Michael Lynch - Disputing Peak Oil

WebHubbleTelescope · **Joined:** Thu Jul 08, 2004 12:00 am **Posts:** 911

TonyPrep wrote:

Lynch seems to be getting bolder:

Quote:

"Crude-oil inventories are starting to look very healthy and gasoline inventories are tremendous,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "Demand is awful and there's a lot of oil that's on its way here. There is going to be serious downward pressure on this market within a few weeks.''

Oil Falls From Record After U.S. Supplies Rise a Seventh Week

The ambiguous a-hole Lynch sez "Demand is awful .."

"awful"-what ???

Is demand "awful strong" or "awful weak"? He knows that the ambiguity will serve him well in the future, as he can twist it any way he wants. Lynch is pure snake-oil.

pstarr · **Posted:** Wed Feb 27, 2008 11:42 pm

"Crude-oil inventories are starting to look very healthy and gasoline inventories are tremendous,''

Inventories means a couple of million barrels in a pipelines or a ship hold somewhere out in the Atlantic. so?

How about the 40-year discovery decline? Is that looking healthy?

It seems folks want to pay lynch to look no further than his lint-poofed bellybutton

seahorse · **Posted:** Wed Mar 05, 2008 7:15 pm

Here's a letter to the editor from Lynch in the latest issue of "Oil and Gas Journal."

Quote:

Peak-oil context

The letter by Al-Husseini and Al-Husseini about the Cambridge Energy Research Associates decline-rate study, as well as comments by other peak oil theorists on the subject, demonstrates their habit of ignoring historical context (OGJ, Feb. 4, 2008, p. 12). The point is that the decline rate, and the effect of depletion on capacity, is not a new element; rather, the industry has been replacing about 4 million b/d of lost capacity a year for some time now. With growth of approximately 1.5 million b/d of capacity every year, the gross additions must be on the order of 5.5-6 million b/d, or more than a Saudi Arabia every 2 years. Analysts like Matt Simmons and ASPO-USA always describe this without context. Thomas Petrie, for example, was quoted as saying, “When was the last time we discovered another Iran?”

Yet the industry has not only raised capacity by about 15 million b/d over the last 10 years, it has replaced something like 35 million b/d of capacity lost to depletion. This is equal to 10 Irans, without actually finding a new, major petroleum basin.

The only point of interest is whether or not the decline rate in existing fields has grown with new technologies, as some have claimed. CERA states that it did not find this to be the case. Why peak-oil pundits ignore this is hard to explain. Indeed, ASPO-USA’s comment that “betting on depletion is like betting on rust” nicely demonstrates the shortcoming of their thinking: The oil industry, and many others, deals with rust all the time, without thinking it will cause them to peak and decline.

Depletion, like rust, has always been with us and can be dealt with, given proper investment.

It is hard to produce oil, and always has been. But the industry has managed not only to run faster to stay in place, but to continually pull ahead. The resource that is lacking is logical thinking on the part of the peak-oil community.

Michael Lynch, President
Strategic Energy & Economic Research Inc.
Winchester, Mass.

OGJ

DantesPeak · **Posted:** Wed Mar 05, 2008 8:59 pm

This is a backwarsd lookiking report, but bascially he is saying there will always be ever greater supplies of oil if we make ever greater investment, although exactly how much investment is needed and how much do we get for that investment is not stated.

Elsewhere here I have said that the net return on new energy investment has turned negative (if lumping all the world's oil companies into one large pool and comparing what oil they get compared to what they spent).

I don't see any evidence that Lynch has suggested anything other than mindless investment with the slim hope that future production will some how keep place with depletion.

TheDude · **Posted:** Wed Mar 05, 2008 11:18 pm

seahorse wrote:

Here's a letter to the editor from Lynch in the latest issue of "Oil and Gas Journal."

Lynch wrote:

With growth of approximately 1.5 million b/d of capacity every year, the gross additions must be on the order of 5.5-6 million b/d, or more than a Saudi Arabia every 2 years.

Didn't realize we were pumping 90 mbpd! Prices at record highs and they're just leaving it in the ground, then? Doesn't exactly sooth the nerves.

TonyPrep · **Posted:** Thu Mar 06, 2008 1:19 am

Quote:

Peak-oil context

The letter by Al-Husseini and Al-Husseini about the Cambridge Energy Research Associates decline-rate study, as well as comments by other peak oil theorists on the subject, demonstrates their habit of ignoring historical context (OGJ, Feb. 4, 2008, p. 12). The point is that the decline rate, and the effect of depletion on capacity, is not a new element; rather, the industry has been replacing about 4 million b/d of lost capacity a year for some time now. With growth of approximately 1.5 million b/d of capacity every year, the gross additions must be on the order of 5.5-6 million b/d, or more than a Saudi Arabia every 2 years. Analysts like Matt Simmons and ASPO-USA always describe this without context. Thomas Petrie, for example, was quoted as saying, “When was the last time we discovered another Iran?”

Yet the industry has not only raised capacity by about 15 million b/d over the last 10 years, it has replaced something like 35 million b/d of capacity lost to depletion. This is equal to 10 Irans, without actually finding a new, major petroleum basin.

