Houston ASPO Day 1 part 2

The pace of information that comes at you during the ASPO meetings is so intense, and immediate that it is sometimes hard to capture all the information, particularly where it is tabulated data on a slide that is on the screen for only a short time. The organizers have, however, taken pity on the ineptitude of your humble scrivener, and from sometime in the morning (i.e. Saturday) they will have the Powerpoints up on their website . For the full power of the debate you will still, however, have to buy the DVD’s.

I had left you at the end of my earlier post with George Baker reviewing the situation in Mexico. We have seen Cantarell dramatically decline from the point that it was providing more oil than Mexico exported to the United States, to the current position where it produces significantly less. I asked George later about whether, given the choice between reneging on their contracts, and dropping internal use, which they would select. In contrast to Westexas views that countries will always look out for the internal demands first, he expected that they would fulfill their contracts. He was also curious as to why Pemex had installed an FPSO at the Ku Maloob Zaap field, since there is existing infrastructure that should have handled all the product. Mexican deepwater production is likely to come on in 2013, but the issue of cross-border fields has not been addressed.

In a day of discouraging news, Vince Matthews came on to talk about “Oil, Minerals and the China Syndrome.” He reviewed the change in the world supply of minerals over the past few years. It is a debate framed in the context of electricity growth, Of the last 7.2 Terrawatt increase China had 2.21 Twh; India 0.4 Twh; the U.S.A. 1.1 Twh. The rest of the world is growing toward ou standard of living.

China is rich in minerals and resources, and yet, when Vince looked at the state of a range of minerals, China was not only a major producer (perhaps 1 or 2) but was also one of the largest importers. This has had an impact on commodity prices with this increase in demand.. It has also spawned a significant rise in copper thefts (and from the editor – also major thefts of billets of other material). The numbers that were put up in a series of slides showing the change in critical minerals told a shocking, yet consistent, story of change across a wide variety of minerals, in terms of the increase in price over the past few years.

Supply growth calls for increased technology, yet even though we have transformed from a wait of 6 months to get information from lab analysis, to the point that it is processed on the laptop on site, and within minutes of getting the raw data, yet production declines.

Natural gas is a fuel that is highly regarded in China and India, but U.S. demand peaked in 1973. Although the gas has a number of advantages (particularly in power stations), the problems that companies encountered in the subsequent years have led many firms to move out to sources of more reliable supply, and thus, overall, demand has dropped. Which, in a way, is a good thing since production has also dropped since 2001. The only growth, apart from LNG imports now at 4 tcf or 20% of usage, will come from the Rockies.

He noted the success of nuclear power, where efficiencies of operation are now up to 90% operating time. The question of a reliable source of uranium has been sidelined by the use of military grade material from the recovery of FSU munitions, but this will soon be over, and leave a gap of 80 million lb/year that has to be made up.

The severity of the impact of Chinese demand on the American supply market was illustrated by an anecdote that Vince related about a plant owner coming to his office and complaining that molybdenum, mined in Colorado, and an integral part of the visitors operation, was simply not to be had, at any price. Colorado coal ha gone from $17 to $37 on the spot market, but for long-term contract is still around $20.

The luncheon speaker was Matt Simmons who has been here sensibly the whole conference. He noted the high quality of the speeches at the conference, but contrasted this with the recent NPC report (pdf) where 1500 people had labored to produce a 250-page report that “copped out” in facing the challenge on peak oil. It chose to just list differing views, without drawing any conclusion as to which was most credible. Mattt plays close attention to a couple of tables from the IEA and noted that crude oil production peaked in May 2005. This is at a time that demand is growing, and he presented one of several worrying slides to the audience. Even if peak oil has not occurred, and he thinks it has, as the curve moves forward available supply is now below and falling behind potential demand, so that there is an initially small but growing gap between the two.

So now the questions come as to what to do next, is there enough capital to develop new sources in time, will it be spent, will we do the R & D to allow some discoveries to be developed, and will we make the best decisions, and who will know?

If we are indeed in the post-peak period then how fast will the decline now be. There have been quotes of 4.5%, but talking to rig operators he felt that the number was closer to 8-10% on current projects. The NPC estimates a value of 6.8% (remember that 1% is around 800,000 bd). The gap is growing not only with oil, but also with gas. And the question comes as to when we drain the gas cap on a reservoir, since at that point the field is finished.

For crude the supply ceiling is currently under the anticipated supply numbers for the fourth quarter of this year, and if we cannot sustain supply against that demand then we will enter a period of great uncertainty. If the demand is up around 90 mbd at the end of the year, there is no way that supply can be produced to meet that number. And while demand is fickle, it is also inexorable, so that the limitations on Deepwater in the GOM, and also off Nigeria, will have an impact relatively soon.

He noted the downside to an Oil Major underestimating the price of oil. By the time that a decision had been made to drill a second well in the Jack field, the available rigs had all been employed and back-ordered so that the next open window for use will be in a few years.

He repeated the concern about 4th Quarter world supply at a 85 mbdoe being faced with a demand of 88.2 mbd – where does the shortfall get made-up. There is no source that can now turn on, that fast, an additional supply of 3.2 mbdoe. And of that excess how long can the current stocks last when faced with this level of shortage. We are, in short, already in a world of hurt even before the actual peak in supply arrives. His prediction for the annual drop in production for an average well is 6.7% and there is increasingly evidence that this will not be met by the supply options (He got a standing ovation at the end).

Tom Petrie spoke next on the Strategic Perspective. In regard to the current situation that Matt had outlined, with demand beginning to exceed supply, he wondered if current price signals work? There is a collaboration between Russia, China and Iran that does not bode well, and he recommended that listeners read “The Black Swan”, by Nassim Nicholas Taleb . He felt markets were beginning to embrace peak oil, but that the situation with LNG was slipping past folk. Although 14 countries can supply LNG 10 are in OPEC and we can’t use historic patterns to judge the future response.

He noted that Peak Oil will hit the radar just after next years elections, but wondered what price it would take to limit demand, and that we need the gas pipeline from Alaska, which is there but cannot be installed.

He noted the “tragic mistake of corn-based ethanol”, which gained some applause, but does not gibe with what I am hearing elsewhere.

The next speaker was Joe Gladbuck, replacing Claire Farley. He note that the game is changing and that the Majors are now being hit. Having led, they are now more often sidelined. Looking at a growth in oil demand of 121 mbdoe by 2030, the question is from where will it come? Deepwater GOM won’t come on board until 2015, and that currently found under exploration may not appear until 2020. Russia and Middle Eastern supply remains limited, and while investment doubled, production remains flat. Deepwater is a place to look, but the incentives to do so are diminishing. As individual breakthroughs make less impact, so the incentive to do more reduces. It has been said that we may need to spend $20 trillion to find all the oil we will need by 2020. In context 2006 spending has been around $410 billion, so who raises this sort of money, spends it and manages the result. The Majors don’t have the prospects, the independents, being field focused won’t and the national gas and oil companies have other priorities.

