Remembering Mr Micawber*

Bless my socks! I had popped the Hel post into the hopper a couple of weeks ago, when I left, and am now back, although still trying to catch up on the information that was posted while I was away. One thing that has struck me, which related to the last post, has been the speed with which wind seems to be catching on as an alternate energy source. The NYT had a piece on the growth in India and China this past week (but since I was traveling I failed to tag it). And turbines are appearing when least expected, showing that the investment is now considered worthwhile.

By the same token, while driving around Poland we were, at least once, carried in a car powered by gas, and these are fairly common, though when our host said two million such, I am not sure if he was correct on the decimal point.

I listened to the recent interview with Matt Simmons and am not sure that I completely agree with one point that he made. In talking about production, he suggested that we had (as Khebab pointed out) reached a point where there has been some slight decline in production over the past months, and that this might signify that we have passed the peak.

. I am more inclined, at this stage, to think that this might in part be a demand driven peak. Bearing in mind that the increase in prices has caused some response, and reduction in demand from those who either can no longer afford the price, or chose not to buy. I do believe that the KSA, for example, has more oil that they could sell, but that given the quality of their surplus, that there is no current market for it, thus constraining how much they produce. (And thus the announcement that they are starting work on Manifa while expected should also mention that they are also building a refinery which will be needed to process the oil).

The reported moves by Nigeria and Venezuela to reduce production would fall in with this line of thinking. I don't know what the surplus of potential supply over demand currently is but the cited number

Ramirez said that there is a surplus of at least 500,000 barrels a day in the market.
is apparently sufficient to cause such a reaction. Which then leads on to the question as to the size and nature of the decline in demand from that projected. The drop in price, however, can only feed the nervous concerns of those in oil production.

It is hard to remember just how many times over the last months I have talked with folk in the oil business who are sure that the current bonanza will not last. They have been burned too many times before, and now, the drop in price feeds into those fears. The likely result will be that projects that had been pushed hard, may now see less pressure. Delivery dates for new production, or plans to chase that production, are pushed back a little, until the situation becomes clearer.

Looking at the headlines that Leanan posted today (Oct 1) I was struck by how many of them are suggesting that this slow-down in demand (which occurs each year as we transition from summer to winter, but which gets hidden, on occasion, by the impact of hurricanes) and the possibly sustained drop in price, is going to be a big problem across the energy production board. This may well slow decision making, but, in reality, depletion is still gnawing at the underbelly of supply.

And demand still continues. The Newsweek story seems to suggest, from the headline, that Chinese demand is going away, though in the story itself it does report that growth is on target to be 6% this year. And the story does comment on the concern that I have about the climate slowing investment, but other than that it would have you believe that depletion does not exist. Two quotes

In fact, the current oil crisis has nothing to do with a catastrophic shrinking of global oil resources, while the specter of rising Asian demand is largely a myth--China has huge potential to reduce its oil consumption. Supply is tight because two decades of low prices discouraged the exploration and development of new fields in the world's most oil-rich areas. That has cut spare production capacity--the critical cushion needed to cope with crises--to just 2 to 3 percent of global consumption. This makes the price of oil a hostage to political and climatic events. There has been no objective rise in oil-state instability, only in the market's vulnerability to speculation--gloomy or not.
Followed by
Essentially, the underlying causes of the new century's first oil crisis are in the process of being solved. Since 2002, the major producing countries and oil companies have gained the confidence to invest in exploration, development and refining. We are in the midst of a real investment boom, although it needs time to bear fruit. Oilfield development takes several years, and there is now a serious shortage of equipment and qualified personnel.

If investment continues at current rates, however, the global production capacity of crude could increase by 12 million to 15 million barrels per day between 2010 and 2012, outstripping expected demand growth of about 7 million to 9 million barrels per day. This would boost spare capacity and drive prices down.

Need I mention that the article was written by the senior vice president for strategies and development of Eni SpA.

