Midweek Open Thread

Since it appears we haven't had one for a while.
I'd like to discuss what motives there might be of various entities to claim there is more (or less) oil in our future - not whether they are right or wrong, just their motives.

For example, I believe that the Saudi's want to remain in the political spotlight as the only swing producer. It gives them an international clout that must be intoxicating. If all oil producers are at full tilt, then all oil producers are equally important.

Clearly Chavez became much more prominent and powerful from petro-dollars as oil became more expensive. It works to his advantage to raise the oil panic by repeatedly claiming oil is running out.

Comments? What about other groups? I'd especially like to understand the motives of the US Geological Survey.


This is an interesting question.

I'd draw a distinction between "motives" and "ulterior motives" intended to decieve or mislead. Both types of motives occur.

As a quick segmentation analysis, we could group commentators on oil issues roughly into political groups, corporate groups, and intellectual groups. The categories are not mutually exclusive. Other groupings do, of couse, make sense.

Political bodies include the IEA, EIA, USGS, and OPEC. They often have to support a homogenized point of view that is politically expedient. Many inside the groups may not really believe what they say. Consider the outrageously high USGS estimates, but the fact that they also publicize Les Magoon's peak oil viewpoint. I feel a lot of these groups are either disingenuous or have clear ulterior motives.

Corporate groups are the oil companies and other associated producers and users. A very few choose to speak openly (Chevron's "Will you join us" campaign). Some speak in code (Exxon Mobil's graph showing non-OPEC supply flat within the decade). Most don't speak, for good reason. Saying that your industry has no long-term future in its current form is bad for stock prices, and could even lead to lawsuits. I think these corporates will tell the truth when they believe it's good for business, and be discreet and quiet when they think the truth causes more trouble than it is worth. I don't think there is much outright lying here, perhaps because of liability issues as much as anything else.

Intellectual groups are those people studying the issue from a more outside perspective. I suspect most of these people are sincere and motivated by the truth as they see it. There are diverse opinions in this group: I'd put the Lynch & Yergin cornucopian / economic camp in this groups; as well as Hubbertarians/ depletionists like Deffeyes, Campbell, Simmons; environment policy people like Heinberg; social critics like Kunstler; and the more extreme post-industrial and dieoff groups. Some have clear agendas, such as pushing environmental or climate change policies, or debunking peak oil. But that doesn't mean they are lying--it's how they see the truth.

Dave said in an earlier post that peak oil is not a matter of belief, but I disagree with that. I am a fervent peak oil believer, but I can't (yet) prove my belief to a smart skeptic. The data is simply too bad, too incomplete, too full of holes. Ultimately, we don't know people's motives, but we can judge their words and actions. I'd assume sincerity, even from those I vehemently disagree with, unless we have clear evidence to the contrary.

This matter of belief is irritating.

If Peak Oil requires belief, then I want no part of it.

I "accept" it pretty firmly; I don't believe in it.

Belief is something you accept either in spite of or in the absence of evidence.

Belief requires faith, an evolutionarily designed mental error, I believe... Oops.

See? There's the colloquial sense, "Well, I believe what you're saying is not true," meaning "I think," and the psychological sense: "I believe because I believe."

This guy is so much more articulate about it:


Sorry to offend, but we are accepting peak oil in spite of an absence of good evidence. Nobody knows what the OPEC reserves really are. We don't even know good production figures. Matt Simmons puts fixing bad data as a major top-priority problem. Even Colin Campbell won't show his data.

I have no problem accepting peak oil as a near-term reality. But I also know the data to date only partially supports that, and it is far from irrefutable. We in the peak oil community are assembling scraps of information, and putting it together in a qualitative, value-laden way that reflects our outlook. I happen to agree with most of it it. But don't think that this is rational, unbiased inquiry. We're partisans, and we are constructing our world view to fit our partisan leanings.

Peak Oil doesn't need good data to be proven. It is a fact for a finite resource that there will be peak extraction. Period.

You probably meant "we are accepting Peak Oil in the 2005-2010 timeframe despite not knowing what the OPEC reserves really are".

No offense at all.

You're saying exactly what I'm saying, in a sense.

"Belief" is irrefutable; peak oil, on the other hand, being subject to crappy data, is provisional, changing, irritatingly difficult to pin down.

It's that word, "belief," getting thrown around a lot that I don't like. See the crappy blob "Debunking Peak Oil," and you'll see what I mean. It's the idea of peak oil being a belief system that critics are seizing upon.

Again: peak oil does not require faith, which is what belief is all about.

What you are objecting to are irrational beliefs. Many of our beliefs are based on past facts as baseline data and then extrapolated into the future and which have various probabilities assigned to them by us.

When I encounter cornucopians, I tend to think of these as people with data sets less complete than my own. Their extrapolations are valid and have been valid historically yet they are lacking the additional data that transforms the expectation of continued oil availability into oil depletion.

The problem that occurs in human beings is that many, perhaps most, of us strive to not change beliefs even when the data set is expanded to include new data (or correct erroneous old data) that yields a different conclusion.

This question is quite philosophical.

If you dig into any statement you can find underlying assumptions which ar emore a less a matter of belief. Some of the assumptions are "widely accepted" and you can bet pretty much on them but some are indeed a matter of belief.

