Happy Peak Oil Day?

World crude oil production (exclusive of NGL), as estimated by the Oil and Gas Journal. The highest production so far occurred in May 2005. The graph is not zero-scaled.

Peak Oil Day Indeed!

Thanks for this post Stuart, I thought this day would pass by without being noted.

Around here the few scattered peakoilers are trying to raise awareness for this matter once more - this time in a concerted manner.

I'd like to invite everyone already aware of Peak Oil, to take this day and discuss it with people not yet aware. You can send Happy Peak Oil Day postcards to your friends, mail everyone in your address book, whatever you think proper. It could be just a family talk during the Thanksgiving gathering.

Better do something than just sit and watch everything fall apart.

Tomorrow everyone will think we're lunatics. But,  Who Cares?

And a happy Peak Oil Day to you too, Stuart!

I've got a little piece of land. Even if it is winter season it still has kale on it, as well as cabbage, sunchokes and chard. I got quite some potatoes from it last summer, despite an attack of late blight.

We'll get by somehow.

I don't see any peak in the graph. And even if production drops in the following months I don't think you can call it a peak because as the graph shows clearly, production fluctuates.

Prices are high because production can't keep up with demand, but sofar I haven't seen any real evidence of a world peak, I think it is still some time away.

I gather this posting is a tad tongue in cheek. There was a Kenneth Deffeyes predicting Thanksgivings Day 2005 as the date for peak oil. A prediction which itself was a bit tongue in cheek according to Mr. Deffeyes himself.

In person he would say he made the prediction tounge-in-cheek.  He then says it could be a few weeks to either side.
He made the prediction (and the error bars) based on his application of the linearization method, but both the prediction and the error bars are only as good as the data he used. If his data aren't quite complete or accurate, then neither are his results. But it's a fun idea anyway!
As has been mentioned, the peak might not be a clean peak, but rather an undulating plateau.
we will probably observe peak demand before peak supply.
PEAK.....SMEAK......Our climate can't take much more of this 84 mbpd!!!
Why would this be>? Does Hubbertian methodology work on human consumption habits as well as oil? I think we will see A CONSUMPTION peak but not a demand peak - demand will outstrip supply after 2008 or so - forever.
What I meant is that demand is growing so fast that supply growth cannot keep up but it does not mean that we are peaking  in term of production yet. We are probably reaching a plateau right now with little yearly supply growth.
Happy again!

I almost forgot it. Remember that since October and till the end of December, OPEC is officially producing flat out.
If so and May is still the highest month...
Two and two makes what?... ah, five!

Actually OPEC has over 1 mbpd spare, plus inventories keep building which means demand is less than supply. I will not be until 2007 when we will noticeably get short. Unless of course next hurricane season gets as bad as this year's.


Inventories are not necessarily building. Last week, the small build in commercial inventory was matched by a drop in SPR. Inventories dropped the week before with SPR flat. We stayed afloat the last 3 mos by utilizing European inventory plus 16 million barrels of SPR (which led to half the commercial inventory build). This, coupled with an abnormally warm fall during a time of typical slack demand anyway gave the appearance of business as usual. Now that US & Europe are having real weather and refineries are producing again we will see.
Well, even if that's the case (which I don't believe to be), remember that all spare capacity available is from one state alone, Saudi Arabia. Most important of all is the quota system being suspended, meaning that OPEC has lost control of prices.
The same happened with the Texas Railroad Commission when the US-48 peaked.
And all spare capacity is heavy man... sorry...

It effectively cannot be used to fill the gap because refining capacity does not exist for it... We could well see rising inventories with rising prices and the lead time on new refining capacity is in years...

Well, let's see.  Declining gas production is going to leave a lot of GTL plants with nothing to do.  If syngas-sweetening systems aren't too slow or expensive to add, maybe that heavy crude could be turned straight into diesel fuel by gasifying it, scrubbing the nasties and liquefying via F-T.

Unfortunately, that process appears to be only about 63% efficient (see page 37).  We'd need a lot more heavy crude than light to do the job; about 1/3 more for gasoline, almost 1/2 more for diesel.

Deffeyes is giving a talk at CalTech.  That's where David Goodstein, author of "Out of Gas: the End of the Age of Oil" works. He's not just a physics professor there, he's the vice-provost.

I think it would be great if Goodstein and Deffeyes got together. Their areas of expertise complement each other. The weakness in Deffeyes' books is that he doesn't get into the thermodynamics of alternatives enough, while Goodstein is all about thermodynamics.

I'm a Caltech alum myself, and my son just graduated from there this past June. At the commencement address, the school president, David Baltimore, mentioned Peak Oil as a challenge which the school's engineering and science graduates would have to take on during their careers. So I think they are pretty big into the whole Peak Oil scenario around there. David Goodstein does have a favorable blurb about Deffeyes' book on the web page:


"With his folksy style and penetrating vision, Deffeyes tells it like it is. This book is another nail in the coffin of the age of oil."
   --David Goodstein,
       Vice Provost, California Institute of Technology,
       and author of Out of Gas: The End of the Age of Oil

I live a ways from Caltech now but I'll see if I can drive down and attending this talk.

The irony of the situation for someone who believes in PO is beyond me.
Happy Peak Day all.

Or maybe not? But that's a lot snappier than what the graph seems to indicate, the dreaded undulating plateau at 72.25/mbd.

