Peak oil coverage on CNBC

CNBC had a lot of peak oil coverage Friday (November 2, 2007). Included were interviews with Matt Simmons (author of Twilight In the Desert) and Vijay Vaitheeswaran (author of Zoom!), which is under the fold.

Matt Simmons on CNBC
Crude Realities

Vijay Vaitheeswaran on CNBC
Running On Empty

(Clicking on the images will take you to YouTube to see the videos. An experiment, to see if it runs more smoothly than embedding them here.)

nice to see a real PO guy on the MSM (simmons)

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

I find it just astounding that otherwise reasonable and intelligent people like Joe Kernen don't get off their butts and do some basic homework. Man-o-man denial and laziness is just astounding. His comment at the end about why the Canadian tar sands will save us is so typical of lazy TV personalities. Simmons didn't rebut with laser focus on the key issue: flow rate. The primary rebuttal to anyone that speaks of Canadian tar sands as our savings grace is that they will never likely flow beyond five million barrels per day in production given the problems that come with mass production (energy use, needed water, ability to process tailings and conduct production in such a way as to not totally write-off Alberta as a sacrifice zone, etc.

I forget the name of the woman anchor that introduced the segment, but she's got to know the story (and hides her knowledge well). Afterall, she spent a whole darn week in China with T Boone Pickens.

Oh well. In a twisted way, it's easy to make the argument that it's good the mass media is still in obfuscation mode. But the arguments cut both ways.


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.

Simmons is fond of quoting oil in price per cup. He uses 15 cents per cup to show how cheap it is compared to anything else of any value. He must not have checked out agricultural commodities. A pound of corn which is more than a cup sells for about six cents locally. How is it that as oil prices rise to $300 that agricultural commodities can remain priced so cheaply? If they do, ethanol/biodiesel production will continue to expand.

Critics of oil sands, ethanol, biodiesel often complain that these are not a cure all as promoted by some advocates. It is not necessary to have a cure all, silver bullet type solution in the early stages of post peak oil where the decline rate is relatively small. Some conservation brought by higher prices (finally) and increased production of tar sands, ethanol and biodiesel will partially mitigate peak oil effects initially. I think that is what is happening now in that gasoline prices are slow to follow crude oil's lead to new highs.

No, practical, corn is not six cents per cup.

There are 128 cups per bushel.

Corn, according to Friday's close, is 3.77$ per bushel.

3.77 divided by 128 equals .029453125. Let's call it 3 cents per cup. I would say that that is substantially less six cents.

If you remember correctly, he said that nothing "worthwhile" is priced less than fifteen cents a cup.

While food seems very "worthwhile" to me, others apparently find that not to be the case.

If you ground that corn up and packed it into a cup to remove most of the air volume, does it make a difference?

Jaymax (cornucomer-doomopian)

How is it that as oil prices rise to $300 that agricultural commodities can remain priced so cheaply? If they do, ethanol/biodiesel production will continue to expand.

Since oil and natural gas based fertilizer are among the main inputs into corn, the price of corn is going to go up with the price of crude oil. Since is takes at least 5 barrels of oil and gas to produce ethanol with the energy equivalent of 6 barrels of oil, the cost of ethanol is going to go up a lot, too.

Most fertalizers are made of Natural Gas. If oil rose to $300, but NG stayed at $7 MCF, or even doubled to $14 MCF, food price increases will be much less than you think.

Only nitrogen fertilizer is made out of natural gas. Phosphorus is mined from phosphate rock deposits mostly located in Florida in the US and potash is from strip mines in New Mexico in the US. Its hard to call one-third of the fertilizer requirements "most fertilizers are made of natural gas".
Another big source of nitrogen fetilizer is bird guano. Mostly in the US agribusiness manure is a pollutant in water run-off although some is composted and sold in garden supply stores. Its a real wasted asset.
Bob Ebersole

Nitrogen fertilizer is the "dominant" fertilizer of the three nutrient fertilizers you refer to. Approximately 85% of all ammonia used in the US is used for nitrogen fertilizer, a substantial amount as anhydrous ammonia. At more than $500/ton, it has gotten quite expensive.

Phosphorus (as phosphate) and potassium (as potash) while "mined" also require substantial treatment to turn to suitable agricultural products. That means energy.

In addition to the phosphate mined from Florida (the highest point in Florida is actually a gypsum stack from the phosphate rock processing), you also have substantial deposits in eastern NC (Aurora, PCS Phosphate) and eastern ID (Soda Springs). In the case of the Eastern ID deposits, the rock is either hauled by dedicated haul road (the trucks on this road have the right of way when the cross "ordinary" roadways) or pipelined to the phosphate plant. PCS Phosphate in Aurora is the single largest phosphate mine in the US ( if not the world).

All "manures" tend to be high in nitrogen (and phosphorus) but there is a transportation/cost issue with the weights required for commercial agriculture.

I believe he often compares it to the cost of water...
I'm not sure that his argument is that it should cost more than water, which i would disagree with, but that it should be at least at parity with water.

Really? You don't think that crude oil, which takes hundreds of millions of years to form, and fairly rare geological structures to preserve until today, made from millions of years' worth of sunlight, shouldn't cost more than something that falls freely from the sky?

No. It will come like a thunderbolt.

Or thermonuclear cloud.

See Missing Nukes: Treason of the Highest Order

By Mahdi Darius Nazemroaya

11/02/07 "Global Research"

Every oil discovery/production watershed has been acompanied
by a Major SocioEconomic Event.

Every one.

We are now moving off the plateau and ito the Olduvai

Two Events are happening now:

1) Fallon was in Pakistan Friday.

"According to an Inter Services Public Relations statement, Admiral Fallon also called on Vice Chief of Army Staff General Ashfaq Kayani at General Headquarters and Chairman Joint Chiefs of Staff Committee General Tariq Majid at Joint Staff Headquarters, Rawalpindi, and discussed matters of professional and mutual interest with them.