Well we have written here, many of us, about the errors in those statements, so it is a pity that they are being repeated. But the current world surplus is only a small amount, and depending on the real growth in demand this year (and I have heard a variety of numbers) an assumption that it will be sustained into the new year may be premature, at best.

Even the Nigerians seems to be hedging their bets. And they are noting the effect of time on the impact of any change in oil production, as the Nigerian oil Minister noted

Daukoru told THISDAY that "whatever decision members eventually take, it would be in their best interests" adding that "do not forget that whatever decision is taken would not reflect now but would only come into effect in at least two months". . . . . . . . . Daukoru, who is also Nigeria's Oil Minister, said that even if OPEC reached an agreement to cut ahead of the group's December 14 meeting, it would be difficult logistically to lower supplies before November at the earliest.
"Our nominations for October are already out, so if we were to cut it would be from a later date," he said.

Well, time will tell, but I don't think I plan on buying an SUV in the near future, though the Actress is concerned (having been rear-ended several times) that a Smart car does not provide the protection against them.

* From Dickens "Annual income twenty pounds, annual expenditure nineteen pounds, nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Heading Out,

One NY Stock Exchange guru this weekend argued that oil will be down to $35 a barrel in 2009.

I wonder if Venezuela and Nigeria are cutting production because their production has fallen . . .

2009 futures are at $63 - so $35 and $90 in 2009 are of roughly equal probability, (interest and carrying costs not included). If more people thought $90 was more probable, the price would be closer to $90.  Therefore, there are many in the camp that think we might have $35 in 2009. Most of them dont post here however.
To believe that oil would be US$35 in 2009, one must believe that the growth in world oil production over the next 3 years will greatly exceed the growth in US$ M3.  Seeing as M3 is no longer reported, but credibly estimated to be growing at a double digit rate, to expect oil production to grow faster than that is simply amazing.
Would you mind explaining the linkage between M3 and the oil price?
Micro, never thought of it before in that manner.

It would seem to indicate that oil, at US$35 in 2009, would be essentially worthless in the face of a global glut of US dollars.

I still don't get it. If the US prints money, the dollar deflates. This causes the price of oil to go up in dollar terms, not down.

It seems that case for $35 oil is impossible if the US is printing enough money to deflate the dollar relative to the basket of currencies of oil buying countries. This doesn't seem to be happening at this point.

It is true that a weakening dollar could make the dollar price of oil higher in dollars, even if it did not go up in purchasing power terms for other countries.

The original calculation could be modified by using 2009 dollar values from the futures market, but this would probably not have a huge impact. It would also be a bit of a tricky calculation to figure out the basket of currencies that oil prices trade against.

But Jack, you do get it.

The Feds are printing money like reckless thieves, but who knows, they won't tell us any longer how much they are actually printing.

This will certainly devaluate the dollar.

Add in the rate of inflation... and who knows what that really is either. Its either what the feds tell us, or more likely, it really is about 7 percent.

Now, imagine oil selling for half the price than it did several weeks ago, 3 years from now!

2009 futures are at $63 - so $35 and $90 in 2009 are of roughly equal probability

Right, and actually if you look at option prices (I had to go to 2010 because it is more liquid, being a round number) the prices of $35 and $90 options imply about a 20% chance that the contract price will be outside that range - either less than $35 or more than $90.

I'm sure many people here don't find that too surprising; they're probably all sure that the price will be over $90. But the smart money says that below $35 is equally likely as over $90 - about 10% in each case.

what i think is more likely is that demand outstrips supply in the next 18 months, causes spike above $90, and the ensuing economic dominoes collapse world economy leading to supply (at that near peak point) far outstripping demand, and the marginal barrel heads below $35. volatility will be extreme and as Ive discussed previously, volatility itself can be worse of an enemy than expensive oil
So you think that since we may fall a tad short in the near term, the entire economic system worldwide will collapse?  It takes a LOT longer then 18 months for something like that to happen.  Just look at the 70's~
Halfin, I'm on track with you much of the time, but pedantic soul that I am, I must remind readers that it isn't "smart money" that says.  It is the past statistical pattern, which if countinued, will produce prices with an 80% probability of beinf within $35 and $90.

