The hypothesis is that bell shaped production functions have a linear-like behaviour on a P/Q vs Q graph. It works for Gaussian and time differentiated Logistic functions. But for Gaussian production distributions the linear regime will overestimate the URR since linearity fails as P --> 0 as the P/Q vs Q function curves down towards the Q axis. I think that for large production regions and the world the Gaussian distribution is a better fit. So the whole debate is missing the mark. The URR will be lower than we can predict around the time of the peak. Underpredicting the URR is not the problem.

Here, at least is a hypothesis: The infrastructure put in place for an oil field closely correlates with the initial estimate of URR...

I think there's something to that. Otherwise, in the Prudhoe Bay example, the pipeline capacity (if too small) would have forced a "mesa shape" to the curve.

But suppose that too-small a pipe had been built. If later the URR was seen to be big enough, another pipe would have been proposed. The reason is that when people see an opportunity for profit, they usually pursue it.

In my view the basic assumption behind the Hubbert method is exactly that. Humans are a "weedy" species, that tend to exploit all resources they can. The method expects such growth, which is indeed driven by economics. It does not depend on a specific rate of growth of production (in the initial, exponential, stage). The same math works for any constant rate of growth. In reality the growth rate fluctuates due to non-geologic factors, but in the long run (and the method applies to decades-long periods) there is usually a roughly exponential development, which slowly and eventually becomes affected by depletion (the growth rate slows down) - the first signs of below-ground factors.

I don't believe the downslope will mirror the upslope though, because I can't think of any underlying reason for that.

"Would you please please please please please please please stop talking?"

A Hemingway character.

No more tempests in teapots.

HL is a theory without a hypothesis. OK, oil production is never a square wave and it rises then falls, and the area under the curve will equal URR at the limit but so what!

OK, let's see.. I think you have sort of answered your own question there, Alan. The hypothesis goes something like this: many natural phenomena follow a bell-shaped curve. I think there's a formal statement of this in the discipline of statistics.

So, what Hubbert was saying, is that oil production will follow this trend regardless of political / economic / etc. issues. Basically we're gonna pump it out and use it as fast as we can in the end. Some of the TOD filk will superciliously say it's a "logistic curve", but they're both just blobs on a graph, near as I can tell. It looks to me like the bell is just the first derivative of the logistic WRT time.

I was trying to explain this in a recent thread, and was duly corrected: Hubbert did not originate "Linearization"; it had been my impression that he did. Anyhoo, the linearization is a clever way of graphing the production curve so that the points (theoretically) fall along a straight line. Furthermore, as time passes and production continues, the estimate gets better (because there is more history [larger Q] in the later points on the graph).

The beauty of linearization is that it allows you to place a ruler on the graph, strike a line, and get an estimate of the URR for the stuff you're trying to predict.

But in the end, it's all just statistics and the actual URR will only be known in hindsight. Many of us have looked at the graphs put together by SS, Khebab, westexas, and others and concluded that peak is probably about now. Since it is a century-long bell curve, there may be as much as 5 - 10 years of uncertainty as to the actual location of the peak — check back in 2025 and we'll know for sure.

There must be some similar process or behavior at work in order for HL to produce similar outcomes in different oil provinces if that is what it is doing.

Yes, and I'm surprised there has been so little discussion of this so far on this site. On poster on the HL debate left a clue: creaming curves.

It appears from the empirical evidence that the sizes of oil fields in any oil province are distributed so that there are very few large fields and increasing numbers of increasingly smaller fields. Geologists can't demonstrate from physical laws why this must be so, nor can they give you a formula to predict the distribution, but still that's what the creaming curves tell us.

Given this fact, it is easy to see that simple economics will, in part, govern the history of oil production. All other things being equal (and I know they are not), production from a large field should be more profitable than a smaller field because the costs of exploration and development of a field can be amortized over more barrels of oil. That being the case, larger fields will tend to be developed before smaller fields.

Over time, as fields deplete and production declines, that decline must be offset by the development of an ever larger number of smaller fields, which decline more quickly and must be replaced at an increasing rate if production is to be expanded or even just maintained. At some point, the capacity, financial and technical, of the oil industry to add new production will fail to keep up with the required rate of development and production will peak and go into decline.

There is a hypothesis for you all to chew on.

For Prudhoe Bay look at this analysis:
http://mobjectivist.blogspot.com/2006/12/alaska-peak.html

Everything was put in place, and then they turned on the switch. That's what explains the deferred sudden increase that occurred a few years after discovery.

