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Peak Zealots and Their History of Failure

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A recent headline based on an EIA report citing reserves may peak in next 20 years revived the discussion of “peak” oil six months after the markets shuddered with a $60/barrel drop in price and the idling of wells and new drilling because of the “glut” of supply. The “Peakonistas” and their political sycophants came out of hibernation like cicada bugs chattering doom and gloom. Since I have been bullish oil in the mid to high 40s, I felt I might have to reverse my position and get bearish oil based on the contrarian theory that no one has had a worse record of forecasting the supply or price of a commodity than these market-challenged alarmists.

Let’s examine the record and where we are today.

In 1798 Thomas Malthus famously said food demand would outstrip population causing massive starvation. While there has been hunger, and some starvation, it has been driven by political, poverty and distribution factors. In fact, in most of the 19th century countries fought trade wars to access markets for their surplus commodities. The corn wars in Britain and the South fighting the Civil War (as much for access to European textile mills as for the right to preserve slavery) are but two prime examples.

In 1865 two members of the British parliament grimly predicted the peak of coal production and the dire consequences that would follow. At the same time some U.S. politicians predicted oat production for horses would peak, and other politicians predicted that if we would not limit the horse population the streets of N.Y. would be covered in manure. Oat production in the United States did peak (in 1980) when farmers switched to corn. Food processors (except Cherrios) used other grains and we lifted the ban on importing Canadian and Polish oats.

There were also concerns over our dependence on whale oil either based on concern for the whales or fisherman, but we survived that scare (though it did depress land prices in Nantucket for a while).

Our first peak oil call came in 1956. What followed was 30 years of unprecedented growth in both production and proven reserves culminating in $20/barrel oil, 30-cent retail diesel and $1 gasoline (less if you took out taxes). Only crazy government designed market schemes (old oil/new oil), several Mideast wars and the formation of OPEC derailed that train. As little as 5 years ago $100/barrel oil was going to be $200 by the prognosticators, so the solution crafted was to have billions of subsidies for solar and wind (to those companies supporting the agitated politicians), higher café standards and higher taxes to discourage usage.

The shale revolution was the skunk that showed up at the subsidy garden party hosted by the alarmists and would be energy czars. And despite every attempt to squash badly needed pipelines to move our new found abundance from where it is produced to where it is needed, we have oil and natural gas prices at 25-year lows and proven reserves at all-time high.

What do these nervous Nostradamus’ miss?

Two factors always blow up peak forecasts:

1) Technology: 1.5% of the world is carbon which is the 5th most abundant element on earth (hydrogen at 7% is the most abundant and we are creating economic hydrogen infrastructure and vehicles today). Hydrocarbons are everywhere. All the dinosaurs did not go to Saudi Arabia to die—we drilled there because of geology and cost (early Pennsylvania oil was called “rock oil” because it bubbled to the surface). Our ability to find oil, drill in multiple directions, fracture rock and extract it economically was a technological breakthrough. Currently Texas and California—two of our oldest producing regions—are producing higher percentages of our national production as we are able to recover more hydrocarbons from existing wells. This is why despite a drop in price our production level has held reasonably well, and our reserves have actually gone up.

2) Price and Markets. Most politicians struggle with economics. The cure for high prices is high prices. The cure for low prices is low prices. As Sheik Yamani the Saudi Oil minister famously said, “The stone age did not end when we ran out of stones.” It ended when we found substitutes that were better or cheaper. The oil age will end, but not any time soon and it will be when we switch to natural gas (already one-third the price of oil on a per-barrel equivalent); hydrogen; electricity or something that we simply cannot foresee today. And while the supply response is more easily understood driven by price levels, the demand response is often more powerful. Energy efficiency and demographics have been as big a contributing factor to this current energy revolution as has technology.

In conclusion, the only peak we have experience in this country was a peak in political intelligence by our elected officials, and that occurred between July 4th 1826 and April 15, 1865. And we have survived that.


45 Comments on "Peak Zealots and Their History of Failure"

  1. Sugar Seam on Sun, 21st Jun 2015 7:20 am 

    ignorance surpassed only by their arrogance…. every time…. amusing, if not for the fact that theyre destroying the planet with this “no problem” mindset.

