Get real!

Energy Sector Is Approaching Negative Seasonality

Babak wrote, "I don’t buy into 'Peak Oil.' We will either discover more oil, better extraction methods for existing reserves or move to alternative energy sources."

FYI, Babak, we would have had to "discover more oil" twenty years ago in order to start bringing it to market today. But that's not going to happen, because FYI, annual oil discoveries have been declinining each year for over 30 years! Of the three largest oilfields in the world, two are in steep decline (including Cantarell in Mexico), and the world's largest, Gawar in Saudi Arabia, is in its old age, after over 50 years of extraction, and is now producing more water than oil. Just to make up for the declines in production in Cantarell, the North Sea, and other mature fields, we need to discover new oilfields totalling the size of Saudi Arabia EVERY YEAR!

As for new extraction methods helping -- the U.S. uses the world's best, most technologically advanced extraction technology, but yet our oil production peaked in 1970 and has been declining ever since, despite Alaskan oil and deep sea oil brought online since then. Likewise, the British use the latest technology in their North Sea oilfields, but North Sea oil production is declining rapidly.

This analogy may help: think of an oilfield like a 16 ounce slurpee (drink). Better extraction technology is simply a "super straw" that sucks up the liquid FASTER, but it does NOT increase the amount you can drink, does NOT turn your 16 ounce slurpee into a 32 ounce slurpee! Or you could say better drilling technology is like giving an extra straw to your friend to share your slurpee drink -- two straws will sucks up the liquid twice as fast, but doesn't change your 16 ounce drink to a 32 ounce drink!

Economists are eternal optimists, however.