Naaa, the Saudi's are F*****D. They are drilling like bitches in heat already. Anyway give me that cubic mile or i'll whip you.

Marco.

Actually Roger I did quite enjoy readingyou post, and the link. very interesting. You always appear to hold much faith in Aramco and what they could achieve.

A temporary flooding of the market with cheap oil is not that hard to control, tax it. In USA you could pour the money into your budget deficit and post peak oil investments.

This were the response to falling oil prices in Sweden and manny european countries. But I dont think it were post peak oil planning, I suspect it were simple fiscal greed.

Hello ThatsItImout,

This is interesting (I am also impressed by the size of your post). I also believe there is more to what is happening within OPEC than just monitoring production developments (which of course also is useful and important).

If it is that OPEC are aware of Peak Oil, I think it could be a useful exercise and an educational debate to try to understand how that could shift the scales and also increasingly become a political factor. I read somewhere that during the oil embargo of 1973 the Arabs were aware of that US had peaked. Anyone who can confirm?

I reread a recent presentation by Dr Shokri Ghanem (inspired by your post, Roger) and have attached some snippets from said presentation (I’m sorry I don’t have a link, I have the presentation in pdf-format.) You may read and judge by your own.

From the 27th Oil & Money Conference in 2006 and the presentation by its guest of honour “Is the era of cheap oil really over?” by Dr Shokri Ghanem, Chairman of the People’s Committee, the National Oil Corporation (NOC) of Libya and former Director of the Research Division at the OPEC Secretariat in Vienna.

Dr Shokri Ghanem ceartinly possess an impressive knowledge about the oil and energy industry.

“The question of Peak Oil” The question of peak oil output, which once was the concern of few individuals, has become a concern of some countries, as well as several organizations. Despite the fact that many are unhappy with Hubbert’s peak oil predictions, his 1970 peak oil theory for the US turned out to be quite accurate, and for many, particularly the pessimists, his end-of-the-century peak oil predictions for the world also proved to be correct”

However, while some of the more pessimistic oil specialists are declaring that peak oil has already been passed, or at its best is here now, others believe it is not going to arrive before 2010. Some optimists give the world a little more breathing space – that is to say up to 2020, and perhaps even up to 2030. However, all in all, most would appear to agree that peak oil output is not very far away for all of us. It could take place sometime within the next decade or so, which in fact means that there is not much time left for a world economy to be driven largely by oil.

Furthermore, under any of these scenarios, and since peak oil output is not about the time at which oil will run out, but the time at which production can no longer be increased demand, it seems the only way the oil price can go is up.

This conclusion seems to be in line with the view held by the peak oil output advocates who argue that the ongoing oil price rises are mainly due to supply-demand imbalances. This is because we are at, or near, the production peak of world oil, if not on the downward slope of Hubbert’s peak curve. This is not to deny the role of other factors (such as geopolitical), but only to stress the importance of supply and demand for crude oil as the prime factor in determining the price of the commodity.”

… a bit further in the presentation

“The future of oil prices” ”Some analysts now say that nothing short of a major worldwide economic recession in the major consuming markets can turn down the price of oil. So, what can we conclude from this? First, it is highly likely that $20/b or even $30/b oil is a thing of the past.

Second, if current supply-demand imbalances, both for crude oil and refined petroleum products, persist
- and there is no reason for this situation not to persist
- then one can only conclude that a return to $40-50/b seems quite unlikely. Even though there are some who would still disagree and would hope to see the price of oil falling – even below $40/b – they also say that the history of the oil industry is characterized by volatile changes in price.

Third, $70/b plus oil may be quite likely if the world economy continues to grow at the rates experienced in 2004 and 2005. These rates may cause demand for oil to increase proportionally and it may even start to exceed available supply.

If the tensions seen in so many areas of the world, especially the Middle East, are not reduced and disrupt some supplies, a noticeable gap in supply and demand will occur earlier than the revised Hubbert-type analysis would suggest….
…….

Based on the previous conclusions, although there are, of course, some negative consequences of persistent high oil prices and the end of the era of cheap oil, there are also a number of positive consequences, or more appropriately “opportunities” that arise. High oil prices can lead to, first and foremost, more aggressive exploration and production policies by the major international oil companies, as well as the national governments of the oil producing countries. However, the pursuit of such policies entails monumental financial commitment of the type required by truly enlarged exploration and production programmes.