Is it now time for Saudi Arabia to explore the perhaps aptly named "Empty Quarter"? Personally, I think it is time to pay a visit to the Great Khan of Central Asia

bearing gifts and good wishes, despite his idiosyncracies--
Domestically, he has adopted a policy similar to China's in that he is pursuing capitalist economic development without political liberalization, sometimes resulting in draconian policies and harsh clampdowns on dissent, including the disqualifications of electoral opponents and the muzzling of the press, which incidentally is controlled by his daughter, Dariga Nursultanovna Nazarbayeva. Nevertheless, he is respected by some in the West for his relatively even-handed development of the country and his maintaining stability and growth in a volatile, energy rich region.

His supporters credit him with improving the lot of the common Kazakhstani in the face of allegations that he stashed well over a billion US dollars in Swiss bank accounts and allegations of rampant corruption involving himself and many members of his government.
On this day of thanks, we should not be disturbed that God put the oil in some inconvenient places nor should we shirk our obligation to do everything in our power to obtain it. Allahu Akbar!
The graph indicates nothing. It does the cause of drawing attention to depletion no good at all to focus on the Thanksgiving 2005 claim. I recall a number of posts to this site expressing concern that Matt Simmons forecast of over $100 per barrel oil risked failing and bringing discredit to peak oil arguments as a whole. Last night I gave a talk to a group of Japanese economists about peak oil. The most impressive items for them were the gap between reserve discoveries and consumption, plus the relatively small size of finds since the 1960s. Against the backdrop of that clear evidence, the peaking of 54 of 65 producer countries, the peaking of Burgan field in Kuwait, the forecast 2006 peaking of Cantarell in Mexico, and other facts made the case. Then I added in the disputes over the role of technology, the 1980s fiddling with OPEC reserves, Simmons' doubts about the Saudis' capacity (backed up by Al Husseini's refutation of AEI optimism on production potential), and so on. But the key issue was that oil's a finite resource and the big finds were long ago, while demand is rising relentlessly (with little or no apparent "demand destruction"). Remember, even CERA and Daniel Yergin (extensively quoted trashing peak oil in last week's Japanese business journal Shukan Daiyamondo) see a peak in 2020.
Re: "the graph indicates nothing"

Of course the graphed data is uncertain. Stuart was being ironic or facetious and so was I. So let's see if 1st or 2nd quarter numbers in 2006 indicate higher available supply numbers. But worldwide production growth is clearly not the answer--the true solution is re-scaling of national economies (US or Japan) to do more (or the same) with less.

I (and Stuart, HO and the others as well, I think) believe the current evidence for a real peak in the near-term is becoming more compelling. That's why we post here. I understand your concerns as you "[give] a talk to a group of Japanese economists about peak oil". We're all concerned. Nobody looks forward to a world-wide depression.

I can only make light of an obviously precarious situation given the fact that (at least here in the US) we've done virtually nothing to mitigate the effects. What else can we do here? TOD and others have been sounding the alarm for some time now. I only hope the coming crash in the next few years will be gentler than I fear.

best, Dave
I am in complete agreement on the scale of the challenge. But as the peak oil debate goes mainstream, particularly in elite political circles, vested interests are getting aboard and riding it. We see this with the nuclear industry in the UK and here in Japan. To assert, even facetiously, an imminent peak on the basis of the above data is to risk being marginalized. That means handing the advantage to others with aims that the people who manage and post on this list might find objectionable. Another example (aside from the nuclear industry) is James Schlesinger. As you all know, he's a peak oiler who apparently dismisses global warming. What sort of mitigation strategies would he and his network of politico-bureaucratic allies support?

Anyway, that's why I criticized the use of the chart. If my point was made too bluntly, I  apologize. But this is becoming a fight with real swords, and one where you have to watch which way your seeming allies are swinging theirs.

dave..in this vein have you seen this on energy bulletin:


evidently, according to a group called platform (??) the iraqi poo-bahs are in the process of lining up PSA's (production sharing agreements with oil "multinationals" viz:

The report, titled "Crude Designs: The Rip-Off of Iraq's Oil Wealth", said the majority of Iraqis were against the large-scale involvement of foreign companies in the post-Saddam era. "Iraqi public opinion is strongly opposed to handing control over oil development to foreign companies," it said.

"But with the active involvement of the US and British governments a group of powerful Iraqi politicians and technocrats is pushing for a system of long-term contracts with foreign oil companies which will be beyond the reach of Iraqi courts, public scrutiny or democratic control."

now....who do you think those "multinationals" in question are??...let's see...the germans, french and russians worked with saddam before the war...and the americans and british were shut out..does that mean the PSA contracts will have a return address Houston,Tx.??

I have to say that I am in the camp of those who feel the graph does not (yet) show a peak.

In financial markets analysis we'd call the period cfrom early 2004 to now a "pause" - its a consolidation zone, the underlying trend remains, for now, intact, and that trend is, for now, still UP.

A series of higher lows within the consolidation zone maps out a structure we call an ascending triangle. In financial markets an ascending triangle within an uptrend is considered a "bullish" pattern. I prefer to consider them as the pauses they are; what's yet to be known is whether the uptrend has legs to continue or not.

Some might argue that its unfair to apply financial price analysis techniques to oil production volume charts, but I disagree - oil and the economy (price driven) is inextricably linked to point of being synonymous. Until such time that world wide economic growth can happen with less and less oil (instead of more and more which has been the case for decades), we should be able to ascertain clues to the trend of production using price analysis methods used to model any market.

Carrying this a step further, the trend will officially reverse from up to down if production were to make a set of lower swing highs and lows under 71,000 k bbls/day. Whether such an event is caused by peak production or world wide economic contraction is another matter entirely.