  2. ghung on Sun, 21st Jun 2015 7:28 am 

    Peak everything is too terrible to contemplate for those who define their self worth by the level of their exploitation and consumption. Life will have little meaning.

  3. Jimmy on Sun, 21st Jun 2015 8:59 am 

    Personally I think ‘The collapse’ is going to be very interesting. Nature is divine, despite all the suffering. The socio-political response to collapse will be as it has always been; stratification of in-group/out-group thinking, blame Obama, blame immigrants, blame muslims (used to be blame jews), etc etc… Collapse will result in unregulated mass migration (well underway) and State failure (also well underway). ‘Government by ox cart’ will be a wonderful thing.

  4. rockman on Sun, 21st Jun 2015 8:59 am 

    “…an EIA report citing reserves may peak…”. And I’ll make the obvious point although at this stage I would hope no one here needs the be reminded: PO has nothing to do with peak reserves. But if some folks want to play that game: remember the amount of proven RECOVERABLE reserves varies with the price of oil used to make that estimate. IOW with the recent price collapse the world lost tens of billions (perhaps 100’s of billions) bbls of proved ECONOMICALLY RECOVERABLE reserves.

    But this piece points out a criticism I’ve harped about from the beginning of the PO conversation: the obsession of many over predicting the DATE OF GLOBAL PO. In essences those folks gave a huge debate advantage to the other side which argued there was no real problem.

    Yes: it’s the POD again…Peak Oil Dynamic. This is where I’ll stop. One either gets it or not.

  5. shortonoil on Sun, 21st Jun 2015 9:44 am 

    “The oil age will end, but not any time soon and it will be when we switch to natural gas”

    When you see a comment like this you know author is talking with a dart board in one hand, and Ouija board in the other. They have obviously never calculated how much NG it would require to replace crude. If the world switched to NG that reserve would be gone before the infrastructure needed to use it could be put in place. This is more like a six year old’s letter to Santa than it is a study of the world’s fossil fuel status. Ignorance is bliss, until it isn’t.

  6. gdubya on Sun, 21st Jun 2015 10:05 am 

    Good to see he’s solved the peak oil issue. Now I’d like to see him work on population, biodiversity, extinction, loss of 1/2 the worlds animals in the past few decades, climate chaos, freshwater aquifer depletion, and society’s wealth inequality – none of which have anything to do with burning a cubic mile of petroleum annually.

  7. Jimmy on Sun, 21st Jun 2015 10:35 am 

    @Rockman re: the obsession of many over predicting the DATE OF GLOBAL PO

    Making predictions is human nature. People like to forecast. There’s nothing wrong with that. The fact that people have done it in the past and have been inaccurate in their predictions, combined with Nony and his ad hominem attacks an PO theory via pointing out ad nauseam that forecasters have been wrong doesn’t change the value of forecasting. I like forecasts. I like future trends analysis. Ron Patterson probably has my favorite forecast for Peak Oil production. it also doesn’t help that the definition of oil varies in the minds of those that measure it’s production. NGL ain’t oil. Moonshine ain’t oil. Condensate ain’t oil. Refinery gains ain’t oil. But when stubburn people are staring down the barrel of a gun they tend to dance hard in an effort to keep the music playing, so to speak. That’s human nature too.

  8. hiruitnguyse on Sun, 21st Jun 2015 11:23 am 

    An article with no data. Can’t we start putting these in a separate entertainment category?

  9. turningpoint on Sun, 21st Jun 2015 11:29 am 

    “hydrogen; electricity or something that we simply cannot foresee today. And while the supply response is more easily understood driven by price levels, the demand response is often more powerful.”

    The author(s) of this piece doesn’t seem to realize that hydrogen and electricity are not primary sources of energy but energy carriers.

  10. Joe Clarkson on Sun, 21st Jun 2015 11:45 am 

    Rockman: The importance of the date of Peak Oil is in the consequences for the economy. Once oil supplies start declining, it will be very hard for the world economy to keep growing. Continuous recession will then result in higher and higher unemployment, debt defaults, financial panic and likely culminating in economic collapse. I want to know when that is likely to happen (within a few years plus or minus), don’t you?

