free html hit counter Peak Oil Debunked: 379. TWILIGHT IN THE DESERT, MY ASS

Saturday, October 11, 2008

379. TWILIGHT IN THE DESERT, MY ASS

Matt Simmons has been wrong about virtually every important trend he has tried to call.

He was wrong in his shrill predictions about US gas "going over a cliff". He predicted a catastrophic drop in US natural gas production by summer 2005. That never transpired, and in summer 2008 US gas production is *rising* at a rapid clip. Details

He also predicted a near term collapse in Saudi oil production (Twilight in the Desert: The Coming Saudi Oil Shock) which never transpired. The book was released in June 2005, and in the last 18 months, Saudi crude+condensate production has steadily risen, reaching a high of 9,700mbd in July 2008 (EIA stats, Table 1.1c). Historically, that's an extremely high level. The last time Saudi crude+condensate production was that high was almost 30 years ago, in October 1981 (see EIA, 2008 Monthly Energy Review, Table 11.1a Link).

Simmons staked his reputation on the claim that Saudi Production was going to collapse, and it did exactly the opposite. No wonder he's having a nervous breakdown and promoting bizarre schemes like mowing the bottom of the ocean with "underwater lawnmowers":
“Call it seaweed, if you want,” Simmons said. Whatever you call it, Simmons said the world must start harvesting this micro algae using what he called “underwater lawnmowers.”

Simmons acknowledged that any plan for large scale harvesting of micro algae likely would be strongly opposed by environmentalists. His blunt message to them: "Get over it. We’ve already destroyed the fish stock."Source
Simmons' consistent view has always been that high prices will not temper demand, that demand will continue to follow optimistic IEA forecasts even if supply massively undershoots that level (economic gobbledygook like "In seventeen years the world’s demand for oil may well be more than 50 percent greater than it is today, while production capacity may well sink to 1985 levels."Source), and that prices are going to go through the roof. Which, of course, is completely at odds with the actual situation of falling demand and prices. The man is overwrought and out of touch: on Sept. 22, 2008, as the price of oil was nosediving to $33, his comment was: "There really is no roof on oil prices at this point."Source
-- by JD

76 Comments:

At Saturday, October 11, 2008 at 7:37:00 AM PDT, Blogger JD said...

As always, please use the Name/URL option (you don't have to register, just enter a screen-name) or sign your anonymous post at the bottom. The conversation is better without multiple anons.
Thank you!
JD

 
At Saturday, October 11, 2008 at 8:02:00 AM PDT, Anonymous Anonymous said...

No roof on oil prices? More like there is no floor!

One thing that I've noticed: When ever oil spikes or plunges, you see all sorts of articles from "experts" who go to extremes in predicting where the price of oil will go. Just a few months ago, they were saying that nothing is stopping oil from hitting $200 and beyond. Now those same people are saying that $50 oil is possible! Of course it can't all be good news so they also predict the Dow will drop below 6,000 that another Great Depression is on the way and that we've all got to commit suicide. Can we please get a grip people???

 
At Saturday, October 11, 2008 at 3:43:00 PM PDT, Anonymous benny "peak demand" cole said...

The craziest part of the whole doomer-sniveler crowd are the predictions for soaring demand while output shrinks. Um, the math does not add up. Demand cannot soar by 50 percent, if there is no supply. The price has to go up. And that crimps demand.
Everybody long on oil is now dead in the financial markets. Oil is trading for half of the peak, and at the peak the doomers were screaming for $200. People were going long, and spreading hysteria.
But remember, almost all of the world's oil fields were developed assuming $40 oil. Moreover, the marginal cost of production is very low, and under $1 a barrel in the Mideast.
Even at $20 a barrel, almost no field will be shut-in. The production keeps coming.
We may see an old-fashioned glut, and $10 a barrel again.
The NYMEX price is set by speculators, so making predictions is even more precarious than usual. Speculators can set the price, as demand and supply for oil is inelastic. And that speculative price can hold for years. This is a market that adjusts in terms of fiev and 10-year cycles.
Still, it could be a long, long time before we see $100 oil again. Global demand is very weak for crude, while biofuels are exploding.
Advances in palm oil plantations and hybrids have translated into output doubling per hectare and doubling again. The palm trees live 25 years, so the older trees are left in. This means the increased supply will be sustained for generations, as older trees are finally pulled out, and new plantations opened up. That is just one type of biofuel. There are tohers, and together we could see 10
Meanwhile
Smaller cars are becoming the norm.
We could see global demand barely budge for years, or even retreat, while more of the mix is supplied by biofuels.
Interesting to consider; For years, oil-producing nations could do almost nothing, and enjoy fatter revenues.
Now, they will have to produce more to get more revenues. And that means? More production, meaning lower prices.
Venezuela and Mexico may get serious of about production again, and Venezuela has vast reserves of heavy oil, dwarfing those of the Mideast.
It could be another 10 years before "the oil story" gets ginned up successfully again by speculators. Or maybe even longer. It was 20 years from the last oil crisis.
Now, we have plenty of oil, better tehcnologies, faltering demand, and biofuels booming. We may see 3 mbd of biolfuels by 2020 -- although, if prices stay high, I suspect this is underestimate. New strains of cold-tolerant and drought-tolerant heavy yield oil palms have been developed, meaning that vast new swaths of land can now grow oil palms, not just incredibly hot and wet places, like Malaysia.
At $100 a barrel, it makes sense to grow high-yield oil palms in Texas and Louisiana, and people are going to figure that out soon.
Oil could be dead for a long, long, long time.
We can all reconvene in 20 year to debunk the next oil scare.

