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Saudi America Will Overtake Saudi Arabia As Top producer

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Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby C8 » Thu 27 Jun 2013, 20:51:21

Saudi America Will Overtake Saudi Arabia As The World's Top Oil Producer Within A Decade

In a new study published by Harvard's Kennedy School of Government, former oil company executive Leonardo Maugeri predicts that for America's three largest shale oil plays — the Bakken in North Dakota and the Eagle Ford and Permian Basin in Texas — the boom should last at least another decade.

He arrives at that estimate by calculating current well densities — how many wells there are in a given acre of shale play — and improving rig efficiencies, the result of improved drilling times and lower-cost drilling methods. Plus, he writes, new infrastructure coming online will make it cheaper to invest in these plays:

Figures about the Permian basin are still in the making, yet it is possible to figure out that the Big Three U.S. shale plays have a combined potential of many more than 100,000 shale producing wells, or about ten times the number of those already on line. Taking into account this potential, the limits to drilling intensity probably would start affecting Bakken Three Forks and Eagle Ford only in the second half the 2020s.

There remains uncertainty about the rest of the country's plays. But Maugeri asserts that the U.S. will become the world's top oil producer within this decade, leapfrogging Russia to topple Saudi Arabia.


Read more: http://www.businessinsider.com/harvard- ... z2XTGEvNG1
Read more: http://www.businessinsider.com/harvard- ... z2XTFtf8q0
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby Quinny » Fri 28 Jun 2013, 01:12:03

Bit late this isn't it
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby westexas » Fri 28 Jun 2013, 06:30:20

EIA data show that what I define as Global Net Exports of oil (GNE) have been below the 2005 rate for seven straight years, with the developing countries, led by China, consuming (so far at least) an increasing share of a post-2005 declining volume of GNE.

I define Available Net Exports (ANE) as GNE less Chindia’s Net Imports (China + India). ANE fell from about 41 mbpd in 2005 to 34 mbpd (million barrels per day) in 2012, an average annual decline of one mbpd per year in the volume of exported oil available to importers other than China and India.

I examined this topic in the following paper on what I call the Export Capacity Index (not yet updated with 2012 data):

http://peak-oil.org/2013/02/commentary- ... ity-index/

While the current increase in US crude oil production is very helpful, the steady increase in the decline rate from existing production means that the US oil and gas industry is facing enormous challenges in just trying to maintain current production levels, and in all likelihood we will continue to see an “Undulating Decline” pattern in post-1970 US crude oil production (currently US crude oil production is about 25% below the 1970 peak annual rate).

As noted in the following article, if we assume a probably conservative average year over year decline rate in existing US crude oil production of 10%/year from 2013 to 2023, the US oil industry would have to replace, over a period of 10 years, the productive equivalent of 100% of current US crude oil production, in order to maintain the current US crude oil production rate:

http://www.resilience.org/stories/2013- ... l-exporter

And a recent Citi Research report puts the current year over year decline rate in existing US natural gas production at about 24%/year, which implies that the US has to replace virtually 100% of current US natural gas production in the next four years, in order to maintain the current US natural gas production rate.

The bottom line for developed net oil importing countries like the US is that (so far at least) we are gradually being shut out of the global market for exported oil, via price rationing.

Definitions:
GNE = Combined net exports from top 33 net oil exporters in 2005
Net Exports = Total petroleum liquids + other liquids production less liquids consumption (EIA)
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby ROCKMAN » Fri 28 Jun 2013, 07:10:55

wt – “…led by China, consuming (so far at least) an increasing share of a post-2005 declining volume of GNE.”

And as significant as your metric should be to many folks it doesn’t include the amount of loss in future net exports already baked into the cake with more on the way. As we’ve seen China is aggressively removing future oil production from the open market (and thus reducing available imports to the rest of the word) via direct acquisition of reserves in the ground and those refinery JV’s and long term purchase contracts. This would be a volume of oil in addition to what you highlight as China’s current ability to outbid many other importers in the current market place. If one were to factor this into your numbers I suspect the amount of available net exports may decrease at an even faster rate in the next 5 to 10 years. Just consider that one refinery JV with Saudi Arabia on the Red Sea. The day that plant comes on line 400,000 bopd will disappear from your net export numbers overnight.

As I just ranted on another thread how much oil the world is producing today and will in the future isn’t nearly as important as how much it will cost and who will control it. IOW PO is poo poo. It’s all about the POD, baby. Just as all your diligent work indicates.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby Tanada » Fri 28 Jun 2013, 07:46:42

ROCKMAN wrote:wt – “…led by China, consuming (so far at least) an increasing share of a post-2005 declining volume of GNE.”