So, you stick a straw in a 16 ounce bottle of soda and draw out 1 ounce, then 2 ounces, then 3 ounces, then 4 ounces, then 5 ounces. Using your logic, I should expect to get 6 ounces out in the next draw.

Unfortunately, reality smacks pseudo-sciences like economics upside the head from time to time and there's only 1 ounce left in the bottle. Economics tells us nothing about future production, only about potential future demand. People like you, who cannot see beyond their programmed cultural mysticism, are why no valid response will occur to the peaking of oil supplies until it is too late. And down that road lies conquest, war, famine, and death.

Ad hominem attacks, like calling someone a "programmed cultural mystic," aren't very useful and TOD usually sets a higher standard. Economics isn't perfect, but it's better than a ouija board. Efficient market theory would hold that all the knowledge about peak oil has already been factored into the price. There are a lots of interpretations of the current price. For instance, let's pretend that Prof. Deffeyes was correct and the world peaked yesterday. Maybe we've entered the famous undulating plateau. Maybe the current price is sufficient to "destroy" enough demand so that the price need not rise higher until we leave the undulating plateu and definitively enter the backside of the curve. To quote Simmons, we'll only know we've peaked when we see it in the rear-view mirror. The great thing about TOD is that we are collectively trying to understand as much as we can about peak oil. The sobering thing about TOD is that it demonstrates how far we have to go before we are confident that we truly understand the parameters of the problem.
Efficient market theory would hold that all the knowledge about peak oil has already been factored into the price. There are a lots of interpretations of the current price.

Bottom line is that "price" is not a scientific measure. Production rate, if real, can be a scientific measure. Price is not. I've already ranted on it here

I never said price was a scientific measure. What I did say is that all the science on peak oil, as currently understood, has already been factored into the spot price. Should Stuart prove conclusively in his next post that the world peaked yesterday, then that new information would be reflected in Monday's price.
Stuart [must] prove conclusively in his [very] next post that the world peaked yesterday

That is pure mind-twisting rhetoric.

I suggest that YOU prove conclusively that everything can be proved conclusively.

Almost nothing can be proved "conclusively" to all people.
Tyically new information is surfacing all the time.
So few things are "conclusive".
Or at least new, ignorant people are surfacing all the time.

The "market" rarely witnesses full dissemination of knowledge to all ranks of players (the hustlers, the suckers, and the not-yet-scammed masses of greed driven sheeple in the middle) all the time.

Remember cigarettes and cancer?
How long did it take for the "markets" to factor in the truth?
Way too long for many who died needlessly of lung cancer.
Scientists had proved the link "conclusively" to the scientific community.
But those who stood to lose money muddled the waters.
They came up with that same "conclusive"
manipulation line you are trying to use now.

Oil and mud don't mix.

Mother Nature doesn't heed our "conclusive, convulsive" noises. The oil will peter out no matter what. A peak production point will be hit no matter what. Maybe not today, maybe not tomorrow, as Humphrey Boggart may have put it, but all too soon.

Was Deffeyes correct that Thanksgiving 2005 was the magic day? We will never know conclusively.

The "market" rarely witnesses full dissemination of knowledge

You should bone up on efficient market theory, which has demonstrated to most folks' satisfaction that market prices include all available information. (It's why trying to pick stocks or time the market is a losing proposition.)

Rejecting efficient market theory is analogous to rejecting the theory of the biotic origin of petroleum. There are some people who believe in abiotic oil, but, as we've seen recently on TOD, they tend not to be taken seriously. Likewise, you won't find much support among academics for those who reject efficient market theory.

I'm an academic and I don't have much time for efficient market theory. How does it explain the huge swings of positive feedback in something like the dotcom boom, the South Sea Bubble, Tulipmania, the Roaring Twenties and the Great Depression or the rise and fall of the Nikkei? These things have always happened because they're based on human nature, which involves a great deal of lemming-like behaviour as TN Granny pointed out in another thread. There's not much rationality or efficiency about it.

Market manias are basically Ponzi schemes. More and more people (with less and less investment experience) are sucked in as the mania continues. The longer it lasts, the more sceptics finally give in, the assumption being that there'll always be a bigger sucker down the road to sell to at a profit no matter how outrageously high the price one paid.  It continues until the biggest sucker has been fleeced. The smart money cashes out in time and leaves the public (and their pension funds) holding the bag. The market crashes and the shares (or real estate or tulips or whatever was the focus of the mania) end up being virtually worthless. A great deal of wealth is wiped out in a deflationary collapse.

The stock market is setting up for an almighty crash, as is the US dollar, real estate and eventually the derivatives market. No lender of last resort can bail that out.

Stoneleigh, it would help to define terms. "Efficient market theory" is about predicting future price movements. The theory holds that everything that is known about future favorable and unfavorable developments is already included in the price of a security. "Efficiency" means that as new information arises no one can consistently buy or sell quickly enough to benefit. In other words, don't look for any clues about the timing of peak oil by looking at the markets.

Yes, there will be bubbles in the future, as there have been in the past. What you cannot do is time the bubble so that you get out before the crash. That's all that efficient market theory holds -- you can't time markets: day-to-day prices move in a "random walk."

I share your fear that the stock market and other markets may be setting up for an almighty crash. But don't look for any clues in price movements about whether and when that crash will occur. Can't be done.

But the efficient market hypothesis can't be 100% correct, right, or Warren Buffett would be no richer than the rest of us.
If the market were based on real information and rational analysis, that theory would have to account for the formation of bubbles. Prices are driven by many participants who have no real information at all - they are just chasing momentum in search of a quick buck assuming that the other investors must know what they are doing. It's a case of lemmings jumping onto bandwagons (to mix a metaphor for a moment) when its far too late. That sort of behaviour isn't driven by the rational part of our brains at all. It's a far more primitive emotional response involving a positive feedback loop of greed and fear rather than thought.