Jeffey Brown (our Westexas) then spoke about the question as to whether exports would peak before peak oil? He spoke to the integration of data on field production, exports and internal consumption, with example cases, that showed, for example, that with internal consumption of 5.7% growth per year, Saudi Arabia will stop all exports by 2035. Russia he felt was “watering out” under a decline rate of 5.1%. Norway will stop exporting in 2030 and the UAE in 2037. Averaging for the top 5 he found that the decline rate was 3.8%, with internal consumption rising at 1.8% pa. Demand is becoming the driver and dramatic changes will soon need to be made in fuel efficiencies in countries that can afford to.

David Hughes spoke to the chance that alternative fuels could bail us out. The need for an answer to the problem is due to its immediacy, and that with projected growth world energy may triple by 2030. Remember that 90% of the oil has been consumed since 1958 with 50% being consumed after 1984. 50% of natural gas has been consumed since 1988.
(Ed note: David Hughes has kindly corrected the following in the comments that follow this piece.)

Yet there is a lot of natural gas, it is just not in the U.S. but in the Middle East and Russia. North America has 10 years of gas left. We now need 4 wells to produce the equivalent of that achieved by 1 well in 1996. Costs have doubled since 1998. Rig cost has risen 30% since 2006, while Canadian production is dropping by 12%. (This again was a paper where I could not write fast enough to cover the info on the slides – which I recommend that you go see).

In the United States gas output was lowest since 1995, while there was a record number of 1400 rigs working, yet we are still sitting on a plateau of production expected to start declining at 1.5% a year. It may be that there will be 11 new LNG terminals (providing 15 bcf) but 26 terminal sites have been cancelled, and there was 1 new terminal in the GOM in 2005.

Coal has been used for a long time, but 90% of total coal consumption has been mined since 1909. It is the fastest growing energy source in the world, and it is spread around a bit. Growth is forecast at 74% through 2030. The U.S. exports coal and burns it for power, though there is a variation in calorific value between Eastern and Western U.S. coal. It is anticipated there will be a huge growth in coal demand across the world.

The new high efficiency boilers are 43.5% efficient, but with residential heating this can be increased to 60 – 70%.

Nuclear energy will face a huge boom since there is a need to replace the current reactors, let alone build new ones.

It was thus appropriate that he was followed by Scott Pugh who noted that the industry had seen 5000 reactor years with safe operation. He recommended Senator Peter Domenici’s book “A Brighter Tomorrow.” He noted that in order to maintain an adequate oil supply we needed to find the equivalent of one new Saudi Arabia every four years. Since that is unlikely we will need to find an alternative and the best alternative is to switch cars over to running on electricity. (There was a plug-in Prius in the foyer of the meeting floor). But this will need 1000 x 2,000 MWe power stations at $3 – 4 billion apiece. However once built the operating cost for the power would be $0.0172 per kWh. Recently plants run 90% of the time, and provide a steady consistent base load.

Plants built initially to last 40 years are now in for consideration of a life extension to 60 years, at which time thy must be replaced. 27 reactor operators have stated they plan to renew, and 44 permits have already been granted. He showed a map that showed the regions of the grid showing spare capacity, and this is rapidly disappearing. Thus we need, either 50 nuclear, 261 coal powered, or 273 NG plants in the near future. The cost will not be cheap, for $1 billion you get either a 1000 MWe nuclear plant; a 1500 MWe coal plant or a 5000 MWe natural gas plant. But there is the issue of the availability of supply. And, in contrast to coal, the amount of nuclear waste generated each year is only 3 cu m. (All the nuclear waste generated so far would cover a football field to a depth of 15 ft). However he did note that, because of safety interlocks, when a nuclear power plant shuts down it takes a week to restart.

For a contrast the next speaker was Kyriacos Zygourakis who spoke on biofuels – the great green hope. He noted that the claims for biofuel suggest that we can produce a lot, but some of it isn’t there yet, such as cellulosic. As well as light plants need nutrients and water. Using input energy as a metric of performance he also questioned if we had enough land, enough energy, what the impact would be on carbon dioxide levels, on water availability, and on food production. He noted that ethanol is alive and well in DC if not doing quite as well everywhere else. He did not think that corn ethanol would ever displace more than 5-6% of the gas volume, but every little helps. However it only helps if we can do it economically. And here he noted that the difference between the energy input being below the energy output for corn comes from the secondary product (distillers grain), which provides the swing volumes to make it a positive operation. He gives ethanol a 1.2 on EROI in general, but only 0.72 in Georgia, but notes that a plant only converts 0.03% of the sunlight that falls on it into product. With cellulosic ethanol there is 750 million tons of dry biomass that can replace 30% of the US gasoline demand, when perfected. However proponents exaggerate the yields and neglect that only 60% of the biomass can be converted into ethanol. It is assumed to make the process profitable that the lignin component of the biomass will be burned to generate the heat required in the process, but he felt that this was a zero sum game.

For switchgrass the EROI is 8 times the fossil fuel input, though that also assumes that the lignin be a source for the heat required in refining. We need 24 million acres, while total cropland is now 434 million acres, with harvested cropland being 303 million acres. He assumes a yield of 25 ton/hectare but it can vary from 2 – 20 ton/acre. (He thinks an achievable target is 10 ton/hectare), but does not think that there will be enough energy from the lignin so that, in the final analysis he sees switchgrass having an EROI of 1.42.

He had no time to cover biodiesel, but has problems seeing that soybeans or canola could meet the scale of the demand that will be placed on biofuels. He sees the energy balance for biodiesel being at around 1.9, though two studies have shown that it is less than 1. It does produce less GHG than corn ethanol, does not need large plants and can be produced locally.

There was not any time for questions, though the moderator noted that the speaker on nuclear power might want to wear a Kevlar suit before wandering into the reception.

The formal program closed with Tom Whipple talking about the Media. Prior to the talk the organizers of the conference noted that they had developed a new Award for those that volunteer their time to the cause of Peak Oil. They have named it the Whipple Award and Tom was the first recipient.

He asked, why are we here, given that the MSM barely covers the subject. Reasons he has been given include “absolute nonsense,” “never heard of it”, and “readers don’t want to hear about it.” Without a smoking gun we cannot get attention, and won’t until an event occurs. The GAO and NPC reports got zero attention. Does this matter. Yes it does, since without public awareness and pressure politicians will not do anything.

As an example of the problem he noted that the LA Times had a story on oil price that ran when oil hit $88 a barrel. Of the possible causes only at the bottom of the list of possibles was there the note that the IEA had predicted we would use 88 mbd at the end of this year. (But no indication as to why this might be a problem). It will take severe shortages before we see the attention the story needs.

