Saildog

Stephen Schork: More Upside in Oil

I have no idea who Schork is, but he hasn't a clue about oil production, or about Peak Oil that he supposedly doesn't believe in. There is no dispute that high prices will enable oil to be found. That is not the point. Finding it is not producing it. Production is what matters; and it cannot be increased from the 85m barrels per day range we have been in since 2004. Note also it doesn't matter why it cannot be increased. Whether the reason is geology, politics, lack of investment, war or what ever. It doesn't matter. Peak Oil is now a past tense term and I suppose 10 years from now, when production will have drifted down by 5 or 10m bpd that Schork and his ilk will still be arguing that production can be lifted.

Iraq Production, Conservation Could Keep Oil Price in Check for Years

I am not so sure a distinction between "in ground" and above ground factors is relevant or even appropriate. "Above ground factors" are almost certain reinforcing feedbacks from the "in ground" reality that production has peaked.

Iraq, the major topic of the piece is itself the prime example of such a feedback. The US does not invade China over its aggression in Tibet, or Zimbabwe because Mugabe is a a worse despot than Saddam. The US invaded Iraq because of oil. It's own oil of course, but also because Iraq sits neatly between Saudi and Iran, both odious and unstable but oil rich regimes.

The American mistake was to assume that stability could be quickly and easily imposed.

Who's Really to Blame for Rising Oil?

The author of this article needs to learn Economics 101, then read a but of Herman Daly, then some Hartwick, even some Harold Hotelling. He knows nothing.

To point out the bleeding obvious supply is static and demand is such that all will be taken up at what ever the latest high price is. It is inelastic. No one will care if you do not buy gas on a Monday.

We're Nearing Crunch Time for Oil

I agree with A von A - tar is tar. It is not oil.

Jim did acknowledge his 5 point wish list was just that - wishing on a star. New oil production must outstrip production declines elsewhere significantly and there are quite a few roadblocks in the countries mentioned. The projects will be more difficult and more expensive than can possibly be imagined.

Ethanol is a form of top-soil strip mining. It can be done once, for a short period and the you are in worse trouble than ever.

Plug in hybrids - maybe. Lithium seems to be a problem.

Adjustment of populations to mass transit? In the US? Or here in Oz? Like the morons in the US we have craftily built all our new suburban McMansions at the end of dead end streets. Buses will never run down them.

Industrial production from trucks to rail? I read somewhere else today that "Just in Time" is a concept whose time has passed. Jim seems to agree, but I am not sure that our warehouse on wheels economies will adjust smoothly. At the very least there will be significant losses in efficiency and higher costs.

My point really is that all of these megatrends must come together spectacularly well (and a lot else besides) for there not to be significant dislocation as oil becomes unaffordable.

Oil Hits New Record - Is $125 Next, or $100?

Oil has lurched up in a series of steps over the last ten years, during which there have also been some big drops. I am not aware of any reason why this pattern should change.

The Reasoning Behind Oil's Irrationality

From an investment perspective I cannot fault this article's conclusions. But his reasoning did prompt a recall of that syndrome of not seeing the wood for the trees.

The fundamentals are why oil is $90+ and will carry on trending up.

Whinging about oil locked up in ANWR, Venezuela etc misses the point that we have passed the point when oil becomes more valuable in the ground than as dollars in the bank.

It doesn't matter why production has remained flat at 85m barrels a day since 2004. The fact is that it has. Meanwhile China, India, Russia and most of the OPEC countries are using much more oil. As production is flat, that must mean more and more people in other countries are using less oil. That is why the price is trending up. It doesn't seem so difficult to me, but nobody else had said as much that I have read. Jeffrey Brown's Export Land Model is very alarming. Is suggests that net oil available for export is in an accelerating downtrend.

The final point is field decline. The North Sea is declining at around 8%, while Canterell crashed 20% in 2006. Global field decline could be anything between 4% and 10%, though nobody knows the exacty number. Platts report field declines of 8% in certain Saudi fields, but we don't know which fields, or what the overall picture is.

If we take the low end and round it down, global field decline from existing production is 3m barrels per day every year. In other words, with flat production since 2004, new production additions in the 3 years have totalled 9m barrels per day. That is more than total Saudi production. How many more Saudi Arabias are there?