Freddy Hutter, TrendLines Research

Does Crude's Price Reflect Reality?

Babak wrote: 'Considering the extreme economic downturn, crude oil should have fallen to $20 - previous support from 2002. That’s just my own guess."

There is no doubt that tightness of surplus capacity is an important component of contract crude price. But even at the July 2008 high of $134, the global surplus capacity of a mere 2mbd was only an $18/barrel forcing. Currency debasement played a far greater role ($30/barrel), while tight inventories ($6/barrel) were a factor as well.

2008 was a perfect storm - one that affected virtually all commodities. Attempting to seek a basis for these mega movements based on fundamentals is futile. At least that's what the last ten years of observation reveals: trendlines.ca/monthlyr...

Peak Oil for Dummies

Realitychecker wrote:

> Another good article on the impending energy crunch by Lionel. The
> link below goes to an interesting paper produced by Shell, which
> descries two future energy scenarios.

The cherry picked data is not indicative of any crunch ... neither total energy nor oil liquids.

The 2009 Royal Dutch Shell projections are indeed a case in point. In 2008, the Scramble scenario had a 99mbd Peak in 2020. The 2009 studay amends this to 97.

The 2008 Blueprints scenario projected a Peak Plateau of 101mbd from 2020 to 2030. 2009 forecasts amends the Peak during this plateau to 100mbd.

Today's production is 84mbd. The outlook for the next two decades remains status quo according to Shell. The probability of imminent Peak Oil is once again marginalized...

Peak Oil for Dummies

Here's a chart of the five Regular Conventional Crude projections: trendlines.ca/scenario...

2 by MK Hubbert ('56 & '74), Albert Bartlett ('98) & 2 current forecasts (Hutter & Campbell)

Peak Oil for Dummies

Your link does not track light sweet crude, wadosy. As i mentioned above, light sweet peaked at 68 and is today only 61mbd. The 74-mbd plateau shown in your new link is tainted data i.e. includes alaskan arctic crude and deep sea projects in Brazil, Angola & Nigeria.

It was the collaboration of similar early data between TrendLines & Colin Campbell that resulted his dramatic declaration of the Regular Conventional Crude Peak in his August 2005 ASPO newsletter. Subsequent data revealed that PEAK was actually a few months later ... in 2005.

Neither Campbell nor myself foresee a breach of the 68-mbd production record for regular conventional crude. It is this narrow definition that was the subject of studies by MK Hubbert & Albert Bartlett.

Contributive papers of the "unpure" metric including arctic & deep sea facilities were conducted by Ken Deffeyes, Seppo Korpela, Renato Guseo & John Walsh. As mentioned by William Davison above, differing definitions have not been helpful to the public discourse.

Peak Oil for Dummies

Bankrupt of any further arguments, the rhetoric by wadosy is deteriorating into a childish rant.

And hoping nobody would look, his own EIA link shows production of 84.6-mbd in 2005 was surpassed (85.4) last year. It further reveals that the 2005 monthly record of 85.3 was toppled four times and now stands at 86.6-mbd.

Even as he typed his post, analysts around the world had announced upward revisions to their 2009 & 2010 Demand forecasts. With worldwide Surplus Capacity approaching 6-mbd, all monthly/quarterly/annual records are poised to fall in 2011...

Peak Oil for Dummies

Wadosy in overly concerned with underlying decline in his future. He need only look to the past to feel relieved. Since 1970, the oil sector has installed an avg 2.9-mbd/yr of new capacity (120mbd). 1.9-mbd of this addressed the Underlying Decline Observed loss factor and 1-mbd/yr went to new Demand (82 & 38mbd respectively).

In short, Producers came up with a new "Saudi Arabia" every three years...

To avert terminal production decline in the medium to long term, the Industry need only extend its current decadal trend of 3.8-mbd of new capacity/yr. This will counter the current rate of underlying decline (2.8-mbd) and provide 1-mbd for annual growth.

Presently available data on Reserves implies the intersection between (rising) loss factor and new capacity will not be resource constained 'til 2031. Annual production decline will commence unless annual Megaprojects are enhanced.

Even this event is not beyond the realm. Albeit the present trend is 3.8-mbd of new capacity/yr, 4.3 is being installed in 2009 & 4.5-mbd is scheduled to be commissioned in 2010.

Only capital & geopolitical issues threaten oil growth over the coming decades ... not geology.

Peak Oil for Dummies

No Lionel, Peak Oil is not mainstream. It is a 20 year hoax. The only oil running out is Regular Conventional Crude ... known as light sweet. As shown in our charts, RCC peaked in 2005 at 68-mbd. Today it is only 61-mbd, comprising a mere 72% of All Liquids production ... the latter being the stat quoted by all the agencies and oilco's.

By 2030, light sweet will be only 48% of global oil production, which in turn will have grown to 99 from 84-mbd today.

In short, if the status of low hanging fruit was your intent, your post is four years late...

Peak Oil for Dummies

wadosy wrote:
> so the fact that oil production's been flat for the last four or
> five years despite the price increasing seven-fold and drills nearly
> doubling has nothing to do with anything.

Wrong again, grasshopper. In 2003, extraction was 79.6mbd ... and rose to 85.5 by 2008 (1.2mbd/yr growth). BTW, between 1970 & today, oil production rose 40mbd or 1mbd. You are "flatly" in error.

The avg contract price in 2003 was $26. Today it is $67/barrel. So, price is up 2.5's over that period ... clearly not seven-fold.

With 6-mbd of surplus capacity, the industry is poised for several years of new production records and at least four years of sub-triple digit prices.

The rest of your post and the next one border on the lunatic fringe. Sorry, i ain't going there...

Peak Oil for Dummies

wadosy wrote:

> how do you explain this, freddy?
> img382.imageshack.us/i...

