samadams

The Oil Shortage, and Other Fairy Tales

You cant prove peak oil yet and we wont know it until after it's happened. It's like a recession. You don't know it until after you've been in it for 6 months. And in both cases we have to rely on government agency reported numbers. They cant get unemployment, inflation, GDP right. Whether or not production is 85 mbpd or 87 is irrelevant to me right now. The so-called 2 mbpd deficit is being offset with sugar cane, corn and excess capacity in the system. We are burning 1 billion barrels every 12 days. You can only suck so much out of the ground. We will hit a peak in production at some point. It may be further down the road than many expect. I don't need government numbers to tell me demand is growing like gangbusters. All it took was another trip to the far east a few months ago. Millions of bicycles have been replaced with cars. Funny thing, there aren't many roads. People seem to be happy to be able to sit in a car and idle in traffic.
There have been discoveries however these will take 5-10 years to bring production on line in most cases and by then I expect demand to be higher and the new discoveries will at best replace the current supply. I don't doubt reserves in the world but it's production and location. We are developing tar sands at an enormous cost both environmental and material. It takes 2000 gallons of water and a lot of nat gas to produce 1 barrel of oil equiv. The deep sea discoveries in the Gulf of Mexico (Jack field) are miles below ocean and thousands of feet below salt, and seabed. This is not going to be cheap oil. The infastructure and raw material cost to replace rusted out rigs and build new rigs will keep prices up. Brazil has discovered some fields in the Atlantic and they recently tied up the remaining 20 or so deep sea rigs. If we are turning tar sands to oil and drilling miles below ocean then I feel like we may have a problem. I don't think the world is running out of oil, since there's oil washing up on the shores of California and improved techniques can increase Iraqi production. However, I feel like we are in a lose/lose situation. If the price comes down demand will soar in developing nations and Americans will upgrade to larger vehicles. We only need 1/10 Indians and Chinese to start driving to put more vehicles on the road there than in the US. Take away autos and just the energy demands of industrializing nations and industry are enough to strain the supply/demand cycle.
While there's probably a 30% price run-up due to speculation based upon supply demand price elasticity, I believe the days of cheap (sub $50) oil are over. If you get caught up in CNBC and and focus merely on crude speculation you're going to miss a great area of investment in oil services, steel, construction etc..

The Oil Shortage, and Other Fairy Tales

Those of you who agree with Mr. Davis' view should short oil and hold your position for a year. We'll never hear from you again after this. Is there speculation? sure but the science is there as well. The author never tells us where he gets his data showing the 2 mbpd shortfall is a lie. The major fields are in decline. The Saudis cannot be trusted and wont allow anyone to assess their fields. The new production they are bringing online is sour crude not the cheap light sweet. You need to do your homework, stick with science and facts and connect the dots. The game is afoot. There are only a few of you who actually get it. Please don't tell me I served 2 tours of duty in the mid east and oversaw 22 bases constructed at or near pipelines and oil fields and there is still plenty of cheap, accessible oil out there. But I guess most of you myopians think I'm over here looking for WMDs and promoting democracy.