As noted earlier James Kunstler then gave a brief review of the activities to date, noting along the way that he had just written a novel set in the future that looks back on this crisis. He noted that the meeting was dominated by males, and had a bias toward bean counting. He noted that we have a leadership problem, and in large measure are denying the problem. We need leadership politically, educationally, environmentally and in the media.

That was a brief run through the main talks on the first day. More will follow later. Again I encourage those that were there to chip in. As I saw with Jim Kunstler's remarks we obviously all hear a different side of the presentations.


It was good to meet you and all of the other TOD crowd. It was a very interesting conference.

In regard to the Export Land Model (ELM), strictly speaking my view is that we will see a wide range of responses to declining production in exporting countries, but I think that the UK and Indonesia case histories are very interesting.

The UK has a high per capita income, high energy taxes, minimal increase in consumption. Indonesia has a much lower per capita income, energy subsidies and it showed a fairly high rate of increase in consumption while exports were falling. The result was that the UK went to zero net exports in seven years, while Indonesia went to zero in eight years.

I would think that virtually all net exporters would fall somewhere between the UK and Indonesia in terms of income, energy taxes/subsidies and rate of change in consumption, but as noted, it didn't seem to make much of a difference.

In regard to the "conventional wisdom" model regarding Saudi Arabia (KSA), we used the Economist Magazine's assertion that KSA could produce 11 mbpd (total liquids) for 70 years without finding another drop of oil. If we just plug in the +5.7%/year increase in consumption that KSA showed from 2005 to 2006, KSA would cease exporting oil in 2036, with a flat production rate of 11 mbpd. (In 2075, they would be consuming 108 mbpd, which perhaps even Peter Huber might consider to be unlikely.)

We are working on the full written report on our models, but our middle case for the top five net exporters (half of current world net exports) is that they have remaining cumulative net export capacity of about 100 Gb, after 2005. They exported about 8 Gb in 2005. So, at the 2005 rate, they would deplete their export capacity in about 13 years, which is why, in our opinion, that net exports from the top five fell from 2005 to 2006, and why their net export decline rate appears to be accelerating.

Our middle case forecast is that the top five net hit zero net exports in 2031, which would be 26 years from peak exports (in 2005) to zero.

I would again like to acknowledge Khebab's tremendous work. As I said at the conference, when I referred to "we" in the presentation, it meant that Khebab did at least 90% of the work.

Jeffrey J. Brown

Hello, Mr. Brown. I'm honored to be able to address you directly with a question about your ELM theory. You said in your ASPO address that KSA will cease exports in 2035 and the UAE in 2037, etc. My question is, how soon will the decline in US imports from these producers begin to adversly affect life in these United States? Also, should we expect that, for the US, the effect of ELM will manifest more exponentially considering the growth of China and India? And the bottom line question is this: How long will it be before ELM causes TSTHTF?

Ok, that was three questions but I'm feeling especially nervous lately as I suspect that TS is currently on a trajectory to HTF in a fairly short time frame.

Details, details.

Note that we presented low, middle and high cases for consumption and production that resulted in a range of predicted points at which production = consumption. Our middle case for both production and production resulted in Saudi Arabia going to zero net exports in 2031.

As noted above, if Saudi production stayed flat at its 2005 rate for 70 years, and if consumption increased at +5.7%/year they would cease exporting in 2036. BTW, this would be a net export decline rate of about -5%/year over the net export decline period with a 0% production decline rate.

IMO, October 1, 2007 was an inflection point of sorts, as a bidding war for declining crude oil exports began to heat up.

Given our national debt and high levels of per capita energy consumption, I am somewhat pessimistic about our ability to keep our imports at their current level.

In any case, the key point is that our model and recent case histories suggest that net export declines tend to accelerate with time.

Note that Mexico has a high level of consumption, similar to the UK and Indonesia. Their actual peak was probably in 2004. If the estimate in this article of zero exports is correct, they would have gone from peak net exports to zero net exports in eight years--same time frame as the UK and Indonesia.

Mexico was actually the only top 10 net exporter to show a consumption decline from 2005 to 2006, presumably because of the decline in cash transfers from workers in the US. If their consumption in 2006 had increased at the same rate as 2004 to 2005, they would have seen a double digit net export decline rate from 2005 to 2006.

Council on Foreign Relations: Non-OPEC Oil Production
Author: Toni Johnson, Staff Writer
October 19, 2007

. . . D. Barry McKennitt, executive director of the U.S. National Association of Petroleum Investment Analysts, questions Mexico’s ability to continue to export, noting that with domestic consumption going up and production going down, “They may not be able to export to anyone in five years. . . ”

. . . Some experts say that countries, especially the United States, need to work on limiting consumption to help ease world demand instead of focusing on new production. The United States, the top net importer in the world, consumed 21 million barrels of oil per day in 2006 and accounts for a quarter of the world’s oil consumption. The next largest single country consumer was China, one of the fastest-growing energy consumers in the world. It, along with other large emerging economies, has added to the global strain on oil and gas supplies. . . .

Ovis Suburbanus:

This is a complicated question about when export cutbacks from Saudi Arabia and the UAE begin to affect the US. In at least one area,price, the cutbacks are already affecting the US. The cutback of exports of light, sweet crude to Asian importers this year have raised the price of crude in Asian markets and helped it remain high, plus the Saudi's not raising their production of Arab Light to satisfy the growing world demand at a lower price has had an effect on the world.
The Saudi's are unlikely to specificially target the US unless they fell they have no choice, although individual members of the royal family may be against US interests. The US administration is unpredictable and out of control, and the Saudi's are likely to view any new conflict with any Moslem nation as proof that the administration's US policy is a crusade against Islam. I'm an American and hold the same view, it seems our foreign policy is being shaped by fundementalist Christians who have that view and its truly scary. So, in spite of having over 300,000 troops and mercenaries in Iraq, the US can't attack any country in the region without risking WW III.
The Saudi's have very substantial US refining interests. When Texaco lost its lawsuit to Pennzoil over Getty, they sold 1/2 of their US refining interests to the Saudi Arabians for cash to help pay off that judgement. That interest is at least part of a big joint venture with Royal Dutch Shell called Motiva, they have a couple of giant refineries. Texaco is now part of Chevron, and I'd guess that Saudi Refining also has some joint ventures with Chevron in petrochemicals, although I have no exact knowledge. Another reason the Saudi's won't target the US is the personal investments of members of the Saudi Royal Family. They own much of the Carlysle Group that, together with the Bush famiy, owns Haliburton and many other US investments.Until about a year ago these investments were managed by Prince Bandar, AKA Bandar Bush.
But, this tangled web is further complicated by the Saudi's own fanaticism. The Wahabi sect controls the holy sites of Mecca and Medina, and run the country through Islamic law. They are the basis of Jihadist cults like al Quaida, who want to destroy Israel and the western Materialist culture. Many members also want to destroy the Saudi family too because they have defiled the holy sites of Islam by allowing US troops in the region.