Our best guess is that the pattern will continue, but we cannot predict the chance that the pattern will be broken.

Again, the 20% outside, is the chance given the past pattern.

OK, so who's bluffing : Nigeria/Venezuela, or Saudi?

If we believe that they will deliberately cut production in order to boost or support prices, then that implies that they think that

  • the Saudis will go along with that, rather than flood the market for oil to counteract it, or
  • the Saudis are holding a busted flush : i.e. don't have the spare capacity to keep/drive prices down. If we believe this, then we are at a major turning point indeed! Bye bye swingin' Saudis! Venezuela and Nigeria are the new hep cats.

On the other hand, it's quite plausible that they are making a virtue of necessity, trying to talk prices up by claiming they will withhold supply that they couldn't actually produce anyway...

Place your bets, gentlemen.

"OK, so who's bluffing : Nigeria/Venezuela, or Saudi?"

I am assuming that's a question only asked as a joke, right?

Yeah, I would bet on Nigeria/Venezuela against the Saudi's about like I would bet for my local high school football team against the Pittsburgh Steelers.
I may love the local kids, I may root for them, but I ain't stupid....

I have learned that the Saudi's always seem to take the old military advice, THE 5 P's...Proper Preperation Prevents Poor Performance, and ALWAYS have a contigency plan.

I don't trust 'um.  I hate the U.S. being relient on them.  I would watch them like a hawk, and confirm EVERYTHING about them.  I know they don't really like or trust us.  But, I do admire them.  They are damm clever, and I am certain of almost nothing, but if I had to bet I would bet on this:

They still have not even gotten close to revealing their best hand, the aces in this game are are still hidden, and the Saudi's certainly still have some of them.  What they have to go with them is what will decide much of the economic fate of the world over the next two to three decades.

Roger Conner  known to you as ThatsItImout

Doesn't matter how clever the Saudis are, they can't beat geology. If the Nigero-Venezuelian front really DOES cut production, and the Saudis don't increase theirs, then all the world will see that the Kingdom has no clothes.

If the Saudis really do have spare capacity, and Ghawar isn't watering out, then logically they will have been uncomfortable with $75 oil, which demonstrably dampens demand and accelerates substitution. So they would be pissed off at anyone withdrawing oil from the market to tighten it. They will presumably feel obliged to increase their production to assert control.

If, on the other hand, they are struggling to maintain output, or in decline, then they must be relieved to see the pressure come off, as prices and demand slacken. So they would be more than pissed off, completely apopleptic, at anyone withdrawing oil from the market to tighten it.

It's also possible that both sides are bluffing, in which case the current easing will soon be over.

Five reasons I believe that we are past the peak of crude + condensate production:  The HL model; Ghawar; Cantarell; Burgan and Daqing.  

Mathematically, the world (based on crude + condensate) is at the same point at which the Lower 48 and the North Sea peaked and declined, and who among us is willing to predict rising world production when we have credible reports that the four largest producing fields in the world are declining or crashing?

Yesterday, I pointed out that the Saudis were celebrating over reportedly getting the Ghawar water cut "down" to about 35%.  Note that this is after redeveloping the field with high tech horizontal wells.

From yesterday's open thread:

This is a link to an updated version of Morton's excellent article on Ghawar:

In this paper, Morton said that there were reports circulating at the Offshore Technology Conference about Ghawar's water cut being up to 55% (one barrel of water for every barrel of oil).  I would also point out Heinberg's report that Ghawar was down to three mbpd.

So the question is, is Ghawar producing one barrel of water for every two barrels of oil, or one barrel of water for every one barrel of oil?

IMO, Ghawar and Cantarell are beacons--burning brightly in the night sky warning of the onset of Peak Oil.  

These two fields account, or accounted, for 10% of world crude + condensate production.  In both cases, the remaining oil is in rapidly thinning oil columns in carbonate reservoirs, between rising water legs and expanding gas caps.

