ozzy43

Peak Oil as a Function of Earth's Volume

Seems to be a version of 'Don't worry, be happy'. This has to be the most incoherent and inane post I've ever seen on SA. There is little if any connection to economic, practical or geological reality evident in this post.

Murray Rothbard once said:

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."

This is as true of petroleum geology as it is of economics, and both speak to the loud and vociferous ignorance apparent in this post.

Oil May Trade in the $80-100 Range for a While

This is devilishly difficult to determine with any precision, but I think this represents a fair minded and thoughtful stab at the beast. After all, Cantarell is declining at, what, 15%+? North Sea 10%+? If the global depletion rates come close to these, the far side of the curve looks to be a cliff. Who says the market is intelligent, rational? Perhaps a truly free market which priced in externalities properly would be, but ours - heavily regulated, subsidized and now increasingly nationalized - sure seems to be a dullard at times.

Oil Demand Down, Supply Up

Seems to me to be unlikely that we'll get any decent visibility into longer term oil price levels/trends until the November elections have passed. I also think the issue of resource nationalism/exports - especially given the recent actions and resulting re-alignment in the Caspian Sea region [ www.atimes.com/atimes/... ] - are set to play a large role once they've been more widely understood, and so simple production vs consumption analyses that ignore the geopolitical aspects are bound to be quite limited in their ability to yield solid conclusions. Therefore, instead of focusing on one single production model - megaprojects - it's probably wiser to look at a range of models to get a better overall sense, as the oildrum does here:

www.theoildrum.com/nod...

Includes, but does not limit itself to, the megaprojects data. So the question becomes: if you use this production analysis as a basis for comparison to anticipated consumption, does that change the conclusions? Or does it just obfuscate things?

Why $200 Oil Is Good for US Markets

Very interesting article; however, a correction needs to be made regarding this old myth, masquerading as conventional wisdom (who did *not* learn this as fact in school?):

"The Great Depression needed the Second World War to terminate its grip on the economy."

Conclusively disproven back in '92 by Robert Higgs - journal article here:

www.independent.org/pu...

Just an old wive's tale. Aside from that, though for somewhat different reasons, I agree that $200/bl oil would be a good thing.

Where Does Oil Go from Here?

I gotta say that this statement:

"If Americans can’t afford 140dollar oil- how can China and India afford it?"

Gave me the best laugh I've had in some time. It posits America as wealthy and China as poor - now *that* is rich! Thanks for the laugh.

Seriously, just how many US Treasuries is China sitting on? $2T worth? More? And just how far in debt is America, and are Americans?

Puh-lease...that hoary old myth of the affluent American and the poor rest-of-the-world is not exactly 'congruent with reality', as they say. I think someone needs to get out more and stop reading fairy tales. We're flat broke, and so are our kids, their kids, and their kids after them, compliments of those thrifty guys and gals in DC. And with Helicopter Ben spinning up the printing presses for a full court press to save America's banks and brokerage houses from the folly of their idiocy at our expense, that's only going to get worse.

The question you should be asking is *not* how can China afford $10 gas (hint: bilateral agreements will be the new oil pricing regime - and it probably won't be priced in USD anymore anyway), it's how will I be able to afford bread when it's USD1000 per loaf?

Oil: Does Supply and Demand Still Apply?

"here let's take a look at past data for the oil industry"

Not to be facetious, but: does the author not grasp the meaning of the term 'peak'? It implies that looking forward at the downslope is vastly different than looking back at the upslope. Peak oil means an entirely new paradigm, and a new paradigm is one in which the tried and true adages and analyses of the past no longer apply, because the fundamental assumptions have been made invalid - that's what defines a paradigm shift.

I also must question what part of the terms 'finite' and 'non-renewable' are not being understood here?

The implicit assumption underlying the author's logic is that oil is an *effectively* infinitely renewable resources - in which case, more exploration and more drilling, over time, will inevitably yield more oil. But we know this to be false.

Interestingly though, on his own graph, the percentage of successful wells peaks in 2005 - which seems to have been when production peaked as well.

Additionally, this seems to be a rather contrived metric to use - it does not make clear that over time, the *size* of the fields being found has diminished considerably! So in this graph a successful well drilled into a field of 1Gb has the same status as one drilled into a field with 10Gb. The percentage of successful wells is not nearly as significant at the ultimately recoverable resources in these new fields, nor as important as the ERoEI for recovering those resources.

In fact, I would argue that the proper way to interpret his graph of increasingly successful wells over time is by explaining this as an example of what Matt Simmons has called 'super straws' - the better the technology for extracting the oil discovered in new fields, the faster those fields peak and then go into depletion.

