They put Simmons on at 5am and the we got plenty of oil guy on at 7am

Well, I'm amazed to see the headline "peak oil reality" on the MSM.

I don't think there's going to be a sudden moment when everyone "wakes up" to peak oil. Acceptance is going to come gradually. They'll have "both views," and not take a side, and reality will eventually win over. OPEC will gradually admit that they can't increase production. Traders will realize $40 oil is never coming back. Etc.

Until one day, it's the people saying peak won't be until 2040 who are the quacks, and we won't know quite how it happened.

Peter Tertzakian, Chief Energy Economist for ARC Financial Corporation based in Calgary, Canada examined the potential of Canadian oil sands in Canadian Oil Sands - Myth and Reality (2006):
“As investment in the Canadian oil sands ratchets up, so too do the myths and expectations. Some are speculating that this secondary and synthetic oil resource is the cure-all for the world’s growing addiction to oil, a resource that soon will be producing more than Saudi Arabia. Others are taking the argument further and viewing oil sands as the magic bullet that will pound the price of oil back down to U.S. $40/bbl or less. Don’t bet on any of it.
The big mistake is assuming that Canada’s vast oil-sands reserves can be turned into large production volumes in a time frame and a manner similar to conventional oil. On more than one occasion recently, I have heard people talk about oil-sands production reaching 10 million BOPD [barrels of oil per day] by the middle of next decade. Here is the reality: If all announced projects come on line on time, then Canadian oil-sands production may reach about 4.1 million BOPD by 2017. But the probability that everything goes according to plan, and that all projects are on time and on budget, is next to nil. The region is remote, with major stresses and strains because of a perennial shortage of labor, services, equipment, and materials. Logistical problems are acute and it is well documented that the situation is going to get worse. One doesn’t need a spread sheet or calculator to figure this out. Merely recognizing that Fort McMurray is a small, remote town that is at the end of a very long (and still narrow) highway should tell you that the technical challenges, let alone social issues, are daunting. Pushing more than U.S. $65 billion worth of steel, equipment, and labor—and that is only the direct investment that is expected over the next 10 years—up this constricted highway is akin to pushing a herd of elephants through a door.

The realistic estimate for what level of total production can be achieved by 2015 is no more than 3 million BOPD, which is only an incremental 2 million BOPD greater than volumes being produced today. So, putting things into perspective, what is likely to be achieved in the Canadian oil sands over the next 10 years is roughly equal to a little more than one year’s worth of global oil demand growth (emphasis added). Certainly, it is no panacea for the world’s growing addiction to oil or for mitigating U.S. energy dependence.”

According a study by the Canadian National Energy Board, “Canada’s Oil Sands, Opportunities and Challenges to 2015: An Update” (2006) [the Canadian National Energy Board is the energy department of the national government of Canada], there are significant obstacles in reaching the production goal of 3 million barrels of oil per day by 2015:

“The rate of development will depend on the balance that is reached between the opposing forces that affect the oil sands. High oil prices, international recognition, geopolitical concerns, global growth in oil demand, size of the resource base and proximity to the large U.S. market, and potentially other markets, encourage development. On the other hand, natural gas costs, the high light/heavy oil price differential, management of air emissions and water usage, insufficient labour, infrastructure and services are concerns that could potentially inhibit the development of the resource. There is now a clearer understanding that large water withdrawals from the Athabasca River for mining operations during the winter could impact the ecological sustainability of the river. As well, it is uncertain if land reclamation methods currently employed will be successful. These issues have moved to the forefront of environmental concerns. Regions associated with oil sands development enjoy several economic benefits but at costs to the social well-being of the communities, including a shortage of available housing and stress on public infrastructure and services. There is currently a limited supply of skilled workers in Alberta, and this tight labour market is expected to continue in the near future.”

And, when the U.S. experiences natural gas shortages, which could happen with any cold winter, the oil sands will have reduced natural gas for processing the oil sands.