For Peak Oil we generally assume that oil is a finite non-renewable resource, though nobody can be absolutely sure on that. Another assumption is that the world has been thoroughly searched already and nothing substantial is left to be found. Well we have the evidence for that but nobody knows for sure, right? We simply extrapolate or deduce in uncharted territories and these deductions are potentially flawed. That's why it is better to say "I think" or "I believe" than "I know".

surely everyone who is aware that america is importing oil is "believing" that america has peaked.
do other countries not peak?
belief makes little difference to the time of when peak takes place. what does the smart sceptic say?

isnt it a question of believing WHEN oil is going to peak?
 so some people think 80 years time and because they will be dead they dont care, so people with kids care more?
the people who "believe" it will happen after they die still "believe" (apart from the abiotic amongst us)

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10-27-2005/0004197851& ;EDATE=

here is a nice story about peak silver

"In free markets with free prices, supplies are rationed not by limits, but
rather, by higher prices.  The SUA, who is advocating a type of limit for
investors, would rather not see higher prices.  Today, it appears as if the
SUA is more concerned with keeping silver available to its members than
keeping silver prices low, since they can no longer continue to do both.  The
SUA is endorsing the bullish story for silver, in an attempt to keep silver
available to users, and away from highly capitalized investors who may want to
buy silver through a silver ETF.
    What are the bullish fundamentals for silver?  According to the Silver
Institute (silverinstitute.org) and CPM Group (cpmgroup.com), each year about
600 million ounces of silver are mined, while about 870 million ounces of
silver are consumed by industry, jewelry, and photography.  The difference is
largely met by recycling and investor selling.  In 2004 however, investor
selling ended as about 40 million ounces of silver was purchased by investors
throughout the year, which drove silver prices up from a low of $4.15 to a
high of $8.40/oz."

if i dont believe silver has peaked will that mean there is more silver for me?

I recall listening to a BBC interview in the 3rd or 4th week of May 1990 (~2 months before Saddam Hussein invaded Kuwait).  They were interviewing the VP for Marketing of the weapons division of Vickers, a British weapons manufacturer.  At some point during the interview the interviewer asked him if Vicker was going to de-emphasize the weapons side of their business now that the Cold War was over.  He replied, "Oh no.  We think there is still a large market for weapons, especially in the Persian Gulf."

I offer this and subsequent events as evidence that the worldwide military-industrial complex considers oil as crucial to their marketing strategy.  If oil is becoming scarce I fully expect that it will lead to a windfall for them.

Thanks for this question about motivation.  I have thought about the issue more from the perspective of trying to understand what unconscious motives or subconcious needs might cause us to deceive ourselves in these questions that have great impact in how we decide to live our lives.  Cuz when you decide to junk your cushy pleasant life and buy the organic farm in Sasketchewan, you don't want to realize later that you allowed yourself to be mislead by someone with mixed motives.

We in the Peak Oil camp like to point out that our spokespeople are more believable than governments or corporate spokespeople because our champions have no vested interests in the outcome.  They are retired, they are outside the system, etc.

I beg to differ.  At a very basic level, we have a need or desire to be proven right.  We tend to become attached to an argument and world view, and an unconscious need to be proven right can become a powerful motivator, especially for those who define themselves as intellectuals, as ones who have tasted of the tree of knowledge, and who can discern not only what is true from what is false, but what the future holds, and how the rest of humanity must conform to their divine revelation or perish.  This motivation can skew our interpretation of reality, causing us to filter incoming data that interferes with our world view.  I humbly suggest that this motivation runs deep and has a long history.

Along with this subconscious need is a tendency for groups to begin to reinforce each others opinions, as noted here:
http://www.energybulletin.net/10113.html, where the author mentions the study on firemen adopting similar viewpoints in their close knit firehouse societies, viewpoints seen by any outsider as silly.  So this is not so much a motivation but a group behaviour.  In public policy debates, this group think tendency leads us to polarized, inflexible group positions, and an inability to thoughtfully consider other viewpoints.  

When I read the Time point-counterpoint essay, I was struck by the degree to which this is already a polarized issue in which each camp trots out the same verbiage and arguments, replete with key emotional trigger words which quickly identify one's faith allegiance and remove the need for any further thought.

I am glad though that we can agree here to leave religion out of it and resolve everything through our pristine scientific objectivity.

I think it would be interesting to discuss the plausibility of the idea that we've already peaked.  Bakhtiari created a model called WOCAP that was predicting a peak in 2007, but Bakhtiari claims that we are likely past Peak Oil.  He also says that production is really about 82 mb/d, even though "some institutions try vainly to push 2005 statistics towards 83 and 84 mb/d".  Simmons is saying just about the same thing.  He emphasizes how he speaks of sustainable peak production, not instantaneous peak production, but from some of his drastic predictions you would think that he truly believes that the exact peak is now.  

I've done a lot of research lately.  IMHO, there is a 25% chance that we have passed peak.  The peak will likely occur by 2007 if it hasn't already.  I used to think that it was a safe bet that the peak won't happen until the next decade.  Projections by Koppelaar and Laherrere suggest this.  However, when I look at Koppelaar's report, I can't help but think that he's way too optimistic about decline rates.  He also slightly overstates the amount of new production that will be added, particularly in the Middle East.

I think we can look at two useful smoking guns.  #1 is how Dr. Sadad Al-Husseini said on September 20th that the best case Middle East capacity in 2025 is 25 mb/d.  The current capacity from the Middle East is 21-23 mb/d.  Keep in mind that as Al-Husseini makes this prediction, he is confident that Saudi Arabia will easily produce above 12 mb/d.  Therefore, he is saying that production from the Middle East (best case) will remain flat.

#2 is how ExxonMobil predicts a non-OPEC plateau beginning in a few years.  They are quick to add that OPEC should be able to greatly expand production with necessary investments.  