So, in summary, its a hell of a mess. All the regional powers, except Turkey, are run by fanatics. I haven't mentioned the Zionist crazies that control Israel or the Shia mystics with control of Iran, but they are all motivated by a fanatical view of the situation. And, we've barely begun to look at the situation, but the US policies are being formulated by our own crusaders. Eric Prince, the owner of Blackwater, is a non-denominational fundementalist, and looks to become the Praetorian Guard of the American Empire. Our professional military officer corps is run by non-denominational cultists, IMHO. We've abandoned the constitutional seperation of church and state that was the basis of the US success in the first 90% of US history. And its terrifying and gloomy unless we get some balance again in the world and go back to reason and tolerance, the gift of the 18th century to the west. Bob Ebersole

Bob, hope you are doing better today.

Yes, a fine mess the world is in. I have to keep reminding myself that some good minds are working on these problems in the administration along with what is probably the most concentrated nexus of computing power on the planet.

Scary that they are making the moves that they are. Obviously this is the best that they can come up with from the data available. I rather doubt that they are missing much.

It makes one wonder just how bad the alternatives are that they see.

Hi Jeffrey,

re: "It was good to meet you and all of the other TOD crowd."
Wish I had been there (sigh).

I wonder if there's any chance you could keep us posted if/when you accept future speaking engagements? (Even if I'm not able to be there, I might know others who would be.)

Alan Drake and I are kicking around the idea of some joint presentations--ELM + EOT.

That sounds like a great idea. We need to start mitigation These are geological problems that are going evryone in the world working together on solutions..
Bob Ebersole

To all at the conference, KUDOS to all your hard and important work. I can tell this year has much more coverage than similar conferences in years past and, I feel, the time is ripe for the general public tuning into what you have to say.

I just have to make a point about this:

The formal program closed with Tom Whipple talking about the Media. Prior to the talk the organizers of the conference noted that they had developed a new Award for those that volunteer their time to the cause of Peak Oil. They have named it the Whipple Award and Tom was the first recipient.

What a great idea and Tom definitley deserves recognition. I think Leanan should be up for that award as well.

I wish you not only had an award for volunteers donating time for the PO cause, but also for recognizing those in the media that do PO coverage justice.

"He-Matt Simmons- repeated the concern about 4th Quarter world supply at a 85 mbdoe being faced with a demand of 88.2 mbd – where does the shortfall get made-up. There is no source that can now turn on, that fast, an additional supply of 3.2 mbdoe. And of that excess how long can the current stocks last when faced with this level of shortage. We are, in short, already in a world of hurt even before the actual peak in supply arrives. His prediction for the annual drop in production for an average well is 6.7% and there is increasingly evidence that this will not be met by the supply options (He got a standing ovation at the end)."


1-How is the US maintaining EIA Oil Inventory numbers


2-There is a world 3.2 mbdoe shortfall

As science fiction writer William Gibson said, "The future is here. It's just not evenly distributed yet."

Arkansaw of Samuel L Clemens

I discussed inventory numbers in the following article, but in any case note that crude oil inventories worldwide are declining.


From your article:

"Second, we need to evaluate crude oil inventories based on Days of Supply in excess of Minimum Operating Level (MOL). In the US, the MOL for crude oil is probably about 270 million barrels (mb). At about 322 mb, US crude oil inventories are probably best characterized by Hours of Supply in excess of MOL (about 80 hours). In my opinion, recent fluctuations in US crude oil inventories merely reflect minor changes in a thin margin of supply in excess of MOL.

Refiners are unlikely to let their inventories drop below certain critical levels, and given the expectation of declining world oil exports, refiners will have two choices: (1) Bid the price up enough to keep their inventories up and/or (2) Reduce their crude oil input, thus reducing product output.

My contention is that instead of focusing on crude oil inventories, we need to focus on world net exports, crude oil prices, refinery utilization, product prices and product inventories.

I expect to see crude oil exports trending down, crude oil prices trending up, refinery utilization trending down, product prices trending up, and product inventories trending down."

I'm focused on crude and gasoline inventories in the US.

$2.75 gasoline is impossible with $88 crude.

And locals are still competing with "cents lower/sell more gas" prices in my area.

Like $2.50 bread with $10 wheat.

And yet we have it.

Even as China continues to import more.

Like the SIV derivatives debacle, someone is hurting now.

The EIA Inventory numbers must be wrong.

Thank you for replying.


Arkansaw of Samuel L Clemens

It continues to amaze me how often I see the media, energy analysts, pundits, and peak oilers like Matt Simmons throw around phrases like "world supply at a 85 mbdoe being faced with a demand of 88.2 mbd" without mentioning either the "P" word, price, or the "I" word, inventories.

If the number of barrels of oil demanded is higher than the number of barrels of oil produced, the difference between barrels produced and demanded will need to be supplied out of inventory, typically from above-ground storage tanks. It costs money to build and maintain storage tanks, so for obvious reasons inventory is finite. For that reason, the quantity of oil demanded cannot exceed the quantity produced for very long or oil stocks will be exhausted.

So what then? What happens when the tanks run dry and quantity demanded continues to exceed quantity produced? Do the supertankers get turned away empty, the refiners unable to refine enough gasoline, and long lines form at gas stations as shortages develop?

Fortunately, there's a third variable that tends to get left out of the discussion: price. Price will rise or fall as needed to ensure that supply and demand are always in sync.

Therefore, if we re-visit the Matt Simmons example: "world supply at a 85 mbdoe being faced with a demand of 88.2 mbd" we see that absent any discussion of price and inventories it's actually a pretty silly statement. (In fairness to Matt Simmons, I wasn't at the conference and it's quite possible that he did indeed discuss price and inventories.)

However, let's assume that another oil pundit made this exact statement in isolation without any discussion of price and inventories. It should be obvious that one can only predict a certain quantity demanded at a certain price. They go hand-in-hand--because a change in price will naturally affect the quantity demanded. It should also be obvious that quantity demanded and produced cannot diverge for long, so in essence what this pundit is really saying is that price of oil in the 4th quarter is going to have to rise substantially in order to keep supply and demand in sync.

By now, it should also be clear that some of the graphs out there that purport to predict a multi-million barrel gap between oil supply and demand over the next several years are utterly meaningless. Instead of trying to predict the 'gap' between supply and demand, those graphs should instead be trying to predict the price of oil at which supply and demand will be satisfied.

I think we should re-label often fuzzily used "demand" (which is a fixed economic term, really) as "expected future supply at today's price".

Business make investment plans based on a certain oil price range. If they make a plan that only amortizes if oil prices stay between 40 and 60 dollars, and the price goes up to 80 and stays there, their investment is likely to turn sour unless they can pass on the price increase to the next in the supply chain - ultimatley a consumer.