And as significant as your metric should be to many folks it doesn’t include the amount of loss in future net exports already baked into the cake with more on the way. As we’ve seen China is aggressively removing future oil production from the open market (and thus reducing available imports to the rest of the word) via direct acquisition of reserves in the ground and those refinery JV’s and long term purchase contracts. This would be a volume of oil in addition to what you highlight as China’s current ability to outbid many other importers in the current market place. If one were to factor this into your numbers I suspect the amount of available net exports may decrease at an even faster rate in the next 5 to 10 years. Just consider that one refinery JV with Saudi Arabia on the Red Sea. The day that plant comes on line 400,000 bopd will disappear from your net export numbers overnight.

As I just ranted on another thread how much oil the world is producing today and will in the future isn’t nearly as important as how much it will cost and who will control it. IOW PO is poo poo. It’s all about the POD, baby. Just as all your diligent work indicates.



I think its more of a problem of Who Decides? China has placed themselves in the position to be the deciders of the future, they get to choose who can or can not buy their products from all these joint ventures scattered all over the place. Right now price is the limiting factor to access, show up with a $110.00 bid and you can fill the biggest tanker on the planet because we have a mostly open market. In another ten years assuming we leave the plateau some time between now and then you can bid as much as you want, but if there is a short fall on product the person with the product gets to decide who to sell to.

Look at it this way, if you want to make bread with wheat and there are a million people selling it you get a good price because they are all competing against each other to make the sale. If you want to add Quinoa to your bread you are dealing with a much smaller group of sellers and the price is much higher. If you want to add maple seed flour to your mix the price is incredibly high because very few people are making maple seed flour to sell, even though there are lots of maple seeds out there they are inaccessible to you today for your specialty bread flour. It isn't just the supply on the trees at the start of the harvest season that counts, it is the number of seeds collected and processed into the product you want.

In the same way it isn't the reserves in the ground that counts for oil, it is the amount processed and delivered to market that lets the salesman set the price. The less competition the greater the ability to set the price wherever you want it. You can give discounts to your friends and charge everything your acquaintances can afford to pay for the rest. Once it is all spoken for there is nothing anyone can do to make more magically appear without doing to work to get more out of the ground and processed.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Fri 28 Jun 2013, 09:57:11

ROCKMAN wrote:. IOW PO is poo poo. It’s all about the POD, baby. Just as all your diligent work indicates.


It's all about the POD. You got that right Rockman.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Fri 28 Jun 2013, 09:58:54

westexas wrote:EIA data show that what I define as Global Net Exports of oil (GNE) have been below the 2005 rate for seven straight years, with the developing countries, led by China, consuming (so far at least) an increasing share of a post-2005 declining volume of GNE.



What do your metrics mean in relation to America's ability to become an exporting country in the future? Do you have something which accounts for countries going from import to export status and a calculation for when this happens?
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby ROCKMAN » Fri 28 Jun 2013, 10:24:11

Tanada – So true. It’s not so much who owns how much oil/product but what their options might be. For instance that huge refinery in BC that might be built and might process a lot of oil sand production with the products tankered out of BC. I have to believe that China will get right of first refusal on some or all of those products. But in the short term I can also imagine most or all of it being sold on the US west coast if the price is right. China wants to take advantage of those investments by either utilizing the oil/products at home or selling to other end uses. Same situation with the Red Sea refinery JV with the KSA and the largest refinery ever built in Egypt. China may be very glad to sell all of the product to the EU instead of shipping it home. Of course, only as long as they can’t make better use of it at home. It seems like a perfect scenario for China especially now that the govt seems intent on slowing up their growth a tad. The world is a ready market today for China’s oil and refined products. They’ve invested 100’s of $billions in acquiring those assets. Getting a payback on those investments by selling to other consumers will help bankroll other efforts to tie up future energy sources. Future energy resources they may decide to keep all to themselves one day. Seems like the “perfect storm” of energy strategy IMHO.

Along those lines I was disappointed in the NPR report yesterday about the POTUS trip to Africa. He mentioned the hope to expand trade with Africa especially when the US benefits from the process. And what trade aspect did NPR focus on? The Senegal music industry with emphasis on rap style. I would like to think they just went for some cute sound bites instead of highlighting more relevant trade aspects, like energy and agriculture. Not really a big matter but while the president is giving speeches the Chinese govt is investing 100’s of $billions in Africa’s resources including ag lands. Just struck me as a cruel caricature of the current state of affairs.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby Oily Stuff » Fri 28 Jun 2013, 10:51:24

I think this fella Mauguri must have fallen off a rig floor once and landed on his head. 100,000 shale wells in America, zoweeeeee!!