It was the first interaction of the US Centcom chief with the two top military officers of Pakistan after their elevation. Though officially there was no word about the details of the talks, defence sources said that terrorism, Waziristan and the Swat situation and increasing suicide attacks on security forces were part of the discussions. online/staff report"\11\03\story_3-11-2007_pg1_9

The last factual story you'll be getting from Pakistan for awhile.

"“The situation in Pakistan’s Tribal Areas, Afghanistan, the ongoing operation in Swat, joint military exercises and other issues of professional interest were discussed in the meeting,” Sajjad Malik reported diplomatic and government sources as saying.

The president said the operation against extremist elements in Swat was continuing and peace would soon established there.

Fallon lauded Pakistan’s efforts in the elimination of terror and said that the US would continue to provide assistance to Pakistan."

2) I said that Mexico's oil production had essentially
stopped US Exports.


""The storms have forced the closure of three of Mexico's main oil ports, preventing almost all exports and halting a fifth of the country's oil production. It has a strong economic impact" Calderon said in an interview.

The storm did not spare the Bay of Campeche, Mexico's main oil producing region and home to more than 100 oil platforms.

Overall, the region normally exports about 1.7 million barrels of crude daily. Since, most of the production remains shut down, it would mean that Mexico's output would drop by 2.6 million barrels a day."

It will not come back.

Citigroup on Monday will announce that it's insolvent.

From elaine supkis. This Great Dame rocks:

Schumer And Feinstein Betray Constitution And Voters

November 3, 2007

Elaine Meinel Supkis

Thanks to Hitler and 2,000 years of persecution of the Jews by the two other religions they gave birth to, we can't talk reasonably about the Jewish people. I was Mrs. Levy for many years plus I come from, on my father's side, a German/Jewish background. Hitler would have killed me if he could. So I have a right to talk about the Jewish situation in the United States. The sudden reversal over the Jewish Attorney General nominee by two Jewish Senators, Feinstein and Schumer, shows clearly how Jews in our governemnt are sticking together even in the teeth of severe disapproval of the voters at large in their own states over any issue concerning power of Princes.

Hell's Gates open .

Arkansaw of Samuel L Clemens

A couple of links for the stories you noted.

Missing Nukes: Treason of the Highest Order

Bond Insurers Are Going Bankrupt Now

Also, make sure to read Doug's piece this week.

Road to Ruin
by Doug Noland

I pose the following question for contemplation: How much would the Chinese government, with their $1.4 TN stockpile of chiefly dollar reserves, be willing these days to pay for the necessary energy resources to sustain their economy and stem social unrest?

This one by Mish is a MUST READ. This week we just might see the whole banking industry go "Caster's Up" as we say in the IT world.

Downward Spiral of Deep Junk
by Mike Shedlock

Credit-default swaps tied to MBIA Inc., the world's biggest bond insurer, rose 60 basis points to 480 basis points, the widest in at least three years, according to CMA Datavision in New York.

Ambac Financial Group Inc., the second-biggest bond insurer, climbed 63 basis points to 689 basis points, CMA prices show.

The last two sentences in the above snips hold the key to a cascade of defaults. Let's continue with that thought to see why.

Buckle Up folks.


Thank you very much.

I read them. Robert Rubin to be head of Citigroup.-calculatedRiskblogspot

Unloading Toxic Waste Mortgage Backed Securities: “We Americans Were Very Clever”
November 2nd, 2007

Arkansaw of Samuel L Clemens

Iran already has twelve nuclear capable cruise missiles purchased from the Ukraine right after the Soviet Union broke up. There is no evidence that they got the warheads by some other channel, but on the other hand they were highly motivated and Putin visited there just a few days back. Would they arm the Iranians to resist U.S. aggression if they had plausible denial? Yes, I think things are getting that crazy ...

Why is it that Mexico's oil exports will never increase again? Its a temporary shutdown because they can't dock their ships, much less load the oil and then ship it to the US.

Looks like the storm rolled over a few rocks and some doomer trolls popped out. Beware all!

Hmm - let see what the export rates are same day next year?

We all know Mexico is on a plateau/decline trend. They stated very specifically that the 1.1 million bpd that was exported to the US and has been halted completely will not come back. Are you suggesting they had a national 33% decline last week and thats it?

Mexico has just taken a Katrina sized or larger hit in Tabasco. Their emergency services are much less capable of handling such a thing than our own poxy FEMA, their people are under the gun due to declining remittances from the U.S., and the government is under the gun from declining oil revenues.

So they need the oil revenues they used to have in order to upgrade their plant to maybe get the oil revenues they used to have, and before they do that they need the oil revenues they used to have to bail out Tabasco ... but their oil is both declining and now shut in.

Does the U.S. tap the SPR to cushion for the missing oil, or does our incompetent government fail to execute again, or does it purposely fail because TPTB in the oil business want the Mexican direct investment block lifted?

I'll go back under my rock now ...

What's scary is trying to find news about the flooding.

You can't.

Anyone think that PEMEX has fixed this yet?:

Tabasco state officials said the pipeline had exploded, but that there were no deaths or injuries. The unnamed brigadier-general who spoke to a few Jewish journalists in Toronto on October 22 had his remarks posted on the Canadian Jewish News Web site. [19] Tabasco officials also reported that there was an explosion at a gas pipeline in the city of Huimanguillo, about 50 kms (30 miles) west of Villahermosa late Tuesday, but that the blaze had been brought under control by employees of the state-owned oil company, Petroleos Mexicanos, or Pemex.[9] MEXICO CITY Dozens of residents of an oil-rich capital on the Gulf of Mexico coast were evacuating their homes Wednesday after a river overflowed and began rushing through cracks in a containing wall following a week of rainstorms, Mexican news media reported Wednesday.[9] Gov. Andres Granier urged residents to evacuate the city where floodwaters reached the rooftops of homes.[5]

All the water that comes in has to be pumped out." Mr Granier said ..."

Or this?:

A 10in (25cm) natural gas pipeline sprung a leak after flooding apparently washed away soil underneath it, but it was unclear if other facilities operated by the state-run Petroleos Mexicanos were damaged.

Arkansaw of Samuel L Clemens

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.