Consumers have the final say: If they are unwilling to buy the product or service that's been loaded with all the passed-on oil price increases, the companies in the supply chain will get into trouble, one after the other, as the effect gets passed back.

What do you think?



Hi Davidyson,

You're actually describing two separate notions here. 'Demand' is actually pretty well defined in Economics. When an economist speaks of 'Demand,' he/she is usually referring to the amount of goods (or services) that a consumer is willing to purchase at a variety of price points. This is typically represented by a curve on a graph, hence the term 'demand curve' which you may hear in these types of discussions.

Another often-used term is 'quantity demanded.' Perhaps as its name implies, this is the amount of goods (or services) that a consumer demands at a particular price point.

Unfortunately, this definition tends to differ slightly from the every day use of the term which to me implies a certain emotional component which can't be easily quantified. Joseph gives a good example in his post following yours.

The crux of the communication issue in my opinion is not that lay people tend to use different definitions, it is that they do not define their terms sufficiently rigorously. With a good enough definition you could define demand to mean anything at all and if you use it in a sentence I'll be able to understand what you mean.

As for your other point on business investment, you bring up a very good point, but unfortunately exploring how the various actors in the supply chain will be affected by an increase in the price of a commodity is actually a pretty complex endeavor.

I can understand your consternation on this, it's frustrating for to see the precise lexicon of one's profession or avocation misapplied.

I often scamper off to the dictionary to try to improve my understanding when I see a grievance such as yours. Here's what I found at Answers.com.

5 Economics.
    a. The desire to possess a commodity or make use of a service, combined with the ability to purchase it.
    b. The amount of a commodity or service that people are ready to buy for a given price: Supply should rise to meet demand.

I think the economic laity frequently misapply Demand because they have all experienced the reality of of a strong desire to acquire something which cannot be found. The lessons of supply and demand are little comfort to a crying child intent on a Wii, or a tickle me Elmo, or in a previous generation, a cabbage patch doll. Any parent will tell you that a lack of supply will have no effect on the demands of their children.

I find the second definition ironic in view of the ASPO conference. Supply should rise to meet demand is exactly what this is all about.

Query: Does the economic lexicon offer a word for what Simmons is describing?

Hi Joseph,

I completely agree that the term 'Demand' is frequently misused due to the emotion / desire that you describe.

In response to your question about Economics offering a word for what Simmons is describing, I'm not sure there is a single word per se, but there are certainly concepts which capture what he might be trying to say. I say 'might be trying to say' because it is actually extremely difficult to understand exactly what he is trying to say! My interpretation could be substantially different from someone else's. This is unfortunate, because it just adds noise and confusion to the discussion and detracts from a substantive debate on the merits of the issues.

Having said that, the claim that 'demand will be 88mb with supply 85mb' might be trying to say this:

If prices stay constant, consumer demand for oil will rise to 88mb.
All major producers of oil worldwide are pumping just about flat out right now so supply will remain constant at 85mb.
Therefore the price of oil will rise substantially in order to keep the actual quantity of oil demanded by consumers at 85mb, in sync with the quantity of oil supplied.

This, in my opinion, is a plausible interpretation. However, there are other (perhaps less plausible) interpretations one could make. Another possible interpretation:

The amount of oil supplied in the fourth quarter will remain 85mb.
The amount of oil demanded in the fourth quarter will rise to 88 mb, resulting in rapid draining of inventories followed by widespread shortages.

Note that this is not a likely result given how markets work and that the price of oil is free to move as needed to balance supply and demand, but the fact that this is a possible interpretation should show how careful we all need to be in terms of how we convey this type of concept.

So how would an economist convey the same idea? An economist might say something like:

The global economy will continue its healthy growth in the fourth quarter causing a shift to the right of the demand curve. {A shift to the right of the demand curve implies that for any given price consumers will seek to consume more oil.} However, supply will remain constant, putting upward pressure on the price of oil. {So that supply and demand continue to be balanced.}

You are an amazing scribe....thank you.

He noted the “tragic mistake of corn-based ethanol”, which gained some applause, but does not gibe with what I am hearing elsewhere

What are you hearing elsewhere?

I had just come down from Dubuque where the corn ethanol business still seemed to be doing quite well.

well, ethanol is turning corn and natural gas into liquid fuel which costs about $2.25 a gallon - if I could do this and get .53 cents from the government as a subsidy, that is a 40% return - no wonder they are doing well. But they are using corn (in effect land) and natural gas that could provide much better uses for society used in some other venture.

If we were in a different stage of societal needs, I wouldn't care what they are doing in Dubuque - as it stands though, we are wasting one of our precious bullets (time) by marketing to americans that biofuels can replace fossil fuels. More important than the fact that its not true, is that people then are red-herringed away from where we really need to (and can) change - what are our goals and how can we be happier (easily with less energy)?

Biofuels produce fuel from a food source when there is an developing shortfall in the grain used for food. This fuel is being produces in order to get the .2 - .4 percent gain in fuel in oder to continue to run our SUV's for a few more years. The years of plenty are ending we should be storing grain not burning it up.

Re: The years of plenty are ending we should be storing grain not burning it up.

Like Matt Simmons's sloppy supply-demand analysis which does not include price and inventory, this statement is also sloppy. Firstly, all grains are not the same. Some are primarily human food such as wheat and some are primarily animal feed such as corn and soybeans. The current grain shortfall is wheat. There is no developing shortfall in corn or soybeans. A shortfall in corn or soybeans is pure speculation. Secondly, the energy gain on ethanol is about 25 percent not .2-.4 percent as stated. While this gain is small compared to extracting oil, it is a respectable gain in the business world where probably 90 percent or more businesses at net energy losers. Also as a business model a guaranteed 25 percent return is excellent and will attract investment. The big gain in ethanol is not in net energy but in that a relatively unuseful energy source is converted into liquid fuel for transport. Thirdly, the fundamental problem is that the stored energy in grains is grossly under priced compared to the inflated price of crude oil and such. Currently the value of corn locally is $3.20/bu. and the price of LP is about $1.75/gal.. Since one bushel of corn has the heat value of 5 gallons of LP, that bushel should be trading at over $8.75 so as to make it too expensive to be used for fuel. The market refuses to do that. This enables corn to be used in corn stoves or for ethanol at a substantial profit. As long as this situation exists, burning corn makes sense.

There is a corn shortage in Mexico, they have had tortillia riots. Just because you are rich enough that the demand distruction hasn't affected you doesn't mean that there are no shortages. And if the misery in Mexico causes a revolution or even more emmigration to the US, you will experience the effects of a corn shortage personally.
Bob Ebersole

It has been said that we may need to spend $20 trillion to find all the oil we will need by 2020.

That $20T would buy a lot of nuclear, wind and solar.