  11. Davy on Sun, 21st Jun 2015 12:09 pm 

    Joe, I think Rock is mentioning the PO side of the predictions. In this arena of predictions the subject matter has become so polarized by peakers and anti-peakers as to be ridiculous. Just read some of the NOo’s comments to get a flavor of the absurdity.

    I think the actual date no longer matters. It is the approach of multiple peakings in multiple areas that are the key variables. Personally I think it is the combination of oil and economy that are the back breakers then it is the consequences of food shortages from the economic and oil issues that will be the population killers.

    You are very right by me on wanting to know when this is all likely to happen. It is critical for preparations to have a time frame to work with. This is one of the reasons I am here every day and that is to get a better idea of the date of a significant contraction in our global system.

  12. Apneaman on Sun, 21st Jun 2015 12:11 pm 

    Let Them Eat Smartphones!

    “Lately I’ve noticed a new trend among the economics priesthood. When trying to explain the extreme income inequality, stagnation in living standards, social disintegration, and general immiseration of the population of the past few decades under Neoliberal capitalism, economists have a new favorite argument:

    They argue that it isn’t true at all–people are, in fact, much better off! Look, people have the internet! Smartphones! Flat Screen TV’s! Netflix! None of those things existed in the 1980’s. They argue that the “utility” of these things is not captured in the “official statistics,” therefore the longer hours, falling wages, debt servitude and precariousness of work is all cancelled out.”

  13. GregT on Sun, 21st Jun 2015 12:27 pm 

    You forgot resource wars Joe, civil unrest due t food and water insecurity, debt monetization, and historically low interest rates, which when added to your list above, are all already occurring around the globe.

  14. Steve Challis on Sun, 21st Jun 2015 2:21 pm 

    I wonder if the author has ever even read the Reverend Malthus’s “An Essay on the Principle of Population”.

  15. Beery on Sun, 21st Jun 2015 2:32 pm 

    So because some guy, 200 years ago, was wrong about population, peak oil is a fantasy.

    Yeah, right.

  16. Boat on Sun, 21st Jun 2015 2:37 pm 

    ApeThey argue that it isn’t true at all–people are, in fact, much better off! Look, people have the internet! Smartphones! Flat Screen TV’s! Netflix! None of those things existed in the 1980’s. They argue that the “utility” of these things is not captured in the “official statistics,” therefore the longer hours, falling wages, debt servitude and precariousness of work is all cancelled out.”,

    Don’t forget, all those diabetics who used to just go blind, lose a foot and die that now take a $4 a month generic. Same with high blood pressure etc. Of course we could go on and on and on.
    For every cheaper tv and cheaper to run tv we have better windows better insulation, better refrigerators, dryers and of course we could go on and on and on.
    My daddy used a pitch fork and loaded hay on a wagon when he was a kid for $.25 per day, if he got paid at all. I was hired to load square bales of hay from a popup chute onto a wagon for $2.50 per hr. Much easier I would say. Now we have machinery that make huge round bales of hay. No physical effort required. Yes our way of life is easier and we are much better off.

  17. GregT on Sun, 21st Jun 2015 3:34 pm 

    “Yes our way of life is easier and we are much better off.”

    Ourselves, and all future generations, are about to pay the consequences for two human generations of ‘ease’ afforded to us from burning fossil fuels and destroying the natural environment.

    With reckless abandon and greed, come dire consequences.

  18. wildbourgman on Sun, 21st Jun 2015 3:35 pm 

    I too believe in the power of economics to deal with many problems, but history has taught us that economics dealing with a problem doesn’t automatically mean it’s all good.

    Civilizations have collapsed, societies have crumbled, cultures have become archeological excavation sites. Economics might dictate somewhere between Mad Max or a Jetson’s scenario. We’ll just have to wait and see, why not be prepared for either direction, isn’t that prudent?

  19. GregT on Sun, 21st Jun 2015 3:40 pm 

    The modern school of economics was borne from fossil fuels. It all boils down to how much energy is available to society.

  20. Newfie on Sun, 21st Jun 2015 4:24 pm 

    I’m betting on Malthus. And I’m betting on Peak Oil. Infinite growth in a finite world is the core delusion of industrial civilization.

  21. davy on Sun, 21st Jun 2015 4:25 pm 

    Wait a minute Boat I could if I wanted and had time refute everyone of your examples of your wonderful modern life. Life is nothing but trade offs. There is few cases of better especially concerning modern life.