BTW, the Saudis earlier this year complained about not being able to find buyers for all of their oil--even light, sweet oil--so, they "elected" to cut back their production.  Note that light, sweet oil prices traded in the highest (nominal) price range in history during this period.

I doubt that ghawar is down 40%... if they are down 2mmb/d, then other fields are up nearly that much, which is hardly credible.
Assuming that Ghawar is declining--which seems credible to me given the reported 35% to 55% water cut--one question is when did production start falling?  

For all we know, the most recent decline may have been from 4 mbpd to 3 mbpd.  There is also the possibility that they are draining their inventories.  


The problem is, and I quote from the excellent paper of Morton's (great maps too!) you link,

"Unfortunately for the world, few know the actual state of Ghawar."

And this is considering that everyone in the business had tried to beg, borrow or steal information about the condition of the field....imagine how little we know about the less studied Saudia areas, including Saudi offshore oil.

The problem is that sooner or later, this lack of oil would have to start showing up in a big way.  If Ghawar really is done that much, combined with Bergen, combined with Canterell combined with the known large drops in the North Sea combined with Norway, combined with China's field, then...?

Where is the oil coming from?  Are refiners having any difficulty getting supplies?  Are contract prices rising to lock in supplies?  Is any serious effort at diversification being made, to nat gas and propane, which for now we seem to up to our eyebrows?  Are drillers of gas and oil jumping back in in a big way?

These would be confirmation signs.  In the short range, we can find no one in the industry itself showing signs of panic or need for expedited action.  In fact, the trend in the short terrm is running the other direction, with countries talking of reducing production to protect price, investment firms running scared after the derivitives in natural gas collapse  (a collapse brought on by falling, not rising, natural gas prices), and gas drillers out west now delaying action on drilling of known assets to "store the gas in the ground".

There are however some confirmations, in the Saudi's march to more complex and expensive fields (remote ones which require pipeline water to inject and expensive pipeline to get the oil out) and high tech drilling to boost production, and into the offshore area in a bigger way  (this to me is always a sign that gas/oil is getting difficult to find onshore....otherwise, why go through the pain in the azz that is the nature of offshore drilling....and the deeper they go, the more it signals that onshore oil is getting hard to find and develop, for whatever reason.

There is one more thing I have to mention, even though I don't want to go too long.....these so called "oil insiders" or "a Mexican oil worker has leaked" or "an unnamed Saudi oilfield insider said" type stories are completely useless.

There is no way I can know that this is not some guy who saved up a couple of thousand bucks, bought oil futures on the long side and then started making a few phone calls to back up his bet and pick up some extra money.
It could be a PEMEX or ARAMCO secretary or janitor for all I know....with no attribution or confirmation, that is National Enquirer type stuff....

Roger Conner  known to you as ThatsItImout

No one is denying that additional sources of oil are coming on line.

I'm developing new (small) oil fields in Texas, decades after we peaked.

The problem in Texas, the Lower 48, the North Sea and now the world is replacing the production from the old, large oil fields.

There appears to be no dispute regarding Cantarell, Burgan and Daqing.  

The estimated worst case decline rate of 40% per year for Cantarell came from an internal Pemex report.  In any case, Pemex has confirmed the Cantarell  decline

The only question regarding the top four  is Ghawar.  Morton refers to the problem with recent data regarding Ghawar.  A lot was known about the field before the Saudis took over operations.  What we do know is that cumulative production is getting close to the same stage of depletion, as a percentage of OIP, at which the Yibal Field--same reservoir, also redeveloped with horizontal wells--started declining.

Since the net decline (or increase) = older declining production + rising new production + workovers and infill wells, the initial decline can be quite subtle, e.g., the 0.6% Texas decline the first year after the peak year.  Worldwide, we are also seeing production from non-conventional sources.

However, historically, we have not seen production increases when the largest fields are all declining, and despite the highest (nominal) oil prices in history, world crude + condensate production is still down from December, as predicted by Deffeyes' HL work, just like the Lower 48 and the North Sea.