There has been a very long bull market uptrend, which lasted long enough to morph into a mania. Market timing is forgotten under such circumstances, as is pretty much everything except buy and hold. I'd predict that it will be remembered before the bear market trend has built up too much of a head of steam, but by then the public will no longer be participating to any great extent because it will have lost its collective shirt.

I've seen some very interesting market timing work by Robert Prechter (www.elliottwave.com). There are both quantitative and qualitative aspects to it. I'm agnostic about the quantitative side, although I've seen him be uncannily accurate at times. As I'm not a trader I don't need any great degree of day-to-day precision. The qualitative side is far more interesting as far as I'm concerned.  Crudely put, it involves watching where the herd is going, especially when it's almost unanimous, and going in the opposite direction. Given our programming to act collectively, that usually involves a degree of cognitive dissonance. That's where the rationality comes in.

At an extreme of optimism, the next move is probably down (as the lemmings go over the cliff), so withdraw your capital before that happens without waiting to wring every last ounce of profit from the situation. Cashing out early, even very early, is far better than waiting until it's too late. The greater the degree of optimism, the greater the urgency to withdraw from that particular market, because widespread optimism is built on past performance (ie it's late in the trend), not future performance.

A bear market in stocks is conversely a bull market in cash, so stay liquid and watch the value of your cash appreciate against stocks, bonds, commodities, real estate, goods and services (ie deflation). When prices have fallen sufficiently far and everyone else is extremely pessimistic, there will be many investment opportunities available for the capital you will have preserved, although you'll have to climb a mental wall of worry in order to bring yourself to take advantage of them.

The difficulty in the meantime is holding on an ephemeral pile of uncommitted choices (ie cash) while all hell breaks loose around you. Personally, I maintain a stake in the real estate market (ie my small farm) and some commodities (eg my firewood pile) even though I'm convinced the real estate market will crash and remain illiquid for quite some time. I regard it as a consumption item I can afford (ie I didn't have to go into debt to acquire it) rather than as an investment. By making some choices in advance, I am hedging my bets.

[It] has demonstrated to most folks' satisfaction that market prices include all available information.

Funny, Martha didn't call me with that special [insider] information she had about Imclone.

A series of higher lows within the consolidation zone maps out a structure we call an ascending triangle. In financial markets an ascending triangle within an uptrend is considered a "bullish" pattern. I prefer to consider them as the pauses they are; what's yet to be known is whether the uptrend has legs to continue or not.

Out of curiosity...is this anything like spreading the entrails of a dead chicken out on a board?

Happy Peak Oil day to all in the Peak Oil Community

As we stand at the Peak it is truly a monumental occasion in history.

As we stand here having climbed the biggest mountain in history let us pause a while to remember the great MKH. Although he was able to climb to top of the L48 peak and foresaw us getting to this one, he is not able to share it with us today. As students of the great man and keepers of the PO flame we, seemed to take longer to get here than he expected we would. This was because we took some time out, rested and got diverted along the way.

This is a mighty achievement that would not have been possible without the many people who have made it possible. Let us toast to the engineers and geologists who have made it happen. Your ingenuity seemed to conquer all known limits. Also to the economists who told us nothing could stop us. Records were meant to be broken. Thanks to you both.

As we rest up on these heights, it is now time to rest and enjoy the view. Time to savour the sweet moment before the smog hinders our view and time to begin thinking about the long climb down and possibly the thought of climbing the big one. The monster peak known to all called Abiotica.

Perhaps this can be an annual event. We can celebrate a new peak prediction every Thanksgiving.
Halfin, in the best sense, put your money where your mouth is. Show me the new oil supply capacity coming online and the decreased demand that will make for a comfortable margin that will keep prices low or lower over the next few years. I've seen no credible source from the oil finance journalism (Bloomberg, Rigzone, et. al.) over the last year that shows prices decreasing next year.
There is some indication that lack of refineries will prevent us from using the available crude through maybe 2010. This would meand high prices for product, low prices for crude, and a delayed peak.
Dave, if we look at the consensus of people who are literally following your advice to "put your money where your mouth is," namely speculators betting on the future course of oil prices, we see no evidence for the kinds of short-term shortages that most people here are predicting, particularly what we would expect to see if we were really hitting a production peak about now.

So which prediction methodology is more likely to work? Try to study every major oil field in the world, figure out details of how each one is being developed or declining, feed that into an economic model for demand levels, and calculate the difference between these highly uncertain estimates of supply and demand? Or sit back and look at what consensus emerges from people wagering their hard-earned money on the outcome?

I know which way I'd bet - on the people who are betting!

I have tried to explain this before, but apparently I wasn't very clear so let me try again. There is, doubtless, some speculative activity in futures markets. But most activity in futures markets is not speculative. Futures are traded by large suppliers and large consumers of a commodity. They exist to reduce speculative risk, e.g., in the case of a farmer who wants to lock in a sale price for his crop at the beginning of the season, or in the case of an airline that needs a fuel price number when building next fiscal year's budget. Futures prices remain close to spot prices because if futures were to increase dramatically vis-a-vis spot prices then spot prices themselves would also rise as purchasers found it advantageous to buy on the spot market and store for later.

Right now, the market does not believe that the clearing price of oil will rise dramatically. When evidence of an immanent and protracted reduction in supply, i.e., peak oil, presents itself to the market, then you will see an increase in both spot and futures prices. Indeed, if buyers were worried enough, then spot prices could exceed futures prices.