IMHO, the position is essentially as follows:

If you look at Dave Rutledge’s presentations (e.g. ASPO Houston 2007) , the empirical data would seem to be that realistic downgrades of fossil fuel reserves and availability, by the organisations primarily tasked with this role, only occur AFTER a significant decline of OUTPUT has set in.

It looks like this pattern is being be repeated for global oil. Fatih Birol, Chief Economist of the. International Energy Agency (IEA), is only now saying that the basis of all previous IEA forecasts (the 2000 SGS report) is faulty, and that a completely revision of approach is being undertaken by the IEA, based on a best-possible bottom up analysis of the world’s 200 largest fields. Birol says that the key new issue (by implication the one they had missed) was that the rate of decline from existing fields is a much bigger issue than changes in the rate of growth of demand. I strongly recommend listening to the interview mp3 half way down this page http://www.davidstrahan.com/blog/?p=69 ) Elsewhere Fatih Birol said last week that his thinking had “experienced an earthquake” http://www.iht.com/articles/2007/10/31/business/oil.php .

(Mr. Birol, it sounds as if you are now reading TOD. If by chance you read this post, then please also make a serious attempt to look at the effect of the oil price profile of the last five years, on demand for the next few years, making reference to the effect of the 1979-1985 oil crisis on oil demand after that crisis)

I think that it is only once peak oil (PO) has been endorsed by such a body that it will become widely accepted. From Fatih Birol’s comments, it looks as if this will not be until the IEA’s World Energy Outlook (WEO) 2008, although I presume that the IEA will prepare the way strongly for the 2008 revision, in WEO 2007 due out next week.

I think that the reason for this apparent irrationality (in a delay in accepting the hypothesis of imminent PO) can perhaps be explained by the ‘erupting volcano problem’. A volcanologist, or politician, who forecasts the massive eruption of a volcano at time X in the future, in the absence of publicly obvious and frightening signs of activity, is in a terrible situation. If the forecast is wrong, this is a career-ending event. So official forecasts of drastic change will tend be delayed until two conditions are met: firstly, on reflection, the official has high (say 70%+ confidence) that the change is going to occur, and secondly, that there are already significant and obvious signs for everyone to see of the imminence of the event which requires drastic action.

So finally, only now that the PO volcano is making frightening rumbles and puffs of steam, the IEA is able to predict the high likelihood of an imminent eruption.

Once the IEA publicly and officially accepts the likelihood of imminent PO, for politicians, company CEO’s,reporters etc. the ‘right ‘ decision changes. If the IEA forecast is correct and one had acted on it, all is fine. If the IEA forecast is correct and one had failed to act on it, then this now is the negligent, career-ending decision. If one acts on the IEA forecast and it turns out to be wrong, this is a survivable position, because ‘not to have taken action on the advice of the official source of expert opinion’ would have been grossly irresponsible.

So in a nutshell, most of the time, most people do not accepts the evidence for a need for action until the reference organisation legitimises such an inconvenient position, and the reference organisation usually does not face up to the inconvenient reality until the issue has become to a significant degree self evident.

The other side of the coin is that, as long as one is in a position where one does not have much power, then forecasting an eruption well in advance is a much easier choice!

We are only Homo Semi-Sapiens.

Ever notice how they quickly cut Matt off when he says (at around 2:30 in the above clip) he wishes more people would have listened to him 1-2 years ago... 'we could have done some more things about it.' Then, almost as if on cue, the next guy fumbles in with a question to steer the conversation elsewhere. I swear I've seen this happen to him before.

These interviews with him are reruns essentially. I'm waiting for the day when they ask him 'What do you mean by 'we could have done some more things about it?' Or, 'what do you think we should do now, Matt?'