Sterling: The other issue is that it is becoming increasingly unlikely that this $20 trillion will be spent. Companies such as Chevron and Exxon have shown with their recent behaviour that they are losing their appetite for money losing exploration. IMO, most estimates are undershooting the amount of oil that will stay in the Earth permanently. Contrary to some comments, there is a ceiling (in today's dollars) on the price of a barrel of oil. The ceiling is very high, but it does exist. It is a great product, but it will never be worth, as an example $10000 in today's dollars-the usefulness just isn't there. Oil that costs $3000 in today's dollars to get will never be got.

Actually the ceiling costs for oil are suprisingly low.

First forget about it as a energy source and consider it as a compact store of energy i.e the battery potential. A good use case if for airplanes because of the limitations its tough to substitute for a jet engine. This needs to be fed some sort of organic fuel.

So we have a use case for organic fuel as a store of energy one now only needs to figure out the cost of synthesizing that fuel from various feedstocks. I simple solution is to start with syngas to final product and then consider the inputs needed for syngas production separately. Once you have syngas you can make anything thus the reason its called syngas.

In general I'll assert whith out proof that production cost are far less than 10 dollars a gallon. Methanol manufactured from syngas sets at 1 dollar a gallon now. You can find a number of synthetic products made from syngas that are priced under the cost of kerosene right now. In any case its obvious that the critical use case i.e as a store of energy in constrained cases we can synthesis all the fuel we need at a reasonable price.

To a point. And the critical problem is these approaches don't scale that well they work fine for say 10% of the current liquid fuel usage or less lets say 5%. This would cover in effect critical usage. If you try to scale beyond this prices shoot skyward as fuel production causes problems with food production and the rest of the economy.

What this means of course is pretty simple that the non-critical uses of liquid fuels will simple have to cease.
The pricing of oil vs other organic liquids gets out of wack but a rush to alternatives cannot be supported since other solutions have limited scalability.

I suspect you may well see Airlines buy up a lot of farmland and even oil production to supply themselves or coal mines.
Obviously in this situation the people that cannot substitute will go vertical to secure supplies.

I suspect you may well see Airlines buy up a lot of farmland and even oil production to supply themselves or coal miines.

American Airlines had an oil company subsidiary that invested in oil deals back in the late Seventies and early Eighties (they were in a field we found in the early Eighties).

Hi memmel and WT,

re: "buy up..."

I'm not so sure. As oil prices zoom upwards (and the price of everything else follows), along w. increasing volatility, will airlines have the capital and/or positive cost/benefit ratio? I'd expect such "vertical" thinking to come first from the military. Which may not even leave a market in place for others.

Your suggestion to think of it as a store of energy, easily converted, is very useful IM(H)O. Liquid petroleum fuels are worth a lot more than one would think looking just at their heating value.

Energy quality is an important concept, but it's hard to put absolute or even relative values on different qualities. Or are all joules equal, but some are more equal than others?

If for example you are looking to heat your home almost any energy quality will do, waste heat from a nearby thermal powerplant would work nicely, but so would burning natural gas or oil in a furnace in your basement, or electric resistance heating using electricity from said powerplant. By using electricity to power a heatpump you can even tap the heatcontent of the outside air or the ground, an energy source initially of even lower quality than the waste heat first mentioned. For this purpose there are a numver of different energy sources with differing qualities, some useful for many purposes, some for few.

If however you want to power a car oil would most likely be your only option. With the right car you could ofcourse use natural gas or electricity, but powering the car directly with hot water wouldn't be practical.

Hi memmel,

re: "a rush to alternatives cannot be supported since other solutions have limited scalability."

1) By "alternatives" do you mean liquid fuel alternatives? Or do you mean wind, solar, solar thermal, PV, nuke, etc.?

2) I take this to mean the following:

It's not only - or merely - that alternatives are limited in scalability, rather that the current oil infrastructure was put in place outside the direct market, via taxation and subsidies (roads, oil cos., perhaps even federal regulation, legal system to keep the whole thing going, etc.).

Is this a fair translation? So, do you mean, alternatives cannot be support by some kind of normal (if there, indeed, is such a thing) "market mechanism" - ? (Question mark?)

3) This seems to leave the question: Well, do we want something to be there (even if less total energy input) - or not?

Assuming we do, what does this build-out look like and is there enough oil (or capital) right now today to do it? (And does this mean we need, for eg.: gasoline rationing today, oil tax today, no new roads today, - or what?

Being as how I'm basicly lazy, I much prefer B.S. over research. But against my principles, I actually looked up kerosene.
According to Wickopedia, kerosene is produced as a fractional distillation product of oil and requires temperatures between 150 degrees and 275 degrees Centigrade. Its similar in energy value to diesel at 18,500 BTU/lb or 43.1 MJ/KG. Kerosene's main use beside as jet fuel is as a cooking fuel and heating fuel, where its main advantage is a high flash point, it burns but not explodes.
We all saw a horrible but practical exhibit of that property in the 9/11 Twin Towers attack where the jets didn't explode but instead burned long enough and hot enough to burn through the steel and concrete in the World Trade Center buildings. That's why its used in air transport-safety.
Kerosene was discovered by the alchemist al-Razi and discribed in his Kitab-al-Razi (Book of Secrets) in the 9th century in Baghdad. Its first commercial manufacture was by the Scottish chemist James Young in 1851 and he made it from Torbanite (a variety of coal), shale and sub-bituminous coal. Kerosene was first distilled from oil gathered at seeps by the Polish chemist Ignacy Lukasieuwicz in 1856.

This leads to several relevant conclusions about kerosene. First, we aren't going to run out. Kerosene can be replaced with low technology processes from domestic sources including oil shale and hard coal. Since this represents about 10% to 12% of our petroleum useage in the United States, coal to liquids or oil shale to liquids plants will work very well to replace a large part of our useage. If they are built using"clean coal" technology, it should be no worse on greenhouse gasses than kerosene from petroleum, and the absolute costs will be in the area of 300%-400% of the current prices of oil.Second, that clean coal, or CO2 capture at the plant should help a lot with greenhouse gases and make these processes no worse than biofuels. Third, securing stable domestic sources of miltary fuel should be at the top of our list of peak oil policies. Fourth, we are likely at the end of the era of short hop airline flights, which should be replaced with Alan Drake's Electrification of Rail Program. Bob Ebersole

With respect to the WTC, kerosene poured down the elevator shafts and exploded on the bottom five floors. Safer than gasoline, sure.


I haven't escaped from reality. I have a daypass.

Hi Robert, I don't mean to pick nits but flammable liquids don't explode. They burn, sometimes very rapidly in what is known in the response industry as a flashback or flash. They teach this at major response schools such as Texas A&M's Industrial Fire School and Ansul's fire school (both very excellent schools btw). And yes, I taught this for 9 years also.

And yes a lot of people in both the response and oil industries don't make this distinction until after it is pointed out to them.

Even Napalm is just a form of flammable liquid flash.