It is an impressive presentation that reveals that Dr Shokri Ghanem has a superb understanding of renewables, conservation and nuclear and the challenges with the tar sands and oil shale.

OPEC expands it numbers of members, Angola have become a member and Ecuador is considering rejoining (it was said somewhere they never actually left).

During a recent visit to Libya by, among others, the Norwegian Minister of Oil and Energy (MOE), it was reported in media that Dr Shokri Ghanem made the Norwegian MOE aware that he (Dr Shokri Ghanem) knew Norwegian oil production peaked several years ago (in 2001).

Does this reveal the outlines of a pattern or/and a strategy?

Seems like OPEC is keeping a watchful eye on the competition, but what are their real intentions? What are their strategies ?

Rgds
NGM2 (in Norway)

That remains my fear too - that the Middle East is holding back production capacity and will be able to flood the markets if alternatives to Crude Oil gain some threshold market-share.

THE CARTELs LONG AWAITED WINDOW OF OPPORTUNITY

According to BP Statistical Review 2006 OPEC controlled 75 % of the global oil reserves, 42 % of the global oil production and MOST IMPORTANTLY approximately 64 % of the global net oil exports capacity in 2005.

Since 2005 Angola has joined and Ecuador is considering rejoining OPEC.

ONE POSSIBLE NEAR FUTURE SCENARIO

After some time with supply driven price increases on oil (and other energy), the major industrialized economies enter into a recession that gradually develops into a severe depression.

This economical downturn lowers demand for oil and puts a downward pressure on oil prices that gradually declines towards the $30 - 40/b range (a cartel that controls two thirds of the worlds net oil export capacities, could use this opportunity to weaken their competition, and thus increase their relative share of the market thus strengthening the cartel and maximize the profitability of the products (being a non renewable resource) from the cartel in the long term. A low price would influence oil developments requiring such prices as a minimum of $30 - 40/b range to become economical robust, or developments in a late state of production (tail end) requiring an oil price say in the $30 - 40/b range to break even or as a minimum to recover OPEX (operational expenses).

A cartel could seize upon such an opportunity and if it has the capacities (and will) to control the prices and reduce incentives for exploration and developments of alternative supply sources from competitors. This would after some time increase their iron grip on the importers (by reducing or slowing development of alternatives) and put them in a position where they may become selective of customers, set prices, or attaches other requirements to customers etc. being aware of the oils importance for the economies of their customers.

Others?

NGM2

Roger
this is classic American conspiracy theory - applied to oil
why are all the american enemies sly cunning and devious?
they patiently wait for years for the americans to fall into their carefully constructed trap

its been applied to the japanese, the germans, the russians, the cubans the "enemy du jour"

you know - I think the Africans are just pretending to be screwed up - to lull us into a false sense of security. All the slaves we thought we "captured" and brought to the new world - really sleeper cells - just waiting...

Instead of raising awareness I think they are going to find out that there are a lot of people who ignore politics until the lights go out -- and then they get really upset. The rolling blackouts in the early 2000s in California -- largely being the cause of the ouster of Gray Davis -- are a perfect example. A one hour blackout may not be a big deal normally but that it was done as a political stunt is going to rub a lot of people the wrong way.

Actually, it was Friday's WaPo. ;-)

The prairie grass stuff was kind of interesting. Though I wonder how it would hold up to harvesting year after year. A lot of the switchgrass studies have that flaw. Switchgrass grown as pasture, or for a few years as a research project, is not the same thing as harvesting it for biofuels year after year after year.

You better hope you're wrong, because the thousands of existing coal power plants will be your doom otherwise.

More notes from the housing bubble:

http://news.yahoo.com/s/ap/20070325/ap_on_bi_ge/house_of_cards_surviving

(interesting choice of URL by somebody at AP or Yahoo? Compare with the title linked by Leanan. The visible article title in this case is "Group meets in shadow of foreclosures")

On a Wednesday morning, 30 people ... pack a small classroom in the basement of the Adams County Housing Authority, northeast of Denver. They are here because foreclosure is close behind. A new group has filled the room every two weeks since July.

"This is about choices and sacrifices," housing counselor MaryEllen De Los Santos tells them. "Ask yourself continuously, `Do I want to keep my house?'"