In conclusion, if an individual believes that peak oil will occur, say, next February, but the market does not share that belief, then she should buy futures for next February. But don't look to the futures market to telegraph an early warning about peak oil, because once the markets accept peak oil then the spot price will rise too. There will be no dramatic and visible delta between spot and futures prices.

I am a historian, duly trained and certified, so I can say this with confidence: the future is unknowable. We can't predict exactly when the peak will happen, nor can the geologists, nor can the markets. We'll just have to wait and see.


"So which prediction methodology is more likely to work? Try to study every major oil field in the world, figure out details of how each one is being developed or declining, feed that into an economic model for demand levels, and calculate the difference between these highly uncertain estimates of supply and demand? Or sit back and look at what consensus emerges from people wagering their hard-earned money on the outcome?"

In 2001 the stockmarkets came down unexpected. The consensus then was that the "New Economy" would escape such a fate. People actually lost quite a lot of their hard-earned money. May that, and several stockmarket crashes before 2001, serve as an example of the accuracy of the consensus that emerges from people waging their money.

Sorry, but I have to jump in here and respectfully disagree about the dot-com bust.  I was writing in the technology field in the run-up to that point and until shortly thereafter, and I can tell you with 100% certainty that a very sizable portion of the people in the tech industry weren't drinking the "New Economy" kool-aid.  They were happy to make money and/or get every hairbrained scheme they could think of underwritten by someone else, but few of them were true believers.

(Many of these people would say one thing in public and another in private meetings when they were among their fellow insiders; they knew the party wasn't going to last, but as long as someone else was paying for the food and drinks, they didn't complain.  The hipocrisy was hip deep.)

All right, point taken. It doesn't even matter since the posting above explains that oil future aren't speculative :-)
I've got to say that I'm getting pretty tired of this 'market knows best' nonsense.

In addition to Southsider1's point, it's instructive to look at the historical prices of long-dated crude futures.  If the market is truly a predictive instrument, long-dated futures should barely budge in price until current events start to affect the oil demand or supply situation near the contract date.

Therefore, unless there's a change in projected projects for 2009/2010, or some consensus long-term demand forecast radically shifts, a 2010 or 2011 future should not move more than a point or two until a year or so before it expires.

But of course that's not what actually happens.  In October 2004 you could buy a December 2010 crude future for $38 a barrel.  Several months before that you could buy that same future for $28 a barrel.  Currently that future is $54; and in August it was over $62.

Oh, yes, we forgot: Investors are omniscient.
Do you seriously believe that the futures market actually predicts future prices?  If so, oil should be $25 a barrel now, based on the futures a couple of years ago.
"Price" is just a noise made up by noisy critters whether meeting up in a rat hole or on the fancy floor of a futures exchange.

On any given day, any two critters can meet up and make up whatever "price" number they want.

Predicting what that noise is going to be is risky business. It is as good as betting on a football game, a hockey game, etc., because on any given day, one team can beat the other despite all the past history. What were the future market's odds USA hockey would win gold in Olympics 1980?

Mother Nature doesn't care about the "price" noises that we human critters make. Those noises are not going to compel Ma Nature to generate new oil down there under (abiotically or otherwise). "Price" is just a distractive noise that obviously has oil peakers all in frenzy and running for the cliffs. Don't fall for it!

Keep your snout securely focused on real production numbers. Peak Of Oil Production rates (POOP) is the real deal. "Price" is an illusion.

With the growing awareness of possible peaking, speculators will be watching the data from places such as TOD as well as the demands of consuming countries.  They will also factor in "demand destruction."  In short, data from here and elsewhere will be scrutinized carefully.

Consequently, we might expect the futures market--in perhaps a year's time--to give a good measure of where "we are."

For those of you who are "speculators," your problem is to be slightly ahead of everyone else.

I have to say that I disagree with your interpretation of the market Halfin.  As far out as futures go, the price is high enough to make CTL, tar sands, etc profitable.  If that isn't saying the market thinks there's going to be a problem supplying enough conventional oil, I don't know what could.
We're now in day one after "peakoil" and the odd thing is I don't feel any different :-)
Hello, I would just like to add this:

When I saw this graph this was the line that my mind almost immediately fitted to this graph.  Let me drop my credentials (B.Sc. Math) first but add I find it bizarre and disturbing that people could make the comment that they see no pattern in this graph.  The argument could be made that almost any line could be drawn through this graph to represent the trend.  The line I have drawn is, I'm fairly sure, close to what the least squares best fit to that data would be.  Of course this line would correspond pretty closely to Deffeyes peak since it is based on essentially the same data...am I wrong here?

If you've worked with predator/prey differential equations, or done statistical analysis, or worked with dynamical systems I think some version of the line I have drawn should be obvious to you.

Well done. Still, we're just look at a small part of the story.
It would be nice if you could perform a real fit of the logisitic curve to this graph.
If this trend matches with reality there are some conclusions we can drawn: we may see some other local peaks above 72 mdb, but it wont last. In 2006 production will probably stay in the same numbers as in 2005. If not before, 2007 will see the first major fall in worldwide production.
The more I look at it, the more correct Deffeyes seems to be.
It would be nice if you could perform a real fit of the logisitic curve to this graph.

In order to fit a logistic curve you need to know precisely the URR for conventionnal oil which varies between 1,750 Gb (ASPO) up to 3,500 Gb (USGS). According to the value you choose, the resulting peak position can shift between now and 2020! a curve fitting approach to infer peak production is an ill-posed problem.
a curve fitting approach to infer peak production is an ill-posed problem.

