NG projection as was his oil projections.
Good point. It will probably be at least five years post-peak before it's widely accepted. Look at what happened when other regions peaked, such as the North Sea. They didn't recognize the peak until it was years in the rear-view mirror. They kept thinking they could still raise production.
As Hirsch said, "The bell curve has a sharp crest, and you can't see it coming." Because it's so unexpected, it's not recognized when it hits.
"As Hirsch said, "The bell curve has a sharp crest, and you can't see it coming." Because it's so unexpected, it's not recognized when it hits."
I agree with Hirsch that peak will very likely come with little or no warning, but I laughed myself silly and did a bit of a "spoof" post on that sentence at the time it was quoted in TOD...."a bell curve with a sharp crest? That, by definition would not be a bell curve, would it? :-)
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
Unless it goes into an undulating plateau, and then the crest turns into a bluff.
I love it.
It's a Crest,
No it's a Plateau,
No, it's The Peak Oil Bluff
Is that something CERA can get behind?
LMAO
JC
Leanan,
But there was no Hirsh report before those other peaks. There were no high oil prices either than could not be attributed (accurately) to oil embargo or wars. There was no Matt Simmons on CNBC. There was no Congressional Peak Oil Caucus. They didn't have both the US peak and the North Sea Peak in the rearview mirror. They didn't even have the term "peak oil".
The only thing that knocked the wind out of the movement was that prices fell...BIG TIME.
Here is one thing I am willing to bet on:
If crude trades above $100 for more than 3 months, peak oil will be a religion with its own churches.;-)
I don't think that Simmons was saying that "we," as in everyone on Earth, will know and understand next year that we hit peak oil the prior year. He is simply saying that we are likely at peak now. When, and if, the effects of peak oil hit us hard, very few will know what actually precipitated the crash. The fact that most are in the dark, does not mean we didn't hit peak. Simmons is simply referring to those who understand the peak oil issue when he uses "we."
I think this interview missed the point of peak oil.
The problem is NOT when do we run dry. The problem is when demand is greater than supply. It appears that will happen again THIS YEAR.
If demand continues to rise this year like normal and KSA output continues to go down, then we got major problems.
When the price at the pump gets to be 5 dollars a gallon in USA, then people will realize there is a problem. Until then Matt Simmons will be ignored.
Greetings KJD,
You have pointed that the oil problem was simply to ensure that supply was greater than demand. Well, never mind that because oil is a commodity and so price equilibrium will ensure we will just pass trough short-term shortages, right?
No, this is not right because the main issue here is NOT making sure that unsustainable demand meets unsustainable supply. Some authors point that the Hubert peak for the whole oil industry will be met at 2010 while some say 2025. Well, the REAL issue does not concern production, but the amount of POLLUTION and WARMING our small planet Earth can process before playing more havoc with our main environments and mainly, with the atmospheric layer protecting us from lethal solar / gamma rays.
More and more people worldwide are increasingly concerned with something bigger than Managerial Economics: it is called (Sustainable) Environmental Economics, in other words, to treat natural resources as capable of producing (X tons or Y thousands of bpd) AND consider their capability of reprocessing/cleaning that same amount of resources in the same period of time as a most real natural constraint. It is harvesting today the same amount we planted yesterday. Otherwise it’s like sharing the destiny of shipwreckers who are eating faster than their island is capable of producing. If we want to harvest more we would need space to plant more. In the case of the O&G industry, this means a LOT of time and space, as any environmental engineer can tell you. Earth is NOT incredibly immense as many people think it is!
The world must find other ways to produce clean energy or we are 100% destined to loose not only the "American way of life", but in fact, any dignified way of living! We need something besides the already known and not so efficient alternatives energetic sources (wind, solar, sea, thermal, etc.). For instance, I have seem many innovative and seemingly practicle articles and videos from inventions and patents about "WATER MOTORS" (http://www.waterforfuel.com/, http://www.youtube.com/watch?v=ZGjJ0WQZVqk, http://www.youtube.com/watch?v=c-ulOvJl46U, http://www.spiritofmaat.com/archive/watercar/h20car2.htm, http://www.youtube.com/watch?v=MS5qFTWBbP4, etc.), "AIR & AIR-HYBRID MOTORS" (http://www.youtube.com/watch?v=QmqpGZv0YT4, etc.), “ELECTRIC MOTORS” (http://www.youtube.com/watch?v=wTRRCQhEimQ, etc.).
We shall learn to think ahead and respect Earth.