De Los Santos is no fan of lenders who sign people to mortgages they can't afford. But, she tells homeowners, responsibility also falls on them. Talking to dozens of families has convinced her of that. ...

Stout's best hope is a "short sale," where a lender approves a sale for less than the value of a loan, taking a loss but avoiding the time and expense of foreclosure. The homeowner keeps a foreclosure off their record, giving them a chance to start over.

The problem is that there are way too many homes for sale and way too few buyers.

Not far from Stout's home, real estate agent Bill Thornton threads through subdivisions, pointing out all the homes sitting dark. "Price Reduced," a real estate sign in one yard says. "I'm Gorgeous," says a sign on another. Some have "No Trespassing" signs taped to the living room windows.

"If you eyeball it and it's empty," Thornton says, "it's usually either foreclosure or bankruptcy."

The housing situation seems to me to be the most unevenly reported story I have read in a long time. For every article like the one you posted Leanan, there is one like this:

U.S. Economy: Existing Home Sales Surge in February (Update3)

Purchases increased 3.9 percent in February to an annual rate of 6.69 million, the National Association of Realtors said today in Washington. Sales have risen in each of the past three months, a streak not matched since April 2004 in the midst of the five-year housing boom.

``We expect the drag on the economy from housing will be gone by mid-year,'' said Dean Maki, chief U.S. economist at Barclays Capital in New York. The rebound in sales is ``an important development.''

It seems like this is more a scandal about a segment of the market, the borrowers of subprime loans, that never should have received loans in the first place set against a backdrop of a thriving housing market.

Leanan;

Look at this one for a updated scorecard on the lenders that went out of business.

It was twenty something when I first found the site in Jan.

http://ml-implode.com/

Here are some others for this subject.

http://buttonwood1792.blogspot.com/

http://calculatedrisk.blogspot.com/

Via Econbrowser I found the following report on the subprime loan situation very interesting:

http://www.naca.net/_assets/shared/633081903109944364.doc

(Readable Google cache here.)

"Assessing subprime lending from 1998-2004, CRL reports in Losing Ground that refinance loans were a majority of all subprime originations.

"A survey published in Housing Policy Debate in 2004 by staff from Opinion Research Corporation, Freddie Mac, and Equitec revealed that only 14.2% of subprime borrowers reported taking their loan to purchase a first home."

This is a big unreported part of this story! Most subprime loans are refinances and are not loans to purchase homes. Yet time after time I read these sob stories about people who are "victimized" by "predatory lenders" and it's always about people who have bought homes. Readers should be aware that this is a small part of the picture.

In other words, subprime loans have mostly been used by homeowners who wanted to dip into the piggy bank of their rising equity. That doesn't present quite as sympathetic a "victim" picture so we don't hear about it so much. But that's the true story of what's going on here.

It means that the crackdown in the subprime market won't by itself do that much to reduce demand for new homes, because most home buyers are not using subprime loans. It's still a concern for people who are being foreclosed on, it doesn't matter that the reason is they got too greedy in terms of wanting to cash in their home equity. They lose their homes no matter the reason, and if more and more of those homes go on the market at fire sale prices, it will depress everyone's house values. But people should be aware that the effect is mostly on the supply side, not so much on the demand side. The absence of subprime loans won't curb demand much.

Oh my...pretty funny, but let's not crack open that can again...pleeeeaaaasseeee!!! Things seem to have settled somewhat.

ROTFLMAO :-)

Yeah, well I've mentioned the post-democratic society a few times so I'll take up the challange so to speak. This is vast and complicated subject, so I'll be simplifying a lot here.

Some form of fuedalism would appear to be a reasonable model for a post-carbon world where energy surplies are severely constrained. I've been speculating that there is a renewable, large scale, form of energy available to us in spectacular quantities and in our type of society it remains untapped. All that might change in the future. I'm talking about slave labour, or the muscles of peasants.

Now, admittedly, this sounds pretty far out at the moment, yet only a hundred years ago farming and basic food production required masses of intensive human labour and two hundred years ago perhaps 90% of the population of Europe worked and lived on the land producing food. So we've been there before. In a post oil world, whose to say we won't be going back there?

