No Question Oil has Peaked

Glenn Hunter, Houston Business Journal via MSNBC -T. Boone Pickens in an interview said: I think you'll see $80 oil before the end of the year. There's no question in my mind that oil has peaked. If you've already peaked, you'll start to decline. Can you replace it? Probably not. What happens then? The supply goes down, demand goes up, and price goes up. It will be a case of, how much does the consumer want to pay to get gasoline?

I don't know whether $4 chokes them. Three dollars didn't. But, you know, Europe has seen $5, $6 for gasoline. So I have the feeling that you're going to see the price go up in the U.S. I think cars will get smaller over time. ... read more

Comments

[paddy]

"Europe has seen $5, $6 for gasoline". Well, actually today the price here in Sweden is $5.90 per gallon, and that's not at all high or unusual. It's been higher too. But as you might know, us Europeans think it's pretty funny when Americans start to complain that gasoline prices are "high" when it goes over 3 dollars. All we can say is - hey, welcome to reality.

[T]

Guess we'll know soon enough.

End of the year. Heh that's barely a few weeks after the end of the exams.

[Demesure]

This guy is a crook. Each and every year, he comes back and announces peak oil to line his pocket with speculation. Same breed as Simmons.

“Never again will we pump more than 82 million barrels.”

-- T. Boone Pickens, 9th August 2004. On the Kudlow and Cramer Show, MSNBC.

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“Global oil [production] is 84 million barrels [per day]. I don't believe you can get it any more than 84 million barrels."

-- T. Boone Pickens, addressing the 11th National Clean Cities conference in May 2005.

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"I don't believe that you can increase the supply beyond 84 or 85 million barrel as day."

-- T. Boone Pickens, on "CNN In the Money", June 25, 2005.

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"Supply is—you‘ve just about had it on supply; 85 million barrels a day world supply is about it. "

-- T. Boone Pickens, on Hardball with Chris Matthews, MSNBC, Aug. 26, 2005

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[Tony Belding]

Intuitively, I think US drivers will start to "choke" somewhere around $8 to $12 per gallon gasoline. I'm sure ten dollars would be a big psychological blow. What would choke them a lot worse, and a lot quicker, would be actual shortages or rationing. If there's one thing people fear more than high gas prices, it's not being able to get gas at all. That's a fairly remote fear now, but a supply disruption could bring it to the forefront.

[Mark C R UK]

If the man's a crook:

See yesterday's THE INDEPENDENT, UK.

Not that I agree with everything they say - such as THE BIG GREEN FUEL LIE (5/3/2007)
- which was poorly written with no mention of CELLULOSIC ETHANOL and some other important bits and pieces missing.

But with a diminishing resource (OIL) and increasing consumption (China/India and elsewhere) - then the barrel is running low! Oil fields will not magically appear.

What about the automotive/transport industries response? Fuel cell and ultra High MPG vehicles e.g. biodiesel (on board reforming) fuel cell powered 76 MPG vehicles??? As much a part of the solution....

The question is - can the biorefinery and other elements of the alt-energy sector respond in time as well?!? What about consumer products? - plastics etc? What impacts?
Chemicals traditionally obtained from petrochems........?

This is equally my interest. As I think all consumers and society will start asking. This is all on our sustainability agenda.

Mark C R is a Green Chemist working in the Biofuels sector in the North West of England (UK).
The Green Chemistry Technical Blog

[nathan]

This guy ia just a peak oiler. thi9s hold no weight in th industry. current known reserves are at about a 40 year supply. with confirmed resourses at about another 40 years (if th price of oil goes up resourses get converted to reserves) funny thing is that if you look back into the 60's we had a 40 year reserve then too. It turns out the industry average the companys don't want to look more than about 40 years in the future for the oil supply.
There are theories out that essentially say there is enough fossil fuels around that if we burned all of them we would burn all of the oxygen with it. (about 4000 years at current usage) We are a long way from there. there is no shortage for in the near future.

[Al Fin]

Anyone who believes in Peak Oil should put his money where his mouth is. Pickens is too smart to do that, even with creeping senility. But a lot of people who listen to him may not understand his underlying motives. Hint: Pickens wants you to act in such a way as to benefit HIS interests.

[Mark C R UK]

Nathan and Al... have a look at the article I quote.