If you add these two together (ExxonMobil says that OPEC is the only hope for expanded production in the future, but Al-Husseini says that OPEC can't do it), then I don't see how a hypothesis of an imminent peak is doubtful.


why do you think decline rates are way too optimistic in my report?

I was the one on peakoil.com who commented that you listed Upper Zakum as a 650,000 bpd increase even though it is only 200,000 bpd.  I think your report is great.  You've done good research and you have the best tabulation of future projects that I can find.  

Maybe "way too optimistic" is an overstatement, but I say that the decline rates are a little too optimistic.  I agree that oil could peak around 2013, and then rapidly decline because next decade we'll have a much harder time adding new supplies.  You made a good comment in your report when you said, "It appears that the existing reserve base is rapidly being brought into production."  I'm just concerned that despite that, we'll still see a peak much sooner due to higher decline rates than you suggest.  I could give several detailed examples, but I don't want this post to be too long.  

If you were to listen to Simmons, you would not increase Saudi Arabia's production by any amount, not even a million b/d.  Simmons also thinks that Nigeria won't increase by much because declines will almost offset new fields.  On the other hand, one doesn't have to believe Simmons.  You think Nigeria's decline will be 2%, which is small compared to the amount from the new fields.  Therefore, you add 1.25 mb/d to Nigeria's production over the next five years.  

How do you estimate the decline rates?  That is very important.  In some countries, the current decline rate would work well.  For others, won't the declines accelerate?  It seems hard to determine, but I know that you did a lot of hard work to put together your report.  

I think it would be interesting to discuss the plausibility of the idea that we've already peaked.

IMHO it may not be as simple an issue as asking when, geologically speaking, we as a society reach the point where our oil extraction rate at the rig-site is at maximum.

It may be more complex than that.

Maybe we should look at the whole oil-utilization infrastructure?

The Peak Wood study offers an interesting parallel:

It wasn't so much that there was no more wood, or that production of wood had maximized in the dense forests...

It was more that the increasingly longer trips out to the deep offshore woodsheds (OK, to the wooded hinderlands) to get the wood was becoming a growing pain for the collapsing society (Cypress, Rome, etc.)

It was more so that supporting the armies to protect the woodsmen who went out to the hinderlands to get the wood was becoming an economic strain ...

It was more so that the uncertainty of every next venture to get the next batch of wood was growing ...

It was more so that supporting the roadways along which the wood was brought back home was becoming an economic strain ...

If you look at the American situtation:
Maintaining our roadways (pipelines, refineries) is becoming a strain in view of changing climate and changing military security,

Maintaining and supporting our armies is becoming a problem as we go out to get that oil (from Iraq, Iran, etc.)

The ROI (Return on Investment) for each venture is becoming more uncertain. Iraq is not paying back like we thought it would (by "we", I mean Cheney & company of course) ...

So it is becoming economically unviable to boldly go out and get more oil in those outer quadrants where no Columbus has gone before ...

You see?

So it's not just about when peaking occurs at a local rig site.

Localized extraction peaking may have been the prime factor for domestic oil in Hubbert's time.

It is no longer the prime limiting factor for foreign oil in our times.

Hi Typhoon - I'd been thinking along similar lines and was also interested in Husseini's projections and what it means for the peak (see Simmons thread).

There is a lot more consensus on projections of non-opec peaking around 2010-2015, than there is on world peaking - mainly due to the middle-east being an information-free zone. That's what makes Huseini's view so interesting IMHO.

One such "non-opec" study (Wells, R.A O&GJ Feb 21) appeared in O&GJ recently. He projects non-OPEC peak around 2007-2011. On this basis he shows what OPEC will need to produce to fill the gap for IEA's low, medium and high demand forecasts:

As you wrote above Husseini says at best the ME producers will at best be able to increase from around 20mbd to 25mbd be 2014 and then plateau to 2025. This leaves the remainder  of OPEC to come up ~60-90mbd by 2025 which seems pretty unlikely.

Here is the corresponding non-OPEC forecast from the same O&GJ article.

Whhops minor stuff up - the rest of OPEC (outside the middle east) have to find around 20-40mdb (not 50-90mbd as written above) if Husseini's projection is correct. Still doesn't look any more likely though.
A problem here is, what you mean with oil? Natural gas liquids are now counted in the "all liquids" production, but they are not oil in the proper sense. Besides they are a side-product of natural gas production and follow the Hubbert curve of gas.

Sweet light crude has probably peaked already some time ago. Most new fields are "non-conventional", mostly deepwater. This is oil but behaves a little bit differently in the depletion sense.

And we don't really know what is production level today or even what it was last year: somewhere between 80 - 82 mbpd. 2  or 3 mbpd difference means an 2.5% error margin at least. This is as much as the average production increase in a year. It is quite right to suspect that the peak is already here because we can't know. But remember: oil seemed to peak already in 2000, so we don't know if this it now or not.

But is it important to know the exact date of the peak? It can be known only afterwards when the downwards trend is visible i.e. a couple years or more after the actual peak.  The economic and political repercussions might appear before that, but it will be hard to tell that these were caused by the peak. We should not expect any sudden petrocollapse but a period of uncertainty and strong price volatility.

Those who don't "believe" in the Peak Oil will be as sceptical after that. They just say that the supply problems are temporary and caused by the likely recession and lack of investment. And probably those who expected a dramatic collapse and sky high oil prices will be ridiculed. And probaly I will be wrong with my "grey" scenario...

has anyone seen this?


I quote:

"The scientific evidence cited in "Black Gold Stranglehold" suggests that oil is constantly being produced by the earth, far below the earth's surface, and that it is brought to attainable depths by the centrifugal forces of the earth's rotation."