Tertzakian and Simmons sure do differ with Vaitheeswaran.

Vaitheeswaran said that the problem with oil "is not scarcity, it is concentration" and also that the oil sands have more oil than Saudi Arabia, so we have plenty of supply.

There are no fundamental issues driving the high price of oil, according to Vaitheeswaren. Supply is not a problem at all. The high prices are only due to geopolitical and technical concerns, and so the price of oil could easily go down as well as up from here.

Vaitheeswaren also blamed "resource nationalism" for high price. This makes it sound a bit like "they won't sell us our oil at prices we like and let our companies profit from it along the way." So we are the victims of Russia, Venezuela, the Saudis, Iran, and so forth?

Vaitheeswaren bubbles on about "look to unconventional" as a solution, specifically look to the Canadian oil (tar?) sands." Tough to produce and expensive to turn into gasoline? No problem, says Vaitheeswaren, "you give me a price point, and I'll give you the gasoline." there it is, the economist's oversimplification: walk up to the tar sands with a big enough bag of money, and all our "supply" problems vanish overnight.

Finally, Vaitheeswaren confides that we'll just be leaving lots and lots of the oil in the ground because we will come up with much cheaper and better sources of energy. Nice and neat, in a pretty package, and in time for Christmas, too?

Vaitheeswaren ought to have been preceded by a Disney fantasy theme song like "when you wish upon a star" and followed by another like "someday my prince will come."

Did Vaitheeswaren present the best economist's cornucopian ideas? I think that he did, but that it is becoming apparent that the flaws of our corrupt crony capitalism are starting to show.

MSM economists look more like carny hawkers and snake oil salesmen with each passing day. It is so obvious, so glaring, that I think even people who are not used to thinking may really suspect that wishful thinking is not what capitalism is supposed to be about.

At any rate, Simmons made more sense than Vaitheeswaren, and the analysis of the tar sands from Tertzakian show that Vaitheeswaren's optimism is simply wishful thinking.

Vaitheeswaren ought to have been preceded by a Disney fantasy theme song like "When You Wish Upon a Star" and followed by another like "Someday my prince will come."


Vaitheeswaren noted that the resource nationalism is directed against the multinationals located in the US and GB. I've wondered the same thing, and also speculate that as soon as the army and mercenaries leave Iraq, then the Export Land phenomena willl really kick in and they won't be able to buy much crude except where there are joint ventures in refining like the Saudi's with Motiva/Shell in Deer Park (Houston).

Friday was the first time I've heard MSNBC discussibg the deppletion rate amoung the multinationals, noting that both ExxonMobil and ChevronTexaco were down 2% on crude volume. I haven't looked up if this is the annual rate or 2% for the quarter, which would make 8%.

IMHO this is huge. It might be time to sell our stock in the old seven sisters survivors. Bob Ebersole

Simmons & Tertzakian - experienced practical realists with knowledge of technology and geology. Constraints and model minded.

Vaitheeswaren - experienced journalist, with upside potential focus and aim to passionately instill optimism.

Both are needed, but for facts, I'd go with Simmons any time of the day. For rallying speeches with Vaitheeswaren (only if based on Simmons&Tertzakian type analysis though).

Well SamuM, I checked the ExxonMobil earnings report that was released Friday. Liquids production was off 111K barrels a day, 2% from the level at the first of the year, blah blah, blah...except for blah blah blah the production was really up 5%...
I'm selling the XOM and BP stock I just inherited, and buying Apache and Petrobank with the money. Petrobank has developed the THAI system of in situ combustion reviewed here about 2 months ago that looks as though it will make Alberta Tar sands very profitable, while Apache is the largest independent producer redeveloping domestic production in the US. Their production grew by 15% so far this year, no BS and no excuses and no stock buy-back .

Guys, all BS aside, is there a particular discount broker that you'd care to recommend as cheap and easy to work with? My email is my name all lower case and run together twothousand four at
Bob Ebersole

I've been happy with Fidelity. You can open an account on line and after you send them a check to set up a core account and then you can buy and sell most any stock or mutual fund you want. I'd minimize the amount of money I keep in their money market fund though because I think it has a large subprime/ CDO exposure.
Does anyone know of any canadian oil trusts that I can research?
I have some but want to increase my holdings to protect myself from the decliningg US$ and bump up my oil holdings more.
The Canadian trusts I currently own have 10 %+ dividend yields and the income is paid in Canadian $'s. I think they will perform well even as Canadian tax laws change and am interested in learning more about them.

all bs aside oilmanbob, wouldnt you be wise to diversify, hold some of the bp and xom and buy a slate of smaller co.s you may be right on the thai system, but i am sceptical, given what little i know about insitu combustion.
i have a few shares of tlm (talisman) which i bought when they announced they were getting out of the tar pit. take a look at their projects worldwide. of some concern though is their recent appointment of an ex bp refining guy as ceo - do they plan to get into refining ? i hope not, maybe it is lng. their recent press releases seem to telegraph that they are considering acquisition(s).
i also have a few shares of bowvf (bow valley) and tga (transglobe). a domestic co that i have held before that may be right up your alley is phx (panhandle oil and gas). they have minerals in every corner of the us of a.

I didn't quite understand how that relates to what I wrote, but thanks for the tip (I was just reading THAI backlog yesterday).

Sorry, no tips on discount brokers from me (I don't have a US account), but perhaps the following might be useful to you:

Barron's 2007 Online Broker Review: How the Brokers Stack Up

A more important point to me than production is reserves... if production goes up but reserves go down, the company will go bust pretty soon. Of course they all will eventually do this, but in the long run we are all dead; meanwhile, we want climbing reserves for at least a few years.

So, I first look for companies with climbing reserves, and I don't count tar sands - high reserves but surging costs. I also don't count reserves xom is booking - they are replacing high value oil reserves with low value ng in qatar, far from markets.
Futher, I stick with E&P's, the large integrated oil co's (IOC's) have too much concentration in refining, a poor investment as we slide over po... less oil to refine, and anyway persian gulf are building new refineries to handle heavy oil (SA) or because internal facilities cannot handle internal demand (Iran.) As they send their crude to new refineries they will be exporting product, not crude, so non opec refining operations will be under increasing stress.