Too many people don't give a damn about the Earth though. A lot of people support protecting the environment, until push comes to shove and they have to pay for it out of their own pocket. It's hard to be optimistic about the future sometimes. I would actually say Peak Oil is less of a concern than Global Warming. One is very obvious, and when it occurs we will not be able to ignore it, and we will have no choice to react. The other is slower and it's easier to keep passing the buck, all the time things keep getting worse and worse.
Peak Oil is jumping into a cauldron of boiling water, Global Warming is the slow boil where by the time we realize what's happening it's too late.
If you notice, Maria Bartiromo visibly relaxed when he said oil would not run out in her lifetime. Unfortunately he did not explain very well that that did not matter, that we're still screwed.
This is the new line of obfuscation that big oil has decided to use. They can change the subject to the question of oil running out and they can basically tell a completely honest lie.
Didnt see that, but possibly I dont have as sensitive antennas as you :)
Keep a really focused line when explaining peak oil - "the moment of maximum worldwide production, whereafter year-on-year production will be continuously lower".
(That should keep the "run out of oil" phrase at bay.)
Regardless of what anyone else says about it, I'd say it was one of those historic little footnotes.
Back in 2002+ We all dreamed of a Matt Simmons being on CNBC saying that WE have PEAKED NOW. Wow.
If you would have told me this would be on primetime news back then I would think I was dreaming.
Great.
I do wish that he simple would have said that 'It means we will never produce as much oil per day(ave) EVER again.
Bottom line it means each year SOMEONE will be buying LESS. And Fewer Will Buy Less EACH Year From NOW ONWARDS.
120 per day in 2030 is fantasy.
That would have been cool if he said that.
And Maria would have said, "Uh Ah, I See, Well then which stocks would you buy in that case?"
But The PEOPLE... untold numbers of them who have already been told about peak oil by someone, sees Matt on the TV and has an a "Holy Shit" moment.
I would also add, I wonder how many rich people who read about Richard Raiwater and such finally said, "It's Real" and will change investments from here on. How many trader types who watch CNBC and have been sitting on the fence because of something his brother or wife told him about peak oil and finally are taking it serously from this point on?
Things will pick up speed from here..
Sam'
I figured out the (holyshit) a long time ago. It's nice to see that some are finally getting it. ;)
Yeah, but then they go out and read the CERA report, and allow wishful thinking to convince them that it is correct.
It's really funny how Maria keeps coming back to what stocks would you buy. The biggest clusterfuck in the history of civilization and all they can focus on is stock tips. Really mind blowing.
Yes, now that we get peak oil, we need to figure out how to profit from it. But then, Maria lives within a bubble within a bubble within a bubble.
This is March Madness- we see some MSM eye candy "bubble exponent 3" can shake her pom poms even in the face of Simmons.
On Friday they had one of those banners across the lower portion of the screen that said, "The Correction is Over." Laughed myself silly over that one.
CO2: IMO, America circa 2007 is a pre-intellectual, primarily visual culture (built by television and print advertising). If the leaders of the oil depletion movement, Deffeyes, Simmons, etc. had managed to get a front person like Maria Bartiromo to do their talking for them "peak oil" would be accepted and understood by most Americans. There is a reason most (not all) newscasters in 2007 look like Maria. The American public won't take their medicine without their candy.
Is KSA lying ?
I'll post this here since its a short thread and I think the point should be made.
Understand that in exploring our globe for oil we have found it in a lot of places and we are producing a lot of oil. The middle east is one of the most promising area's but other regions have quite respectable reserves.
The problem is KSA is claiming reserves that at least 3-4 times larger than any other region on the globe including other parts of the middle east sometimes 10 fold on a bad day. We don't have another region that even comes close to what they are claiming even in places like Russia/Siberia that cover a significant portion of the globe. You would think that with oil being fairly widespread that if KSA has the reserves they claim we would have found another reserves of similar size say a 3/4 KSA and so on for Russia the region is so large it should not be treated as a single entity just like you should break out Alaska from the lower 48 better the analysis should be done by basin so the GOM should be treated as a single region that includes parts of Texas if not all.
For every other oil producing region we have this sort of similarity in the sense that regions of equivalent reserves exist in multiple places.
Sure one region will have the most and thus one country will have the most reserves. But I do not believe KSA is what they claim to be. They have good reserves probably 150GB or so and they are the largest by a reasonable amount but if you use the rest of the world as your guide no way are they what the claim to be.
Next most of these great reserves are tied to a single mega-field if they had such fantastic reserves and the region is so special where is the second ghawar to back up the claim ? They should have at least two mega-fields.