Slowly but surely every day a little bit of my beloved Texas hill country gets hauled to S. Texas for stinkin' shale well pads and roads. Millions and millions of tons of crushed limestone every week leave vast, gapping holes in the cedar hills. Every highway every morning is full of belly dumps, bumper to bumper, headed south. Its impossible now to drive anywhere in S. Texas on any road without getting seasick, the roads are so bad. Water wells needed for agriculture and human use are drying up from excessive frac water withdrawal, the cattle business is a thing of the past because there is no grass for them to eat (cows don't like to eat limestone); in the sweet spots the no vacancy sign is already hung.

So, Leo, where we gonna put all these shale wells, dude?
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Fri 28 Jun 2013, 11:24:17

Oily Stuff wrote:So, Leo, where we gonna put all these shale wells, dude?


The USGS estimates of well counts can be estimated from their factsheets. Divide mean area by mean area per well and presto! Nice estimate.

Doing just that we get: 3600 Elm-Coulee Billings Nose, 7000 Central Basin, 6300 Nesson Little Knife, 4300 Eastern Transitional, 4200 Northwest Transitional, 32000 in the Three Forks.

There is the first 57,000 right there.

The Eagleford only needs to come up with another 43,000 and we're golden!
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby ROCKMAN » Fri 28 Jun 2013, 11:47:09

John - “What do your metrics mean in relation to America's ability to become an exporting country in the future?” The US exports both oil and refined products today but I’ll assume you mean a net exporter. Let’s look at a longer trend…say the last 40 years since US oil production peaked in the early 70’s. In 1970 we were importing 1.3 mmbopd and producing 9.5 mmbopd. Some ups and downs along the way but in 2008 we were importing more than 7X as much (at 10 mmbopd) and producing 50% less. The shales, thanks to higher oil prices, have added a nice increase to around 6.8 mmbopd (http://seekingalpha.com/article/1525522 ... oogle_news). Along with a downturn in consumption from a variety of factors US consumption has fallen to about 18 mmbopd. So even with the recent increase in US oil we still import a 10.95 mmbopd (http://ycharts.com/indicators/oil_imports).

So if it’s all the same I would just prefer to wait to speculate about the US becoming an oil exporter until we are producing 2.5X as much oil as we are today or the economy craters and our consumptions drops 60%. Or any combination of those two. Otherwise it would seem to be a waste of time IMHO. Even when either of those two scenarios develops we still wouldn’t be an “oil exporter”. Not saying it's impossible but probably a bit to far off in the future to be of much relevance today IMHO.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Fri 28 Jun 2013, 14:02:21

ROCKMAN wrote:So if it’s all the same I would just prefer to wait to speculate about the US becoming an oil exporter until we are producing 2.5X as much oil as we are today or the economy craters and our consumptions drops 60%. Or any combination of those two.


of course you would Rockman. But here is the problem. Some people in this country are tasked with futurecasting, like it or not, TPTB want estimates and ideas and some hint what they should be thinking about in the future, NOT after it becomes reality.

They want to be prepared, good or bad, they want to know which way to influence policy, as it pertains to making estimates about the future. The markets want to know this, individual investors want to know this, the government wants to know this. It does none of them any good whatsoever to sit around and say...we cannot guess because it hasn't happened yet. Won't happen, can't happen, if you are human, you do this with your paycheck and the food in your refrigerator (just because it only has 2 dinners in it, I can't ever assume I will be able to eat after the 3rd night!).

So not even you can insist on the "not knowing" in advance, be it your refrigerator's contents, or the next well you drill.

So what do YOU think is a reasonable way to supply the kind of future looking information individuals, governments, the markets and investors want?

As an example, sometime in the next couple of months, we are HOPING that winter time natural gas storage will exist. The gas to fill that storage hasn't been produced yet. Are you going to venture that the storage WON'T get filled, just because we haven''t seen the natural gas? Of course not. So, how do you think we should estimate the amount of oil production will make in the near future should work, what should it be based on, because to be perfectly honest, you sure can't string together a hubbert linearization, or randomly decline time series data to predict how much of the unknown, unseen, underground resources and reserves are going to comprise the countries production rate say, a decade from now. And SOMEONE has to do it in as objective and reasonable way as possible.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby agramante » Sat 29 Jun 2013, 05:28:55

John-the Hubbert linearization might not be a reliable predictor of ultimately recoverable reserves, but one thing is definite: after peak, production declines. Global production's been at a rough plateau since 2005, and even recent oil fracking hasn't brought the US back to its 1970 peak. Natural gas is a different story. It's harder to ship, not as dense energetically, and isn't the same global product that crude oil is. It seems we haven't hit peak yet, and if the EIA marketed gas stats are reliable, it's not a very smooth bell curve at all. (And there's no strict necessity that production of any fossil fuel be a bell curve: several peaks, kurtosis and skewness are certainly possible. US oil production has had a few minor peaks since the overall peak in 1970, and our natural gas production had a subsidiary peak in 1973.)