I stick with US, don't trust canada's changing tax laws, canada much more liberal than US... they will never restrict exports on account of nafta, but taxes are not restricted. Higher taxes are how russia/venezuela confiscated energy assets. Higher taxes in canada have already begun, trusts can no longer acquire new fields under the same favorable tax regime, and this is why drilling for ng has slowed there.

I use a formula to compare US E&G's... note that only in the us can you find sufficient data, so far trust worthy, to do the calc:

JKEP = Reserves/production x net/EV

All of this info can be found in the Yahoo finance pages.
Reserves are published by each co once a year, usually in advance of their annual report, and is usually shown on the profile page.
Production and net are released with each quarterly report, the former on the headline page that links their quarterly statement and the latter on the income statement page.
EV changes daily with the stock price, and is asually shown on the statistics page (if not, add market cap to debt and subtract cash on hand for EV)

As an aside, the first term, reserves/production, = life in quarters.

The calc is an attempt to guess total future earnings based on present resource price, (life in quarters x net/quarter), and then compare this with EV. It is obviously better if total future earnings at least equals current EV, so better if the result is at least 1.0. The calc is conservative to the extent that reserves grow with time and if resource price climbs, but non conservative to the extent that cost to produce the reserves, or taxes, increase with time.

Note that, while the market always likes to hear of increased production, the formulae does not like increased production because the co is simply pumping out its reserves. Far better to have increased earnings with decreased production, a neat trick when you can do it. Remember, production is the top line, income is the bottom line.

Most US E&P's are under 1.0, some substantially under. Of course, if you think company X is about to develop a profitable new field, then you might accept what you hope is a temporarily low value. One of my invesments, GPOR, is one such, hopefully will have improved production/reserves/earnings end 07 as it brings on line its new hackberry field.

My energy investments are ARD/GPOR/OXY (oils) (the latter my only energy multinational), and GMXR (NG). GMXR has suffered this year with low ng price, but this price is being pulled higher by high oil price and, even with high storage, ng price normally climbs as cold weather approaches.

Even with po, which may or may not be here now, this is not IMO as good a time to invest in energies as when I began early 2005. We are going into a recession next year, IMO deeper and longer than either of the last two because banks' ability to loan is coming to a stop... the crash in 00/1/2 took the S&P500 down 50% over 30 months, and the recession in 91 also took 30 months to bottom, down 40%. True, in the seventies oil never declined in spite of three recessions, but you cannot expect energy to do as well when demand declines. We are already seeing a flight from small caps, real estate/financials are crashing... I have already reduced my energy exposure from 100% to 50%, moving into gold (AUY, anticipating more dollar decline) and the short side of the market, BEARX (mutual, picks weak companies, easier in falling markets, no leverage?), SRPIX (mutual, bets against builders, no leverage), and SKF (shares, bets against financials, about 2x leverage.)

Pesonally I think the market crash began oct 9 (DJI/S&P500), might bottom late spring 2010 if not worse than last time, OTOH we will likely be peaking or past peak then, recovery may be slow. The financials are in free fall, some of the biggest may go under. We'll see... but IMO its time to be increasingly defensive.

Picking brokers is not as important as picking sectors and companies, and deciding whethre to buy or sell... but, if you are doing the picking, you certainly want to minimize your brokerage fees. TD waterhouse is probably best of the low priced brokers, they have a lot of offices, have decent PC software, I think they charge $8/trade.

Good luck.

well your formula has certainly put you into a mix of companies and if you bought all in '05, you are standing tall. i have to question your assumption about canadian and us taxes. to my knowledge canada is not considering a wpt. i favor canadian co.s over us, because us co.s seem to be overvalued when compared to canadian.

Bob. I've been using Schwab and they charge me $10.00 to $15.00 per thousand shares of stock I buy and sell. They have a terrific American staff who will help you understand everything from margins to bank linkages.
The only thing I can complain about is that they only pay 1% on stock that I short. When I was a market maker, they interest on my shorts was 5%. So it goes.
Thanks for the tip on PBT. I've made 32% in 3 months. Email me if you need more muscle on your local project.


Hi bob,

I use Ameritrade, can trade anything for a low commission. I am now out of all majors with the exception of of RIG Transoceanic- deep-water drilling) and CVX (Chevron).

Yes, I like APA (Apache-argh, did not buy last dip, should have expletive deleted).

Of the 7 sisters I think CVX has been making the best moves lately. They seem to have the best awareness of the situation. RIG has serious upside potential still IMVHO.

Looking at a small wind turbine manufacturer, AWNE. Have played it before, not in right now, may be time again soon, not sure yet.

Best of luck to everyone making enough moola to pay this winters heating bills.
Cheap, professional and very secure with personal code generating device. Trade about everything but T and M bonds.

Vaitheeswaren bubbles on about "look to unconventional" as a solution, specifically look to the Canadian oil (tar?) sands." Tough to produce and expensive to turn into gasoline? No problem, says Vaitheeswaren, "you give me a price point, and I'll give you the gasoline." there it is, the economist's oversimplification: walk up to the tar sands with a big enough bag of money, and all our "supply" problems vanish overnight.

Haha, I immediately thought of the Thurston Howell III illustration from Nate's keypost yesterday.

The problem will solve itself.
But not in a nice way.

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 ) Elsewhere Fatih Birol said last week that his thinking had “experienced an earthquake” .

(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.


"We are only Homo Semi-Sapiens."

Is this another way of saying we are only Monkey Boys?

SubKommander Dred

The problem will solve itself.
But not in a nice way.

I will be awaiting those reports.

Excellent analysis, Nerd. This helps account for the political/media vacuum into which so many conspiracy theorists venture.

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?'

You can also notice that the faces haven't changed
anywhere since 121200.

One of the Goobers (Loeb, I think) yesterday. A paraphrase:

"...I really, really hope I'm wrong and I can say that three years from now.