Oil is very fairly priced currently, and as a proportion of gross income, at an historic low still.  It was much worse in the 70's, and even when oil was first being pumped.
Wilkins Micawber mentioned shillings and pence only the once. However he did say several times words to the effect 'something always turns up' (think Bob Hoskins in the made-for-TV version). I think we should  call PO deniers 'Micawberists'.
Or we could spend less time obsessing about peak oil deniers.
Thanks for catching the mispelling of Micawber - I changed it.


India's economy grew at 9% last quarter and china just under 10% again. In india gasoline prices are controlled. Goverment sets the price for gasoline. There has been 1 price hike about 6 months ago about 10-11c per gallon. I am inclined to think Petrol/Gasoline prices are set by the goverment in China and much of Emerging markets in Asia. So price response must be poor - since the price change itself is muted. If anything, demand must be up in much of Asia, including the prospering middle-east. Some demand cut backs must have definitely happened in USA and Western Europe. Also one must take into account the fact that, US military probably has stopped buying oil temporarily - also the SPR buying has stopped. - Oil Shock
> I am inclined to think Petrol/Gasoline prices are set by the goverment in China and much of Emerging markets in Asia.

You are correct. Gasoline and Diesel are subsidized by the Chinese gov't.

Almost 50% of the final pump price of petrol in india is taxes. Kerosene, for domestic consumption and LPG (liquified petroleum gas- butane) are subsidised using these taxes. I don't exactly know the deal with diesel, whether it is being subsidised or not.
On the approach to peak oil increasing price volatility should be expected. Several factors come to my mind: Repeated swings from production surplus to deficit, amplified by supply responses ( seasonal or economic boom/recession) , speculative hoarding (if you expect something to go up in price you start to fill your tanks, when your tanks are full, that demand on the oil market disappears); hot money...
It might be enlightening to study the price volatility in the North American natgas market..
It's this
NYT article about wind power in India
you couldn't tag?
"I listened to the recent interview with Matt Simmons and am not sure that I completely agree with one point that he made. In talking about production, he suggested that we had (as Khebab pointed out) reached a point where there has been some slight decline in production over the past months, and that this might signify that we have passed the peak."

I also listened to the Simmons interview, and it was very good, although the interviewer spent more time talking and expounding than Simmons did :-(

As I have said before, I am absolutely convinced that short term production drops DO NOT prove peak oil in any way.  If they did, then the half decade production drop of the peak of 1980 would have meant peak was a quarter century ago, and we are far into post peak mitagation now.

Simmons points to the more fascinating problem of structural decline where there is no logistic reason for production to drop by such large amounts year on year, such as the North Sea, and he is excellent at keeping event the doubters on point.

From where will new production come?  We always end up back to (a)Saudi Arabia (mystery from front to back, (b) Deep offshore (last ditch expensive drilling as predicted by ASPO and Campbell early, or natural development of a maturing, but not panicked oil industry?  Who knows?  (c) Arctic (same question as b, and (d) unconventional (same questions as b and c, plus a host of others...scalability, cost of extraction, use of massive natural gas at what price (?), EROEI issues and greenhouse gas problems.

Here's the fun part....if the (a) option, Saudi Arabia, can come through in a big way (that is, they have loads of undeveloped oil that they can develop and act as swing producer again) they effectively junk the b, c, and d options. Due to the cost advantage of Saudi Arabia, even in their more remote and difficult areas, and offshore in the shallow and sheltered Persian Gulf (this could be a HUGE surprise, so watch out where you put your money!) they could effectively flood the market, and create a price collapse, destroying all the above alternatives, plus wiping out the real renewable alternatives and conservation efforts.  

That would be good news, right?  No.  It would be catastrophic.  It would further siphon power in the market to an unstable Saudi Arabia, be a horrendous blow to U.S. balance of payment, destroy mitigation and efficiency efforts,  and send waste and greenhouse gas through the stratosphere (pun intended)

Which would be worse in the long view, oil at $25 bucks a barrel or oil at a $100 a barrel?