It's just a silly graph. Silver spiked. Iron, corn, sugar, copper & 50 other commodities spiked. Did they all PEAK in July 2008? And why are they all back to 2004 levels today?

And if there is a shortage of oil, why was it only $32/barrel in January? Why was it $67/barrel one year later?

Learn one thing today, grasshopper: Correlation does not imply Causation.

Peak Oil for Dummies

Lionel Badal wrote:

> I've been in touch with top-officials at the IEA and EIA (US Department
> of Energy) and they recognise Peak Oil is imminent (not publicly...).
> Read the news in the coming months...

Really? In the meantime, i advise interested readers to put your money on the less anecdotal information available: In its biannual WEO forecast in Nov-2008, IEA puts PEAK OIL @ 107mbd in 2030 (compared to 84 today).

And the EIA's last projection has PEAK OIL @ 108mbd in 2090.

Albeit both of these are downward revisions, the probability that either Agency will confirm that Peak was last year is a flat zero.

This article quotes Bakhtiari, but his failed forecast was 81-mbd in 2006. Total is referenced, but their 2008 published target is a 100mbd Plateau 2020-2030.

Finally we are to put faith in Colin Campbell's declaration that PEAK OIL was in 2008. Yet, history reveals that he first declared PEAK OIL @ 66mbd in 1989, and has made almost annual pronouncements ever since.

The Scenarios venue at our website tracks the forecasts made a dozen years ago to see who is most accurate. Jean Laherrere of France & the EIA have the best long term projections. Amazingly, their old forecasts for 2008/2009 are within 1mbd.

One can believe those with credibility ... or those selling books or flogging wares on CNBC.

Peak Oil for Dummies

This article is an excellent example of cherry picking facts. Hilariously, most footnotes are several years old and include failed Peak Date predictions. That wouldn't be hard 'cuz 2008 was the 20th consecutive year McPeaksters have declared that production would never rise from "today".

Seemingly agenda driven, the author chose to ignore the dozen predictions for Peak Oil made by geologists in the last year. Instead, we got the "speaking tour & book sales" version.

the Average of the 20 most recognized forecasts: currently 93-mbd in 2023 (compared to 84-mbd in 2009).

Another seasonally updated chart is the Average of 21 recognized estimates of URR (ultimate recoverable resource). It reveals that: (a) Reserves have doubled since 1982; (b) URR has doubled since Y2k; (c) albeit only 30-Gb (billion barrels) are extracted annually, there are 2,582-Gb of oil remaining.

In short, these alarmist claims have been around forever and are easily dismissed when compared to data and explanations by real geologists.

Pay Attention to Oil Decline Rates

At TrendLines Research, we track the 20 recognized forecasts of future crude production. Based on the group's Average, our June Update projects that Peak Oil will occur in 2028 @ 95-mbd (compared to 86-mbd in 2008).

Our own model, the Scenario-2300, is based on Underlying Decline Rates (UDR) of 4.2% in the USA, 2.5% in Saudia Arabia and 3.8% on the global scale. UDR became significant in 1999 and our analysis reveals that it is increasing world wide by 0.35-mbd/yr.

During these past 10 years, the Industry has brought aboard 26-mbd of new capacity. 10-mbd has increased the production rate & 16-mbd has been lost to addressing the Underlying Decline factor.

As the UDR continues to grow towards 8%, it will be increasing more difficult for the Industry to exceed the Supply undercut in mature and retired fields. My own model predicts that the crossover will occur in 2029 when flow will Peak @ 94-mbd.

Our oil production, reserves & price charts may be viewed at www.trendlines.ca

Global Net Oil Exports in Decline

Brown's model is distorted by its premise that global production is declining by 5%. In fact, the medium term avg is a rising 1.7%. It assumes that the MegaProjects will vapourize in 2014. This is wrong 'cuz that limited horizon is obviously due to the five to seven year time line for commissioning new capacity.

Back in 2004, Skrebowski's Megaproject analysis warned that 2008 would be Peak Year. Today's analysis of future producer activity illustrates that 2012 is Peak Year. The date keeps being pushed out. This is an inherant flaw of bottom-up studies.

Another red herring discussed by Brown is what i call the Underlying Decline Rate (UDR) caused by maturing and retired fields. Brown, CIBC & Simmons would have folks believe this is some kind of new phenom. It clearly isn't. It is the depletion nature of petroleum provinces. Albeit rising slightly each year, it has increased to only 3.6% of All Liquids supply since 1999. If the Industry can bring on 3 or 4-mbd of new capacity each year, it can withstand the losses due to UDR.

On that factor, Producers have a 4.5-mbd/yr record (8-yr avg) of new flows coming to the market. This includes 7-mbd in 2008 & 6 next year.

In short, exports are down 'cuz OPEC sliced 2-mbd from the 2006 high in a response to record OECD inventories. It was an stock balance correction ... not a sign of Peak Oil.

Crude supply set four new quarterly/monthly records in the last seven months. It will Peak some day, but the avg of 21 recognized estimates of Ultimate Recoverable Resource (URR) reveals that the Post Peak decline will be less than 1% annually. Dire predictions of $100-trillion in needed infrastructure by 2015 are similarly misguided.

In 1989, Colin Campbell became the first pundit to declare that "this year is The Peak" of crude. 2008 marks the 20th consecutive year of these annual proclamations by the McPeaksters. Perusal of their websites and literature often reveals an underlying motive of social engineering with foundations in the zero-population growth fraternity.

They simply don't like cars, airlines, suburbs or lotsa people. But like Al Gore's prognostications, we are finding that "scary" doesn't work unless it has its foundations in good science. The oceans will rise only 4mm this year and Oil will set another annual record in 2008.