Does anyone know what the scientific evidence this guy
is talking about? He has a Ph.D. next to his name!!!
Must be a Ph.D. in bullshit!

The article talks about abiotic theory and refinery closures.

I'm not decided on the abiotic theory, but one thing is clear: Refineries have been shut down to increase margins. Oilcast, for example points to Sen. Wyden Report (pdf) on these concerted closures.

I've read similar stories about other very profitable refineries being closed to increase margins on those still open.

Yupeeeeeeeeee. We are saved!
We'll simply stop driving our cars and heating our houses and just wait a couple of eons for the oil to regenerate! Brilliant!
I have another solution - we can all save our organic
shit to use it to power our cars. why waste it!? think
outside the box... abionic my ass
If centrifugal forces were of any significance for fluid motions in the Earth, then we would be getting liquid iron and other heavy elements (uranium!) here at the surface, since these heavy fluids would displace lighter ones.  A fluid like oil would collect at the center of the Earth!  Anyone who has ever operated a centrifuge would know this.
They are right that the earth has a creamy nougat center of oil, but they are wrong about centrifugal force. Everyone knows oil rises from lunar gravity, synchronized with the tides.
I guess you could say that 3-5 miles below the surface is far below in general terms - that isn't anything new. You could also say that centrifugal force does work, since coriolis is obvious in massive fluid bodies on the planet. The big BUTT is where does he say this oil originates from?

Abiotic oil is pure bullshit - the Siljan Ring drilling proved that.

Siljan proved no such thing.

Siljan proved there was no oil at the location drilled.

Better hope Google's indexing of TOD is still lame. Otherwise, anybody searching for "big butt" is going to come right to your comment. Might liven things up a bit.
To overcome gravity at the equator the earth would have to spin over 17 times faster than it currently does. At point away from the equator the spin would have to be even faster. It is thermal forces that push lava from the mantle and geysers. What does this guy have a PhD in?
Actually this is an excellent idea! Let us just spin the Earth faster and at the equator we would have zero gravity, people flying with self made wings like Icarus (save from jet fuel!) and oil coming out of the ground by itself!
How did I not think about it myself...

(sorry, getting in the black humour part of the picture already)

The U.S. peaked in oil production in the 70s. Had
this "Abiotic" theory been correct, we would still have
the same amount of oil flow in the USA today. The fact
the oil fields in USA, North Sea, etc deplete is the
biggest proof that this is bullshit.
I'm glad to see other people noting this rather simple fact which contradicts the abiotic thesis.  (Another one is that the Earth would have been leaking oil from every fault if it was true.)

Let's hope that critical thinking spreads and leads to ridicule of anyone who dares put forth such easily-refuted nonsense ever again.

It is quite possible that small amounts of hydrocarbons are generated deep in the earth, but I agree with this argument that it cannot be a very significant flux. I also note that the fossil fuel theory is used by oil companies to find oil and make lots of money. Oil companies using the abiotic theory to find oil do not appear to have been very successful in the marketplace.
One particularly irritating claim by the oil creationists--by which I mean abiotic theorists--is that they repeatedly cite Eugene Island in the Gulf of Mexico as an instance of an oil field that has "regenerated"; but here's what Laherrere says about that:

In fact the Eugene Island oil field is flanked by the largest and best known fault in the Gulf (the Red Fault) which puts the reservoir in direct communication with the source rocks. Evidently, the rapid depletion of the reservoir dropped the pressure, allowing it to be recharged with oil from the source-rocks. But the declines have resumed, adding only about 10% to the total reserve value.
Even if the abiotic theory is correct, it doesn't overturn the simple physics of fluids moving through porous media as the result of differential densities, etc.   For the sake of argument, let us assume that the abiotic theory is correct.  Even so, it would take many thousands of years (perhaps millions of years) for our 'shallow' oil fields to be replenished by this presumed abiotic oil from deep within the earth slowing migrating up to the shallower levels.

Even if true, what good would that do the human race in the 'short' (i.e, next hundred years) term?

However, don't underestimate the degree to which the concept of abiotic oil has captured the collective imagination of those who chose not to believe that we have a looming oil shortage problem.

The concept of abiotic oil must be addressed in a logical scientific manner, simply because it is getting more and more attention.

My own thinking goes approximately along the lines you've drawn.

We'd have to dig much deeper to get this oil. I think this fact means that we'll run into a supply disruption what ever is the truth behind abiotic oil.

Exploration and extraction technologies are not optimized for this kind of extreme either. Still, I think fifty years would be enough time to advance our understanding of the deep geosphere. If there is fifty years of civilisation, that is.

From what I've read, oil in source rocks that spend any time beneath the oil window (15K ft.?) becomes natural gas.  Why wouldn't abiotic oil, supposedly created below this window, do the same?
Hi y'all, I've been a way a bit.  

I didn't see much comment today about one of the world's largest corporations, ExxonMobil, posting their largest ever profit, up almost double last year's record profit, and the analysts still aren't happy?

Why is this man smiling?

While Exxon's quarterly profit was up 75 percent from a year earlier, and revenue rose 32 percent to more than $100 billion, the results fell short of Wall Street forecasts due to production outages caused by the hurricanes and sharply lower profit at the company's chemicals division.

