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When will people start to understand peak oil?


Peak Oil will always be a controversial theory… always.

But it’s a reality.

What’s maddening is explaining it over and over again to people that don’t get it.

For example, Dr. Sami Al-Nuaim recently wrote in the Saudi Gazette:

In the last few years, there were several attempts from several non-specialized writers in the Saudi media to advocate for what is called “Peak Oil Theory” that wrongly predicts dark future for oil production. 

This theory was introduced in the US after the oil embargo in early 70s by some bankers stating that when 1/2 of the oil reserves in any field is produced, the production will follow steep decline. This concept is based on a probability theory that is not linked to any scientific facts or physical laws that govern oil production in oil reservoirs. 

In addition, what makes this theory completely false is the fact that it totally ignores the impact of technological advancements in increasing the recovery factor and the probability to find new oil discoveries.

I hope he’s joking, though.

As I’ve said, peak oil does not refer to the amount of oil we have left.

Peak oil refers to the flow rates. It refers to the fact that the “easy to get to” oil is gone. It’s the “hard to reach” expensive oil that we now have to go after. Hydraulic fracturing – like I said – is more expensive than traditional drilling techniques.

Even my old friend – and former colleague, Chris Nelder recently said this to the Washington Post:

There has always been a lot of confusion about this point. Peak oil was never about “running out of oil.” The only people who characterized it that way either didn’t know what they were talking about or were trying to confuse the issue.  Peak oil has always referred to the production rate of oil — it’s about finding the point where that production rate peaks.

It’s why we’re now going after the expensive “hard to reach” oil in places, such as Alaska’s North Slope, which is turning out to be pretty exciting stuff.

As we told you:

Petroleum geologist Ed Duncan recently told Energywire that Alaska’s North Slope geology may “yield bountiful untapped resources as vast as the unconventional oil plays at Texas Eagle Ford and North Dakota’s Bakken shale fields.”

Duncan apparently shocked the oil industry when he picked up half a million acres in an area once dismissed by other energy giants.  The shale Duncan is looking at could hold up to two billion barrels of technically recoverable oil and up to 80 trillion cubic feet of natural gas, according to a 2012 US Geological Survey.

And, as The New York Times reported, “the State Legislature in Juneau has granted oil companies an estimated $750 million in annual tax relief to increase investment in the giant North Slope oil field.”

Major oil companies are just as excited about it as we are.

 “The tax change, approved on Sunday, was a major victory for Exxon Mobil, ConocoPhillips and BP, which had lobbied hard for years to repeal a tax system put in place by former Gov. Sarah Palin in 2007 that made state oil taxes among the highest in the nation. The companies have long claimed that high-operating costs and taxes in Alaska encouraged them to move their investment dollars to other states with lower tax rates, like Texas and North Dakota, where oil and gas exploration and production have been booming in new shale fields.”

Ignore those that have no idea what peak oil theory really is. For a Saudi to get the theory wrong is just laughable.

Not only will my Royale Energy (ROYL) recommendation benefit from the North Slope trend, the majors will, too.

In fact, days after the Alaska Legislature lowered taxes ConocoPhillips said it would boost investment in the North Slope area.  Alaska’s oil industry is likely to surge on what’s happening lately.  And we’ll be there to profit.

Better yet, according to the Alaska Journal:

BP did not identify specific projects the company would pursue, but was upbeat about the tax change.  “As a package, this is an important step forward and will help us compete for more investment. This puts Alaska back in the game,” said Janet Weiss, BP’s Alaska region president.

ExxonMobil was also positive on the change.  “We believe Senate Bill 21 provides significant progress towards making Alaska’s investment environment more globally competitive and could lead to additional investment and production,” company spokesman Patrick McGinn said.

Again, I’ve been been committed to this wild growth with a position in Royale Energy.  Stay tuned for more.

Market Intelligence


14 Comments on "When will people start to understand peak oil?"

  1. Plantagenet on Wed, 24th Apr 2013 8:26 pm 

    ROYL is a fracking play.

  2. Arthur on Wed, 24th Apr 2013 8:38 pm 

    “When will people start to understand peak oil?”