Isn't that what Hubbert's Method is all about?

By the way 1,75 doesn't show anywhere in ASPO's newsletter. They present 1,85 as the URR for Regular Oil (more or less the OGJ data excluding deepwater), which already peaked in 2004.

Isn't that what Hubbert's Method is all about?

Let's say that Hubbert got lucky! if you don't have a good estimate of the URR the method is highly imprecise except if you are several years past peak!
By the way 1,75 doesn't show anywhere in ASPO's newsletter. They present 1,85 as the URR for Regular Oil
You're probably right, they changed their numbers many times! :)
Let's say that Hubbert got lucky!

Look man, you don't seem to get it. Hubbert's Method ESTIMATES the URR, that's the beauty of it.

Anyway, if you think that Hubbert was just 'lucky' you're probably in the wrong forum. In order to understand what Peak Oil is I'd recomend you to read some good introduction like

There is no need to get hostile, we are just talking here! I've been following the PO problem for two years now so thanks for the link!

Curve fitting techniques are imprecises, check the following ASPO paper:

Uncertainty in Peak Oil Timing  - Marcel Schoppers

Yes you can estimate the URR if you assume that the world production will follow a bell shape curve perfectly! but nobody knows if that hypothesis is valid.

Why would anyone use the logistic curve to model oil depletion?
Because no-one has come up with a method demonstrated to have more predictive accuracy than the (admittedly crude) Hubbert method.
Sorry. No hostility intended.
I'll check that article. Still as pointed out before, the logistic curve is the best we have. Also it is something we know to work well in many other fields of geosciences. Let's just say that a Logistic curve is the most natural thing to expect.
Er ... have you looked at HOW USGS came up with that number?  To say their methodology was bullshit is doing them a favor.  I only wonder what kind of pressure they were under by members of the Clinton administration or members of industry (Clintons are such GOOD friends of share holders, aren't they) to adopt such as wildly unreliable methodology and choose such a rediculous level of confidence (50%) upon which to base their claims.

But, criticisms of methodology aside, the USGS method at 95% confidence is the one that has actually had any success predicting what has actually been discovered and added recoverable reserves 2000.  The USGS 95% model and ASPO are pretty close to one another.

Check out pages 11-13 of this report

I didn`t say that the USGS numbers were realistic, some people actually think they are too conservative (see Michael Lynch).
Historically, since the US peak in the 1970s, the USGS numbers have been nothing but wrong and too high, always. That's 34 years of being wrong and too high yet they still produce more forecasts that are on the high end and which many people think are still too high. The USGS is a political entity and must bow to those pressures (and apparently does) rather than face the truth. Now consider that the USGS has been wrong every year since the US peak in the early 70s, then consider that Lynch thinks they are conservative, and exactly how reliable would anyone consider Lynch based on that data?

In fact, why don't you look at the USGS forecasts for reserve growth from 2000-2005 and compare that to what actually occurred? That's a wonderful sample of how out of touch with reality the USGS is. And Lynch? He's out in orbit somewhere.

I created an account to reply to this comment...

This sentiment is something I'd really like to have numbers around, but I'm not really sure where to start.  I have the current ASPO production forecast on a big poster, but I would like to overlay it with current and historical forecasts from ASPO, IEA, and USGS before posting it.  Is there a way to get these numbers for IEA without buying their expensive reports for every year?  Is there any single location for all historical ASPO forecasts?  And for USGS I haven't started researching.  If these numbers are at your fingertips, it would make my job a lot easier.

Don't forget your fitting that curve to only the last three years of data. The decline in production because of lower demand during the recession before that doesn't show on this graph.
It seems that there is an inflexion point (i.e. where the second derivative is changing its sign) around July-2004 which means that the production rate is slowing down from that point in time.

However, four years is a very short window to make any long term conclusions. I wonder how significative is this event? one experiment could be to take many random four years wide windows and see how often we observe inflexion points.

Given that this is data through August, the effects of the hurricanes aren't showing up yet. (Katrina came throught the last week of August, so has a small effect in Aug). This will cause a discontinuity in the next few mos data. The effect on long term production due to lost/damaged drilling rigs, delayed projects and worker/supply shortages will be seen through 2006 at least.
Let me ask one question: What shape line would you fit to that data if the graph stopped at July or August of 2003?  My guess is pretty much the same line you did draw, except it would have approached a peak at a production level just shy of 69MB/d.

If there's one thing attentive economists learn, it's how incredibly risky it is to reach conclusions about such high-level abstractions basd on a single graph.  

I believe PO is real and imminent, but I also think that ASPO's 2010 prediction is on the mark.  This is based more on faith in their organization and expertise than anything else, but this early in the game, with demand response just shaping up, plus CTL coming into play in the next few years, it seems to me like a safer bet than saying we're at PO now.

Hi Unasimple

As my understanding of calculus is pretty hazy now.What is the rate of increase near the top of the curve? Based on what I can see on the graph of best fit it must be nearly flatling.

Then is is possible to work out an inflection point bsed on this data?


Hmmm, so many interesting thoughts have followed.  I'm glad I wasted a couple minutes to make the graph.  First although I noticed the inflection point I didn't pay it much attention and actually found it distracting to what I was trying to illustrate.  Looking at it again it seems it would be hard to redraw the line and not include it if one were doing it fairly.  Thus production in these last few years does appear to ramp up and then slope out towards a future maximum.