"They were a bit disappointing, but this a temporary phenomenon," said Paul Kuklinski, an analyst with Boston Energy Research/Soleil Securities. "This is largely attributable to hurricane effects."

link to article at Reuters

here is a nice story from NY times via the IHT


 A global shortage of tools for the oil industry

By Jad Mouawad The New York Times


NEW YORK Kim Bennetts, an executive at a Texas-based natural gas company, traveled over 7,000 miles this year to the heartland of China to look for the right rig to drill four wells in the Piceance Basin, a booming exploration area in western Colorado.
 That is how far he needed to go to get the basic tools of the trade. The shortfall in drilling rigs has become so acute that some executives blame it for slowing down new exploration projects.
 "Sure, there's been some hue and cry," said Bennetts, the vice president for exploration and production at Presco. When the skeleton crew arrived, along with the rig, a local newspaper compared them to Chinese railroad laborers in the Rockies in the 19th century.
 "But the Chinese are not displacing any Americans in terms of either technology or jobs, not when nearly every American rig and crew is spoken for," he said.
 The oil and natural gas industry is awash in cash. Collectively, major oil companies are on track to earn more than $100 billion in profit this year. But even with all that money, energy executives cannot simply snap their fingers and bring on more supplies to meet strong demand. The bottleneck in drilling crews and rigs is only one piece in the giant jigsaw puzzle of infrastructure needed to produce energy.
 Each piece that is needed to find, drill, pump, carry, refine and ship hydrocarbons has been stretched by years of underinvestment. Today, just about everything between the wellhead and the gas pump is in short supply.
 Even before hurricanes sent energy supplies into a tailspin this year, the oil industry had been hard pressed to find drilling rigs and crews, petroleum engineers and geologists, contractors and suppliers, tankers, pipelines, storage tanks, refineries and import terminals.
 "The supply side is stretched from an industry perspective," David O'Reilly, Chevron's chief executive officer, recently said. "It's a little reminiscent of the squeeze we had 25 years ago."
 Today's shortages can for the most part be traced to the boom-and-bust cycle that has shaped the industry. Even with record prices now, industry executives still are haunted by the collapses of 1998 and 1986, when oil prices tumbled to $10 a barrel in a matter of weeks.
 These oil crashes sent many smaller companies into bankruptcy and left a profound impression in the minds of today's managers. In response, they went on a massive diet, cutting costs, reducing research budgets, freezing investments, and ultimately seeking savings that led to the mega-mergers of the late 1990s. The trouble is that by the time oil prices recovered, a more nimble industry was struggling to keep up with high growth. By that time, the industry in the United States had a much smaller work force, the result of years of consolidation and big layoffs.
 Meanwhile, the number of oil companies has shrunk sharply. For example, BP is what was created after various mergers of at least 10 separate companies since the 1950s, including British Petroleum, Amoco, Atlantic, Richfield, and Sinclair. Today's top 10 oil companies were formed by mergers of over 45 separate entities.
 "The industry has gone through such a contraction that getting it to expand again is proving difficult," said Paul Horsnell, an analyst with Barclays Capital in London. "These companies are not equal to the sum of their parts. "
 One problem common to most companies is finding new engineers and geologists to fill the shoes of an aging work force that is mostly expected to retire over the next decade.
 In the United States, half of workers in the oil and gas industry are between the ages of 50 and 60 and will retire over the coming decade; only 15 percent are in their early 20s to mid-30s; the average age in the industry is 48.
 "The industry is going to have a lot of challenges replacing all the graying people leaving in the next few years," said Mark Rubin, the executive director of the Society of Petroleum Engineers. The average age for oil engineers is 51.

Students have been scared away from petroleum engineering and geology studies by the oil industry's brutal layoffs and negative image, analysts said.

After reaching a peak of 11,000 in 1983, the number of students enrolled in petroleum engineering in the United States has dropped to 1,700, while the number of universities offering these programs halved to 17 over the same period, according to figures compiled by Lloyd Heinze, a professor at Texas Tech. Enrollment hit a low of 1,300 students in 1997.

According to the American Petroleum Institute, oil companies will need to hire more than 5,000 engineers and 1,300 geoscientists to meet their needs. Getting them will be challenging.

"The availability of talent across the globe is shrinking," said Navjot Singh, the global marketing manager for recruitment at Royal Dutch Shell, whose company said this year that it plans to recruit 1,000 petroleum engineers.

According to a recent study by Wood Mackenzie, an oil consultancy based in Edinburgh, oil companies have been finding much less oil in recent years than they are pumping out. Their reserve replacement level, which peaked in 2000, has slumped over the past three years as the world's top oil companies found only half the oil they produced, according to the study.

"The reserves exist," said Andrew Latham, vice president for upstream consulting at Wood Mackenzie, "but it's almost inconceivable that we will get full reserve replacement. There are simply not enough rigs available, not enough geologists."

One reason, he said, is that oil companies have simply not been investing enough in exploration. These budgets, he said, have shrunk by a third since 1998.

One thing that's not in short supply is cash. With oil prices averaging $41 a barrel in 2004 and $56 this year, oil companies have been enjoying record profits. But much of these gains have been going back to shareholders, either in terms of record high dividends or as share buybacks.

This year, the six largest oil companies are expected to buy back shares worth $40 billion, a 60 percent jump from last year, according to John S. Herold, a research firm. They will also pay out some $31 billion in dividends.

Only 34 percent of their cash flow, or $54 billion, will be invested in their so-called upstream businesses - drilling wells, building pipelines, and bringing new supplies to the market.

"The concern now is that there will be a backlash against big oil companies who do not seem to be doing enough to bring new supplies and push oil prices down," said Arthur Smith, Herold's chief executive. "The industry basically downsized itself into trouble."

"Eventually, the industry will come to the realization that it will need to go into a crash course of investments," he said.

