if we assume a alpha= 8% depletion rate, past peak production with a maximum noted P0, the area (Q) on the right side of the curve is:


Depending on what is the value of P0 we have the following URR (cumulative production in 2003 being about 1092 Gb):



For reference ASPO puts the URR around 1800 - 2000 Gb, BP around 2476 Gb, Gueso lately put the value around 1500 Gb (see thread Peak prediction based on the Riccati equation: 2007!).

Sprott is NOT predicting peak this year. He is stating peak MAY occur
this year.

I can state the Yankees may win the World Series this year. My statement
would be considered a WAG(wild ass guess).

Sprott's statement includes numbers, so his is a SWAG(statistical
wild ass guess.)

Opec is the key to world decline and specifically SA.

Looking at the evidence they did cook their books back in the 90's and all of them doubled there known reserves with no evidence to support their claims.

The argument can also be made for a quicker decline because of how the oil has been extracted.

Horizontal drilling and 3-d seismic imaging have made the North Sea the example of what has happened with the use of greater technology in oil extraction. It does allow for higher peak extraction but then a corresponding steep decline.

The SA fields have also been using secondary recovery techniques (pumping in sea water) for years which boosts peak extraction but also decline rates when the field passes prime production. Pumping in see water is also inferior to tertiary extraction in which co2 is pumped in to the field to push the whole reserve towards the well head. Secondary extractions weakens the field and the water breaks through the oil and does not push the whole field.

The large oil fields that the US did not see the these techniques used until much later in there lives so that helps explain why they did not see as steep of declines.

There are a couple reasons we should be concerned bout a faster decline rate:

1. Use of secondary and tertiary methods. These keep field production rates up, but make for a steeper decline. This is possible for many of the larger fields, including Canterell an Ghawar those 2 fields along current account for ~10% of world production.

2. Offshore fields. These have been source of much supply growth in the past 10 years, and tend to have shorter lifespans with steep decline (e.g. North Sea) due to higher costs they pump full tilt.

3. Mathematical relationships:

Rate of discovery rose then fell (peak ~1960)
total reserves rose then fell (peak ~1980)
production rose and will fall
Rate of depletion is just beginning to rise (and wont decline under most oil is gone)

pepper2000 is correct. This article makes no distinction between the various types of depletion--type 1, 2, or 3. Type 3--national depletion--is our signpost to world decline, not that of individual fields. An 8% depletion rate in an existing field or well is not unusual, but it is constantly offset by new drilling and production. At some point, these new wells don't offset the decline from others and the entire field enters depletion, and when all new wells and new production don't make up for the decline in all the fields in a country, you have type 3 depletion. The ODAC estimates that at about 1-1.2 mmbd/year.



Generally the good stuff is produced first. But refining doesn't require natural gas. It is used to make supplemental hydrogen for removing sulfur in products, but that's only when refinery hydrogen from reformers is insufficient. And if you don't have natural gas, you can make it from other hydrocarbons like naphtha, thaough not as cheaply.

The US peaked in the '70s, just as MRE was becoming popular. The older fields in the US never saw those technologies. We are probably applying MRE techniques right now, but during the 30s, 40s, 50s, 60s oil was so damn plentiful and cheap that it didn't even warrent the research to recover more oil.

I have been a big fan of Sprott since the crash of 2000 where he has been the best performing money manager since the internet bubble. I believe his fund groups had the best return in 2001. I know he made a fortune with PetroKazakhstan buying it under $1 among other stocks. I know I spend big time checking out what he is doing on the Canadian SEC equivalent Sedar.


Regarding this latest piece on oil I am not sure that his figures are accurate but he has been uncanningly accurate on the timing of many of his investments. Its hard to dispute him when he has been right so many times. I know he also has written a piece also on our real estate bubble and mortgage debt and that was also a scary scenario.

The United States has already fallen into a defict.

Speculation about depletion rates must take into account consumption. Long before 8% annual depletion rates are a proven fact the world economy will produce an extraordinary amount of demand destruction that will push the decline out by many years--and put many people out of work.

Answer these questions:

How many of your purchases are necessary? How many of the automobile purchases are necessary? How many vacations are necessary? How many vacations to far off places on jet planes are necessary?

Needs versus wants. Wants will decline to meet needs. I don't think 8% declines will happen. Demand will drop to produce period gluts of oil.

I'm not convinced of that, I think people will keep buying the black stuff at any price! crude oil prices have almost tripled in three years but the economy is still going strong, US GDP will be probably grow +4% this year, consumer confidence is very high despite higher gas prices. Inflation seems under control. Historically, it does not seem that oil demand is influenced much by prices.

The situation may changed but so far world economies are getting used to higher oil price (at least for rich countries). Demand destruction could happen faster in poor countries.

However, the last BP energy report shows that new discoverie numbers are going flat since 2003 so depletion could show its ugly face sooner than we think.

We've not hit depletion yet. There have been no shortages. There have been no gas lines. True depletion, once we hit it, changes the game. The end of economic growth (on a global, time averaged basis). Imbalances will unwind.

Speculation? Of course. But my gut tells me that once we hit true depletion, once world production drops by a few percentage points, recession starts, imbalances unwind, etc.

What's happened so far is not depletion, just speculation about upcoming depletion.

What he said.