 
At Saturday, October 11, 2008 at 4:51:00 PM PDT, Blogger Stellar said...

While i am not one to gloat i feel the need to wish mister Simmons all the best in these hard economic times. Since it's going to be a absolute bitch to earn his keep now that the speculators who gave us 150 dollar oil are all scrambling to save the very financial system that made such outrageous possible in the first place i reckon we should all say a prayer to the all the desperate doomers out there who are again losing control of one of their favorite propaganda ploys.

I suspect it's back to global warming ( oops;, 'global climate change' ), general resource 'depletion', 'water wars', global famines and the latest idea ' the credit crunch'( where everyone is going to go bankrupt because there will no longer be even short term loans) and like scenarios of global doom.

If only lightning were distributed properly...

Stellar

 
At Saturday, October 11, 2008 at 5:59:00 PM PDT, Blogger Yogi said...

Good post. I have also heard Simmons touting the use of anhydrous ammonia as a motor fuel, which is another example of a hare-brained scheme. Anh-NH3 is a nasty, toxic, corrosive gas that has to be liquefied under pressure. It’s great for fertilizer, but I wouldn’t want to be in a garage with a leaking vehicle tank full of the stuff.
Simmons appears to be completely unaware of the possibilities of synthetic hydrocarbon fuels.

 
At Saturday, October 11, 2008 at 8:55:00 PM PDT, Anonymous mdavid said...

I work in oil and gas, have for about 15 years. I'm pro-oil, I'm certainly not a "doomer". I just bought $100k of stocks, in fact, on Friday. We don't have an energy crisis, the economy will pop back, but we do have a serious liquid fuel crisis.

I've read Simmons a lot. The guy is very, very astute on oil. I know a lot about a very small slice of the industry, and he is one of the few guys who I've read that really gets it. In fact, he's one of the few folk I trust to usually get it right. He called that last 10 year price increase way back when oil was $15/bbl.

His book "Twilight" is very good. Note that Simmons is talking about trends, and he would certainly agree nobody can call anything to the day nor exactly when Saudi will peak. But he thinks sooner than later, and I agree.

The things that people who aren't in oil don't get:

1) How hard we've looked for oil over the last 20 years. We have every rig in the world fighting for the last reserves. You have to be there to see it, it's crazy.

2) The technology brought to bear to find and extract oil has been massive, and people who aren't part of the industry really don't understand that we simply are not getting the return on our investment due to lack of product. The price increase is real - we cannot supply like we used to anymore.

One last point: we have just seen stock markets crash depression-style worldwide, and oil hasn't dropped to $30/bbl? This alone proves peak oil. Guys, it was around $15/bbl just a decade ago, and we've been drilling with every hunk of junk in the world over the last 5 years with no real production increase. Sorry, folk, but peak oil is real, and the price is the proof.

 
At Saturday, October 11, 2008 at 11:10:00 PM PDT, Anonymous Anonymous said...

Similar to rumors of a pending takeover of , (insert company ticker symbol of choice here), or the many hyped up junk companies by that pile of shit firm, Quality$tocks.net, hype pays very well.

buyer of said hype, beware. 'cause it's piled on daily, hard and sloppy.

 
At Sunday, October 12, 2008 at 2:13:00 AM PDT, Anonymous Brother Cadfan said...

I suspect Matt Simmons is going haywire because his fund is probably getting caned. Goldman Sachs' Currie and Murti have been issuing almost desperate weekly edicts and some of Jim Rodgers investors have asked for a quick exit.

mdavid - I do note that Simmons has had criticism from people within your own industry. I came across a good discussion once on a Oil and Gas site describing how many of the fools in investment banking aren't aware that Simmons has often been debunked at certain oil industry conferences. I wish I had saved it it was an entertaining read.

I don't think anyone denies that there will be an eventual floor to oil prices at a higher level than a decade, with inflationary pressures, ageing equipment.

 
At Sunday, October 12, 2008 at 2:55:00 AM PDT, Blogger JD said...

mdavid,
With all due respect, a number of people who are vastly more astute on oil than you or Matt Simmons have commented very unfavorably on his views.