Meanwhile, the crunch has pushed up prices, for example, with the day rate for renting a 1,000 horsepower drilling rig in the United States jumping to $15,000 from about $9,000 a year ago, according to Richard Mason, the Lubbock, Texas-based publisher of The Land Rig Newsletter.

For deepwater drillships, the jump has been even more substantial, jumping by more than a third to as much as $300,000 a day.

"The last time drilling was profitable like this was in 1981, making this a stars-are-aligned, once-in-a-generation moment," said Mason.

I heard Richard Clarke on the Al Franken shown this week, touting his latest book The Scorpion's Gate. It is a work of fiction, but by being fiction, he feels he is better able to explore some of the issues raised.  In any event, he thinks that the Saudi royal family will be overthrown in the next 10 years (in the book the country becomes an Islamic republic and is renamed Islamyah).  While he did not come out and say it, he thinks oil will not be fungible in the fairly near term, and this fact will drive geopolitical conflict in the near future.  I'm not sure if he would ever have gotten around to saying why perhaps oil would not be fungible (Franken's interruptions make for frustrating interviews), but by his tone I'd place him in the Peak Oil camp.  (Perhaps, though, one of those closet Peak Oilers who dare not speak its name for fear of spooking the markets.)  I thought it was pretty significant coming from someone in the know, the former counterterrorism czar.
EIA press release says demand for the last 4 weeks was approx 20700 GO to this link and compare. It says 20400

Is the EIA up to something? 1 day difference can make an average difference of 300,000 barrels over 28 days. That doesnt make sense.
Any ideas? I have posted this before so forgive me if this is redundant

Total products supplied went up this week; I say demand destruction has run its course. The prior two weeks were steady. Even with the average being applied... this smells like a bottom.

And looky here:

Petro-Canada's Q3 profit up by half to $614M: no 'demand destruction' yet

September sales at Petro-Canada's national chain of service stations were down from the previous year as hurricane-jolted prices surged above $1 a litre "and there was obviously some sticker shock," Ron Brenneman said Thursday during a conference call on third-quarter results, which showed Petro-Canada's profits up by half to $614 million.

"But interestingly enough, those sales have largely rebounded in the month of October, so at least in the short run there doesn't seem to be what you would call permanent demand destruction," Brenneman said.

"You have to anticipate that in time there will be some behavioural change and lifestyle change and driving decisions and car decisions that will ultimately impact demand. But we're not seeing it at this point in time."

http://www.canada.com/windsor/windsorstar/news/business/story.html?id=b35b75aa-cd52-4681-83f0-b1d5b5 59c690

Those of you who know me here at TOD will understand that I've always wanted to do this. From No need to panic, petroleum supply is adequate - Al Naimi

Please forgive me.
It is a confidence-inspiring visage, no? And now that you've mastered Super G's image enablement, we await with great interest to see what enabling the HTML <rant> tag will do.
He is esteemed and beloved but his sons will ride camels.

By the way, I attended a viewing of "The End of Suburbia" tonight sponsored by our local Peak Oil group here in Boulder, Colorado (Yes, we do have one). I'd never seen the whole film. I must say, Jim Kunstler does get through to people with the shock value of the coming "clusterfuck" and "shitstorm". I hope everyone has a chance to see it.

They passed out a sheet of "Peak Energy Quotes" and I really liked the one by Stein. I have added an additional quote I found about peak oil by a famous baseball player.
"Things that can't go on forever don't."

From Herb Stein, chairman of the Council of Economic Advisers duing the Nixon Administration
"You better cut the pizza in four pieces because I'm not hungry enough to eat six."

From the immortal Yogi Berra
I can't imagine what you mean about the "<rant>" tag.

Have a good one --
I'm fairly intelligent, I'd say.

This blog has helped me to comprehend such matters as depletion curves, extended oil recovery, multilateral completions, downhole temperatures, etc.

But now I'm confronted with this:


and I feel stupid again.

Anyone care to comment on whether there is something valid about this, or whether the author is flimflamming us with gobbledygook?

He's trying to predict the future price of oil using a proprietory system he has devised which he calls the "Alpha Trend System". You can learn more about it here:

Don't feel stupid, it is incredibly poorly explained in the article you link, I saw an earlier version of it a few days ago and had to read it about 3 times to make sense of it.

The daily chart suggests the oil price is probably nearing a 'bottom', is beginning to look oversold, but the price should not dip below about $58.58 (next month's contract, light sweet crude) or it will probably decline to $56.50. It should then bounce back to at least $64.01.

The weekly chart suggests the oil price may decline further but may hold above resistence at $60.13. It needs to rally to above $63.56 to resume its uptrend but is highly unlikely to fall below $50.43 a support level that has held since December 05, 2003.

The monthly chart says oil is still in a long term up trend and will remain so until it drops below $46.05.

Summarising: the oil price might dip down to $60, maybe $58.50, possibly even $56.50 in the short-ish term (next few weeks) but is then likely to bounce back to at least the $63.50 to $64.00 level.

Note that all such systems are fallible. What this one is suggesting seems in line with present market thoughts: oil is currently range bound $60-$64 might break down to resistence of $56 in short term then / or up to a $64-$70 range. If it falls through $56 then next major stop is just above $50.

Since the MMS are reporting 67% Gulf oil production still shut in (barely changed in the last couple of weeks - in fact marginally worse than 2 weeks ago - I just checked) :
my guess is it will soon be going up.

Much obliged to you, Agric.

(Is that anything like reading entrails?) ;]

Does the US and North America only have about a 9 year supply of natural gas left??  
Hello again, per my post above I have based the 9 year figure upon this information..

