Where Have All the Peak Oil Believers Gone? 102 comments
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Crude oil is down more than 50% from its high of $147 a barrel. Where are the peak oil believers? the breathless analysts and cheerleaders of the commodity that warned of a Mad Max armageddon?
Physical peak oil, which I have no reason to accept as a valid statement either on theoretical, scientific or ideological grounds, would be insensitive to prices. …In fact the whole hypothesis of peak oil – which is that there is a certain amount of oil in the ground, consumed at a certain rate, and then it’s finished – does not react to anything…. (Climate change) is likely to be more of a natural limit than all these peak oil theories combined. … Peak oil has been predicted for 150 years. It has never happened, and it will stay this way.
Dr. Rühl, chief economist of BP
Last Friday, for the first time in two years, OPEC supposedly cut their production by 1.5 million barrels a day. I say supposedly because these agreements don’t mean much when the member countries are facing the same financial crisis. OPEC members are notorious for cheating on their quotes. So it is difficult to give them the benefit of the doubt today when they are in desperate need of cash from the only thing propping up their economy.
Here is an interesting chart showing the history of OPEC changes in supply. In recessions, when there is less demand for oil, price cuts or better put, announced price cuts, don’t have the same effect.
A walk down contrarian lane brings us to the The Economist cover from March 6, 1999 (see above). At the time oil was trading around $14 and thought by many to only be able to go lower. What we saw recently, sentiment-wise, was the opposite of this, where “peak oil” came to be bandied about incessantly in the media and taken as gospel to imply that oil could only go up.
Oily Bubble
Crude oil’s bubble-like march higher was rationalized by two main proponents, Goldman Sach’s Arjun Murti and Mathew Simmons. Simmons argued for 150 year old peak oil rationale for a spike while Murti made headlines in May 2006 by predicting a “super spike” taking us to $200 a barrel oil.
Murti has since cut his targets repeatedly as oil has crashed through them. First $140, then $110, then $75 and most recently in a bold attempt to get ahead of the price, $50 a barrel.
Although Murti may not have intended his analysis to get so much publicity, it did, and a lot of people came to believe that oil was somehow destined to continue higher: thus proving once again that listening to “experts” can be dangerous to your financial health.
The charts, however, were telling another tale to anyone who cared to listen to their whisperings. Crude oil had all the characteristics of a bubble and it has imploded like one too. Looking at a long-term chart, you can see that it has easily sliced through the long-term uptrend line.
If we are going to go through a deflationary period, then OPEC countries are in for a world of hurt because the demand curve has shifted. If they lower production, they hurt themselves; if they don’t and keep it steady or cheat by increasing it, they will flood the market with supply.
From a technical point of view, there is strong long-term support for crude oil in the $40 area. I have no idea if we will indeed go that low. But if we do, I’d suspect oil to find strong footing in that area.
Here’s a historical chart showing the previous OPEC changes in production:
Source: Wall Street Journal
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You kids are always in such a hurry.
But the proponents of the theory do not assert that. They only say that world production will PEAK and then will plateau and/or GRADUALLY decline. What this will do to prices depends of course also on demand, but since the world has critically depended on a growing supply of oil, this will require significant changes.
The market for oil is very large and very obscure. So it is hard to tell if peak oil has been reached or will soon be reached. Matt Simmons says that the first step to be taken should be to get good production data.
The peak oil practical policy recommendations with which I am familiar are only that a US energy policy be established and followed.
At this point, it seems to me that there is little controversy about the facts, but only about what to do about them, if anything. But if peak oil proponents are correct, the issues will soon overwhelm any immediate problems of global warming.
The problem is that the Americans have to buy and import it from unstable countries, and to buy just means to work for getting oil. If the car factories produce cars with much less fuel consumption or with electric motors, all the money that flows to the Arabs will stay in USA! And imagine all this bugs will create new jobs and work.
The solution is to save oil and to get rid of it. Where do you think Al Kaida gets the money from?? from the support of oil producing countries.
Its just as easy.
Roly
But oil-gas station prices are not down by 50%? Moreover, there were no corresponding increases or decreases in supply-demand in 2007-2008!
The greedy oil price hikers, believers, analysts and cheerleaders were led by top ten global oil companies who continue to loot consumers, fuel inflation and the recessionary credit crunch. This is nothing less than ENRON on a global scale.
But the supply problem persist. Check out the FT article reviewing a draft of the IEA's annual report. The upshot is that we need invest $350B / yr into existing oil infrastructure, including developing known fields and finding new ones, or face severe shortages.
Underlying this is a 9% annual drop in existing oil production from the world's premier fields. Anybody who's looked at it knows a 9% drop in oil production is catastrophic for the global economy. If it comes on the heels of the worst recession since the 1930's, we are in for a world of hurt.