Sure, if conditions are right there can be concussion and overpressure effects. But even gasoline at perfect air fuel ratios and ignition situations in combustion chambers is still generally considered to be a fast burn or flash.

Yea, I'd rather have a truck full of fuel oil (which would include kerosene) rolled over on it's side than gasoline. Fuel Oil flash points are considerably higher so they don't ignite as easily.

DOT doesn't even define fuel oils as Flammable Liquids. They are only Combustible Liquids. Not something the international community recognizes.

Sorry, just something that has bugged me for years.

Bob E:

Third, securing stable domestic sources of miltary fuel should be at the top of our list of peak oil policies.

Can you explain why do you believe this?

Do you think other nations should do (or _will_ do the same)?

What do you think this accomplishes?

Honest questions.

I, personally am not a pacifist, although I am against empires. The world has a number of states and fanatical groups that would like to control the world, including a large part of the US government, and its very sad.

The fact remains that at least half of the people in the United States, and possibly the world, think that providing for the national military is a top priority of any energy policy and the nation's biggest consumer of diesel and jet fuel is our military. I've heard, although I can't remember the source, that the military uses 14 gallons of fuel per soldier for every soldier in the field. Considering the useage of helicopters and speeding Humvees, this seems a plausible figure.

If we get in an embargo situation the miltary will have first priority on the available oil and gasoline and jet fuel and diesel. If we accept this and use it as a reason to swap to alternatives, we can solve the problem of availability of money for the change plus get willing help to change people's behavior if we accept this and use it as a large part of our argument. In fact, if we can portray Cornucopianism and the Invisible Hand theory as unpatriotic, we will end run the corporatocracy. So, my motives are good, but its dancing with the devil in its own way.

I really think that if we do nothing and power down using only demand distruction through supply distruction we risk the collapse of our civilisation and perhaps WW III, and almost assuredly risk ruining the earth with climate change. This is too important to blow, we can't let our corporate enemies categorise us as "liberal tree-hugging pacifists. A rational power down has to include everyone, and we need to make it palatable to them by making it a national security issue. Which, of course, it is. Bob Ebersole

I agree Bob. I don't think simply allowing demand destruction to do the trick is doable. Rationing or usage balancing of some sort will probably have to be used.

This is a simplistic presentation of the problem, but at some point the economy will fail as people on the lower rungs of the economy can no longer afford to simply get to work.

What will happen to the support structure for the rich?

Memmel, your conclusion:

Actually the ceiling costs for oil are suprisingly low.

although seemingly supported by ths following assertion:

In general I'll assert whith out proof that production cost are far less than 10 dollars a gallon.

is dramatically weakened by your subsequent admission:

...If you try to scale beyond this prices shoot skyward...

One cannot argue that there is a low price ceiling, beyond which Oil Majors will not exploit an oil source, if you concede that a proposed substitute cannot supply all the transportation fuel demanded. Right?

It is a great product, but it will never be worth, as an example $10000 in today's dollars-the usefulness just isn't there.

Well, I'm not completely sure about that. A barrel of oil is equivalent to about one year of human physical work, measured in usable kilowatts, as noted a few years ago here in the oildrum.

Right now you have to pay more than $10,000 to get a human to do a year of hard physical work.

Marty: I don't think this often used analogy is logical. Unless I can make more than $10000 from either the oil usage or the human labour, I am not spending the $10000. One goes for the aimless Sunday drive because it is cheap, not because it is necessary. I had a long walk to school starting at the age of 5 (everybody did at the time). If oil is at $10000 a barrel, there won't be too many kids getting a ride to school or the soccer game (it won't be worth the money). Look, you could start pricing USA housing in barrels of oil. In 1998, a median house cost maybe 22000 barrels (guesstimate). In 2007, maybe 4500 barrels. Will the median house price in the USA ever equal 35 barrels of oil? Sounds far-fetched.

Well, we certainly are spending the power in the oil when we burn it, even if it was wastefully spent.

My point was that the compact, easily transportable power that we currently get out of a barrel of oil for the purpose of digging a foundation, grading a road, crushing stone, ploughing a field, lifting up a steel beam, or transporting food to a food store has to come from somewhere. Once the second half of EROEI>1.0 oil is used up, we will have to get power for those crucial activities from somewhere else, whether it be coal, natural gas, uranium, wind, photoelectric, solar heat-concentrating electric, or, cough, fusion.

Before the 1900's, the actions I mentioned above were almost all powered by humans (slaves or otherwise) and large ungulates (there were 3 million horses in London in 1900). Humans can put out 100-200 watts continuously and horses, 750 watts, AKA one horsepower.

Marty: Yes, but before the 1900s, nobody on the planet had humans or ungulates pulling them at 65 miles per hour 3 hours a day, day after day. Most of this ceaseless movement is only done because it is cheap.

Heading Out,

I notice in the notes for Scott Pugh's talk, there are cost estimates of $2/Watt and later $1/Watt for nuclear. Can you say which it is? Thanks,


I'm disappointed, not ny the conference, but by my health. I went in Wednesday and helped with registration, but was not feeling well and left before the evening sessions.
The next morning I left to come back, and got downtown when I felt my blood sugar drop-I'm an insukin dependent diabetic. As I was heading for the Hotel I totally blacked out and sideswiped three cars and passed out at the wheel. Nobody was hurt as the cars I hit were empty. I don't remember any of this, as I was in massive insulin shock. The paramedics took me to a hospital, where they got my sugar stabilised and I came home. They said my blood sugar was 20, where a normal range is 80 to 120, and the dangerous area is a blood sugar below 50
I wanted to participate more but have not felt well enough or confident of my health to travel back to the conference and participate. Needless to say, I'm very disappointed because I'd really hoped to network and meet people who are interested in local activism. That's obviously going to have to wait until I get my sugar straightened out again.

As far as the conference itself, it looks like a home run for ASPO-USA to me. The Conference is located in a first class convention center hotel, and the ambiance radiated an atmospere of self-assurance and power. Of course most people on TOD know the capability and power of the peak oil speakers, but at least part of the purpose was to present various areas of research and evaluation of new techniques. So having the right ambiance is very important.

I've been involved in social activism since I was a kid. My parents were liberals and encouraged social involvement. Real movements that result in change, like the anti-war movement of the 1966-1975 have a natural progression in how they are perceived and adopted by society at large. Although its not measurable by any method I use, people absorb information and give you very little feedback. This is the same as the buyer'resistance described by sales motivation speakers and writers. Then, all you have to do to "close the sale" is ask for the sale, preferably with a physical action like signing a petition, getting a handshake or a hug.

This always seems to happen virtually simutaneously in soceity at large. The most recent example is the sea-change in attitudes about Global Warming. I predict the same thing will happen with peak oil solutions. The important thing for an activist to remember is that this change will not be visible to us as it happens, so don't give up the fight. Believe it, or don't, but we are nearly at the sea-change as it applies to peak oil, and this conference is crucial. Bob Ebersole

Sorry about your health and accident -- take good care of yourself.