The only point of interest is whether or not the decline rate in existing fields has grown with new technologies, as some have claimed. CERA states that it did not find this to be the case. Why peak-oil pundits ignore this is hard to explain. Indeed, ASPO-USA’s comment that “betting on depletion is like betting on rust” nicely demonstrates the shortcoming of their thinking: The oil industry, and many others, deals with rust all the time, without thinking it will cause them to peak and decline.

Depletion, like rust, has always been with us and can be dealt with, given proper investment.

It is hard to produce oil, and always has been. But the industry has managed not only to run faster to stay in place, but to continually pull ahead. The resource that is lacking is logical thinking on the part of the peak-oil community.

Michael Lynch, President
Strategic Energy & Economic Research Inc.
Winchester, Mass.

I really think that he doesn't believe that oil will ever peak, although something like that admission was coaxed out of him once.

He clearly can't read his own words. The industry, according to him, is having to find new production equivalent to two Saudi Arabia's every couple of years. That it may have managed it in the past in no way justifies the belief that it will manage it indefinitely "without actually finding a new, major petroleum basin".

He acknowledges, bluntly, that oil fields and oil regions deplete and eventually decline but appears incapable of realising what that ultimately means.

yesplease · **Joined:** Tue Oct 03, 2006 12:00 am **Posts:** 3655

TheDude wrote:

seahorse wrote:

Here's a letter to the editor from Lynch in the latest issue of "Oil and Gas Journal."

Lynch wrote:

With growth of approximately 1.5 million b/d of capacity every year, the gross additions must be on the order of 5.5-6 million b/d, or more than a Saudi Arabia every 2 years.

Didn't realize we were pumping 90 mbpd! Prices at record highs and they're just leaving it in the ground, then? Doesn't exactly sooth the nerves.

Prices are at record highs, but they could be higher. As high as $100+/bbl sounds, the increase is primarily due to the dollar index falling from about 125 in 2005 to 75 now. Since their largest consumer (the US) doesn't have nearly as much buying power as they did a couple year ago, I imagine they are concerned about defending oil prices, especially in light of a likely US and possible world recession.

FreddyH · **Posted:** Thu Mar 06, 2008 3:11 pm

seahorse wrote:

Here's a letter to the editor from Lynch in the latest issue of "Oil and Gas Journal."

Quote:

The point is that the decline rate, and the effect of depletion on capacity, is not a new element; rather, the industry has been replacing about 4 million b/d of lost capacity a year for some time now. With growth of approximately 1.5 million b/d of capacity every year, the gross additions must be on the order of 5.5-6 million b/d, or more than a Saudi Arabia every 2 years.

snip

Yet the industry has not only raised capacity by about 15 million b/d over the last 10 years, it has replaced something like 35 million b/d of capacity lost to depletion. This is equal to 10 Irans, without actually finding a new, major petroleum basin.

snip

Depletion, like rust, has always been with us and can be dealt with, given proper investment.

It is hard to produce oil, and always has been. But the industry has managed not only to run faster to stay in place, but to continually pull ahead. The resource that is lacking is logical thinking on the part of the peak-oil community.

Michael Lynch, President
Strategic Energy & Economic Research Inc.
Winchester, Mass.

I agree entirely with the intent of Michael's Letter. We differ slightly on the numbers. My calculations on underlying decline presently reveal a 2.9% Underlying Decline Rate in KSA, 4.2% in the USA & 3.7% globally.

The latter figure is growing at 0.34-mbd/yr. Cumulativey, this indicates that 20-mbd of capacity has been added since 1999 to cover underlying decline on top of the 9-mbd of increased capacity since 1999 ... a total of 29-mbd or 2.9-mbd/yr.

His point is that there are alotta silly graphics floating around that show the required magnitude of replacement capacity all starting from 2007 or thereabouts. In reality, significant underlying decline has been a factor for ten years and the industry has been stalwart in matching it and adding to it to grow Supply. This phenom has escaped most of the neophyte pundits as represented by both their rhetoric and their graphs.

decline analysis link

seahorse2 · **Joined:** Mon Oct 18, 2004 12:00 am **Posts:** 2062

Freddy wrote:

Quote:

In reality, significant underlying decline has been a factor for ten years and the industry has been stalwart in matching it and adding to it to grow Supply.

Growing supply Freddy? Hmmm. Just a little FYI, we haven't grown supply since 2005. Crude production has been flat and on a plateau since then. Now, it crept up ever so slightly in Nov and Dec of 07, but, Petrologistics says that was the result of the Saudi's emptying their tank farms.

And, I wouldn't be so quick to jump in bed with Lynch if I were you. First, you claim your models show a peak by what, 2020? Lynch doesn't believe that, so, you two don't agree with each other. Further, if you would bother reading this Lynch thread, you would see he has a dismal track record at predicting anything. He once predicted that by summer of 2005 oil prices would drop to $30 a barrel. He ate lots of shit on that call. Go back and check on oil prices for July 05. Further, just last December, he said in early 08, prices would drop to $70 a barrel. He's still eating shit. I also remember him arguing NG had not declined in the United States. When confronted with the EIA info on the peak and decline of NG in the US, he said he wasn't up on that like he should be. So, choose your camp wisely. It helps to read and understand the issues before you jump in here proclaiming your expertise.