Second, the region that Stuart posted could be considered I think, slightly loaded in its intent and got the response it did from me because of it.  In addition just by changing the vertical spacing we get this graph:

Which just proves you don't even need statistics to tell any damn lie you want.  Plain mathematics will do the job.  The first graph might look alarming to the layman while the second wouldn't even though they are the same graph.  The story neither of them tell is what effect the predicted shortfall in crude oil might cost and whether that be less SUV sales or widespread chaos and death in some economically undeveloped nation.

I think that in order to extrapolate correctly this graph in future we have to add the unused spare capacity during these years. This would produce a much smoother graph, much more resembling the top of the bell curve.
looking at the graphs above and drawing conclusions is wishful thinking....they prove nothing at this point, one way or the other...perturbations will occur up and down...it'll take more data than what we now have to draw any conclusions...although it is fun to get caught up in the moment, i admit.
Yep, we will have to be looking back on a few years more worth of data to see clearly that production has flattened out in reality.  Even if we do do careful analysis of what is coming online against both assumed rates of depletion and demand growth, in the end, we can only achieve a certain probability of being correct.  Anyone have any idea what that confidence interval might be?  If it is less than 95%, I wouldn't buy that long fallow farmland just yet.  Though, apparently some of the current or former people at USGS, OECD, and IEA, would!
Given the fact that GOMEX production is currently at approx. 50% and the Burghan field in Kuwait is starting to decline, and it's winter, and Iran is defying US statements, and the Xmas holiday cheer is most abundant right now , based on the # of Xmas shoppers this weekend, (who are completely unaware and/or uninterested in oil as gasoline has been declining daily, auto mobile manufacturers are discounting prices on vehicles) and the stock market is at a near all time high since 4 and a half years ago, pushing 11,000 on the DOW. With prospects to go even higher through DEC and possibly till mid JAN06 when the new Fed Chairman starts.

Why would anyone consider buying farm land now? I keep hearing that new technology will save the day. Plus the Govt has everything under control.  sarcasm off

According to http://www.valeator.com/drafts it has already happened some time ago.


Nice link - hadn't seen this before.
Based upon the JODI data, I suppose that Russian oil exports are not well represented by the oil carrier sailings.  Perhaps the peak will occur this year if the Russians cannot increase their production.
Since it's been mentioned twice now, let me take up this question of buying farmland. The main reason not to buy farmland now is that the housing bubble has land values inflated way above what's reasonable. It's certainly possible to find some farmland at a reasonable price somewhere, but in general, it's overvalued.

The second reason not to buy is if the purchase puts you too far into debt to be able to handle adequately as the economy deteriorates.

However, there are still compelling reasons to buy if you can find the right deal.

  1. It takes years to get a farm established. The soil will almost certainly need to be replenished by the addition of organic matter and growing cover crops.

  2. If trees (for fruit, nuts, lumber, or firewood) are part of the plan, they need years to get established.

  3. Unless you're an experienced farmer already, it takes years to learn how to farm.

  4. You need to get established in the community and build strong relations with your neighbors.

  5. Setting up a community on the farm is a great option, and it takes years.

In short, it takes a lot of time and effort to establish a farm, so the sooner you start, the sooner you'll be productive. I say this from experience, because my wife and I are in year 3 now and have to date had about $200 of sales at the local farmers' market. We've planted a bunch of fruit trees and bushes but have had only a small amount of fruit for ourselves so far. With the peak of oil production looming, I'm glad we're as far along as we are, but I wish we were further.
I echo your comment ab3. We're in year 5 and there's still so much more to do and to learn. Fortunately, the fruit trees were planted a long time ago by the previous occupants. The sheep and chickens provide organic matter for vegetable growing, eggs, meat and wool. One of the kids is going to be raising our first cow at 4H soon. Check out Lehman's Non-Electric Catalogue (www.lehmans.com) for helpful farm implements abd how-to books written by the Amish and Mennonites.

I agree with you about the real estate bubble and its effects on land prices though. It wouldn't be worth getting into debt in order to buy and overvalued property now. When property prices crash you'd only lose it anyway. Unless you can get a really good deal someow it's better to wait until you can pick it up at 10 cents on the dollar in a few years time. In the meantime you could cash out and stay liquid through the coming deflation in order to have the resources to buy land later.

Why would anyone consider buying farm land now? I keep hearing that new technology will save the day. Plus the Govt has everything under control.

In July 1969, when Neil Armstrong stepped on the moon, I was a glad-on-tech teenager. I remember Walter Cronkite and all the other "most trusted" names in information-delivery promising us that soon, in this glorious "20th Century" there would be wheel-shaped space stations spinning up there in orbit, generating their own gravity. And mandkind would be off to Mars, Jupiter and beyond. There were no bounds to the glories that this new technology would bring for mankind. On the kiddy-cartoons, George Jetson was whizzing in the air in his flying future car. Rosie the robot was picking up the laundry for Jane, his wife. Elroy was off to summer camp on another planet. The General Electric "bright beautiful tomorrow was just a day away."

Here we are some 35 years later and none of it has come to pass. The trusted Governement does not even trust their own Space Shuttles to hold together during launch. They worry about the Public Relations fiasco should yet another Shuttle blow up on live TV. The herds might lose faith and stop shopping for Christmas, the Christams of Tommy Tomorrow as promised by the Ghost of a Christmas long past.

We don't have a Thanksgiving Day here in Lithuania, and we don't have American football on TV, so my TV-watching consisted of the evening news. Lo and behold, a little blurb scrolled across the bottom of the screen, one of about 15 blurbs that scrolled and re-scrolled during the business/finance part of the news.