Ali Daneshy, director of petroleum engineering at the University of Houston and retired vice president of Halliburton:
Why Simmons Is Wrong about Saudi Oil

Sadad al Husseini, a geology Ph.D. who was formerly the head of Saudi Aramco's exploration department:
"Although Matthew Simmons says it is unlikely that the Saudis will be able to produce 12.5 million barrels a day or sustain output at that level for a significant period of time, Husseini says the target is realistic; he says that Simmons is wrong to state that Saudi Arabia has reached its peak. But 12.5 million is just an interim marker, as far as consuming nations are concerned, on the way to 15 million barrels a day and beyond -- and that is the point at which Husseini says problems will arise." Source(pdf)

Jim Jarrell, petroleum engineer and President of the Ross Smith Energy Group:
Peak Oil Promoter Flayed for Saudi Reserves Scare Mongering
Another Day in the Desert(pdf)

Henry Groppe, a very highly regarded analyst with over 55 years experience in the oil industry:
"Matt Simmon's view is that we're just on the verge of seeing very significant depletion decline rates and total world oil production will then decline precipitously and were approaching the end of the world economy as we've known it. Major oil companies take the view that it will be relatively easy to continually expand oil production, specifically, they all agree that world oil production can be expanded 50% in the next 25 years and we disagree very strongly with both of those viewpoints. We think there will be a flattening of total oil supply and the high prices needed to constrain consumption to match that available supply."Source

Matt Simmons has talked an unbelievable amount of poorly informed crap about Saudi capabilities over the last few years, and the Saudis have consistently proven him wrong. Sorry, but I don't buy your revisionism, because I've been here the whole time. Here's Simmons in prime form:

" Simmons also suggests that Saudi production is very near its peak. But the feedback he has received from technical people who have read the book, leads him now to believe that Saudi Arabia has "actually exceeded sustainable peak production already."
"And I think at the current rates they are producing these old fields, each of the fields risks entering into a rapid production collapse," he said."Source

Your point about the recent difficulty of finding and producing oil was addressed in detail on this blog about 300 entries ago Source. Western oil companies have no access to the locations where the oil is. More than 80% of all prospective territory is nationalized and off limits. According to the USGS, the assessment unit with the most undiscovered oil is Iraq and eastern Iran Source. How much exploration have you been doing there? I'll tell you: zero. So the fact that you're not finding much is not a big surprise.

Finally, everyone on this site accepted peak oil a long time ago. It's just part of our mission to expose fearmongering and hype by unaccountable frauds like Matt Simmons.

 
At Sunday, October 12, 2008 at 4:22:00 PM PDT, Blogger bc said...

Of course, Matt Simmons is a salesman. "KSA will eventually peak and slowly decline" doesn't sell so well.

Robert Rapier also did a little debunking on Matt Simmons. RR's view is that Simmons may know a lot of details, but doesn't know how to interpret them correctly.

A Great Depression probably is on the way, though ;)

 
At Sunday, October 12, 2008 at 4:30:00 PM PDT, Anonymous mdavid said...

jd,

Western oil companies have no access to the locations where the oil is. More than 80% of all prospective territory is nationalized and off limits

Everybody knows this. I've read all your sources in the past. I have no personal bias merely experience (trust me, some of your sources are political and some are flat-out out-to-lunch). As a neutral observer, I say Simmons knows more than 90% of those guys. Note all of your "experts" missed the big oil price explosion since the late 90s. Simmons nailed it dead on, when all the "experts" thought we were "drowning in oil".

Because Saudi is shut (except for SPE papers and rumor) you, I, or all your "experts" (including Simmons) have no firm proof as to what Saudi really has, and all we can do is guess. Right now, Saudi has not demonstrated they can pump enough. Personally, based upon the data I see, I think Simmon's guess is closer to the truth than everyone I've read so far. And if you read Simmons fairly (you obviously have a bias) we are not out of Simmon's window yet. His predictions are still alive.

Also, you still haven't addressed our current prices, which seem to vindicate Simmons. In case you hadn't noticed the price is still very very high for where it should be based upon a collapsing economy if supply was fine like you claim. Supply issues must be present, or we would have $15/bbl crude today. It's a good bet Saudi just can't increase production to what the world needs. Based upon the data I see, Simmons looks right, just like he was right back in 1998.

 
At Sunday, October 12, 2008 at 5:13:00 PM PDT, Blogger Ari said...

mdavid,

Supply can meet demand and you can still have a high price thanks to diseconomies of scale, speculation, and a variety of other factors. You cannot use price alone as an indicator of supply.

Also, note that Simmons has also been off on the price as well as the supply figures.