My argument is that oil at $25 a barrel would be MUCH WORSE AND MORE DANGEROUS to the world.

Interestingly, if oil holds steady at say $60 dollars nominal a barrel, each year it is getting cheaper anyway due to inflation.  If you compare oil to other goods since 1982, such as housing, medical costs, university education, etc., it is stunningly cheap at $60 a barrel.  (by the way, for those who know their numbers, this makes "peak oil soon" a VERY hard sell.  They are clever enough to realize that despite the hysterical carrying on of the the average consumer, it is still damm cheap, and a very marginal cost of American life for most people)  If oil had went up as much as the rate of inflation since the early 1980's, it should be about $120 to $140 per barrel easily by now, and if you played a bit unfair and cherry picked your starting place, (many folks do trying to prove that we are facing immediate catastrophe) then oil coming off the superspike of 1979-1980 should be about $190 to $200 now (!!)

As for me, would gladly accept crude oil prices at $75 to $80 dollars a barrel for the rest of my natural life, and I am not a wealthy person.   If it stays below $100, we would still be getting by lucky, and the economy will do fine.

Wishing for crude oil much below $55 a barrel or so is, and I hate to have to say this, the type of self centered, myopic, greed and vanity driven thing this generation is becoming known for.

I don't see anybody having touble being able to afford to waste it at this price....

Roger Conner  known to you as ThatsItImout

Interesting point about the 1980 peak - which just happens to be the last time the world went through a major economic contraction, caused in general through the increase in the price of oil, and which in term led to massive conservation efforts in industrial countries.

A demand driven peak is a fascinating concept, and certainly very relevant to what could be happening now, or over the next 18-36 months.

But there still remains one niggling question, in my eyes - why is the price of oil so stubbornly sitting at $60? This is not meant in the sense of price, but in the sense of cost - that is, why is $60 so magical? Could it just be that the world could consume more oil at a lower price (hello, Vietnam and all its fishing ships not at sea), but since the amount of oil is no longer boundless, the cost of oil remains high, regardless of price fluctuation? (record drilling depths as the salvation of suburbia - hey, why not mine Titan for hydrocarbons and really boost America's future oriented economy?)

In other words, could the cost of oil production be creeping up steadily as it becomes ever harder to pump in the quantities which so many people expect? Tied together with lower demand due to an economic slowdown, this would very much lead to a peak, even if it isn't the 'real' peak. Except the decline rates are real, and the less new production which comes on line, the less these decline rates can be compensated, and the more demand destruction occurs as the price rises, choking off economic activity, leading to a lower price, which may hinder more feverish production efforts - except decline doesn't stop. In other words, at some point, the decline rates will become the definitive measure of oil production - and this point may be reached while price varies due to economic circumstances throughout the world.

Very tricky questions, obviously, and not one really related to price in the way so many people view it. After all, the price in Europe of gasoline is much higher than in the U.S., but that has nothing to do with a marketplace in fungible commodities, it has to do with political/economic decisions within various societies.

My defintion remains that it is what comes out of the pipeline that determines peak, and for close to a year now, there has been less. Whether this is because of temporary factors or whether this time is the real peak is an interesting sidelight - in a few years, the discussion will become moot, I very firmly believe.

What makes you think that "Vietnam and all its fishing ships not at sea" is a reality?

If one in ten of the ships can't go out stories were true, fish prices would be through the roof.

I noted earlier when the story was Thai fleets that I still get plenty of cheap fresh fish in Bangkok.

Well, the article on TOD -

which referenced this article -

talking about Vietnamese boat owners not being able to meet their costs due to oil prices, not being able to sell their boats because no one was interested in buying a money losing machine, and the fear that in a few months, many idled boats would lead to bankruptcy.

But it is all hearsay, as is everything I read in the media which is not in my personal experience.

But being able to buy fish is not exactly the same as saying boats aren't going out - I could buy delicious, locally caught fresh cod and halibut in New England and Nova Scotia long after those fishing fleets had becomes ghosts of their past glory.