The man in question Dr Colin Campbell (responding to the BP study) is a former geologist and was vice-Chairman in the Oil industry:
BP, Shell, Fina, Exxon and ChevronTexaco.

If someone like him is saying to pay attention - its worth more than just dismissing it out of hand.

[Mark C R UK]

"Jeremy Leggett, like Dr Campbell, is a geologist-turned conservationist whose book Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis brought " peak oil" theory to a wider audience. He compares industry and government reluctance to face up to the impending end of oil, to climate change denial.

"It reminds me of the way no one would listen for years to scientists warning about global warming," he says. "We were predicting things pretty much exactly as they have played out. Then as now we were wondering what it would take to get people to listen."

In 1999, Britain's oil reserves in the North Sea peaked, but for two years after this became apparent, Mr Leggett claims, it was heresy for anyone in official circles to say so. "Not meeting demand is not an option. In fact, it is an act of treason," he says."

- Is symptomatic.

One should always look and plan for the edge of the cliff well well in advance.

Preferably with a parachute ready to deploy!

Its best not to dismiss. But to plan ahead.

[Mark C R UK]

"BP's Statistical Review is the most widely used estimate of world oil reserves but as Dr Campbell points out it is only a summary of highly political estimates supplied by governments and oil companies.

As Dr Campbell explains: "When I was the boss of an oil company I would never tell the truth. It's not part of the game."

A survey of the four countries with the biggest reported reserves - Saudi Arabia, Iran, Iraq and Kuwait - reveals major concerns. In Kuwait last year, a journalist found documents suggesting the country's real reserves were half of what was reported. Iran this year became the first major oil producer to introduce oil rationing - an indication of the administration's view on which way oil reserves are going.

Sadad al-Huseini knows more about Saudi Arabia's oil reserves than perhaps anyone else. He retired as chief executive of the kingdom's oil corporation two years ago, and his view on how much Saudi production can be increased is sobering. "The problem is that you go from 79 million barrels a day in 2002 to 84.5 million in 2004. You're leaping by two to three million [barrels a day]" each year, he told The New York Times. "That's like a whole new Saudi Arabia every couple of years. It can't be done indefinitely." "

One should not expect to rely on potential corruption amongst a few. (Anyone recall Enron??).

Spreading the energy-mix around ensures shocks to supply don't affect the global economy or future global economic models.

This is in all our interests.

[Mark C R UK]

I don't agree with some of the journalists opinions - again - he is rather subjective and can misrepresent things. But we know Hubbert's peak is real. I'm in the UK and we're now a net importer of oil. In the 1980's and 90's we were a net exporter.

"Wise up" as they say in the states.

[greg woulf]

I don't think we'll be able to say, "we're at the peak" until we have supply shortages.

I hope we have the brains to act like we're at the peak before we get there. I don't want to go through the lines like the late 70's again, and that was nothing compared to the hole we'll be in this time.

I'm optimistic about our future, and in some ways I think it'd be good for the U.S. to go through a crisis and figure out that you can't have it all for nothing. we'll figure ways around it, but it's not going to be easy.

Just the same, this guys doesn't know we're at peak in my opinion.

[Demesure]

Marc,
Campbell, the peak-oiler in chief has even worse forecast records than Boones. He started crying wolf back in the 90s and has predicted as many peak-oil dates as there are years from then : just see the performance of this gentleman doomer.

You'll trust a doctor who has misdiagnosed your health everytime before ? Wise up, and check out other sources.

[eric]

There is no question that oil will eventually peak - there are only a handful of people who would deny that point. The only question is when. Unfortunately many folks such as Cambell and Simmons get goaded by the media into predicting the date - it makes a much sexier headline if you can put a date on the thing, especially if that date is relatively soon.

Just because the previous predictions haven't come to pass doesn't invalidate the theory as a whole. The most accurate predictions are probably the bottom-up analysis where you consider production levels on a field by field basis, and then include new fields, but even this is fraught with danger, as there are really far too many variables. On the one hand, new projects can come in late, or you can have hurricanes or political instability which decrease production. On the other hand there are many fields for which we really don't have sufficient geologic information about the condition of the reservoirs in order to make strong predictions. That being said, all oilfields eventually become exhausted - it is only a matter of time before they reach the point at which production starts to decline.