In fact I'd go so far as to say that energy from muscle power is likely to make big comeback unless we find an easily available, cheap, flexible, substitute for oil and gas. It would appear that what a civilization like ours requires is something to replace oil and gas, which is actually better than oil and gas, cheaper and more abundant; that's been the trend for last couple of centuries hasn't it? Ever easier and better forms of energy have been the foundation and lifeblood of our civilization of ease and plenty. But what of now? Where is the next great easy and cheap energy source? Perhaps if we could almost magically harness the power of sunlight and turn that into masses of cheap electricity. I'm thinking of something like tiny, safe, nuclear fusion reactors in every car, truck and train. Every house with it's own fusion nuclear reactor, energy would be so cheap we wouldn't even have to meter it!

Unfortunately I don't see that kind of technology just around the corner any time soon.

So perhaps our children's children will all be back working the land.

"We often talk here about a near future in the USA that would include a shrinking economy along with increasing inequality, leading to a "neofeudalism". But how will people react?"

That's why they spent the last 30 years turning the people into sheep. They have followed policies to ensure that a dwindling number would be able to afford an education past high school other than "technical schools" which focus only on the specific skills trained for. They learned in the '60's that a broader education gave people critical thinking skills which led people to question. A line from a Moody Blues song comes to mind, "It riles them to believe that we percieve the webs they weave". In the United States, Logic and Epistemology are not usually encountered until college. Since they are a part of elementary education in Europe, I believe their omission in public education in the United States is a result of Policy. Children in the United States are taught to 'believe' not to think. People in the US are also conditioned to respond to injustice and loss with fatalism. They say, "Well, what can be done about it?" then go on as before. They are conditioned to believe 'Nothing Can Be Done' and to submit. They have been raised to be perfect sheep that don't question being fleeced. The problem is that, like sheep, they will be unable to take care of themselves if the protected little world they live in ceases to exist.
Also, a large percentage of Americans are office workers. They are totally unsuited to manual labor. They would probably make useless peasants. Thus, I believe they will be seen as expendable. Immigrants from Central American countries, being accustomed to hard labor and oppression, will be seen as better replacements when the need for agricultural workers grow. Thus, the current administration's attitude towards illegal immigration.

Oops. Lost track of time.

I have a novel idea.
Build some new power plants and refineries in CA.
Oh wait - I know - NIMBY.

Either control your own destiny - or quit whining because other states and locales make steps to control you.

Which reminds me of Leanan's post the other day:

http://canada.theoildrum.com/node/2381#comment-171128

The problem will solve itself.

But not in a nice way.

I have had this same discussion with everyone from Michael Lynch, to Robert, to Euan, to Alan.

The recurring theme is an attempt to show the HL method gives wrong answers, by focusing on the early (noisier) portion of the data set.

Most large producing regions have P/Q intercepts between 5% and 10% (Russia is 10.4%).

Take a look at the world HL plot: http://static.flickr.com/54/145149301_b930ef7bc4_o.png

Notice any difference between the data that Alan used to perform a fit to, and this plot?

During George Bush's first term, the world used about 10% of all crude oil that has ever been consumed. Based on Deffeyes' plot, during Bush's second term, the world will use about 10% of all remaining conventional crude oil reserves.

In any case, world crude oil production is declining, as Deffeyes predicted (EIA).

Robert and Euan are predicting world crude oil production declines some time around 2012, plus or minus. Yergin says we don't have to worry about it for decades.

Just curious, why all of the criticism of and attacks on the HL method--even as world crude oil production is declining as predicted--but no criticism or questioning of the methods used by Robert, Euan, Daniel Yergin, et al, who have been predicting rising world crude oil production?

The world was well before the discovery peak in 1942. So new additions moved the curve upward as the URR got larger. This is not a bug in the HL method. HL cannot forecast new discoveries, it only applies to mature, maximally produced regions where new discoveries are negligible or non-existent. As long as the production is bell shaped something can be said about the URR. Multiple peaks change the goal posts. The problem with the HL method is that it is based on the logistic approximation for the cumulative production and so overestimates the URR.

Catabolic collapse is not an event, but a process. And the chances are, those guys will just be helping it along. If its history is ever told.

The problem will solve itself.

But not in a nice way.

Hi HeIsSoFly,

You quoted the Financial Times: "The real estate loan market rests on credit derivatives, which are likely worth some $40 trillion worldwide." This is misleading as the credit derivatives are not worth $40 trillion. The $40 trillion is an estimate of the underlying value of the assets (real estate loans are probably a big part of these underlying assets) that they protect. The market value or worth of these credit derivatives is probably about $600 billion (estimated from www.bis.org).