So even with this simple set of assumptions KSA's case does not add up. Basically what I have done is a simple distribution analysis to see if KSA's claims make sense and the don't. It would be cool if someone did a more rigorous analysis but I think the point is pretty obvious.
Memmel.....regarding this post did Kehbab do an analysis outling OIP for KSA???? I'm not very good calling up information and posting it in these blog things as yet.....But as I do recall Kehbab did in fact have a very good go at the very problem you lay out....this was sometime over the last calander year.
Regards....TG80 sends
If you have a link please share. My thoughts came from generally thinking about how we find the king and queen fields and known distributions in other basins and in fact the same basin that KSA is in.
They did get a jewel with Ghawar but their is no evidence not reason for any other anomaly in the area. Considering the wealth of oil in the region you would actually expect a field or group of fields like Ghawar to exist but not the numbers KSA is claiming. And I see no easy way to get their OIP numbers without the existence of another Ghawar like field.
Some people say: "Peak oil? So what". Many are so confident that technology will find a solution or believe that our invincible market economy will do an almost automatic, smooth transition to other fuels. Few understand that bio fuels will only replace a couple of percent of our current oil consumption and that all the other carbon based fuels coming from tar sands, oil shale, coal to liquids etc. are real climate killers. And where is the clean primary energy for electric and/or hydrogen cars? Peak oil just happens at the time where our first job is to replace our coal fired power plants with renewable energies and/or to geo-sequester the CO2, not an easy and cheap task. It is the simultaneous confluence of peak oil and global warming which is the problem. Read about James Hansen's latest interview with the Australian broadcaster ABC TV:
Scientist predicts disastrous sea level rise
http://www.abc.net.au/7.30/content/2007/s1870955.htm
DR JAMES HANSEN, NASA CLIMATOLOGIST:
.....If we get warming of two or three degrees Celsius, then I would expect that both West Antarctica and parts of Greenland would end up in the ocean, and the last time we had an ice sheet disintegrate, sea level went up at a rate of 5 metres in a century, or one metre every 20 years.
That is a real disaster, and that's what we have to avoid....
KERRY O'BRIEN (ABC TV): You said just a couple of weeks ago that there should be a moratorium on building coal fired power plants until the technology to capture and sequester carbon dioxide emissions is available. But you must know that that's politically unacceptable in many countries China, America, Australia for that matter, because of coal industry jobs and impact on the economy.
JAMES HANSEN: Well, it's going to be realized within the next 10 years or so that we have no choice. We're going to have to bulldoze the old style coal fired power plants. We can burn coal, provided we capture the CO2 and sequester it, and we're working on technology that would allow
us to do that and we should have been working a little harder but, nevertheless, we will have, within five to 10 years, we will have that technology. In the meantime, we should be emphasizing energy efficiency so that we don't need new old style coal fired power plants. We're just
not doing that.
James proposes a fail safe sequestration of CO2 in deep ocean sediments. Who would like to have a CO2 dump in their backyard after we have seen how 1,000s of people died in Cameroon from a bursting CO2 bubble in mountain lake Nyos:
http://news.bbc.co.uk/onthisday/hi/dates/stories/august/21/newsid_338000...
We in TOD know the second half of oil and gas will require a dramatic increase in drilling rigs just to reduce steep decline rates. So where will all the drilling rigs come from to do that deep ocean sequestration of CO2, at a gigantic scale all around the world? Stark choices will have to be made.
In Australia, governments started to dream of "clean coal". These are all distractions. We are critically wasting time to go full speed into solar, wind and other renewables. If we don't do this, we will not only wreck our climate for good but also fall down the energy ladder. At a peak oil conference in Scotland 2 years ago they called it 'energy winter".
Coal mining has become an extremely energy intensive industry which has shed lots of jobs over the years because of strip mining and mountain leveling rather than deep coal mines. The economy is transitioning out of certain kinds of jobs into other kinds of jobs all the time. Why should be make an exception for coal mining jobs which are just contributing to the destruction of the planet. As if massive increases in solar, wind, and other renewable won't create jobs. Impact on jobs and the economy is a completely unacceptable rationale for continuing with coal fire plants.
I guess people need to fire up their ac this summer to the max so can help maintain and incrase all those coal related jobs. Furthermore, coal is killing people now, not just theoretically in the future. Might as well encourage people to smoke to help those workers in the tobacco industry.
Reminds me of the movie, "Thank You For Smoking",
And btw, don't forget we still need baseload energy, which for now needs to be substantially nuclear with a bit of gas fired plants thrown in on the side.