Sorry to hear about that.

Get your self better and come back and be active another day. I have a feeling there will be plenty of opportunities.

The world needs all the good activists it can get. It shocks me how few people can raise their voice and demonstrate their concerns in public.


Hope you get better soon.

At ASPO, Boone Pickens said that what he was most proud of was in helping and encouraging his employees to get and stay healthy.

Hi Bob,

I wish you the best in recovering.

We will need all hands on deck as Peak Oil unfolds.

Take care,


Sorry to hear about your accident. Hope you get the blood sugar under control soon.

Bob sorry about your misfortunes. Get well soon,


So sorry to hear about your health problem. I hope you're feeling better now. I missed the Houston conference because I decided it was slightly too far from Helsinki. Thankfully many TODers were there and we get a pretty good idea of how things went even on the interweb.

Once again, I hope you're fine now and look forward to reading your contributions here in the future!




All I can do is echo what others have said. We'll keep your health in our thoughts.

You offer a lot to TOD and it would be a loss if you weren't able to participate.


Hi Bob,

Thanks for keeping us posted and for your perceptive comments.

This blood sugar stuff sounds very (very) scary. I'm really glad no one was hurt. It must have shook you up to realize later what had happened.

Please do take care of yourself - as you can see, we all want you alive and well.

Oh yes, re: the suggestion about cinnamon, I've read that the cinnamon sold in most grocery stores nowadays is not "real" cinnamon, so perhaps you might want to look into this further before trying it. I hope things work out.

Hi Bob,

I'm sorry to hear about your troubles in Houston. I hope you'll be all right again soon.

And thanks for all your great posts!


Might want to try some cinnamon on your toast (whole wheat or multi-grain) in the morning, it can triple the effects of the insulin your taking, helps the severe swings in blood sugar.

I kind of had to balance the idea of burning carbon to travel to this thing vs the benefit of networking. Ultimately there was too much other stuff that I am in the middle of here at home, so the DVD set will have to do.

Matt [Simmons] pays close attention to a couple of tables from the EIA (http://www.eia.doe.gov/emeu/international/oilproduction.html) and noted that crude oil production peaked in May 2005.

From Gail's post
"Did Katrina Hide the Real Peak in World Oil Production? and Other Oil Supply Insights"
this is the graph showing the May 2005 crude peak.

Our post is now available as PDF file from SydneyPeakOil (1 Mb):

Matt, Sydney


I know I was going too fast and I appreciate your efforts to try and keep up but there are some things that need correcting in your post on my presentation:

- global energy consumption has nearly tripled since 1965 (+184%) and is forecast to grow by a further 50% by 2030 (EIA reference case).

- North America has a reserve to current production ratio of 10 years (which does not include undiscovered resources or the fact that production may change in future).

- drilling costs in Canada have doubled since 1999 yet the gas rate added per foot drilled has declined by half over this period, meaning that current gas prices make a lot of prospects uneconomic, which has resulted in a decline in rig activity of nearly 35%, which is forecast to manifest in a reference case production decline in Canadian gas of 4% per year through 2009.

- 11 new LNG terminals constructed over the next 1-2 decades could add 15 bcf/day to the nearly 6 bcf/day of current capacity - LNG liquefaction capacity however is the weak link in the LNG chain at the moment - just because you build them does not mean the LNG will come, and there was 70% of unused capacity in the existing LNG terminals in the US in 2006.

- capture and use of otherwise wasted heat vented from ultrasupercritical coal plants (operating at 43.5% efficiency) in industrial and residential applications can boost the overall efficiency of these plants to 60-70%+, as is being done in Denmark.

- in order to keep nuclear generation capacity flat, we will need some 283 new reactors to be built by 2025 worldwide due to retirements of the aging fleet.

This fixes the inaccuracies in your post - I'm sorry to have put you through that seeing as how I always try to max out my presentations. I think I said quite a bit more than this - the energy sustainability dilemma vs climate change - today's consumption picture vs 1850 etc. etc. - and I encourage people as you did to download the talk when I provide it to ASPO-USA tomorrow or Monday.

- in order to keep nuclear generation capacity flat, we will need some 283 new reactors to be built by 2025 worldwide due to retirements of the aging fleet.

I wonder whether this takes into account the fact, documented elsewhere on this site by advancednano, that the operators of 90% of current reactors are applying for 20 year service life extensions and his speculation that most of these will likely apply for another 20 years after that. It just turns out that most of the world's nuclear power plants can safely run for much longer than predicted when they were built.

Thanks, David:
It's difficult to decide what to include and what not in trying to keep these posts down to a reasonable size, and yours was one of the most informative (as many attendees commented afterwards). As you note looking up at a slide, then down at the paper to copy numbers, and then looking up to see the slide gone, means that I got some things wrong. Sorry, and thanks for making the corrections


Hi Heading Out,

Many thanks for taking the time to write this up. It's great to have your firsthand point of view, (esp. for those of us who wish we had been there...(sigh)...)

Indeed, thanks HO, for the fantastic coverage. Makes my absence almost bearable!

Thanks for posting your notes Kyle. I felt that Vince's, Jeff's and Matt's were the most important presentations. In the future, I trust Matt will not talk during lunch as the clattering of plates, forks, and knives and the act of eating distract greatly from his, and anyone's, presentation. The density of info and the speed of his delivery demand undivided attention. Three quotes from him: "Our system is designed to dumb us down;" Corn based ethanol ... tragic mis-step;" "Depletion vs. investment horserace: At what point does the smart money bet on depletion?"

Hirsch's comment during the Q&A that rationing would be a "must" part of the response to "it" (PO), while ethanol "not," but "government" doesn't get it, coupled with his assertion that "This is non-eqilibrium economics" were quite provocative and appropriate for the morning of Day 1. This Chris Skrebowski echoed by saying "Prices will head north from now on."

Gilbert and Nehring being paired to tackle "The devil is in the (lack) of data" and subsequent discussion of "Reserves Growth" being the defining difference between Imminent and Delayed Peakists was stimulating, with Nehring conceding that "Transition away from oil WILL be painful whether sooner or later."

I was quite pleased that some of my questions got asked, but I really wish we had more time for Q&A, a sentiment shared by my tablemates.

I have more to post, but will wait until you post your Day 2 notes, provided my Las Cruces lodging has wifi as advertised.

Karl Sanchez

I hope somebody asks Chris a) if he now thinks world avg decline rate may be higher than what he assumed when he predicted higher production this year, and b) if he still expects substantially higher world production next year and/or 09.

This is what Chris had to say (paraphrased except for quotations):

IOC production has actually flatlined with decline rates "Faster" than global decline rates (4%), with 5-8% for areas already in decline. And "depletion is accelerating at a rate of .1-.15%/yr."