There appears to be a competition among journalists to state the biggest number possible in relation to the global derivatives market, without fully understanding the meaning of these big numbers.

Here is a recent statement from Bob Chapman
http://news.goldseek.com/InternationalForecaster/1174869837.php

”Another important event has been the accelerating meltdown of the $1.3 trillion subprime mortgage market. The failure in this market is affecting the better quality mortgage market, the junk bond market, the general use of risk speculation, the $600 trillion unregulated derivatives market and the more than trillion dollar hedge fund operations.”

His first sentence states that value of the subprime mortgages is $1.3 trillion. This seems reasonable.

The second sentence mentions a $600 trillion unregulated derivatives market. What does this big number really represent? Does it mean these derivatives have a market value of $600 trillion? No.

The link below is from the International Swaps and Derivatives Association and shows the value of derivatives as at the end of first half, 2006.
http://www.isda.org/statistics/pdf/ISDA-Market-Survey-historical-data.pdf

Total interest rate and currency derivatives are $US250 trillion; credit default swaps, $US26 trillion; and equity derivatives, $US6 trillion. The total is $US282 trillion. However, reading the top of the table the words “notional amounts outstanding” are used to measure the derivatives. What does that mean? – doesn’t sound like market value…

This report, released by the Bank for International Settlements (BIS), might provide some answers
Monetary and Economic Department - OTC derivatives market activity in the first half of 2006 - November 2006
http://www.bis.org/publ/otc_hy0611.pdf

Table 1, on page 7 of the above report gives a split of the global derivatives market. The top of the table shows two headings “Notional amounts outstanding” and “Gross market values”. At the end of June 2006, the grand total for notional amounts outstanding was $US369 trillion and the gross market value was $US10 trillion. If you think of derivatives as financial insurance then the premium rates are 10/369 or 2.7% to insure the underlying notional value. Bob Chapman should restate the paragraph above to say that the market value of the derivatives market is about 2.7% of $US600 trillion or $US16 trillion.

The graph below shows the recent growth of the three largest categories of global derivatives. Note the high credit default swap growth rate.

Let’s have a closer look at the risks of the CDS derivatives.

Credit Default Swap (CDS) Derivatives and Subprime Mortgages

Here is another graph showing the explosive CDS growth, doubling each year. The notional value has doubled every year. Note also how the CDS growth, starting in 2001, coincides with the start of the growth in the subprime mortgage market, when US fed interest rates were under 2%.

This article states the worry about CDS
http://www.iht.com/articles/2007/03/04/bloomberg/bxatm.php

”NEW YORK: Goldman Sachs, Merrill Lynch and Morgan Stanley, which earned a record $24.5 billion in 2006, suddenly have become so speculative that their own traders are valuing the three biggest securities firms as barely more creditworthy than junk bonds.

Prices for credit-default swaps linked to the bonds of the New York investment banks this week traded at levels that equate to debt ratings of Baa2, according to Moody's Investors Service.”

“The swaps on the debt of Goldman, for example, have risen to $32,775 per $10 million in bonds, up from $21,500 at the start of the year, according to prices compiled by CMA Datavision in London. The price touched $35,000 on Wednesday, the highest level since June 2005.

And it is likely that Goldman's own traders were among those pushing the price higher. Goldman and Morgan Stanley were among the top five banks on credit-default swaps in 2005, a group that represented 86 percent of the market, according to Fitch Ratings. Lehman, Merrill and Bear Stearns were among the top 12.

Contracts tied to Morgan Stanley, Merrill, Lehman Brothers Holdings and Bear Stearns are also trading at 19-month highs, and their price increases were larger than an index that measures credit risk for investment-grade companies in North America.

By contrast, default swaps for Deutsche Bank in Germany, which has little exposure to the U.S. housing market, are near a record low at €9,800, $12,935.”

CDS prices for bonds of Goldman Sachs, Merrill Lynch and Morgan Stanley have risen sharply due partly to the subprime mortgage market problems. CDS prices for Deutsche Bank are very low due to little exposure to the US housing market.

Another article mentions CDS (called credit derivatives in this case and also incorrectly implies that $30 trillion is the market value of the credit derivatives)
http://www.globalresearch.ca/index.php?context=viewArticle&code=GAL20070...