Your point on folks being tasked with predicting the future is valid, but there's something else to consider: whom are the predictors working for, and what is their goal? Oil producers are hoping to maximize profit, which could lead them to overstate their reserves in order to attract investment. (Shell had to make some painful adjustments to their stated reserves in 2004.) Most everyone here is aware of the mideast miracle, where reserves suddenly rose by a factor of 25% or so in the 80's, and haven't budged since. The reasons for their doing this--preserving market stability, and their positions within it--are well enough known. And the USGS has revised its shale gas estimates downward, sometimes significantly downward, a number of times. You might theorize on what ulterior motives might exist within the federal government for mis-stating reserves, but to a first order, the USGS isn't concerned with maximizing value for potential investors, so the motivations to overstate reserves might not be so strong.

Though there might have been some in Wall Street who were wise to the situation, I'm not sure many analysts in 2007 and 2008 were telling their clients that a crash was on its way soon (at least, by the time some were, it was too late for most to get out--and the warnings were very quiet). That's not to say a production crash is on its way soon--I'm making no such prediction--I'm simply making the point that industry boosters, even well-paid expert boosters, sometimes believe their own hype and lose touch with reality. If your livelihood is staked on making medium- to long-term predictions based on short data sets (US shale gas production), then have at it. But time will always tell. If fracked gas production continues to rise like it has for the next five to ten years, and then stays at that level for five to ten more, then clearly, we've got a revolution in production on our hands. Many are predicting exactly this. But if your company's earnings or your investment portfolio isn't staked on that happening, then it's not necessary to convince yourself that it will.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby MD » Sat 29 Jun 2013, 07:23:31

John_A wrote:
ROCKMAN wrote:. IOW PO is poo poo. It’s all about the POD, baby. Just as all your diligent work indicates.


It's all about the POD. You got that right Rockman.


I for one am very happy to see the conversation flip to peak demand from peak production. It is the other side of the same coin, after all.

If nothing else it will generate a new series of nonsense arguments, along with perhaps a bit of enlightenment for both sides of the discussion.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby ROCKMAN » Sat 29 Jun 2013, 09:25:20

John - The refrigerator analogy is great. I’ll use it. It’s 4 PM and mom’s 4 kids will be home from school soon and looking for their supper. Mom only has enough food in the ice box to feed half of them. So she has to go get some more from her neighbor but has to pay for it with her kids’ allowances.

As the kids are eating she explains that next month daddy thinks he’ll get a good paying job because other folks are getting jobs now. But he’s not exactly sure where he’ll get that job. But when he does they’ll have all the food they can eat. Of course with the kids being teenagers they look across the table at dad and say: “F*ck you! What’s for breakfast tomorrow”?

We have serious problems today. TPTB aren’t doing much to address those problems IMHO but you want to offer that some future prediction will motivate them to change BAU down the road. The US govt is doing nothing significant today to address the problems we’re facing IMHO. Building fantasies about the future, whether they develop or not, isn’t going to change the current dynamics.

You need to remember the world I’ve lived in for the last 38 years: countless geologists presenting great predictions of future hydrocarbons developments that will make the company prosper and grow. And in the majority of cases those expectations were not met. More than half the companies I’ve either worked or consulted for no longer exist because they didn’t reach their goals. I don’t give a crap about what a company’s PR releases say about their future projects. I look at what they’ve done historically and where they are today.

You and I live in two different universes IMHO. But maybe that’s just me. LOL.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Sat 29 Jun 2013, 11:33:05

agramante wrote:John-the Hubbert linearization might not be a reliable predictor of ultimately recoverable reserves, but one thing is definite: after peak, production declines.


An axiom of the business. A definition. Yergin will admit it as fast as everyone else.

agramante wrote: Global production's been at a rough plateau since 2005, and even recent oil fracking hasn't brought the US back to its 1970 peak.