CNN guy: "...garbled...yea, if you want to be invited back."

No matter how many times they've been wrong.


Maybe 20 Execs control your news on TV/Print.

Arkansaw of Samuel L Clemens

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

Hopefully the more Simmons talks about $300 oil, the more people will feel like morons who are selling today for $95.
And morons they are!

It's like selling Microsoft in 1990.

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

I understood Simmons to say that European drivers are currently paying a price equivalent to $300/barrel oil for gasoline.

Is that correct?

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 think what he was doing is this:

Gasoline at $8/gallon x 42 gallons/barrel = $336/barrel

What I would like to see is the oil price start to be quoted in $/gallon. $95/barrel is only $2.26/gallon (a bargain!).

Somehow its easier to see how oil could rise to $3.50 or $4.75 per gallon than to $150 or $200 per barrel.

Remember that the average european car gets better milage than their american conterparts, and that europeans dont drive as much.

which is because of high taxes on fuel. increasing the price makes people more frugal with its use over time! (note the time component, it took europe 20 odd years to change.)

And most importantly, of that "$250/bbl" oil price, $150 of it goes back into their own economy to do useful things for the good of the many (at least in theory, and somewhat in practice).

So at the end of it, they have widespread health care and an efficient train and ship system.

The USA has more trucks and SUVs. They're not "capital stock", they're anti-capital stock. They have a negative rate of return.

When oil is $250/bbl to producers, in the USA there won't be any of that recirculating money to finally build trains.

Europe will have dense cities with electrified transport.

And when people propose to Americans that they ought to look at what the Europeans did, the response will be powerfully and universally, "what? more taxes? Typical liberal morons. I can barely afford to make ends meet now with gas and food prices so high!"

At that point, you'll simulatneously have $1T/yr subsidies for the agriculture and oil industries, "in order to encourage additional supply". Blah blah blah.

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?

My understanding is that refineries bought extra crude in the spring in anticipation of a bad hurricane season that did not materialize. The relatively cheap price for gas right now is a result of this.

Gas prices are already starting to climb again, and with the flood devastation in Mexico's biggest oil producing/shipping region, I suspect gas skyrocketing over the next six months. Just a guess, but gas prices in 2008 may be on average about a dollar more than 2007.

Gas prices jumped up here in Southern Ontario. Last week it was in the 94-96c range. Last night 1.01. Expecting it to continue to rise.

Wonder what premium Citi+Pakistan will inflict on the price of oil?

Richard Wakefield
London, Ont.

No one is ahead of their time, just the rest of humanity is slow to catch on.

"what's stopping
them from raising gas prices at the refinery gate?"

TPTB realize that $3.50 gal avg nationwide is the nail in the coffin of the American Economy.

80%+ of Americans have not kept pace with the inflation since 1974.

And haven't yet felt the inflation engineered
since 7/17/07.

We have never recovered from Katrina.

BP's Thunderhorse is still not a viable concern.

Arkansaw of Samuel L Clemens

I thought it was proved that food and fuel as a % of income had fallen in the past 30 years, not increased. That effectively puts the nail in the coffin for the '80% of Americans have not kept pace with inflation' rhetoric that seems to crop up here almost daily. Maybe YOU haven't kept up with inflation by buying your gadgets, but plenty of people have :P

Friend of mine in the financial community saw his first interview with Matt Simmons on the CNBC show referenced....he had seen some of Matt's powerpoint presentations of his speeches, because I had e-mailed them to him....he then read the "trillions" of oil to go article, the one linked on The Oil Drum the other day.....although he found it at another source...

"Global cumulative production is 1 trillion bbl from a conventional resource of 7-8 trillion bbl, noted Nansen Saleri, president and chief executive officer of Quantum Reservoir Impact. With unconventional hydrocarbons, the total resource is 14-17 trillion bbl."

"We have a lot more trillions to go," Nansen told the RMI Oilfield Breakfast Forum in Houston Nov. 1"

Needless to say, he is now one confused individual....:-)


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


It's interesting that you should put it just that way, because that is essentially De Marjarie's of French Total's contention....he was the one who famously said "100 million barrels a day, never.", not because in his view the oil was not out there in the world, but simply because the developed nations no longer had the ability from a financial and geo political perspective to get it.

This begs a question, and let me say that I certainly do not know the answer, I am just think tanking out loud....

Is what we are seeing perhaps not peak oil in the geological sense, but instead "peak power" in the world geopolitical sense? Hmmmmm......

Of course, that was something of the goal of the Neocons, if we recall, to reintroduce the ability to use "will" and to use our "power" to retake essential control of the world....of course after we fell on our face in Iraq, that idea has been pretty much discredited.

Essentially, if the above is true, then what we would want to do is basically promise protection and loving kindness to our moderate Gulf oil suppliers, promise to "cost share" on the issue of maintaining spare capacity, and sign for long term contracts even if we have to pay more, which seems to be certain to be the case in any event....and very quietly move our energy base to a diversified sourcing system, particularly in transportation...i.e., mixed electric, compressed natural gas, propane, recovered methane and waste, and even some biofuels, not much, but some to keep development up and moving, in case it can ever be made promising (I hold out little hope, but who knows....)

I don't know....but once again, I don't think anyone has any real idea concerning world URR, so timing anything becomes very difficult.

Anyway, I do agree with your main point and think the big private multinationals are facing a very hard time for a very long time....but then, they are used to that in many ways, given the 1980's and '90's.


Is what we are seeing perhaps not peak oil in the geological sense, but instead "peak power" in the world geopolitical sense?

I think the two may be so closely intertwined that you won't be able to tell the difference.

The problem will solve itself.
But not in a nice way.


Net Free Energy.

If it costs a barrel of oil to pull a barrel of oil,
why bother?


Collapse is economizing.

Arkansaw of Samuel L Clemens

Or, it's hard to project geopolitical power when your hummers have empty gas tanks.

There are two modes for using oil - using it for energy, which depends heavily on EROI, and using it for things like plastics and medicine, which does not. When EROI goes negative we may still be applying some form of energy to pull oil out of the ground as a raw material for certain processes, much in the way we still dig for various types of metals. We'll still need grease for the bearings and plastics for the hoses that go into those wind turbines ...

