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On Oil Supply, Opinions Aren’t Scarce
Joseph Nocera, NY TImes
We’re halfway through the hydrocarbon era,” my old friend T. Boone Pickens has been saying for the last couple of years. You may remember Mr. Pickens as the most famous corporate raider of the 1980’s, but he has spent his life in the oil patch. A geologist by training, Mr. Pickens founded Mesa Petroleum at the age of 26 and ran it for the next 40 years. Now, at 77, he works the oil patch in a different way, running a pair of energy-oriented hedge funds in Dallas.
A folksy line like Mr. Pickens’s – it sticks with you. But I hadn’t realized until recently that it also meant Mr. Pickens had taken sides in a surprisingly heated debate. He subscribes to what is being called the peak oil hypothesis, which holds that there simply isn’t very much new oil left to be found in the world. As a result, we are currently in the gradual process of draining the more than a trillion barrels of proven reserves that are still in the ground. And when it’s gone, it’s gone.
The best-known “peakist” these days is Matthew R. Simmons…
There is a second group of forecasters, though, who argue with equal vehemence that the world is not in an energy crisis and it probably won’t face one for a very long time. The best-known proponent of this view is Daniel Yergin, author of “The Prize: The Epic Quest for Oil, Money and Power,” a history of oil that won the 1992 Pulitzer Prize, and the founder of a rather sizable consulting firm, Cambridge Energy Research Associates.
Finally, though, the fact that this enormous divergence has developed speaks volumes about the very different way each camp views the world. “It’s the geologists on one side and the economists on the other side,” was the way the energy analyst Seth Kleinman of PFC Energy in Washington put it recently. That’s an overgeneralization, of course, but one that contains plenty of truth.
…I wish I had the confidence to make my own forecast, but in this case, I don’t. What I do know – what we all know – is that oil is a finite resource. Surely, the peakists are right about that. What I also know is historically, the economists have generally been right about how the price of oil has wound up fixing the problem.
As Gary N. Ross, the chief executive of the PIRA Energy Group, puts it: “Price is the only thing that matters. The new threshold of price will do its magic on the supply-and-demand side.”
After all, it always has before. And it will again. Until it doesn’t.
(10 September 2005)
The article is also posted at The Ledger (Florida). Also, see The Oil Drum for comments on all the energy-related news In today’s New York Times.
Jim Cramer: “The Simmons Argument is Right…”
Prof. Goose, The Oil Drum
Jim Cramer, on CNBC, at 6:10-6:20 edt discussed Matt Simmons, oil prices, and even took a call on “Hubbert’s Peak!” He also said oil was way too cheap (compared to a gallon of milk) and was going to $100 way before it sees Steve Forbes’ $35/bbl.
It was one of the better lay explanations I have seen in a while. I would recommend you tell your non PO-aware friends about this one if they have CNBC.
The program will be rebroadcast at 9 and midnight edt. The segment begins about 10 past the hour. If you wanted mainstream media coverage folks, this is it.
(9 September 2005)
Many comments at the original article.
Good and bad news at the dawn of petrocollapse
Jan Lundberg, Culture Change
There is more than a double whammy at play in the U.S. Gulf as to the energy supply picture. Besides the devastation of the general infrastructure, Katrina has inflicted two accute shortage situations as never before experienced simultaneously: oil (and refined products), and natural gas.
Gas was already in very tight supply, as has been oil. Today’s sudden and heightened supply tightness can feed on itself, as history has shown. To say the least, this country is going to have a recession that could be rather dark by winter.
A national and global economy that is not built for conservation and efficiency cannot accept “Stop! no more” from Mother Nature. Hence, the possible onset of general petrocollapse and the toll on consumers, even though for now consumerism still rides high everywhere in the U.S. except in the areas directly disabled by Katrina.
(10 September 2005)
Rembrandt Koppelaar’s Oil Peak
Stuart Staniford, The Oil Drum
Rembrandt Koppelaar at the Netherlands Foundation for Peak Oil has just produced an interesting analysis of future production. It’s a bottom up analysis in the style of CERA or Chris Skrebowski’s ODAC analysis. In this post, I want to outline what he did, and also suggest some lessons for future attempts of this kind. But here’s his bottom line: about 2% annual growth in total liquids supply to a peak in 2013 at around 95mbpd and moderate depletion afterwards (rising to 6% annually).
Lest I seem unappreciative in some of my critique later, I want to say at the outset some of the things I like about his analysis. Firstly – it’s open. His assumptions and methodology are laid bare, so we can meaningfully investigate them. No proprietary databases, and no $2500 fee. Secondly, he’s done a good job of assembling a big list of projects, against which other analyses can be checked. He has a much more nuanced analysis of depletion rates than the ODAC analysis. He was even kind enough to us linguistically challenged Anglo-Americans to write it in English, not Dutch. In short, he has tremendously helped anyone else doing the same task in future. Let’s take a look in more detail.
(10 September 2005)
Its a pleasure to read SS’s respectful and constructive handling of RK’s work, a nice reminder of how debate could progress. -LJ