There is no need to bring the US back to a prior peak, the very idea that the oldest producing province on the planet can even increase oil production faster than it has at any time in its history makes the point just fine...remember...for those who follow the definition of peak oil related to flowrates, after peak, they aren't supposed to go UP. That is the key point allowing people to declare this entire "US as Saudi Arabia" routine.

agramante wrote:Your point on folks being tasked with predicting the future is valid, but there's something else to consider: whom are the predictors working for, and what is their goal?


I asked Rockman. I know who the USGS scientists work for, who funds the IEA, who the EIA works for, and pretty much ignore all of those with money in the game, or looking to make money. Scientists and "paid to be objective" strikes me as more reliable. But I asked Rockman, knowing he is an industry guy who doesn't appear to like what forecasting entails, but as someone who also does it every time he drills a well.

agramante wrote: You might theorize on what ulterior motives might exist within the federal government for mis-stating reserves, but to a first order, the USGS isn't concerned with maximizing value for potential investors, so the motivations to overstate reserves might not be so strong.


The USGS employees are required by law to not own stock and whatnot, people were worried about their financial interests way before this peak oil stuff came along. And the energy folks don't do reserves, they do resources. So they are yet a step removed from the actual inventory calculation.

But I am interested in how others (specifically Rockman) think projections should be done, knowing that we all do it, yet appear to discount how others do it.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Sat 29 Jun 2013, 11:42:34

ROCKMAN wrote:We have serious problems today. TPTB aren’t doing much to address those problems IMHO but you want to offer that some future prediction will motivate them to change BAU down the road. The US govt is doing nothing significant today to address the problems we’re facing IMHO. Building fantasies about the future, whether they develop or not, isn’t going to change the current dynamics.


What current dynamics? People projecting into the future are declaring we are going to overtake Saudi Arabia. Peak oil does not encompass the idea of post-peak large areas reversing direction and becoming faster growing in oil production than they ever have before. POD might.

So sure we have problems, we had POD related problems in the 70's as well, but the question is, how do you project into the future, knowing that your natural inclination is as a sort of "show me" kind of guy? People are going to guess come hell or high water, how do YOU think it should be done?

Rockman wrote:You need to remember the world I’ve lived in for the last 38 years: countless geologists presenting great predictions of future hydrocarbons developments that will make the company prosper and grow. And in the majority of cases those expectations were not met. More than half the companies I’ve either worked or consulted for no longer exist because they didn’t reach their goals. I don’t give a crap about what a company’s PR releases say about their future projects. I look at what they’ve done historically and where they are today.


Okay, lets start with "I look at what they've done historically and where they are today". The US began a post peak decline in 1970 or so, and in 2008 experienced a complete reversal of decline, in such volumes and so fast that people can proclaim we will overtake Saudi Arabia as top producer. Using historical data. So what they did is a-okay with your perspective of historical evidence? I draw a line through current production increases and presto! In a few years, America wins! Your approach would validate their claim, but I'm betting that wouldn't be your answer. So how would you convert the fastest oil production growth in American history into NOT ending up as America overtaking Saudi Arabia?
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby agramante » Sat 29 Jun 2013, 11:47:39

And I think he answered you, in a way. Hubbert's original paper allows that production can have multiple peaks. The bell curve he used is merely the simplest model. US production shows two subsidiary peaks, one in 1985 and we're headed toward another now. Time will tell how high this local maximum will be before production starts trending down again.

As to your last question, John, I'd volunteer the answer that, if our production stalls out in the next few years or so, then we won't succeed in overtaking Saudi Arabia. Time will tell.
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby Pops » Sat 29 Jun 2013, 12:08:18

For the new folks, here is a thread dedicated to Maugeri's "study":

maugeri-oil-the-next-revolution-t65870.html?hilit=Maugeri
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Re: Saudi America Will Overtake Saudi Arabia As Top producer

Unread postby John_A » Sat 29 Jun 2013, 12:14:33

agramante wrote:And I think he answered you, in a way. Hubbert's original paper allows that production can have multiple peaks.


Are you kidding? Multiple peaks?

agramante wrote:As to your last question, John, I'd volunteer the answer that, if our production stalls out in the next few years or so, then we won't succeed in overtaking Saudi Arabia. Time will tell.


This is a conditional forecast. Of course if production stops growing it will be a sign...that production has stopped growing. The people doing this for a living, like the EIA and whatnot, are trying to figure that out based on economics and resource sizes TODAY, they need to know now when production will stall out to even refute the claim of others.

Here is the EIA projection case from their AEO report, showing US domestic production stalling out at at 2016-2019. They appear to be already indicating that it will stall out, and that this America as top producer is a load of bull.

http://www.eia.gov/oiaf/aeo/tablebrowse ... 3-d102312a
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