Bob, I would add that for the next N years, it doesn’t matter how big the resource is, even if you can afford to get it out, if there is no way of getting to it until N+1 years. To adapt the joke on TOD, about the two economists locked in a basement without food, it’s not just a question of whether market forces will eventually produce a sandwich at an affordable price, it is also a question of WHEN market forces will produce the sandwich!

As a separate point, as I said in a previous post, I think that a likely scenario is that transport will become electricity-centric within 20 years or less, and that this will put an upper limit on the price of energy for the majority of transportation. By a crude reckoning based on googling the figures for my Prius, the equivalent use of electricity is about 7.5kWhr per US gallon. At 10-20 cents per KWhr, this is would set an upper competitive price for fuel in 2030 of about $0.75 to $1.5 per US gallon, which from the above posts would be the equivalent of crude oil at 30x this per barrel, i.e. $22.5 to $45 per barrel. Hopefully this will mean that most ‘unconventional hydrocarbons’ will be priced out of the market before extraction can scale. In fact, my prediction would be that by 2030, development work on alternative energy will have brought the price of electricity down to below current electricity prices, in particular at the retail level, constraining the economics of fossil fuels even further.

The economists are right, market forces will find a replacement for cheap oil, but it will not be expensive oil, it will cheap electricty, and it will come late, after a period of severe shortages, pain, and very high prices for oil in the interim.

Homo Semi-Sapiens.

Good point nerd. But I do think electricity costs will be elevated in the future though. I am working on a little project to track consumer electricity costs in relation to crude costs.

I had wondered how much indirect crude costs drive and influence electricity costs even though here in the USA not much electricity is produced by using crude or crude products. So far, what work I have done, has shown that crude prices does not move electricity cost much. I choose Florida as a state to use for the test subject because all fuel used to generate electricity had to be imported into the state. My thinking was higher crude prices would increase transport and logistic costs to get the fuel to the generator plant. The best data I have found only goes to 2006. So if I can find data for the current year with the recent run-up in crude prices, which may show more.

The demand side of alternative electricity is so great right now and in the near future I cannot see things getting cheaper in the near term. Supply cannot meet demand; we have been given notice that some solar panels have delays out until February of next year as an example. I do see supply side increasing in volumes in the next 2 years but pricing pressures steady or stronger. And that is what concerns me for solar...shear demand will keep prices high even as manufacturing advances reduce costs.


I agree entirely. My optimism is only about the long term - 10 to 20 years time, when presumably supply will have caught up with demand. With the rate of innovation that has now been brought to this market, I think it would be reasonable to assume some degree of continuous improvement, on average.

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.

It's time for me to change my thinking as well, from preparation to mitigation and action.

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 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.


No one using Hubbert's methods--especially Hubbert himself--was predicting a world peak in the Seventies. In fact, in his 1956 paper, he estimated that the final world peak would be no later than 2006.

So far, world crude oil production numbers and Saudi crude oil production numbers are both consistent with the HL estimates, while oil prices are up about ten fold from their 1999 low.

The real lesson from the Seventies, IMO, is that Saudi Arabia and the world in 2005 were at about the same stages of depletion at which Texas and the Lower 48 peaked in the Seventies.

Please do me a favor. Below is a copy of the ASPO chart, showing our oil production past, present and projected future. It is now one of the more famous visual icons in the Peak oil movement:

Pull the picture up on your computer screen. Now take an envelope, or piece of paper, or even your hand, and lay it over the side of the chart ofter the zero on the year 1980, so that it matches the bottom of "the valley" on that chart.

Imagine that your there. You do not know what is about to come. You are in 1982.

Imagine your the average schmoe on the street. Or the average businessman. There was no internet then. There was no 24/7 discussion boards about energy. You had to have the Wall St. Journal to even follow the stock market.

If you were one of the geological or energy insiders, perhaps a few hundred in number, you had heard of M. King Hubbert. Otherwise? Highly doubtful.

Look again at that chart. look at the valley. Look at the news articles, books, the catastrophe scenarios from that period in the popular press. YOU ARE THERE.

Who in their right mind did think the age of oil was almost over. In 1980 Alvin Toffler quoted in his book The Third Wave an oil executive as saying that the age of the decline of oil and the rise of renewables would occur "in years, not decades". Plug hybrid cars were built using lawn mower engines and lead acid batteries, and displayed on the show stands. I went to an "alternative energy conference" in Louisville KY and saw a "Hydrogen Car", using pelletized hydrogen that looked like fertilizer as a storage medium. The governor of the state of KY, John Y. Brown Jr. flew in on a helicoptor and gave a speech about Kentucky's great new energy frontier, synthetic liquid fuel from coal. And I made great grades in science with essays about solar heating, small scale hydro-electric dams, and windmill systems based on the idea of multiple rotors on a single giant tower, which would use a "turntable" similiar to the one used in the railroad industry to turn around and service locomotives.

No one, and I mean NO ONE bought shares in the NYSE. How stupid, how stupid would you have to be to do that!

(sigh) Westexas, it is now so sad, SO SAD to see that history that recent, that near to us, lived through by the whole boomer generation, has already been all but forgotten. But, time marches on. Once more we will all re-invent the wheel. Millions are being spent now to relearn almost everything we attempted or developed then. But it is such a waste.

Who is that uses a tag line something like that here on TOD.
All these memories will be washed away, like tears in the rain.

As I get older, I understand more and more the true sadness of a line like that.


Who in their right mind did think the age of oil was almost over.

As I said, M. King Hubbert.

As I also, said recent production numbers are consistent with the mathematical models.

As I have stated over and over again, the really, really bad news is that we are almost certainly looking at an accelerating net export decline rate, especially among the top net exporters.

"As I also, said recent production numbers are consistent with the mathematical models."