”As the opaque, $30 trillion credit derivatives market shakes, the hedge funds and banks that dominate this market are getting hit with widespread losses, by all reports. Trading volume on credit default swaps indexes in European markets was estimated at "three times the average weekly volume," by Deutsche Bank and Dresdner Kleinwort. Volumes on U.S. collateralized debt obligation (CDO) markets were thought to be even larger. "Both [Wall] Street and clients have been caught long.... Some peoples' year was wiped out on Tuesday [Feb. 27]," reported Martin Schüler of Dresdner.”

In a worst case scenario of say a 10% default on the notional underlying value of $US30 trillion CDS, this means that the CDS issuers may have to pay 10% of $US30 trillion or $US3 trillion dollars. What happens if the CDS issuers cannot pay? Let’s hope that government central banks will bail them out.

If there is also an oil price shock in the fourth quarter of this year, the resulting inflation increase could cause more problems in the subprime mortgage market. This could cause further CDS price increases.

We have seen it again and again. Mugabe will flee and the IMF will leave Zimbabwe to starve as they are Black and they are African.(Famine in Africa has come to be seen as 'normal' by 1st world nations.)

My wife's cousins boys(3 of them) were big time into these twitch games at about 12 or so years of age.

One developed autism and one of the other began have epileptic seizures. My nephew played one of those Clancy games for years. He finally flunked out of college , never could socialize, and now works at a car wash. He was touted as a bright boy and was when he would visit me on the farm. He is now wasted and has no real future at the age of 19 except menial jobs from now on. His life is in front of a monitor or twitching away on a Gameboy.

Last I heard about, KSA didn't have an army, navy, airforce or ANYTHING that could stop us or anybody from taking their damn oil!

Osama bin Laden and his kind could make it very painful to do so.

How long would an occupying force in Saudi Arabia be able to protect the oil export infrastructure from attacks and sabotage? It doesn't happen in Iraq, and in S.A. the resistance would be even more virulent.

Last I heard about, KSA didn't have an army, navy, airforce or ANYTHING that could stop us or anybody from taking their damn oil!

Osama bin Laden and his kind could make it very painful to do so.

How long would an occupying force in Saudi Arabia be able to protect the oil export infrastructure from attacks and sabotage? It doesn't happen in Iraq, and in Arabia the resistance would be even more virulent.

Actually that's the peak oil debunkers new ploy. To explain away declining oil production they are claiming this grand conspiracy where they are magically stashing away billions of barrels of oil that they are going to somehow drop on the market all at once for some nefarious purpose. Don't even listen to it. It's all BS.

Yeah, it worked great in Iraq...

Interestingly, Korg has returned us to the Subject that I opened near the top of this string, Saudi Arabia and it's obviously increasingly powerful position vis a vie oil markets.

Admittedly, Korg's solution may seem a bit clumsy, in the way that Alexander was said to have solved the Gordian knot riddle (one swipe of the sword), but you would be surprised how popular the "Korg" model is down at street level. I know I have been hearing the "bomb thier azz and take thier oil" theory since the 1970's, it is a propasal with staying power, being exceeded only by "peak" as a theory with a long pedigree!

Of course, the "bomb them, take it" model has some problems, even if you leave aside the moral/legal aspects, as we have seen in Iraq. Force is a limited tool, lacking long term flexibility. Oil is not something you just "take" and walk away with. You have to stay, develop the resources, put the equipment and manpower in, and work to at least some degree with local ports, water transportation and logistical suppliers. You can't "take the money and run", you have to stay.

Now to the replies to my post: Cid Yama had an interesting comment:
"That article reflects the level to which debunkers of peak oil are going. Try to get people to fear the exact opposite of what's happening. It's like a "Hey, look over there", and ripping you off while you look. Saudi Arabia is in pretty dramatic production decline. Period. They are not magically storing huge amounts of oil to flood the market. Anybody that would even think this hasn't a clue."

In my own case, I think I have made it clear often enough that I am convinced peak is coming, and in fact could already be behind us. We must recall that the U.S. government did not admit to peak in the U.S. until 9 years (!) after the event, and even then with caveats. If we peaked in 2005 as some say, it may not be clearly visable to the public at large until 2014 or so.

On the other side of the coin, we must try to be prepared for the other side of the sword, i.e., even a small misjudgement means we may not be at "peak" oil per se until a decade or two later (i.e. roughly 2025 or 2030 at latest), which as has been pointed out by others here, would be meaningless, an eyeblink in the long history of civilization.