And that blurb was [my translation]... "production of oil from Lithuanian wells for 2005 is estimated be one-third less than the amount produced in 2004."

So all those stripper wells you see just inland from the coast don't have much of a future... Welcome to the downhill side of the bell curve!

we don't have American football on TV, so my TV-watching consisted of the evening news. Lo and behold, a little blurb scrolled across the bottom of the screen,

Soon we will have only scrolling blurbs (or ex-suburbs) in America also. As we speak, PBS and CSPAN are being dismantled.

Here is a sneak preview of one of those scrolling, mixed messages:

At just this moment it had been announced by trusted reporter Judith Miller that Oceania is not after all at war with Eurasia. Oceania is at war with Eastasia. Eurasia is an ally. It has become known, with extreme suddenness and everywhere at once, that Eastasia and not Eurasia is the enemy.

--from Orwell's "1984" with minor modifications
Just a comment from me now that I'm back from consuming lots of gasoline over Thanksgiving.  Obviously I added the question mark in "Happy Peak Oil Day?" recognizing the considerable uncertainty in the situation, but wanting to give a nod to Professor Deffeyes' prediction.  The reason I chose the time period I did for the graph is because it represents the time period of the economic recovery after the 2000-2001 tech crash, during which increase in demand has been very significant.  I made the vertical scale big so we could see details of what was going on with as much clarity as possible.


What is striking to me about the graph is that it stalled out in July 2004, and hasn't gotten significantly above that production in over a year since.  Quite clearly, this did not come from some economic issue on the demand side - there was nothing analagous to the Asian flu, or the 2000-2001 tech crash, which caused the last dips in production.  Instead, this leveling off in production can only have come from the supply side, and in the face of ongoing industrialization and increasing auto-dependence in China/India etc, in addition to the ongoing continued desire to drive ever more in the OECD countries.  This is what has caused the collapse in SUV sales, etc - the demand side is having to respond to the failure of supply to keep increasing.

So if this recent leveling off proves not to be the peak (and I agree that's certainly in the realm of reasonable possibility), the question is who will be increasing in 2006 that has not been able to increase in 2005?  The ASPO-Ireland, peak in 2010, answer is obviously deepwater.  But I really wonder.  With the exception of Brasil (Petrobras), the deepwater stuff is all being developed by the IOCs. After we looked at that Petroleum Review story pointing out that the IOCs are as a group in decline, and we did that Exxon analysis we were inspired to by Andrew "8%" Gould and Kyle Swanson showing that Exxon is just managing (or not quite managing) to keep up with an O(10%) internal decline, I have to wonder if the IOCs can in fact increase production much.  The Saudis are flat, the Russians have gone flat...

OTOH, 2005 does seem to be the peak year for new megaprojects, which one might think would help drive a significant production increase in 2006.  Certainly if the 2005 crop of projects is not enough to do that, there is much less hope of it in subsequent years.

Any of our resident sceptics want to propose which country/region they favor to be the one to drive 2006 significantly higher?

Finally, is anyone as puzzled as me by these "superspikes"?  We've got two spikes of O(2mbd) from one month to the next, with almost as rapid a falloff two months later.  That's a hell of a lot of oil production to get turned on and off so fast...

is anyone as puzzled as me by these "superspikes"?

Mother Nature does not automatically pump the oil up for us (with the exceptions of early stage wells). It is a human activity, limited of course by the maximum flow of viscous fluid through porous rock. Humans can toy with the production rate numbers. It's all a matter of meter placement. Do you measure directly at the well head, or do you place your flow meter a bit further downstream on the pipeline? Perhaps after collecting the wellhead flow in a few storage tanks, so you can pretend that the storage tanks are your well heads, and crank their daily output up temporarily or turn them down at will --for purposes of politics and market manipulation?
I found a chart (world liquids production outlook, fig 7, p. 24) indicating the max refineries can handle now is 83mb/day, steadily accelerating to 89mb/day by jan/2010. (The chart meanwhile projects crude output to rise from 84mb/day to 88mb/day early 2009.) If true, today's refinery output is less than today's crude production capacity - if the world can't process more than 83, there is little reason for OPEC to produce more except to lower price. The situation would be masked by shipments of product from European storage post K/R, but would become apparent as these shipments ease and product prices increase while crude declines.
If industry (including OPEC) believes this chart it would explain their reluctance to increase capacity in the face of what looks to be declining price at least until refinery capacity catches up to crude production, shown in the chart to be mid 2009, again around 88mb/day.
What publication are you referring to?

At one time I thought the lack of refinery expansion was due to worries about a lack of supply, but expansion did take place. It may be true that the US has not built a refinery in 29 years, but this is quite misleading. From 1988 to 2000 existing US refineries expanded 29%, or around 2%/year compounded. However, essentially no expansion since, probably on account of the 2000 market crash.

With total surplus capacity gone, refineries are planning expansion, Shell in Texas, 250k/day, and Valero, forget where, 400k/day.

Incidentally, I think refineries were caught by surprise as China and India sharply boosted demand in 03/04. Saudi had excess crude capacity, so was able to fairly quickly bring more crude on line. Meanwhile, it seems refineries did not have as much excess capacity, and it takes longer to expand, explaining the current crunch. However, there is not yet any indication that they are reluctant to expand to meet demand, providing of course permits are forthcoming.

I heard part of the Yergin/Simmons peak oil NPR bit.  Yergin supposedly did a "field by field" analysis of oil reserves and seems quite optomistic.  Upon what is he actually basing this optomism?  Is it because he is believing official "reserve" quotes?