And as I have said over and over again, you may be right. But history shows, the 1970's in particular, one thing very clearly. Production tells us absolutely nothing about the geological amount of oil in the ground or in the sea that can be produced. Production can be changed on the whim of a dictator, or the decision of a few bankers. It tells us NOTHING.

"As I have stated over and over again, the really, really bad news is that we are almost certainly looking at an accelerating net export decline rate, especially among the top net exporters."

Again, you may be right. I will let you argue that one out with Nansen Saleri! :-)
Published on 5 Mar 2006 by GraphOilogy. Archived on 7 Mar 2006.
M. King Hubbert's Lower 48 Prediction Revisited
by Jeffrey J. Brown & "Khebab"

Fifty years ago this week, on March 8, 1956, at a meeting of the American Petroleum Institute in San Antonio, Texas, M. King Hubbert, in the preprinted version of his prepared remarks, had the following statement, "According to the best currently available information, the production of petroleum and natural gas on a world scale will probably pass its climax within the order of a half century (i.e., by 2006), while for both the United States and for Texas, the peaks of production may be expected to occur with the next 10 or 15 years (i.e., 1966 to 1971)." As more and more people are learning, Lower 48 oil production, as predicted by Dr. Hubbert, peaked in 1970, and it has fallen fairly steadily since 1970.

Published the other day....

As I said, you may be right, WT. I put more weight on your numbers than I do most most peoples (you, Robert Rapier, Stuart Staniford, are still the "big three" that introduced me to much of this stuff on TOD :-)

But, even given that level of trust in the intellect of you guys, I hedge.

I am more certain everyday, everything I read, everything I hear, that we (by which I mean the developed world, the fuel consuming nations) are running completely in the blind regarding URR, regarding production ability of the producing nations, regarding real costs in the industry, well, regarding just about everything. Control of information, dis information, rumor, stories and charts and projections with agendas, it's like Ali Baba and the 40 Thieves.

We are running entirely blind. I beg people not to get married to an agenda, Hedge your bets, hedge them and then hedge the hedge. And even then, you wil be facing a lot of risk!


When you say past production tells us nothing about future production, you must say that Hubbert used just this math model to make a wildass guess on when U.S. production would peak and got very lucky when it actually peaked then. Then you must say that he used this screwball method to make a projection no less than 50 years into the future on global peaking sometime between 2000 and 2006 and, with yet another incredible stroke of luck, having the price of oil, with no embargos or Middle East war, mysteriously go into a 10 fold climb starting in 2000! What a lucky guy this Hubbert. What are the odds?

"When you say past production tells us nothing about future production, you must say that Hubbert used just this math model to make a wildass guess on when U.S. production would peak and got very lucky when it actually peaked then."

No, I give Hubbert much more credit than that, but I am also reluctant to use his call of the lower 48 U.S. production peak as absolute prophecy. Here's why:

Of any peak to call, the U.S. had to be the easiest. It was a drilling and investment environment that forced all parties to report their production and their reserves with a relative degree of accuracy. It was an environment that had access to the best technology available as it became available throughout it's drilling history. It was an environment relatively unencumbered by political manipulation or lack of stability throughout it's history. Making a call about peak was almost certainly far easier in the U.S. than in any other environment in the world. You had access to open and reliable numbers to work with.

"Then you must say that he used this screwball method to make a projection no less than 50 years into the future on global peaking sometime between 2000 and 2006 and, with yet another incredible stroke of luck, having the price of oil, with no embargos or Middle East war, mysteriously go into a 10 fold climb starting in 2000!"

Note your own words, "starting in 2000". The 10 fold increase in price did not occur in 2000, but has been driven along by a string of factors unheard of in the oil industry: Lack of stability beginning with the 9/11/01 attack, followed by first a decline in oil prices due to the anticipation of a recession, then recovering prices, pushed along by
(a) Incresing threats of invasion of Iraq
(b) Radical anti Western government in Iran
(c) Strain between Saudi Arabia and the U.S. relating to 9/11
(d) Massively increasing demand in India and China (did Hubbert know that China would throw off Maoism and go capitalist in such a massive way in the 1950's? If he did he was not only a great thinker but was an outright psychic!)
(e) The actual invasion of Iraq
(f) An onslought of Hurricanes unheard of in modern history in the great oil and gas producing region of the Gulf of Mexico
(g) Increasing unrest in Nigeria and most of West Africa
(i) Increasing strain between the U.S. and Venesuala, and decreasing willingness to invest there by oil companies
(j) A weakening of U.S. currency in general, making oil higher in any case in nominal dollars if the producing nations hoped to get what they had been getting for it only a few years prior
(J) Possible world peak of oil production, or at least leveling off and possible peak of Saudi production
(k) Almost assured peak of European North Sea production
(l) Perception of nearing peak, whether it was occuring or not, on the part of speculators

I will stop there. NOTE: I am not saying that peak is not here. It could be. It could have even occured several years ago. It may occur next month, next year, or 30 years from now. Price moves did not tell us whether we were at true peak in the 1970's. They did not provide warning of the U.S. peak, being at near historic lows within months of the U.S. peak.

Production did not tell us anything about peak in the 1970's. If you look at the ASPO chart of production in the late 1970's early 1980's, you would have been certain that Hubbert had just been a bit cautious, and growth in consumption had occured faster than he predicted, and bet that peak was then (I know what Westexas said, and he is right in that Hubbert and a small group of intellectuals were not fooled. Many other good thinkers at the time were misled, and most of the public and investment community could not for the life of them understand where that much new oil would come from however.

So did Hubbert "get lucky" on the call he made on U.S. peak. I don't think so. He was a dammed good statistician, and had good imput numbers to work with.

Was Hubbert right in his call for world peak in the 2000 to 2006 window? We don't know. He may turn to be, which would only increase his well deserved image as one of the great statistical thinkers of our time. But price and production don't prove it. How do I know that? Because it didn't prove anything in prior decades.

Back to my central thesis: We are running blind. We have no real way of knowing if this is the time. The blindness is more dangerous than the peak, which can be adjusted for IF you know it's coming. So what should we be doing? On that I agree with those who are CERTAIN peak is here: Reduce consumption, yes. Increase alternatives yes. Increase reduncy and stockpiles to "case harden" our system against possible peak, yes.