But it could have huge implications for those people and firms engaged in alternative energy and conservation research and business. A drop of some 5 years plus in oil prices would essentially destroy the alternative industry.

nrgyman2000 said "A temporary flooding of the market with cheap oil is not that hard to control, tax it. In USA you could pour the money into your budget deficit and post peak oil investments." Of course, that is the difference betwen Europe, which uses half the amount of oil per person as the U.S., and America, which could have (and in fact was lobbied to by the losing faction) taxed oil and held the price up in the 1980's to protect the investement in lower consumption and alternatives we were then making. It was rejected as an option, the price of oil and gasoline callapsed, and we know the rest of the story....

nrgyman2000 then has a pair of nice posts, one with extracts by by Dr Shokri Ghanem, Chairman of the People’s Committee, the National Oil Corporation (NOC) of Libya,and the other just below it under the title,
THE CARTELs LONG AWAITED WINDOW OF OPPORTUNITY

I won't quote from them, they are well worth reading completely, just up this string, but they and the other responders are going the direction that I have been working in for some time, that being the attempt to understand the "chess game" and the moves of the big oil producers coming down the stretch to the finish of the "carbon era". There are several conceptions that seem to be accepted as articles of faith that I am interested in verifying questioning:

(a) We take it as an article of faith that OPEC is/has been producing "flat out" to hold production up to it's current levels. How can we know this?

(b) We take it as an article of faith that we are well aware of how much oil Saudi Arabia has, and can produce. How do we know this?

(c) We take it as an article of faith that the recent price rise is proof that there is simply a supply constraint on oil, not that any of the large producers may want to see a rise in price (which to this date has not been any greater than would be expected and needed to re-align oil prices to inflation and the rising cost of extracting oil in difficult environment and a dangerous world)
What real evidence do we have of a geological limit on TOTAL production in the world? (note: we are not talking about a limit on production from aging fields...they are certainly long in the tooth, but we are talking about world total discovery and production. This is not a debunking of peak, but merely questioning the timing and who may still have surplus oil in the ground that can be developed with effort and money (the big factor given that oil has been givaway cheap for so long until recently)

(d) How would a massive surplus of Saudi oil, were it to exist, be of benefit to the U.S.? This to me is big. A surplus of Saudi oil would be good for them, yes, but for us, it would mean spiraling balance of payment problems, increased waste, the death of the alternative energy industry in the U.S., increased greenhouse gas emissions, increased geopolitcial and military pressures....on and on. What we seem to most wish for is slavery instead of change.

(e) Is it possible to plan ahead for both edges of the sword being used? In other words, how does one plan for peak, which will surely come (and almost as certain come completely without warning), and also plan for surplus of imported oil (and with LNG, natural gas as well) leaving us more and more unstable as a nation, and declining in national wealth?

These are the complex issues that policy makers, organizations, companies, towns and cities across the U.S. and the world must confront. It is not a simple "That's it, we're out" situation, (some irony there, huh, given my handle...:-) scenario.

Even using the scenarios of ASPO as given in thier most recent newsletter, there will be a LOT of oil and gas in the world out to the middle of the century (2050). There will NOT be a return to horses worldwide or a "stone age" (barring nuclear war or some other catastrophic event, but there will be a mix of powershifts, power grabs, technology, social change, and order/disorder as everyone tries to get to where they want to be/need to be in the new pecking order.

The biggest player, the great unknown, is Saudi Arabia. What are they able to produce, and do they even know? How do they see this game? How confrontational/concilatory will they be? What is the TRUE nature of the Saudi/U.S. relationship, and Saudi's relationship with the world? There are of course other big producers, but I have chosen, at least for awhile to narrow my focus to Saudi Arabia and the OPEC group. Why? As Matthew Simmons says, "When Ghawar peaks, Saudi Arabia has peaked (is this provable?) and when Saudi Arabia has peaked, the world has essentially peaked (is this provable?)." Saudi Arabia's importance to the future of the Western modern world grows by the minute. This alone should be great cause for concern, interest, and show us the need for change. The nature of that change is what is in question.

Thank you.
Roger Conner Jr.
Remember, we are one cubic mile from freedom

I don't we'll be doing that, not least because we're busy in Iraq.

But I do think the Saudis are afraid we'll invade, or otherwise undermine the royal family. That will probably keep them from doing something like this.

Wow that flesh's it out better than I thought when I first posted the idea. I am glad someone put some dates and facts behind the idea.

JC