    You have been conditioned to think that progress is more money and less effort. You have been told efficacy is king. Human complexity is beauty.

    Boat there is a whole other world out there. I have read far too much about both worlds to know better than to buy into your world of slaves and chains.

  22. Dredd on Sun, 21st Jun 2015 4:32 pm 

    Wonder where this TEU filled with leaflets came from (Weekend Rebel Science Excursion – 44).

    Probably Zealotia?

  23. Dredd on Sun, 21st Jun 2015 4:41 pm 

    Peak deceivers always have to take on those who have history figured out in advance.

    “In other words, a society does not ever die ‘from natural causes’, but always dies from suicide or murder — and nearly always from the former, as this chapter has shown.” – A Study of History, by Arnold J. Toynbee

    (The Deceit Business – 3).

  24. marmico on Sun, 21st Jun 2015 5:18 pm 

    Doomer-Davy is affiliated with the “cave & crayola” tribe. Boat hangs with the “slaves & chains”.

    The slaves toss their leftover petrochemical crayons towards the cave mouth and chant “more leisure, less work”!

  25. shortonoil on Sun, 21st Jun 2015 6:17 pm 

    The entire discussion of Peak Oil has deteriorated into an argument of semantics. Without a definition of “oil” there is can be no closure to this discussion. If some jug head wants to argue that oil is any liquid hydrocarbon at any pressure, or temperature we must include Chinese pig farts in the definition of oil. The emitted methane can be cooled, and poured into a barrel, thus increasing world oil production.

    Any idiot can claim that Peak is still far into the future, 50 years from now, or just around the corner. It is all a matter of how far the goal posts can be moved before the opposing team notices. Games that are now started in New York City have the touch down line in Cincinnati. We expect the EIA, and the IEA to be sending monitoring teams to China any day now. Every single occurrence of hydrocarbon production must be recorded, labeled, officialized, and notarized!

    Keep puttin away oinky, the world needs you.

  26. Nony on Sun, 21st Jun 2015 6:58 pm 

    Shale has kicked peaker predictions to smithereens. Peak gas has really been destroyed. (Shale gas is more a success than shale oil…it just flows better.)

    Anyone can go back and look at all the 2005-2010 peaker predictions and commentary. It is (mostly) preserved on the Internet. And peakers have not faced up to what happened.

    Even the more sane peakers like Staniford, Hamilton, Inman etc. have not done adequate post mortems on their failed predictions (or warnings, concerns, etc. if they avoided direct predictions). The have generally not welcomed learning from the new data and applied their same facilities (the amateur SA sleuthing, etc) to evaluation of shale.

    Peak oil was never purely about a rational attempt at reserves/resources calculations. It was always tinged with some political and cultural wishes and beliefs.

    Shale as it was going up, met all kinds of negative evaluations (some mathematical) from the peakers. Rune precited 700K for the Bakken when it was already at 600. Piccolo 225K when it was at 100. And all the people saying the wells were not economic at 100/bbl (BS…companies ain’t drilling for no reason). And year after year, US LTO continued to climb. Only price could stop it…and it was the marginal barrels that reduced world price.

  27. GregT on Sun, 21st Jun 2015 7:18 pm 

    I’m beginning to think that you have a severe psychological disorder Nony.

  28. Apneaman on Sun, 21st Jun 2015 7:27 pm 

    China’s Communist-Capitalist Ecological Apocalypse

  29. Apneaman on Sun, 21st Jun 2015 7:31 pm 

    Boat, in what country is insulin only a $5 co-pay assuming you have insurance? You’re making shit up.

  30. Davy on Sun, 21st Jun 2015 8:16 pm 

    Ape Man did you run your “China’s Communist-Capitalist Ecological Apocalypse” past the board Propaganda expert Mak? I am curious if he will label this U.S, Ministry of propaganda news.

    Ape, that was a profound article of Asian ecological destruction. The irony of the article is the part about the Solar panel company dumping highly toxic chemicals byproducts on nearby villages to make them cheaper! That’s green with a brown twist.