My impression, based on the Thai case, is that fishermen were upset that their previously subsidized bunker costs were rising, so they started complaining loudly in hopes the government would dole out more helpful cash. In Thailand, when that didn't happen, they found that they could actually go fishing an make money again - magic. I expect the same thing is happening in Vietnam. Selling an old boat for 10% of it's purchase price may or may not be a good deal. Not enough info.

If you were buying delicious, locally caught fresh cod and halibut in New England and Nova Scotia, someone was catching them locally. It is possible that the Vietnamese fleets are so fuel inefficient that Thai fleets can take over and substitute for them based only on an increase in bunker fuel, but I doubt it.

I would guess that if someone visited a Vietnamese port today, they would find the same number of ships out there as before. If oil prices make fishing more expensive, people either buy more expennsive fish or switch to chicken. If the markets have plenty of fish at the same price, then oil expenses have not bound fishermen to their ports, regardless of what one journalist says.

I realize this is a fairly trivial point and I am flogging a miniture horse, but so be it.

Anecdotal evidence is not data.

Perhaps you are not aware, Jack : the world is, without a shadow of a doubt, well past Peak Fish.

Modern fishing boats are large, they spend a long time at sea, seeking ever decreasing quantities of fish. Depending on the price elasticity of fish on a given market, it's clear that there's a point where it's no longer economic to put to sea. I suspect that Vietnam exhibits very little price elasticity, because the bulk of the fish-eating population is very poor. The costs can't be passed on easily.

The price of oil has everything to do with the price of fish.

I know that the world's oceans have been badly overfished. I also stated in my post that oil and the price of fish are related and implied a price elasticity.

If oil prices make fishing more expensive, people either buy more expensive fish or switch to chicken.

However, as I noted in the Thai case, when fishermen claimed they could no longer fish what they were hoping to catch was government subsidies. Someone can link to that article today, but the fleets still went out and have been out everyday since. There has been fish in the market and the price did not go up.

I do expect that if fish prices in Vietnam went up, people would eat less fish. However, there is no evidence that they have done so and - as I am sure you know - speculation isn't data.

It appears that subsidized fuel in Thailand and Vietnam led people to follow a cheap energy life that may not be sustainable in the future. I am sympathetic with the poor Vietnamese fishermen and do think that increasing fuel prices are making harder for them to earn a living. My point is that it is overly simplistic to just think everything is going to grind to a halt.

There may be 5% less fishermen going out and the people are eating 3% less fish for which they are paying 2% more. None of them are happy about it, but these are the beneficial changes the world is going to have to go through to adjust to a future with less energy supplies.

In that regard, I don't even disagree with the first post. I just wanted to note that it is simplistic to assume that Vietnamese fishing has failed to adjust to higher oil prices and collapsed.

Well, to finish the flogging - I was just stretching the 'hello Vietnam' reference a bit. There is no question that a number of people worldwide are accustomed to subsidized fuel prices, and will say just about anything to keep the subsidies coming - or riot, but that doesn't apply to the fishermen in this case.

And it seemed, when I was looking for the link, that overfishing is likely playing a much larger role in the losses than fuel prices. The Vietnamese fishing industry seems to be in trouble, in large part due to its own practices. That fuel prices may have been the final straw is imaginable, though if fuel prices had remained stable, it may have been overfishing alone that led to major monetary losses and a collapsing fleet.

Yes, but blaming any particular group for overfishing is oversimplifying... it's a quintessential commons problem. If the Vietnamese didn't overfish their waters, Thais or Chinese or someone else would happily do it for them.

French fisher folk regularly go on strike, block ports etc when fuel prices go up. The result is invariably more subsidies (usually disguised because they are not supposed to get them), plus some measures to retire part of the fleet.

It's a race between extinction of the resource and pricing of the fuel. The result is a foregone conclusion : the end of cheap fish.