Dry natural gas reserves/production/consumption:


All 2003 data

Dry Gas Reserves TCF

US 189.04

CAN 56.57

MEX 14.86

260.47 TCF

Dry Gas Production TCF

US 19.04

CAN 6.45

MEX 1.49

26.98 + 0.51 TCF LNG Imports = 27.49 TCF

Dry Gas Consumption TCF

US 22.38

CAN 3.21

MEX 1.82

27.41 TCF

260.47 / 27.41 ~ 9.5 years

Why are we talking about Peak Oil then? In just several years half of the USA will be frozen to death and without elictricity... in such situation oil shortage will hardly be noticed.
It all depends on LNG imports. There's lots of gas in the rest of the world (for a while) if we can figure out how to get it here fast enough.
It might be cheaper to rework our architecture to eliminate the need for natural gas for heating air and water.  It would certainly give us more energy security and a better balance of trade.
Except for the fact that burning NG to heat air and water directly is massively more efficient than burning it to generate electricity, tranmitting it along the grid, and then using that electricity to heat air or water.  

I think we need a crash program to get us into solar air/water heating/cooling with gas/electric backup, so that we can save the gas for industrial feedstock.  I'd much perfer us all to wear two sweaters on cloudy days than to be warm and run out of fertilizer.

I think we need a crash program to get us into solar air/water heating/cooling

I wholly agree.
But Bush Admin is cutting back on R&D.
Venture Capitalists (VC's) will not invest into project unless it has huge $ ROI.

How then, do we fund a switchover to a sustainable and rational society? Must this one collapse first?

Except for the fact that burning NG to heat air and water directly is massively more efficient than burning it to generate electricity, tranmitting it along the grid, and then using that electricity to heat air or water.
And how is this related to eliminating the need, exactly?

Insulation and passive solar don't have to cost much and eliminate most or all of the need for external heating energy of any type; I'm aware of a passive-solar home which keeps itself nicely tempered (if not toasty) in winter without backup heat... in Vermont.  (Here's another example.)  Smart architecture would stay warm without much attention, and the price of natural gas would be largely irrelevant to it.

We're on the same page here.  Eliminating the need (which to be fair I did not fully appreciate when I first read your post) would solve the problem.  

But then, eliminating the need for fossil fuels would solve pretty much all the problems associated with peak oil.  Passive solar is a beautiful thing.  My own design thoughts are based around how to most-efficiently retrofit existing houses, since that's going to be the big problem of the next 5-15 years.

Today's local rag claimed an efficiency of electric water heaters of about 90% with gas at only about 65%.  I read that and was certain I had read the opposite elsewhere.
Your local rag is hugely misinformed.

Fifty per cent (50%) of use electricity is generated in coal-fired power plants. These power plants have an efficiency of no better than about 33%. That means 66% of energy from coal goes up in the air as poluting waste heat.

Link into Amory Lovin's pdf by way of this site:
http://www.altenergyaction.org/mambo/index.php?option=com_content&task=view&id=82&Itemid =27

OK, seems the local paper was carrying an article from the New York Times News Service: Leaks signal problem for water heater, by Jay Romano.  

Harvey Sachs, buildings program director for the American Council for an Energy-Efficient Economy, in Washington, said that hot-water heaters have different efficiency ratings.  Most gas-fired hot-water heaters have energy efficiency ratings ranging from 0.60 to 0.65.  Electric hot-water heaters have energy efficiency ratings ranging from 0.93 to 0.95.

I'm guessing that Sachs is ignoring the efficiency of getting the energy to each consumer, but even so, I thought gas would be a more efficient heat source than electricity.

Electricity is a huge and pressing issue, and not just for reasons of natural gas shortage, although that's certainly one of the most important aspects. The US can't possibly expect to develop LNG infrastructure in time to forestall a natural gas crisis and it has recently built about $100 billion worth of gas-fired generation. For that reason alone, the population of North America had better get used to the idea of rotating blackouts.

In addition, the tradional centralized monopoly model for power systems was constructed without concern for costs. It was generally reliable, but that reliability was bought at an unsustainable cost. Liberalization has now driven a great deal of the excess capacity that delivered reliability out of the system, with the result that power grids in many areas are teetering on the brink.

I've been researching power systems for years (this was my field as an academic) and have become concerned enough to put in my own renewable power system (PV with battery bank). Electricity is only one part of the giant lifesupport system we have created and now rely on, but it is a particularly important part. We can't expect the whole system to survive a market meltdown, dollar colapse, deflationary depression, natural gas and oil shortages and other shocks coming down the pipeline. I would suggest a measure of self-sufficiency to anyone.

Just out of curiousity... how much independance were you able to achieve with PV?
My house isn't off grid, but I would have the essentials if the grid went down. I have 3 kW of solar panels in my back field and a large battery bank in my basement. The essentials (well pump, sump pump, circulating pumps for the outdoor wood furnace and the solar thermal system, fridge, freezer, security system, minimal lighting)are powered from the batteries through the inverter. I can charge the batteries from the panels, or from a gas generator, or from a diesel generator run by my tractor, or with the mains. The batteries are meant to keep these essentials running for at least 4 days of no sun, no mains and no generator.

The next most important things (geothermal system, furnace fan, microwave, another freezer, ceiling fans, and a few sockets) are wired into a generator panel. I can run those from the mains or with my generator if I have fuel for it.  If I have no mains power, no fuel and no sun for more than 4 days then I can still keep warm, heat water and cook using a 1928 kitchen wood range 2 supplementary wood stoves. I'm also planning to plumb my outdoor funace in to run baseboard radiators so I can distribute the heat from outside with only the circulating pump rather than the furnace fan.