  31. rockman on Sun, 21st Jun 2015 9:30 pm 

    Joe – I don’t have time to go over the POD. But think about it logically: either we just passed GPO or it’s still some years down the road. But what does that date have to do with oil hitting $145/bbl some years ago? What makes that date important to the US recession? And now oil fell to the $44/bbl not long ago. And China is consuming more and more fossil fuels. The Middle East is on fire with much of the cause being a resourcd war.

    Now explain how the date of GPO has impacted all of the above and much more. Obviously the DATE OF GPO, when it has or will happen, didn’t cause these contradictory conditions. But if you think it has then please explain the details of that dynamic.

    The world has been, currently is and will in the future

  32. rockman on Sun, 21st Jun 2015 9:34 pm 

    The world has been, is currently and in the future will be suffering from diminishing energy resources. So again explain how a date of GPO, what ever it is, changes that reality.

  33. i1 on Mon, 22nd Jun 2015 5:58 am 

    Joe Petrowski. That can’t be real.

  34. Davy on Mon, 22nd Jun 2015 6:47 am 

    Rock, my thoughts also on the subject of PO. Dates are for those who like to argue stats of a game. My point has always been it is the global diminishing energy situation approaching some unknown system transition point that is the real key. There are multiple indications especially with oil we are in the vicinity of a transition point where growth cannot be maintained. We have not yet had a significant break to a lower economic level but we see localized decline and failures everywhere.

    The approach of peak oil or just in the vicinity of PO either way surely is in some way responsible. We are obviously on a plateau now with stagnating growth with declining real growth rates. What is less obvious is are we in fact in a descent. In a system such as ours being global and complex that answer is too difficult to determine until a significant break occurs.

    The peak oil dynamics are yet more complex because we have a dynamic global economy and geopolitical club of nations in flux. Oil’s market health is directly related to this and directly influences both. Trying to throw a dart at the peak oil date board is fun but of what use other than gaming. Did you win or lose because you got the date?

    Does the date mean the end of the world like the 2012 Mayan date? Hell no. I have read many books on the Mayans and their calendar end date was never shown in their historical text to be the end date of history. Their time frames were cyclical so it was an end and a beginning. It was a transition point for them. I find it very interesting that shorts half way point for Hill’s groups “total production energy” “ETP” analysis was 2012. Again just some fun thinking on my part. The Mayan’s were more concerned about the period of change then a date of change. The calendar ending meant a change of a period.

    The fact we are even nearing a possible peak oil date is significant. Just being around a global peak oil possibility is significant in my mind. Maybe the cornucopians will be correct and new technology, substitutions of gas and oil, and dramatic efficiency gains will push off a peak oil date for years. I see no cornucopian of any merit that says we will never see peak oil. Peak oil is like the male midlife crisis. There is no set date for a man to go through mental and physical changes of decline but there is a period.

    I think we are now in a global midlife crisis period. Our problem is the size of our population and the degree of our dependence on consumption for the whole system to operate. That is the real issue for me of peak oil. Our global overshoot of consumption needs and total population makes a diminishing energy situation very dangerous. The systematic nature of our complex economy with an energy perturbation is significant because of our overextension of our human system from normal cycling.

    All ecosystem cycle and our human one is no different. We have used economy and energy to move ours out to an edge area making a smooth cycle unlikely. We appear to be close to a bifurcation zone because of our population and consumption situation. Peak oil is just the sort of thing that makes the zone we are in so dangerous.

    Time frame is the key for us. If this is 10 years off or a 10 years of shallow decline then for the most part we will not feel so threatened. If in the next 2 years a dramatic crisis hits then this is significant. I am here every day as part of my risk management of doom and prep to try to get a feel for what is in store in the next few years. I am feeling that something is near and hope it is 10 years out. What could be near is decay or death.

  35. shortonoil on Mon, 22nd Jun 2015 7:08 am 

    “Anyone can go back and look at all the 2005-2010 peaker predictions and commentary.”

    You admit that you have no idea when Peak will occur, but in the same sentence you say that it hasn’t happened yet. If you don’t know when it will occur, you can’t say that it hasn’t. Your entire argument is a contradiction in terms. It is a play on semantics by avoiding definitions.