But there is fundamentally nothing implausible with fuel prices taking out entire fishing fleets. The idea that the market is just going to adjust, is quintessential cornucopianism (that's for Jack ;))

The idea that the market is just going to adjust, is quintessential cornucopianism (that's for Jack ;))

Wrong again. If I said the market would provide fish, that would be cornucopianism.

I said prices would go up, people would have and eat less fish, and poor fishermen would be out of work.

Holding any position other than that a painful doom will descent on us momentarily is only cornucopianism at The Oil Drum, and other doomer dwellings.

Um, though a number of posters may be doomers here, the very point of TOD is considered to be doom and gloom by most Americans, even though this site tends to respect facts over opinions, at least in terms of oil production.

After all, Simmons is a presented as a dour pessimist if not outright Chicken Little, not a factually based banker, at least when he appears in most MSM settings. Even though he is handling a few billion dollars and very interested in facts, not theories.

As you mentioned, the price of obtaining the resource may be one of the factors keeping the price in the $60 range. As an example, based on Williston basin info, an average horizontal well (10,000 foot vertical depth with a 4000'-5000' horizontal leg) cost about $1.2 million dollars in the early 2000's to drill and complete. Today the same well is going to cost about $3.3 million dollars to drill and complete, nearly a 3 fold increase. If the price of crude dropped to the $30-$40 range, virtually all drilling in the Williston basin would cease. Now, what's happening in the Williston is happening in all of the nations producing basins. Any drop in the price of crude oil below $30 per barrels is going to stop dead in it's tracks all drilling in the USA on shore.
the Actress is concerned (having been rear-ended several times) that a Smart car does not provide the protection against them.

Careful how you phrase that, Your Grace!

"I have been rear-ended several times", as the Actress said to the Bishop.

I can't understand,as others on this blog, the drop in oil price even if we have another 500,000 surplus barrels of oil- that just takes us to 1.5 million surplus, when less than 3 years a go we had 5 milion barrels spare. What's all the fuss when China and India are still growing strongly with their oil demand for imports?
As the saying goes, we won't know when we hit peak until we see it in the rear view mirror.  However there are a couple of facts on the pessimist side now as well.

In the EIA's latest set of data for July, North Sea production had rebounded slightly, Iraqi production was getting close to pre-war levels, US production was back close to pre-Katrina levels, and Saudi production was back up.  And still, total crude production world wide came in below last December's peak.

Iran and Nigeria's announcement that they would cut production sounds a bit like they are trying to disquise the fact that their production has already been in decline recently.

I wouldn't bet the house either for or against peak at this point.

Yes, and the constant attacks on PO and wild claims of new discoveries only add to the sense of desperation from the Iron Triangle.

What is the status of Stuart Staniford with regard to his monthly production/plateau posts?

I think they went over this a couple of posts ago.  Apparently hes off consulting for some company, wasting more oil in a post peak oil world, hopeing to have one last hurrah before the crash and we all die...

Or he just knows the speak has been eclipsed and hes letting the other spin doctors go to work.  Either way, chicken little has come home to roost :P

Thank you.  I missed that series of posts.  Stuart is listed as a confirmed speaker at ASPO Boston at the end of the month.
The price of oil is set by marginal demand and supply. The time scale is very important here. The marginal supply/demand is forecast (by the oil companies and government agencies) over a few weeks to a few months. If there is a short term imbalance the price will move.

There seems to be a tendency toward confusion over price movements when long term supply issues such as PO are tied to current price movements. Even a small build in oil production that creates a surplus can drive oil prices down sharply. Similarly, a decline in economic activity that reduces demand can drive oil prices down sharply.

The effects of longer term supply issues will only be shown over longer periods of time. I would tend to ignore the current price decline for any long term planning. Oil prices have certainly swung wildly in the last 35 years, but on the whole they have gone in only one direction. Up!

If the Saudis really do have spare capacity, and Ghawar isn't watering out, then logically they will have been uncomfortable with $75 oil, which demonstrably dampens demand and accelerates substitution. So they would be pissed off at anyone withdrawing oil from the market to tighten it. They will presumably feel obliged to increase their production to assert control.