FreddyH · **Posted:** Thu Mar 06, 2008 5:52 pm

seahorse2 wrote:

Freddy wrote:

Quote:

In reality, significant underlying decline has been a factor for ten years and the industry has been stalwart in matching it and adding to it to grow Supply.

Growing supply Freddy? Hmmm. Just a little FYI, we haven't grown supply since 2005. Crude production has been flat and on a plateau since then. Now, it crept up ever so slightly in Nov and Dec of 07, but, Petrologistics says that was the result of the Saudi's emptying their tank farms.

And, I wouldn't be so quick to jump in bed with Lynch if I were you. First, you claim your models show a peak by what, 2020? Lynch doesn't believe that, so, you two don't agree with each other. Further, if you would bother reading this Lynch thread, you would see he has a dismal track record at predicting anything. He once predicted that by summer of 2005 oil prices would drop to $30 a barrel. He ate lots of shit on that call. Go back and check on oil prices for July 05. Further, just last December, he said in early 08, prices would drop to $70 a barrel. He's still eating shit. I also remember him arguing NG had not declined in the United States. When confronted with the EIA info on the peak and decline of NG in the US, he said he wasn't up on that like he should be. So, choose your camp wisely. It helps to read and understand the issues before you jump in here proclaiming your expertise.

With respect, your comments on a plateau are nonsensical. If u re-read his Letter, Michael's analysis involves a ten year time span. Your preoccupation with the 4-quarter inventory correction is clearly a red herring. BTW, production figures are adjusted for stock builds/draws. Musings by Petrologistics are immaterial in any case and especially in discussions sourrounding this ten year era.

The TrendLines AVG Peak (based on 23 models) is currently 91-mbd in 2013. My own model indicates 91-mbd in 2011 and seems more pessimistic 'cuz it is based on announced megaprojects. As new projects are announced, it will be revised upwards. In that sense, i do not differ with Lynch, we just employ differing methodologies presently. There is no mystery surrounding Peak Oil. It is a function of annual new flow being added faster than underlying decline.

Underlying decline is 3.2-mbd in 2008. It is unknown at what rate this decline will stabilize. As a province, the USA found equilbrium at 4.2%. If the global rate mirrors this experience, it will be relatively easy for industry to add the necessary 4-mbd to grow Supply annually. OTOH, if the UDR drifts towards 7% with time, it will be almost impossible for producers to keep pace.

This thead has a theme reflecting production forecasts ... not prices. Your other Lynch comments are disingenuous. Looking at the 1996/97 Supply forecasts, Michael Lynch had the superior projection. He and Jean Laherrere were within 2-mbd for their 2007 calls. If u know someone who had better 10 year forecasts, please advise us asap, eh.

This thread reflects a major flaw in the understanding the nature of analysts. The best don't have to be correct on every call. They need only be right more often than their peers and competition.

To observers, it is hilarious and by no means accidental that the critics of Lynch et al never proclaim their own favourite analyst. Other than Lynch, Laherrere, EIA & IEA there are no geologists, pundits or analysts with better consistent records of long term forecasting...

seahorse · **Posted:** Thu Mar 06, 2008 7:58 pm

Freddy,

Production has been on a plateau since 2005 using anyone's numbers or figures.

Do I know anyone with better forecasting? Yes. Boone Pickens has been spot on calling the price of both oil and production since I've been following this starting in 2004. Until you develop some kind of track record, your predictions and thoughts don't mean squat.

Lynch's forecasting has been crappy, that's a fact backed up by his posts on this board.

TonyPrep · **Posted:** Fri Mar 07, 2008 2:43 am

FreddyH wrote:

In reality, significant underlying decline has been a factor for ten years and the industry has been stalwart in matching it and adding to it to grow Supply.

Whilst region after region goes into decline. So a smaller and smaller number of regions has to make up for those declines. Lynch (or Michael, as you seem to prefer to call him) ignores that and appears to think that supply can continue to increase regardless.

The question is, does that seem like the thinking of a sane mind?

FreddyH · **Posted:** Fri Mar 07, 2008 4:23 pm

seahorse wrote:

Freddy, Do I know anyone with better forecasting? Yes. Boone Pickens has been spot on calling the price of both oil and production since I've been following this starting in 2004.

Pickens record is in the bottom quartile. JD has exposed the outrageous record of Pickens in several threads. Sorry u missed them...

Toyota1 · **Joined:** Tue Apr 15, 2008 12:00 am **Posts:** 5

http://www.ft.com/cms/s/0/282adfd4-0a4c ... ck_check=1

Russia have peaked!

But russia still have the most unproven oil reserve left? Right or wrong? :shock:

TheDude · **Posted:** Tue Apr 15, 2008 12:43 pm

Reserves aren't "unproven," they're Proven/Probable/Possible. Russia still has a lot of areas in East Siberia that may hold oil but they're finding it impossible to develop these fields and stay ahead of declines elsewhere.

Michael Lynch - Disputing Peak Oil

Who is online