    The world’s petroleum industry is now in the position where it can no longer replace the reserves it is extracting. That may not be a definition of Peak Oil, but it is a definition for the end of the oil age. Even if Peakers have been wrong, that will be scant condolence for what is to come! Admittedly, Peakers have been concentrating on picking up nickles in front of the coming steam roller! All that you are doing is standing with them insisting that they should be collecting dimes!

  36. Lawfish1964 on Mon, 22nd Jun 2015 7:25 am 

    Agree with most of the veterans’ comments here. Just because previous peakers missed the date of PO does not mean PO is not real. To deny that the supply of oil on a finite planet is also finite is to put one’s head in the sand, so to speak.

    It is the when that drives my plans. I have a number of plans, all based on how fast collapse comes. In a fast collapse, I retreat to my house on the beach with a community-oriented defense plan. A slower collapse involves simply expanding my garden and turning a chicken egg-laying operation into a meat-producing operation.

    Financially, I am preparing for various scenarios (like my job no longer existing). If I go 3 more years, I can pay off my house and have no money. In 7, the house is paid off and I have some extra cash. If I go the full 15, the house is paid for and I have a significant nest egg to fund a very modest retirement.

    It’s all about when, not if.

  37. Nony on Mon, 22nd Jun 2015 8:24 am 

    There will just be a gradual increase in price when we hit scarcity premiums. You can make a decent case that this is already happening. Although 1998 is not that long ago.

  38. Nony on Mon, 22nd Jun 2015 8:44 am 

    The “peak oil dynamic” is better labeled by Hamilton as a “scarcity premium”. It is essentially the Hoteling effect (even if the immediate math is not perfect and the trend not monotonic increasing). I was very willing to admit that the 100+ price was powerful evidence of scarcity premium even if volume was still increasing.

    And even 60+ is some sort of evidence. Much worse than the traditional 30 or so.

    However, peakers (Rock, Hamilton, etc.) fail to acknowledge that 60 is patentedly less than 100 and that the prime cause of it was US LTO. If “POD” explains whatever happens (cartel actions, supply increases, demand changes) that it is not falsifiable. You might as well just call it supply and demand or call it mumbo jumbo. But it’s not “peak oil” dynamic.

  39. Nony on Mon, 22nd Jun 2015 8:47 am 

    I would challenge you all with this. What did “peak oil dynamic” have to do with prices hitting 100+ (real dollars) back in 1979-80? And what did it have to do with 1986-2006, including the non-recession valley of 1998?

    Yes, scarcity and depletion have an impact on oil prices. But so does demand, so does discovery, so does technical evolution, and so does OPEC.

  40. JuanP on Mon, 22nd Jun 2015 9:15 am 

    Malthus rules! “Hydrogen and electricity”, yeah, right.

  41. Northwest Resident on Mon, 22nd Jun 2015 9:26 am 

    Nony — What about QE and ZIRP? What about the massive propaganda blitz combined with ZIRP that lured enormous amounts of investment out of “safe” bonds and into higher yielding junk bonds and energy stocks?

    A BIG reason for the $100+ price of oil that finally crashed last year was the immense energy demand of all those fracking companies burning through investor bucks, ordering new equipment, building new infrastructure, hiring lots of employees, drilling and drilling, pumping and drilling some more, constantly. Without the oil industry’s increased demand for their own product combined with QE and ZIRP, it is very unlikely that oil would have ever reached to the $100 range. Consumers around the world certainly can NOT afford that price. Back in 1979-80 — who knows? Who cares!? Today is a whole different deal and the only one that matters.

  42. shortonoil on Mon, 22nd Jun 2015 9:59 am 

    WTI is now selling for $60/ barrel, and has been for months. It is selling for $60 because it is worth $60. All of the supply/ demand rigamarole in the world does not make oil worth $100. Oil pricing has been following the production cost curve since at least 1900. That is not supply/ demand. That is production cost driven pricing! After 2012 production cost exceeded what the economy could afford to pay for oil, and after QE1,2,3,4 wore off the price collapsed back to what the economy could afford to pay for it. It also collapsed to a point where producers can no longer recoup all of their production costs. Producers can no longer afford to replace the reserves that they are extracting.