I am not familiar with the ppl referred to. The problem is that TV announcers, journalists, media types, and many others are locked into a ‘business as usual’ scenario. All of them understand that their jobs, livelihood, are at risk with a paradigm shift, or at least that competition for the remaining jobs will be so stiff that they will probably loose out.

So *don’t rock the boat* is compelling, as a message from on high (which may be subtle or may include threats of censorship and firing) and personal stakes meld together. To me it is quite clear whenever I watch cnn europe or such like that most of the announcers are perfectly aware (and not only of peak oil) but are playing their role, they are actors or if one likes spokesmen for the PTB (powers that be), and the ones who last, the best of them, are supremely good at it.

They need that take home pay for the mortgage, the pool, the cars, the kids schooling etc. This also leads some of them to become genuinely dumb, uninformed. They realize that being blind protects them, playing dumb is good, it is protective cover, so they set about becoming that... They also know, and sometimes stress about, the huge influence they have. Usually guilt fades into self protective greed. (I know several tv types and journalists, not in the US..)

So, to continue, they will only ever *follow*, take orders, speak about what is acceptable. They are always watching for clues and cues about the lines in the sand. When tides turn, they will speak up, prudently at first, maybe more stridently later, but always under the authority of the owners (media..)... in effect, they follow public opinion but only once it has been recycled (reframed) or finally taken into account by the higher powers. For TV, the control (self and other) is due to their huge audience and impact. Print media are are freer on the whole, but not in the US.

edit: was to add a lost paragraph


I find this most amusing. When I was a market maker back in 1989 I bought 10 puts on Misfit when it was selling fot $38. The next day it was $30. Net gain $16,000. Some people have to work all week for that kind of money

Gas is roughly 1 pound per litre in the UK.

There are 3.8 litres per US gallon.
There are 2.1 US dollars per UK pound.

So, the Britishers are paying 3.8 * 2.1 = $8 per US gallon.

Gas is roughly $3 per gallon in the US. If that corresponds to $95 dollars per barrel then $8 per gallon corresponds to $253 per barrel.

He's in the ballpark.

I dont understand why gas is not rising.
In the past, crude rises bumpd up gas.
Now, crude soars and gas is basically flat -
and oil majors' profits are falling.
They're absorbing the rises? what's stopping
them from raising gas prices at the refinery gate?

Roger,
It doesn't matter how big the resource is if you can't get it out at a profit. I think the day of the majors as producers is just about over, thyey can't make a profit on a field unless they have at least 1 billion barrels in the basin or trend and a reservoir size of 10 million barrels, and the reservoir size goes up exponentially in deep water. It costs a lot of money to set up infrastructure-heliports, docks, pipelines, service boats ect., and the multinationals have just about exhuasted the areas that they can operate in in the world.

The big multinationals have huge overhead and no idea how to cut down to survive.

Bob Ebersole

pellice said,
"My personal marker of when Peak Oil is upon us begins when the media replace the message that "Oil is in a bubble; it will come down again," with "Oil is not coming down again." I think that happened last week."

But, and I say this from hard experience, you have to be careful. In the late 1970's, when the message finally became "Oil is never going to get cheaper, it's only going to be more expensive from now on", that was JUST BEFORE the complete collapse in price in 1982. The same was true in the financial markets. When people assured themselves they would never ever see lower interest rates, lower inflation or rising stock markets, just the opposite occurred.

It's called in the financial markets "capitulation", when everyone throws in the towel. Looking at it from an investment point of view, that has always been exactly when it pays to bet against the crowd.

Are we there yet? I don't think so. The stock market on the year to date is still up. Capitulation on interest rates (that is, letting them rise to what should be their current level given world conditions) is far from happening, and the attempt to stick our finger in the dike with lower rates is still going on, inflation rates still do not reflect anything near the fuel and food price changes going on out there. No, we are still only at the front end of the cycle.