In the past year we have started to see strong evidence of production problems and production declines in Ghawar and Cantarell. These developments would indicate that increases in overall world production are now less likely than before, and eliminates some of the uncertainty in the condition of those two fields - two of the giants in the world.

Ultimately it is true that we won't be 100% sure of the date of the peak until we are a couple of years past the peak. Even if peak is still a few years off in the future, delaying mitigation isn't sound policy. The Hirsch report studied the question, and concluded that effective mitigation needs (or needed) to be initiated 20 years in advance of the peak in order to avoid substantial economic impacts. In my view however mitigation hasn't even begun - we have started to talk about it, and consider what effective mitigation strategies might be. But right now the public at large seems to be focussed on denial of the possibility of a peak rather than anything else (or perhaps an unawareness that a peak is even possible), and thus is more interested in grasping at straws that would allow us to continue on with life as usual more than anything else.

[Michael Cain]

I don't think we'll be able to say, "we're at the peak" until we have supply shortages.

Long-term supply shortages can only occur if prices are being set improperly. I believe firmly that if gas prices suddenly jumped to $4/gal, the current spot shortages in the US would vanish -- at that price, people would adjust their behavior almost instantaneously, as teenage cruising was priced out, as people started planning their trips more effectively, as summer vacation travel was curtailed somewhat (eg, here in Colorado, the household that was planning three weekends in the mountains would reduce that to two).

Just speculating, as is everyone who makes such estimates of behavior, but $4/gal seems to me to be the price at which people make those "easy" adjustments, $6/gal is where "SUV as the family car" disappears for all but the wealthy and people who can begin negotiating 4x10 work weeks, and $8/gal is where people make large long-term changes -- eg, move, or take a job close to home with a pay cut that is offset by the gasoline savings. Note that absent increases in fixed costs, $8/gal gasoline translates to roughly $200/bbl oil.

Assume an individual that uses 40 gal/month, and a serial PHEV that meets 80% of that in all-electric mode, electricity at the equivalent of $1/gal (today's prototypes are already better than that), and $6/gal for gasoline. A $10,000 premium for the drive system (compared to today's drive trains) pays for itself in 5.2 years. A $5,000 premium and electricity at $0.5/gal equivalent would pay for itself in 2.4 years. How soon will Detroit and Japan give us such options?

[amazingdrx]

Who cares?

Serial plugin vehicles of the GM volt design could reduce liquid fuel use by 90%. Go to a renewable distributed generation and storage grid to charge them up.

That's the GHG and oil demand/supply solution.

Peak oil is a dead topic, completely beside the point. Moot.

[eric]

Yes, a serial plugin like the GM Volt (if and when it becomes available - this is GM we are talking about, and I don't believe anything they say) would reduce fuel use. The problem is that cars have an engineering lifetime of about 10-15 years or so, and we don't have the industrial capacity to replace all cars in one model year. This is the main reason why mitigation must begin prior to the peak in order to avoid economic impacts.

If we wait until the actual peak, the folks who recently bought expensive gas guzzlers may find themselves stuck with them - owing a lot of money on a vehicle that is worth next to nothing, and is no longer affordable to drive.

[averagejoe]

$8 a gallon? Whew... at that price I might just have to dust off the old bicycle. Who needs those fancy new batteries when you can just tap the energy stored in your beer gut. Just scarf down the occasional doughnut and glass of beer, and you're good to go...

[amazingdrx]

Conversion is the answer Eric. 17 million new vehicles are sold in the US each year.

To go serial plugin with 300 million vehicles in 10 years we will need to average 13 million conversions as well.

With 10 dollar gas in a few years, the motivation to convert used vehicles will be there. mass production assembley line conversion of particular models all in a group should make this affordable.

We are talking complete revival of the US manufacturing base and more if/when this gets going. think of all the wind, solar, biogas, sOFC, and geothermal heating/cooling as well. That spells full employment and a revived USA!

[eric]

Heh. I find that beer doesn't really improve my cycling performance - it makes me really sluggish, actually. I could really get with the donuts though. Bananas and granola would probably be optimum.

I just went out and bought a commuting pannier yesterday so I can try out cycling to work one day a week. It is hot here though, and my body isn't used to riding in the heat yet - it might be a few weeks of shorter rides before I am ready to give this a try...

