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Deffeyes: Update, end of 2006
Kenneth S. Deffeys, Hubbert’s Peak
Happy New Year! It’s time for an oil update. The groups that report 2006 oil production numbers explain that their estimates are subject to later revision. However, we need to know the implications right now. With that warning, away we go.
From April 2005 onward, crude oil prices have been above $50 per barrel. For several months during 2006, oil prices rose above $70. At those price levels, virtually all producers pumped every possible barrel. With that kind of cash flow, any well operator who suspected one morning that his Blakenship #7 well did not produce its usual share last night will have Halliburton out there in the afternoon trying to fix it.
…The US Energy Information Agency publishes monthly estimates of world oil production at www.eia.doe.gov/emeu/ipsr/t11c.xls. (Microsoft Office Excel Workbook) Of course, we hope that their estimates are not politically biased. Their current posting shows May 2005 as the month of greatest world oil production. Earlier, I estimated that the peak would be in December, 2005, but May will do. I’ll take it. I’ll take it.
…As I was writing this, a statement from the Saudi Minister of Petroleum was reported by Forbes, the International Herald Tribune, and the Washington Post. He announced that Saudi Arabia will increase its oil production from 9 million barrels per day to 12.5 million barrels per day by the year 2009. I hope they succeed. Meanwhile, it keeps the other investors complacent while I buy some bargain oil stocks.
I enjoy talking with financial firms about the oil problem. It is gratifying that many in the financial community took an early interest in the consequences of a downturn in world oil production. One of the nicest compliments that I received was in Tokyo. A fellow told me that he read Hubbert’s Peak five years ago, believed it, and told me that he “made a hell of a lot of money.” I wasn’t quick enough to ask how many zeros were in a “hell of a lot of money,” but he heads the largest hedge fund in Asia.
I’m not in the business of recommending individual stocks. That requires far too much homework; I don’t have the patience. Recognition is growing slowly that the world oil situation is approaching a crisis. But whenever the price of gasoline goes down, a lot of people think that the problem has disappeared.
(19 Jan 2007)
Conoco Reserves Disappoint Analysts
John Porretto, Houston Chronicle
The ConocoPhillips announcement that it added three times as much oil and gas to its reserves as it produced last year did little to impress Wall Street analysts, largely because the gains occurred through acquisitions.
At least three major brokerage houses _ A.G. Edwards, Deutsche Bank and Citigroup _ said Thursday they were disappointed with ConocoPhillips’ 2006 reserves replacement figures, released by the oil company after Wednesday’s closing bell.
ConocoPhillips said Wednesday it likely ended 2006 with the equivalent of 11.1 billion barrels of oil in proved reserves, a key asset for the company. That’s up from 9.4 billion barrels in 2005, but the growth was largely tied to ConocoPhillips’ $35.6 billion purchase of Burlington Resources Inc., completed last spring, and its increased stake in Russian oil producer OAO Lukoil.
(11 Jan 2007)
This is the common story of the oil majors, using mergers to replace reserves, and struggling at that. -AF
Modern economic theories unable to tackle peak oil, global warming
techno, Elegant Technology
When I took economics at the University of Minnesota in the early 1970s, one of my professors was Walter Heller. Heller was President Kennedy’s Council of Economic Advisors chairman and would claim, quite seriously, that he taught Kennedy Keynesianism.
In those days, the Keynesians were utterly dominant in academe and government. There were so many of them, they had subdivided into various schools. It could be argued that Heller represented the right wing of the Keynesian school. His economics department used the Neoclassical Samuelson text and his primary accomplishment in the Kennedy administration was his tax cut suggestion.
But even from the right wing of the Keynesian impulse, Heller was quite clear that he thought folks like Milton Friedman were at best mistaken and quite possibly insane. Yet by the time I graduated, the acolytes of Friedman were running the economy of Chile with their sights set MUCH higher. And yes, they would set the economic operating assumptions for planet earth for a generation.