BUT, keep in mind that oil prices at some future point may decrease very rapidly. Production may rise, VERY RAPIDLY OR FALL, VERY RAPIDLY. Be hedged for both possibilities. We have already seen one hedge fund collapse by betting on ever ascending natural gas prices, causing loses to pension funds and other large investors. BE VERY CAREFUL. Assume that things could go either direction. It will cost a bit more in "insurance" investing, and hedging (not the funds, but REAL hedging, to protect whatever decision you make.

Why is this so hard to understand? Why is so radical an idea? Are people really so absolutely sure (whether they are cornucopian or doomer) that they are right they cannot concieve of protecting themselves if they are wrong?


You're right about the wisdom of hedging, investment-wise, on the price of oil (or any commodity) because the next 40% move is never going to be certain. I wouldn't say that the U.S. peak call was "easy" for Hubbert as you suggested; he was going against the considered opinion of nearly every other expert in the industry at the time, in fact, including his boss at Shell. He was the only one making this "easy" call and was thought of as a lunatic untill years after the U.S. peak proved him right. We did not have a price signal from the oil market about the U.S. peak; that's true. But we just ramped up imports from the developing production abroad. We had an "import" signal that was so marked that there was a vast difference in how badly the two Arab embargoes were felt - the first in 1967 and the second in 1973, one 3 years before the U.S peak and one 3 years after. Hardly anyone even remembers the '67 Arab oil thing, but they sure remember the '73 version with gas lines, etc. America was much more dependent on imported oil 6 years after the first event, a clear import signal for U.S production peak. For the global peak, however, there should be a price signal since we can't import from the moon. The list of price raising forces you mention have pretty much always been acting on oil: weather, wars, demand surges, etc. The big difference in the last 7 years is that we are running out of the spare global capacity we've always used to deal with them. Now the effects are more severe and long lasting producing an unprecedented climb on an inflation adjusted oil price chart.

Hello Roger,

Who is that uses a tag line something like that here on TOD.
All these memories will be washed away, like tears in the rain.

I don't know whose sig it is but it is a modified version of Rutger Hauer's character's ("Roy Batty") last lines in "Blade Runner".

Best Regards,

J. Daehn

$100 dollar Oil on Thursday, this week, the 8th of Nov. 2007.

That's my guess.

Last week we had

U.S. crude oil imports averaged nearly 9.4 million barrels per day

This week it's looking like 8.9 to 9.1 per day with the problems down in mexico that should start showing up in this weeks report.

This week in Delaware.

Off Grid, Off Mainland, current profession:Beach Bum

Peak Oil Communications

Man, someone needs to make Corporations realize that the United States is in the deepest of Poo and we must make emergency preparations. Right now, the question facing us is not whether the world will move away from fossil fuels, but how. But, Corporations see it as harming themselves to tell the world that America's financial living standard can't continue as it. That message doesn't go over well with advertisers.

Peak Oil advocates have long been ridiculed by the media as fringe theorists. The past Corporate mantra has been to prop up the military-industrial strategy, just trying to take the oil from elsewhere. That plan isn't working out so well. Oops.

Now, when the mainstream media finally IS interviewing respected peak oil thought leaders, they seem more interested in ridiculing them rather than listening to the dire warning presented.

When I watch the video clip from CNBC with Matthew Simmons , I see dismissive reporter attitudes and utter lack of Peak Oil market education.

What an outrage to mock those trying to implement plans to change our dependence on oil as energy. Mr. Simmons is telling the market that the global market has reached the point when price doesn't matter, people will pay anything for oil because their current economies can't live without it.

Our economy is pegged to the dollar (petrodollar). As that collapses, so does our economy, shutting down transportation systems and completely destroying our "Just-In-Time" way of operating our country. We have run out of time for smarmy commentary, our country has to act like the most responsible of grown ups right now.

I applaud the way this reporter treats a true visionary by doing proper media homework before the interview. Here is the link


Notice the difference in reporting? I would say the best message the media could put out is that we need to brace for impact.

"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.

Its my understanding that the process to get a permit to make your own backyard fuel is not that hard.

Its "still" on the books and a holdover from the Carter days.

Local rules might be a consideration for safety/fire, but the BAF feds give out the permits for a home still. Main rule you have to follow is you have to cut the fuel with something that makes it undrinkable. 15% of gasoline is recommended. Thats what E85 is.


I think your right on that one. I still have a book from the 1970's showing how to set up a small farm still using a set of homemade solar collectors to do the distilling. The advantage is that if your making it at home using solar, you can manufacture in batch to the schedule of the most heat and sun, i.e., July and August. I think that alcohol may have some chance of being useful if done that way, but would require a great deal of labor hours since automating the process would require outside energy from somewhere else.

I am also fascinated by small scale methane recapture from waste and agricultural byproduct. I live in a small town of 1200 people, surrounded by agricultural land. If a community digester were planned to gather agricultural waste, manure, yard clippings, etc., and tied to the sewage system....?
The great thing about methane is that it burns cleanly, and reducing methane emissions is good for the greenhouse gas problem.

Again, I have a book (actually more a booklet) from the 1970's showing a methane digester using 4 cows as the provider of manure, plus the household sewage....

The 1970's.....what a time! :-)


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 -

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

I'm surprised there has been no discussion on CNN replaying the "We were Warned - Out of Gas" piece 4 times this weekend. I wonder if Peak Oil is finally starting to gain ground in public conciousness.

Another interesting outcry from the managing director of McKinsey (Ian Davis) in the latest issue of the McKinsey Quarterly where he passionately preached to corporations to help solve the pending major issue of demographics:
1. China & India need to maintain economic growth of 8% as their demographic is just coming into the work force.
2. Western countries will need to double taxes in the next 10 years to maintain current social programs and levels of service.

If you mix the doubling of taxes with the impact of peak oil, this greatly adds fire to those who believe in imminent (<10 years) economic/social collapse.

Link to McK article (you'll need a username/password) -

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.