What to look for:
#A real stock market decline of about 15% to %25 percent
#Interest rates to almost double off the bottom
#Finally admitting that we cannot go lower on interest rates, and corrected them back upward, until we break the back of the real increasing inflation
#The housing bubble correction back to a place where the banks will loan on fixed rate mortgage to get them moving, or "no reserve" auction them to get a picture of real price. (Imagine, by the way, if all houses were sold that way...you would get a real picture of what houses are worth instead of this "rip off" pricing by the banks, lenders and developers...there are still SO MANY reforms due in our financial system and markets!)

Lastly, to our pet topic, energy: Why not take crude oil prices on out to about $130 to see if the alternatives are out there, and if they will work?

Oil in the U.S. when compared to income at $100 is still pretty cheap. As I write this, a Nascar race is running in Texas, and the infield is still full of RV Motor Coaches, air traffic is so congested that the big concern is not fuel price but airline delays, the car makers still tout GT cars with 300 plus horsepower, while the luxury car makers are in a horsepower war to see who can to the 1 megawatt car soonest.

We are still far from "capitulation". You want to see the real thing, get a few magazines and history books from the 1970's.

RC

"I would say the best message the media could put out is that we need to brace for impact." Ha! that is highly unlikely to happen the media is completely contolled by the corporations. What I found interesting is the comment from the person being interviewed in the link you posted that individuals can do things like produce alcohol in their back yards an sell it to their neighbors. Well I lived in Brazil in the early days of the ethanol revolution there and we built a small still at home to produce ethanol from leftover fruit scraps. I now live in South Florida and putting aside the questions of legality, I am quite sure I could easily produce a few gallons for my own consumption just from the mangoes that drop into my backyard from my neighbors tree. BTW it wouldn't be too difficult to run the still with passive solar. However empowering individuals loosens the grip that the giant corporations and government have for controlling us and I'm sure that the red tape to legally produce our own fuel from alcohol would not be easy to cut through. Still, (no pun intended) it's nice to hear someone talking about it.

Corporations are and have always been very, very aware of energy prices and energy supply. The company I work for has been procuring energy & consulting on efficiency since 1996 and in the past 3 years business is absolutely blooming, in North America we are near a tipping point for the energy management industry sector. The combination of deregulated markets and shareholder's demanding stable costs basically have forced companies to think long and hard about energy... Alberta hitting $1000MW electricty prices over the summer as an example really pushed companies to move, CFOs got blasted for not hedging. The corporates that don't get it are the ones who either don't use that much energy or don't have capital to afford projects,and they will die in the long run. As Lovins and co have written repeatedly, energy efficiency equates to a serious competitive advantage in the corporate world, and CEOs are listening.

BTW - before you adbust McDonald's with that nice little image you should check out their efficiency record - http://www.mcdonalds.ca/pdfs/McDonaldsCSR_ENG.pdf.

Any CFO worth a grain of salt gets that energy prices are and will continue to rise. Energy procurement companies are a dime a dozen and phone them up constantly for business, and explain the issue in great detail (oildrum & Matt Simons graphs are a fan fav in sales pitches).

The real PO, climate change battle is in the private homes and hearts of the average person and forcing them to change behaviour substantially. Wendell Barry has a great quote where he states the above much more eloquently, but I couldn't find it in his books :(

Danny Boy

Rather discouraging to see Simmon's report so poorly received. "And thanks for being on here Matt to fill some time before the next key segment of lets get back to real business." One thought that struck me again is that we are protected from the problems of peak oil for as long (or at least for a while longer) as the price is not a significant part of our income. If I only spend 2% of my income on gas, it doesn't matter if rises to 2.25%. So what has really happened in the last year is that only the poorest people in the poorest countries have been squeezed out of the market. It will work up the economic ladder and squeeze us too, but not this year. And when you measure the cost of gas and oil as a percentage of income you can easily see that gas and oil isn't expensive in Europe either. But Sierra Leon, Kenya, Bangladesh, and the other hundred unnamed and forgotten places are there right now.