…When it comes to delivering generalized prosperity, Finance Capitalism [as represented by Friedman, etc.] is an utter failure no matter how high the stock markets may climb. In fact, the soaring markets in a world where misery grows daily is the perfect condition for open and violent class warfare. But even worse than creating pre-revolutionary conditions, Finance Capitalism’s penchant for destruction has now reached the stage where the survival of the biosphere is at stake.
Why this is so
Whenever a “progressive” politician wants to prove his gravitas in USA, he or she will say something like, “what this country needs is an Apollo-like program to ensure energy independence.” As a self-confessed space nut as a child, I think the metaphor is pretty damn good.
The Apollo metaphor is apt because any complex or long-term space mission must be able to power itself with the energy it can gather on the fly. This dictates a strategy of solar collection combined with a hyper-efficient use of the precious energy that has been captured. Scale this up to a planetary scale and the scope, direction, and the magnitude of the energy problems facing us all become abundantly clear.
The Apollo metaphor also applies because it was a stunning example of an incredibly complex project done successfully in a short time. Yet it is here where the differences between Finance and Industrial Capitalism are especially manifest. Just because the original Apollo project could be done under the rules of Industrial Capitalism does NOT mean a much more complex project like energy independence could be accomplished under a regime of predatory finance. In fact, it almost certainly cannot.
Folks forget that Apollo was an act of industrial whimsy. At best, it was an exercise in a ‘my rockets are bigger than yours’ show of force. But mostly it was a demonstration of industrial potential–we went to the moon because we could. The space race was the world’s largest air show and folks from every corner of the planet enjoyed it.
… an economic system [Financial Capitalism] that can do that much damage to rocket science is somehow going to figure out a way to scale up the Apollo program to a planetary scale? Impossible!! A system that pays a $54 million dollar year-end bonus to a money changer will not hire 540 top-notch engineers at $100,000 a year to figure out a way to power planet earth on its solar income. Unless there are economic conditions similar to those that enabled the original Apollo program to happen, the idea that we can design our way out of the energy trap we built for ourselves with a mega-Apollo program is an absurd fantasy.
…The reasons that the operating assumptions of Finance Capitalism simply must go are many. But two related problems–peak oil and climate change–are SO far from being meaningfully addressed by current economics that all other problems are trivial by comparison.
…We have the technology and institutions to fix major problems but cannot because of corruption in the political sector, intellectual laziness in education and the media, and runaway greed in the financial sector. The problems caused by political corruption and runaway greed can be handled by political will, taxation, and stricter regulations. The intellectual disintegration brought on by 35 years of Finance Capitalism is a much more serious problem.
(18 Jan 2007)
Also posted at European Tribune and Daily Kos via Jerome a Paris.
Congressman Roscoe Bartlett Supports H.R. 6 Energy Bill;
Rep. Roscoe Bartlett, Congressional Record
Congressman Roscoe Bartlett Prepared Remarks, Floor Speech In Support of H.R. 6, General Debate U.S. House of Representatives
Mr./Madam Speaker –
I rise as a proud conservative and Republican as well as a cosponsor to urge support for H.R. 6.
Oil and natural gas are not forever. When we burn them, they’re gone. The U.S. has only two percent of known world oil reserves; produces eight percent of world production and consumes 25 percent of world production. We’re pumping our reserves four times faster than the rest of the world. I just returned from a trip to China. China is preparing for a post-oil world.
There are three reasons to pursue renewable alternatives to fossil fuels.
One is climate change.
A second reason, is preparing for “peak oil.”
The third reason is the national security risk of our dependence upon foreign oil.
The International Energy Agency projects non-OPEC oil production will reach a maximum or “peak” soon. As a cofounder and a cochairman of the Congressional Peak Oil Caucus, I can assure you that half way through the age of oil, there is an urgent need for the U.S. to pursue conservation, efficiency and alternative renewable sources of domestic energy. We have a moral obligation to leave younger generations some oil.
The transition to renewables will be a really bumpy ride if we don’t work together in the Congress, with our President, and as a country with other countries. H.R. 6. will help.
(18 Jan 2007)