I like to see Matt on TV delivering the warning.
Then just maybe, I could talk to someone in my circle of friends and family about the possible impact that this may have in our lifetime.
Oh, they don't watch CNBC or Bloomberg.
Everyone's wondering who will be the next American Idol.
Hello Sandor,
I think it is interesting that MSNBC and Byran Williams on NBC News did not feature this Simmons video on their websites or nightly broadcast. Do they want the rich and powerful, and the Peakoil Aware to get their financial & survival ducks lined up first before finally breaking the news to the huddled masses?
"300" is still the top film. I wonder how many viewers forsee their own neighborhood 'Battle of Thermopylae' dead ahead?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
AFAIK American Idol parallels the CNBC/Bloomberg American Dream- easy money, little knowledge, en masse
Too many people in America think God will either solve the energy problem or they will be "saved" and taken up to heaven before the chaos comes to America. Pure complacency of the brainwashed.
Doug-
I find it rather odd, with a "man of God" currently occupying the White House, that the issue of sustainability (population,energy,environment,finance,etc)is not being given serious attention. Since the majority of the population voted this man in (kinda), you must be correct.
After Katrina hit and gas around here went over 3 bucks a gallon, the local news was covering a Pastor and his followers praying for lower gas prices next to some gas pumps at the local station! I am serious. Unbelievable!
Anyone can say the words, "I am a man/woman of God." It means nothing---what matters is what you actually do. Based on that, he has shown that is unequivocally not a man of God. He started a war of aggression against a country and a people that did not harm us.
And yes, I know some of you believe the stories that Saddam was working with Al Qaeda. That has been debunked repeatedly and the fact is Saddam did not like the religious whackos.
Those that are offended by my post can beat me up over this post --- I don't care and have no desire to engage. I know that politics and religion are real hot buttons, but if you chose to argue that Bush is a man of God, I would really like to know how you came to that conclusion other than because he says he is or because he may go to church. Some of the meanest, nastiest people I've known claimed to be the most faithful.
Easy Girl!
I can see that we agree 100%
Yes, completely. And I'm going to go hide now before the missiles head this way....
Ckaupp: I rented a documentary titled JESUS CAMP about the born again phenomenom in the USA and according to this film Bush's "God" is pro-warfare. It is an interesting cultural phenomenom (here in Canada the devout Christians are left wing, "lets help the poor, raise the minimum wage" types.)Definitely not pro-war.I guess there are lots of "Gods", even among the Christians.
Well, as The God Delusion so rightly points out, the mythological "teachings" that islam and christianity are based on are stupendously immoral and violent, as well as occcasionally peacful. Religious people can always cherry pick whatever they want from the big book of magic - that's what makes it so easy - no thinking required!
That's how most people "think" anyway - you have your opinion already set by tradition/propaganda memes, and you make rationalizations to buttress your "opinion."
For example: "milk is good for you." (Science disagrees. Big Time!)
What I was getting at is more the 10 commandments, of which most American Christian religions adhere to. Two in particular that I was thinking of are "thou shalt not kill" and "love thy neighbor as thyself." Then there's "the meek shall inherit the earth" and "turn the other cheek" which are taught in the Bible.
I'm aware that throughout history most religions have had very violent periods. But they still cling to wanting to be "godlike" and have their cake and eat it too: they want the wars and violence, but they also want to be "nice". It's like politics: They all talk out of both sides of their mouthes.
IMHO, according to your description, the devout Canadians probably have it right. Personally, rather than religion, how about just adhering to the Golden Rule.
Yes too many people in America think God is going to save them. Like the Amish! Those silly God worshipping Amish continue to produce those methane producing cows and force more gosoline to be used up by driving those horse drawn carts and forcing all those car drivers to stay on the road longer. But hey... The Amish don't care because they think God is going to save them from the chaos.
/sarcasm off
Whether we look back to see if last year marked the start of a decline or not, a new oil price base seems to be establishing itself, and rices will probably continue rising along with finding and developing costs. Finding and developing costs (F&D)for a large representative sample of NA and international producers reached $16.50/boe in 2006. Now take that figure and work backwards using a disc. rate of 5%, reasonable assumptions concerning decline rates, operating costs, and royalties etc., and you come up with $55 oil. That is, the price of oil (flat for life)required to generate a reserve value of $16.50/bl in-the-ground is $55. If this trend toward higher F&D costs continues, or even stays flat, the industry would require at least a $55 oil price environment just to generate a positive 5% rate of return.