[averagejoe]

Nix on the beer then...maybe a glass of Jolt cola; twice the caffeine and calories of the regular stuff. Seriously though, my commute is only about 5 miles, so I might just give cycling a try. As lazy as I am though, I'd probably bolt on one of those electric bike motors. If the battery ran out, I guess I could actually try pedaling.

[Greg woulf]

I would define shortage as when people go to the gas station and the station is out of gas.

It's happened before, and then the lines at the remaining stations get longer and longer as people try to find gas before it's gone from the area.

[Todd Lyons]

The one assumption that everybody always makes when talking about how high oil prices will go is that the demand will continue to rise. In order for the demand to stay high or even continue to rise, the economy has to continue to grow.

The fact of the matter is that the US economy cannot continue to grow for a few reasons:
1) If oil becomes short in supply, the industries that contribute to the economy will have to scale back or even shut down.
2) The housing bubble is simply the bubble that replaced the Tech market bubble fromt he late 90's. Housing impact on the economy is going to hit its peak in a year, dragging the economy down with it. I don't see a Depression, but I do see a recession that lasts longer than the real estate shills say it will be. Will the government let the commodity bubble in the stock market continue to grow using borrowed dollars? That's scary because that preceeded the Great Depression.
3) If the US dollar doesn't stop getting printed like a cheap paper wrapper, the rest of the world will stop using it as a basis for pricing/buying oil (aka petrodollar). Then the Depression scenario might just play itself out.

If #3 ever happens, we are *SCREWED*. Our dollar loses its purchasing power. China stops producing to export to us, and instead produces to supply its own consumers if the petrodollar changes to the yuan (or Europe if the petrodollar changes to the euro). The rest of the world goes on growing while we either lower our per capita oil usage (going green) or revert to a Third World Country (rest of the world abandons us. Why would they, I mean, our President and Government does so much GOOD for the rest of the...hmmmm...we're screwed...crap).

[Greg woulf]

That thinking is circular.

If there's demand then the price will go up and if the price goes up there won't be the demand might limit it to some extent, but only after it's had a crushing affect on the economy.

Plus, you're only considering the U.S. when the world is quickly catching up to us in consumption.

In either case there's a limited supply of oil. If we use it at a slower pace it will last longer, but we'll still be at peak and it will change the world. The price will go up and not come down, other than dips, until oil is gone.

Whether that's 20 years, 50 years or a 100 is the only question.

[M. Simon]

Iran is having trouble with output because it is not maintaining its fields.

It is putting all its money in jihad.

Within 4 to 5 years they will be net importers of oil. They already import 40% of their gasoline.

[Nucbuddy]

Eric wrote: The problem is that cars have an engineering lifetime of about 10-15 years or so

Actually, that is not a problem. The average registered car is driven 12,000 miles per year. The average new car is driven 15,000 miles per year. Therefore, newer vehicles dominate the mix of vehicles seen driving on the roads.

You can test this yourself. How often do you see a vehicle on the road that is older than 5 years? 10 years? 15 years?

When a person with a need to drive a lot faces his vehicle choices, for a wide-variety of reasons (including all of those listed below in my response to Amazingdrx) it is not hard to convince him to purchase a new car.

Amazingdrx wrote: Conversion is the answer

Retrofitting of used-vehicles is absurd. New vehicles featuring the latest in safety, style, fit-and-finish, luxury, performance, economy, and reliability are available mass-produced at rock-bottom prices. Meanwhile, the highest costs of owning a rarely-driven used-vehicle are insurance and capital-opportunity.

Amazingdrx wrote: With 10 dollar gas in a few years, the motivation to convert used vehicles will be there.

Relative to earning-power, there was $10 gas in the 1970's and early 1980's. Yet, there was no market for vehicle-drivetrain-retrofitting. Instead, consumers purchased new vehicles.

[Calamity]

Yes, retrofitting usually yields sub-optimal results. Better build the cars from the ground up. Initially, policies may be necessary to jump-start and catalyse mass production and public adoption of SPHEV's.

Sadly, it seems like governments first require something bad to happen for such policies to be accelerated, instead of detecting the signals and taking a strategic approach.