    When the prices at the pump really start to hurt. In the US still only 50% of the prices here in Europe, with (average) income roughly the same, albeit offset with less fuel efficient cars. For the moment ‘treehuggers’, ‘lefties’, ‘environmentalists’, ‘government’, can still be blamed for high oilprices. But soon prices will go down, as the US is ‘drowning in oil’, at least that is what they tell on TV.

    We are not there yet.

  3. shortonoil on Wed, 24th Apr 2013 9:09 pm 

    According to the EIA:

    between 2008 – 2012 there was $133.7 billion invested into shale oil – gas. They also claim that production is now 900,000 b/d. Over the last five years our present production rate of shale oil has cost $153,000/b.

    With decline rates of 45% (or more), replacement costs on that $137.7 billion investment is $68,850/b.

    What part of PO don’t you understand???

  4. J-Gav on Wed, 24th Apr 2013 9:19 pm 

    Arthur – and we’re not going to be “getting there” anytime soon – or later for that matter …

    By the way, this article is farcical! Investment environments my ass! Doesn’t anybody understand geology, the 2nd law of thermodynamics, overshoot …? “Giant North Slope possibilities” … my ass! 2 months worth of world consumption as major field depletion rates accelerate? Royale Energy my ass!

  5. poaecdotcom on Wed, 24th Apr 2013 9:19 pm 

    When will people start to understand peak oil?

    Perhaps when it is no longer referred to as a ‘theory’ but as a mathematical certainty.

    No finite resource can be extracted at an increasing rate WITHOUT peaking.

    Simple Mathematics. No theory here.

  6. Steve on Wed, 24th Apr 2013 10:03 pm 

    I agree, not a theory but an Observation. EVERY well reaches a peak and then declines. As wells decline, fields decline. I note the use of “technically feasible” above. Economically/environmentally feasible??

  7. shortonoil on Wed, 24th Apr 2013 10:39 pm 

    When it is no longer cost effective to replace the reserves that have declined from depletion you are past Peak. Looking at what is happening with shale oil it is pretty evident that we are there!!

  8. Sharpie on Thu, 25th Apr 2013 1:08 am 

    What’s to understand? Peak “real” oil is past tense, old news anyway.

  9. GregT on Thu, 25th Apr 2013 1:46 am 

    The only articles that I have seen in the main stream media, are the very few that tell the masses that peak oil is not true.

    Most people have never even heard of peak oil. How can people even begin to understand something, when they have no idea that it even exists?

  10. BillT on Thu, 25th Apr 2013 4:00 am 

    “When will people start to understand peak oil?”

    When they drive up to their favorite gas station and there is a “Closed Permanently” sign on the door. And the next one and …

  11. Bloomer on Thu, 25th Apr 2013 4:17 am 

    This article lost me when they mentioned new technologies like fracking. Fracking technology been around since the 60’s nothing new about it. What’s new is that the new finds and the old fare so tight that expensive

  12. DC on Thu, 25th Apr 2013 5:56 am 

    Im pretty sure most people actually do understand PO, or at least can understand it. Whether they *want* to understand it, is a different matter. I think of people process PO about the same way the process that fact they are going to die someday. Everyone knows they are going to die, but most of us go our entire lives either denying that it will happen to ‘us’, or just prefer not to think about it all that much.

    Most people, as we all know here, dont process the idea that one day, if it hasn’t already occurred, cheap, plentiful oil and mass, gas-powered suburban motoring will either a) come to an end, or b) become prohibitively expensive for most people. Like the idea of dieing, its easier to pretend it will happen to someone else, or better yet, just dont think about it much, even if its happening all around you.

  13. Ed on Thu, 25th Apr 2013 10:55 am 

    I have no idea what the article was about. Good comments though.

    As to why people don’t get PO; page 19 The Limits to Growth has a great explanation and graph. Basically most people are only concerned about near term space/time events.

  14. jim on Fri, 26th Apr 2013 10:17 am 

    Peak Oil is NOT A THEORY. It’s an OBSERVATION.

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