when we look at risks the notion it is not indicative of resource stress at first hand seems reasonable ..however the fact your are forced into higher risk areas even for primary non geological reasons is possibly an indication you are under stress as if geography(location) determines risk rather than stress you need to accept that the volumes under these locations is a limitation on geology...

this may seem a fatuous argument at first glance but movement of production into these areas of political and geographical difficulty is perhaps an indication of depletion.. in-fact it must be as it is a function of the physical reality of 3 dimensional space..

on a aside for the mo

would it be fair to summarize your position as one where depletion and peak will occur but the evidence it is near or remotely an issue at present false?

ie: we grossly underestimate the oil in place combined with ever increasing recovery rates?

also how exactly do you define stress?

thank you for your attention

Boris
London

on a aside for the mo

would it be fair to summarize your position as one where depletion and peak will occur but the evidence it is near or remotely an issue at present false?

ie: we grossly underestimate the oil in place combined with ever increasing recovery rates?

also how exactly do you define stress?

thank you for your attention

Boris
London

the thing i wonder, spike, is why economists are even bothering to argue that the peak won't happen until 2030. I thought economists believed that the invisible hand of the market will bring about a smooth transition to a better fuel than oil when the time comes and oil gets too expensive.

So what is the problem? Why are economists vehemently denying that Peak Oil is likely in the very near term? Why are they concerned? Won't the market simply find a better alternative with no effort needed by anyone? Its worked so far, so why not this time? Is the concern and denial over peak oil a tacit admission that there is no better fuel than oil and that 'this is it'?

First, the work on peak oil is generally curve-fitting that would shame a sophomore statistics student. This is why Campbell, Laherrere, etc., don't respond to criticisms of their work but pretend it's 'personal' in nature.

IMO, economists don’t give a rat’s ass when the peak happens – they believe the market will provide a solution. Ok, let’s assume they are right. What are the necessary conditions for the market to provide the solution?
1) There has to be a solution.
2) There has to be enough time to implement the solution, especially in the case of oil.

Assume 1 is true. Point 2 then is key – due to society’s utter reliance on oil, shifting away will take a long time to happen – the Hirsch report says 20 years.

Therefore, in order for economics to be of any real use, the market MUST not be looking at just current supply/demand, but it must be looking far enough into the future so as to even allow for the “solution” to be provided. The simple fact that we don’t have contango in the oil futures market indicates that the market feels we aren’t near peak. (I know some have said we have contango, other’s have said we don’t.) If we do have contango, it’s another flag that peak may be upon us. If we don’t have contango, then either the market isn’t looking far enough into the future (so it’s useless), or the market doesn’t have enough data to look that far (making it useless, this is why Simmon’s is yelling for more data.) or the market feels there is plenty of oil (peak is 2030+)

So, only if peak is 2030+ are we still ok.

If we take CERA’s numbers (which admittedly many here don’t like), CERA claims no peak before 2020. Let’s assume CERA is right, and the peak is some point after that. Let’s also assume the Hirsch report is right. If that’s the case, we’re halfway through our “grace period”. The market should be signalling right now that the transition is necessary. Wait, is the market doing that now? Maybe it is!. But Mike feels the current price is speculation based. If the current price is purely speculation based, then using CERA and Hirsch as our guides, the market is never going to “solve” the problem for us. If the current price isn’t speculation based, then for all intents and purposes, peak oil is basically upon us.

So, we’re back to peak oil in 2030+ being a must - CERA is being pessimistic Mike has said he believes the peak is “well beyond 2025”. In order for the peak to be 2030+, URR has to be at least 3TB+. In order for URR to be that high, discoveries would have to be keeping pace, and this is the one thing we know isn’t happening. The only thing that Mike can point to is that production is currently increasing but that could just as easily be “sucking out what remains faster”. The production is increasing argument is like driving down a mountain road in the middle of the night without lights and saying “hey, we haven’t run off the cliff yet, so we’re ok”.

- The market doesn’t have the ability to accurately see far enough in advance… it’s shortsighted and unless this is fixed, we’re screwed regardless of when the peak is. (again, Simmons #1 beef)
- To believe the 2030+ dates, there really needs to be discoveries to back it up, not just “production is expanding.” Show me the beef. The statistics and hypotheticals used by USGS (who claim 3TB) means there is 1TB just sitting out there waiting- so why isn't it being found and booked?

Well there is a pretty obvious profit motive for inventory build when you can make easy money out of the futures market. I don't see how the causality can be in question.



As you rightly point there is no metric for 'desired' inventory thererfore there is no way to know whether or not it has been achieved.



Rising inventory by definition means supply exceeds demand. I take it what you mean is that rising inventory is a signal that the price is too high and should be expected to drop?

Not necessarily, that was my point. Demand for inventory can change. There are seasonal changes in inventory. Do you call these rises in inventory a "sign that supply exceeds demand"? Similarly if the market perceived that there was going to be a shortage some time in the future (for whatever reason) it would induce people who had the capacilty to build inventory. That too would not be a " sign that supply exceeds demand" (whatever that means).

Question for Mr. Lynch:

Do you have any idea on the impacts of oil shale for oil production? Rough estimates on how much and when (technically and economically possible?)

What tripe. A kindergartener could connect-the-dots on the depletion of the North Sea oil. That's what we call curve fitting for the lunch-box crowd.

Spike,

Boone Pickens says the world is operating at peak refinery capacity, meaning essentially that world oil demand is about 84 mbpd and that is 100% of refinery capacity. At what point in time will the world build more refineries to meet the needs of increased oil production and need?

Not in any definitive way. I will be working on that later this year.
Most likely, it would be like tar sands, gradual increase in production over time. It's technically feasible now, but not economic. Shell thinks it will be soon.
Mike Lynch

Yes, that's pretty good.
Mike

The causality is confused because you don't always know if inventories are high because you are in contango, or you are in contango because inventories are high.

But in terms of the issue of whether or not supply is keeping up with demand, rising inventories tells you that supply is above demand. Yes, that's a simplistic measure, but it shows the market direction, especially compared to last year. And in days of consumption, inventories have risen from 52 days last year to 54 now.
If the market thought there would be a shortage soon, wouldn't the demand for oil now move it into backwardation?

The only problem is that you're railing against not only theory but history. We've never 'run out' of a non-renewable resource or faced a dramatic disruption.

I'm off overseas for a few days, will respond on return.
Mike Lynch