I also have 2 bicycle power generators and portable battery packs that I can use to power incidental things if necessary. I have 2 solar ovens - insulated for year round use. My radio is a wind-up one. I have stand-along LED lighting run by batteries in the base which are charged by small solar panels. I have solar powered battery chargers and a collection of rechargeable batteries to run a few more incidental things.

I haven't achieved complete long-term independence, but I'd say I have more energy independence than many off-grid houses. Most of them are dependent on propane and so are exposed to fuel price risk. My only use of propane is for my barbeque, but I don't need to rely on it. Independence in the face of great uncertainty over energy supply comes from flexibility and a degree of redundancy in my view. There needs to be more than one way of doing something so that one can adapt to changing circumstances quickly.

If you allow a little comment - I think the wood stove kitchen is the best investment of these.

Otherwise I'm not such proponent of self-sufficiency. It is good idea - but seems too desparate to work. I mean that if it comes to it probably the society would be in such a chaos that energy would be much less of a concern compared to security.

I agree with you about the likely effects on society and therefore the need to consider security as well. I plan to turn my farm into a small community, partially bcause I wouldn't be able to work my acreage myself without fuel-consuming farm equipment and partially in order to address the security issue without having to resort to arming myself. A small farming community hosting allotment gardens for the wider community (I live just outside a very small town) seems to be the way to provide for social contact and security while sharing the benefits of preparedness.
Well besides LNG terminals I don't know any other option for now... I see us being in a hurry to invest in them but I'm not sure that countries of export like Russia will be as keen as us to invest billions on the other end.

There are lots of effective options for heating other then NG. Unfotunately central heating is not one of them because of the suburban sprawl... I suspect that most probably we will have to return to coal-fired local heating systems.

I have a simple question.  The following is a quote concerning Wolverine's discovery in Utah:

"Wolverine and government geologists said the company is looking at a total of 25 deposits that could contain 1 billion barrels of oil."

We all know that you cannot remove 100% of the oil from the ground.  But, when an article like this talks about 1 billion barrels of oil, is that oil the amount that can be removed or the amount of total oil?  If it is total oil, what percent can "normally" be removed?

Thanks in advance,
Rick DeZeeuw

It depends on the nature of the reservoir.  A normal recovery factor might be a third of the oil in place, but there have been recovery factors as low as 3% or as high as 80%.  
The billion is pretty speculative at the moment. Most of it is undiscovered.
We've had some discussion here a few weeks ago about stagflation, where the economy is stagnating while prices are inflating. Some have even claimed that stagflation is here already. But Macroblog posts today about good economic news showing that we are far from a state of stagflation:


The Opposite Of The "S Word"

I have a confession to make.  Somewhere deep down in my 70s-infected soul, I have been dreading the day when the evidence would make an unmistakable move in the direction of declining real economic activity coupled with an acceleration in the inflation trend.  It didn't happen today.

From Reuters:

    The U.S. economy grew at a stronger-than-expected 3.8 percent annual rate in the third quarter, the government reported on Friday, shaking off the drag from two hurricanes and rising energy prices.

"Shaking off" is right, and it is really pretty amazing.  So maybe we at least had some bad inflation news?

Nope.  From Bloomberg...

    The GDP report's personal consumption expenditures index that excludes food and energy, a measure favored by Fed policy makers, rose at a 1.3 percent annual rate, the slowest since the second quarter of 2003.

... and from CNNMoney:

    The increase in the Employment Cost Index, a broad gauge of what employers pay in wages and benefits, marked a slight acceleration from the second quarter's 0.7 percent advance, the Labor Department said.

    But over the past 12 months, total employment costs have risen just 3.1 percent, the smallest gain in six years, as wages grew only 2.3 percent, the smallest rise on record.

Re: "excludes food and energy"

I will never accept anybody telling me things are OK based on a measurement that excludes food and energy. Period.
Let's consider what the US Bureau of Labor Statistics, keeper of the Preducer Price Index said on October 18:

"During the third quarter of 2005, prices for finished goods advanced at a seasonally adjusted annual rate (SAAR) of 14.8 percent, after falling at a 0.5-percent SAAR during the second quarter of 2005. Excluding prices for foods and energy, the finished goods index increased at a 2.6-percent SAAR for the 3 months ended September 2005, after rising at a 1.0-percent SAAR for the 3 months ended June 2005. Among prices for rawand partially processed goods, the SAAR for intermediate goods accelerated from 0.8 percent to 18.1 percent from the second to the third quarter of 2005. The crude goods index moved up at a 109.7-percent SAAR during the third quarter, after declining at a 12.5-percent SAAR during the previous quarter."

Source: http://www.bls.gov/news.release/pdf/ppi.pdf

I think it is perfectly reasonable to omit food and energy prices, because it lowers inflation to less than one-fifth of what it would be if you included them.

Like someone else already said - we will not get a true economic crisis until we experience shortages.

The truth is that even $100 a barrel would be a mediocre price for the US economy. For a long time from now (at $75...100..150) we will be seeing happy reports like this and more and more US-economy-being-oil-independant talk. The effect of 100$/bbl would be demand being destructed (read social unrest, people starving and killing each other) in 3rd world countries which will of course be the first victum of PO. But this "cushion" provided by them will be very thin and when it evaporates after couple of years we will start recalling the 70-s again.

The price will not really matter - $200-$300 - we will get back to the true reality where not the numbers (and the paper behind them) matter but the physical world we've somehow forgotten about.