So, you see, peak oil is alive and well, and the IEA is now one of the strongest proponents.
hopefully the artificial scenario that has played out over the last 18 months - huge rise and fall of oil prices - has convinced us of the need to find a better energy solution. the price of oil wont be especially relevant to a self-sufficient nation using wind, wave, sun, geo sources (using our heads instead of killing our kids) for our precious energy.
so dont think for a second the fundamentals have changed. be hopeful, instead, that we are coming to our senses, and that only one artificial spike spurs us into action.
and please dont pose a "where are they now" question. we are right here, seeing the same thing we always have, ringing the same bell we have rung for 30 years - "dont fight for oil, do use the truly great American resource - ingenuity - to solve the problem".
No one seems to care that our wonderful government just pumped (and may pump more) an unheard amount of dollars into our system.
Inflation is about to rear its very ugly head.
Oil and all commodities will dramatically increase in price. We are going to have to deal with unprecedented inflation.
We just sold our children's future out. Spineless politicians from both parties should be fired. This is going to be tough for many who can't understand what has happened to them.
Bend over and kiss your a$$ goodbye.
Morgan Stanley and Merrill Lynch were the 800-lb gorilla price pumpers, not oil companies. Equilibrium at $70 kills the unconventional plays like new heavy, Bakken shale, tar sands and ultradeep offshore frontiers.
Demand destruction doesn't alter peak oil reality. It just postpones our consumption (marginally) and kicks the political football around.
Wise old dinosaur speaking to the young ones:
"Don't worry, we've been here for millions of years and the planet has never been struck by an asteroid before and it never will..."
The only thing we can tell from the Great $ell off of October 2008 is that leverage, speculation, poor governance and corruption in oil producing government results in a market price subject to high volatility and little price precision.
Taking how lazily this article was written, by whom and why, makes me think that oil reserves most definitely do deplete, (whether you think oil come from Dinosaurs [fossil fuels, yeah sure, specially off of the continental shelf,] or [more reasonably] from slowly renewing abiotic geologic processes.)
What does he think happened to the Pennsylvania oil fields (the pen in Penzoil [that made such a wealthy man out of John D. Rockefeller?])
Or are they still drawing oil out of the fields in Texas?
Its runs out.
Its a finite resource.
Even if its renewable, the process takes geologically long.
Saying anything else is to fly in the face of reason and to deny the history of what has happened with every oil field we've discovered and exploited to date.
And the process of discovery is happening further and further off shore and the oil fields are smaller and smaller, of less and less quality, and will cost more and more to exploit.
Peak oil is real, logical and a way of recognizing that such peaks and throughs are how you deal with scarcity in commodity markets.
This is a piece of disinformation on a par with the Chinese guard standing in the middle of Tiananmen Square claiming that "Nothing happen here. Nobody die"" with a smile as phony as the assurances of a rutting teenage boy that he'll "only stick it in a little."
Somebody needs to rediscover what shame is.
You are pretty much of a dope. There are 60 major oil fields in the world. 56 of them are in serious decline. There have not been any significant discoveries since the 80s. How do you think the oilers are going to maintain oil flow at 85 millions barrels per day? Magic maybe? Oil will never run out but maintaining the required production rate is impossible. Shortages will cause chaos and war. Once shortages begin the price of oil will skyrocket. After that happens it's going to be very difficult to implement any of the so called "alternatives". Thanks to people like you the people and the politicians are going to sleep past the time when anything can be done that will come close to solving the problem. In the meantime humans can continue to drive their 880,000,000 oil powered vehicles down the road to destruction.
how about a buck ninety for gas in oklahoma? if you paid five bucks for gas, there would be exploration everywhere - drill, drill, drill. at five bucks you would be in line for purchase of an electric car, and would not yell too loud when your utility started building a nuke plant on the corner (in fact you might be willing to beat the crap out of protestors against the nuke plant). instead of buying a new plasma tv, you probably would be screwing your newly purchased solar panels into your roof.
and this is not even considering the toll importing all this oil takes on the economy. No, joe the citizen does not believe in Santa Claus, bonuses for scum on wall street, or peak oil. BECAUSE REALTY IS DEMONSTRATED IN THE PRICE YOU PAY FOR THINGS. you cannot mobilize joe at a buck ninety for gas. nothing will happen because oil ain't at the top of the list of perceived problems.
and ladies and gentlemen, this is why the bullshitters spewing economic recovery are full of crap. if we recover, we will immediately collide with a supply problem - the oil will kill the recovery and send us back to a recession.
there is no solution because we do not want one yet.