Simply, this analysis should makes perfect sense to those who believe that financial trend analysis can somehow render moot and thus obviate physical, geological facts.

Oil Prices Finally Changing Consumer Behavior

petervankan: And El Al never gets hijacked. But their tactics would not work for US airlines. Why? Because of the scale. Holland is not America - it's vastly less populous, and vastly less heterogeneous.

Anyone who wants to buy into the social model made famous primarily by the Scandinavian countries should first read:

www.timbro.se/bokhande...

'Better' is a highly subjective word - Holland's residents pay for their 'better' laws by accepting less liberty, vastly higher taxation, etc. Fine by me, but please don't presume that the tradeoffs you find acceptable are right or will work for every country in the world. I would welcome an end to the calamitous war on drugs here, and I would welcome an end to the misbegotten war on Iraq, among innumerable other 'wars' we declare on everything from illiteracy to teen pregnancy, but as for more State control - you can keep it, thanks very much. The State here has proven unworthy of that sort of trust - no matter who has held office. And in fact the greater the power of the State in a militarized nation like the US - UNlike Holland - the greater the probability that the military will be used to advance political agendas. Again, no thanks. Vast State empowerment is what got us into this mess in the first place, compliments of some other US presidents you probably think highly of: FDR, Truman and LBJ.

Confirmatory Bias and Oil Investing

There are a number of problems with this article. Primarily, it seems to be making a sort of 'collectivist straw man' argument - i.e. painting all oil bulls as having the same series of rationales, and then attacking the collective 'them' simplistically. Real life is far more complicated than this analysis would seem to indicate. Like any other bulls, oil bulls are bullish for different reasons.

The article author's bias becomes apparent with this statement:

"Investors ...ignore a permanent increase."

A "permanent" increase? That would seem to be an admission of belief in the abiotic origin of oil; i.e. the notion that oil is not a finite, non-renewable resource but is in fact infinite. This is even more of a fringe belief - by far - then peak oil!

The essay appears to be a work in over-generalization. This is just as fallacious a logical approach as confirmation bias, of course. Rather ironic.

A final comment: this statement: "Every other week there is news about some labor strife in Nigeria" certainly appears to qualify as confirmation bias in its own right under one of the definitions the author himself provides: "...the tendency to give greater weight to information that is supportive of existing beliefs or opinions than to information that runs counter to them. This does not necessarily mean completely ignoring the counter indicative information but means being less receptive to it..."

Bombs blowing up oil pipelines = labor strife?

Doubly ironic.

Yes, U.S. Gas Use Dropped; But So Did Production

Regarding the author's presumption: "domestic oil production will begin to move higher over the next few years due to all the exploration and development being done"

Are there publicly available articles or studies which present evidence for this view? Most of the analysis of this question I have seen indicates that all of this exploration and development will, at best, only partially offset the *decline* (e.g. www.theoildrum.com/nod...), and I have not seen any logic and fact based articles which make the case that an actual net *increase* in domestic production can ever be expected again. Would be interesting in examining any such.

Also, it seems evident that even if an increase could be achieved via new fields, this could only happen many years from now since it takes a decade or more to bring enough wells online to reach high levels of production. Does this author contend that oil prices will fall sooner than that, or is his timeline for falling oil prices several years out, as would seem supportable IF such an increase could be achieved?

Or is the assertion here that we'll be able to reverse the decline in existing fields? And if that's it, are there articles or studies which are based on evidence of this?

Why $140/Barrel Crude is Unsustainable

A comment about this statement:

"The basic economic principle, which has stood the test of time and applies to this day, is that supply rises in response to prices..."

I think this ignores the fundamental fact that oil is non-renewable and finite, unlike most other products. If the supply of pencils runs low relative to demand, prices rise, and more pencils will no doubt be manufactured to meet the demand and to reduce prices over time. But oil cannot be manufactured like pencils. And most of the credible petrol geologists (which excludes the Russian 'abiotic oil' camp) are telling us that further exploration and drilling cannot even offset the depletion of existing wells, let alone add to top line supply numbers.

So the only way that this article and its author can be right, long term, is if the peak oil geologists are wrong. Hauling out an overly simplistic economics adage is not compelling. Solid evidence that the peak oil engineers and geologists are wrong would be - yet despite an intensive search for such, I have been unable to find such evidence.

Remember that an heretofore truthful adage like the one which undergirds this article's argument is obviated and becomes false when a fundamentally new paradigm replaces the old. If the peakers are right and we are at, near, or even past peak oil, then a new paradigm is upon us. And if that's the case, then I suspect that at some point, what happens to one's position in oil (or any other virtual, non-physical investment for that matter) will be the least of one's worries.