    The supply/ demand excuse is a red herring. It appears to work short term because it is an effect, and not a cause. Producers can not afford to produce oil below their cost of production, and the economy can not afford to purchase it if it doesn’t have the funds with which to procure it. If the price exceeds the economy’s affordability level, the economy just has fewer funds to purchase it with.

    The world’s producers are not going to increase production by investing funds were they can not break even. The little bump in production that has recently occurred happened because producers increased production from existing fields to maximize revenue in the low cost environment. It did not come about because of investment in new projects. That has fallen by more than $200 billion over the last year.

    When existing fields are depleted out, they will not be replaced. The cost of replacing them is more than what can be paid for from the present price of oil. Expect a world wide number of shut-ins, and bankruptcies for producers over the next few years! And, beware the supply/ demand proponents, when your only tool is a hammer, every problem looks like a nail.

  43. Davy on Mon, 22nd Jun 2015 10:14 am 

    NOo, for once get out of your friggen Econ 101 and oil price envelope. Look out the window and see there is a real world out there that is more than just your abstract notions.

    Peak oil dynamics is more than oil price and the influences of supply and demand. I look at the situation from price all the time why is it so hard for you to look at the global systems relationship to oil in a frame work other than Econ 101 and oil prices?

    I know because that is when ugly creeps into the picture. Oil price, supply, and demand can be effortlessly manipulated and goal seeked to communicate your message. With out those tools NOo you are naked and left without words.

  44. Joe Clarkson on Mon, 22nd Jun 2015 12:40 pm 

    Rockman: This is my take on it- Peak oil will become known when oil prices are at record highs (in real $ terms) and production still cannot match previous higher volumes produced when prices were last at record highs.

    The high cost of oil from 2010 to 2014 was the first indication that we are at least approaching the peak, as the price was evidence that supply was not keeping up with demand. But high prices allowed production to increase enough from high cost sources that it was able to satisfy demand (and more), hence the decline in price last year. All this is Econ 101 and familiar to all who follow this issue.

    The importance of actually knowing when we will have passed the peak is that when it occurs it will shatter whatever confidence remains that continued growth is possible. Even the most oblivious investor, banker, hedge fund manager, or even man on the street will know that despite very high prices and huge amounts of money thrown into oil production, supply is not increasing.

    There will be attempts to switch to alternative liquid fuels, to change to natural gas where possible for transportation and all manner of fuel conservation programs, but the association of peak oil, high energy costs and worsening economies will become too obvious for BAU to ignore.

    It will then become clear to everyone that mountains of debt will never be repaid and that financial assets are likely to become worthless. Everyone owning those assets will attempt to head for the exit at the same time. We could wake up one morning and find virtually all forms of money have become worthless. The mother of all financial crises will have happened.

    It is certainly possible that a similar financial crisis will occur before peak oil, one could happen any day, but after peak oil the odds of one happening increase rapidly and inexorably.

    I have been following oil production and peak oil since Limits to Growth. My family has been living in the country since 1975 and gradually preparing for more and more self-sufficiency even though my wife and I have both worked off the “farm”. In the last few years, our preparations have become more intense.

    My goal is to have all financial assets converted to real assets (land upon which food can be grown with non-fossil powered equipment) before the day comes when money disappears. We may not get the timing absolutely right, but knowing when oil is likely to peak will help us plan for the future. In a (large) nutshell, that’s why I want to know the “when” of peak oil.

  45. GregT on Mon, 22nd Jun 2015 2:12 pm 

    “All this is Econ 101 and familiar to all who follow this issue.”

    You must be assuming that we still live in a free market economy? That is no longer the case. That extra production is unaffordable to the economy. The only reasons that it has been exploited is because of trillions of dollars in QE, market manipulations, and ZIRP. Production has not met demand, at least not the ‘demand’ for continued needed rates of growth. We are 7 years into ‘recovery’, but we still haven’t recovered. We are still experiencing stagnation, or even a decline in many places, in economic growth.

    It isn’t the number of barrels produced that matters, it is the energy that is available to the economy, and the affordability of that oil that matters.

    Limits to growth have already been met, they have just been papered over with mountains of debt. We are now living in a world of extend and pretend. At this point we are only digging a deeper and deeper hole for ourselves, both economically and environmentally. When people finally catch on is anybody’s guess. When to get out, all depends on how much you are willing to risk.

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