Finally, questioning Saudi spare capacity based solely on its ability/willingness to tap more in the short-run is a bit... trusting? Why do we believe that the KSA or the rest of OPEC has any interest in letting prices drop too low?

I'm always shocked at how much trust people place in the same people who are selling us a product that is historically priced partially by sentiment.

 
At Sunday, October 12, 2008 at 5:16:00 PM PDT, Anonymous mdavid said...

Btw, I could go point-by-point over your sources (some are ok, but most are political), but I'll just quote this from your Jarrell piece as an example of out out-to-lunch some of it is...he says,

Why would Saudi Aramco lie about what’s going on?

Like, huh? If Jim can't figure out why it's in Saudi's best interest to lie about their reserves with OPEC's production rules for as long as they can until they die out, he doesn't deserve to be read. This is exactly what Simmon's talks about in how ignorant his detractors are.

Granted, Jim's a PE, and as one myself, I confess I'm not suprised at his unabashed ignorance (there are a lot of idiots among PEs like him) nor how gullible the public is to not to have the brains to call this stuff out as political tripe, but sheese, doesn't the guy even have an editor to stop him from making such silly comments? Like:

Overall, we think, Saudi Aramco has given us no reason to doubt statements about its
reserves or future production capacity.


Um, sure. Saudi would never tell a lie. Oh, no! They are such honest, non-corrupt, enlightened types over there. Heck, I expect lies from the free world when they can get away with it. Saudi? If they weren't lying nor planning to, why not open their reserves for inspection and clear the air? Any fool knows why (well, except for Jim...I just hope he's well paid to play the fool...I bet he's just banking on the raw ignorance of the public).

I would be happy to go over the technical errors as well, but it would be wasted time.

 
At Sunday, October 12, 2008 at 5:17:00 PM PDT, Blogger Ari said...

Sorry everyone, one more note:

Also, you still haven't addressed our current prices, which seem to vindicate Simmons. In case you hadn't noticed the price is still very very high for where it should be based upon a collapsing economy if supply was fine like you claim. Supply issues must be present, or we would have $15/bbl crude today. It's a good bet Saudi just can't increase production to what the world needs. Based upon the data I see, Simmons looks right, just like he was right back in 1998.

Saudi Arabia is a swing producer, but it alone cannot increase or decrease production enough to control the market anymore. Those days are over, for better or for worse.

However, I'd also like to note that diseconomies of scale and the increased physical cost of producing oil are enough to keep the price from going too low. Does that mean there's not enough? Doesn't seem that way. Price, again, is not necessarily a good indicator of what's going on with why supply and demand meet where they do. Price is a factor of supply and demand, rather. If the cost of production rises, then that is reflected in the price, along with willingness to buy.

Saying, "but it now costs $85/barrel!" doesn't tell us that it's running out. It just tells us that people will pay $85/barrel for the stuff.

 
At Sunday, October 12, 2008 at 5:20:00 PM PDT, Blogger Ari said...

mdavid,

If you are going to accuse some of JD's sources of being "political," then why does Simmons not also suffer from the same conflict of interest? He is, after all, a man whose income is derived from the same industry that he's saying suffers from price inflating scarcity.

Why should I trust him, then?

Avoid the ad hominem and tell us why Jarrell is wrong. I know I'm interested.

 
At Sunday, October 12, 2008 at 5:43:00 PM PDT, Blogger JD said...

Granted, Jim's a PE, and as one myself, I confess I'm not suprised at his unabashed ignorance (there are a lot of idiots among PEs like him)

Your opinion of Mr. Jarrell is not echoed by Matt Simmons, who expressed nothing but admiration for the report. The bottom line is this, mdavid: Simmons made numerous widely publicized claims that Saudi production was going to go down in the very near future. Well, here we are 3 years laters, and Saudi production has been rising, and in July was at level not previously seen in almost 30 years. That's a really big disconnect, and shows, in the most concrete way possible, that Simmons was wrong, and his critics were right. You can change the subject, tip-toe around the edges, and spin til the cows come home. But it doesn't change the bottom line: Simmons said Saudi production was going to go down, and it went up.

 
At Monday, October 13, 2008 at 8:46:00 AM PDT, Anonymous tesla said...

If oil stays > $50/bbl for a while we're going to see coal liquefication.

And then people who need to have some global doom theory will shift their panic to something else, and the cycle will repeat.

 
At Monday, October 13, 2008 at 9:26:00 AM PDT, Anonymous Anonymous said...

How significant of an impact would CTL have in the United States? Time to get it up and running, how much could it produce, things like that?

 
At Monday, October 13, 2008 at 12:53:00 PM PDT, Anonymous Brother Cadfan said...

Anon asking about coal to liquids. Perhaps someone who is American can comment a bit more, but the US after WWII had a big interest in coal to liquids technology. It was buried and forgotten in the US in the intervening years however. There are two primary methods for doing it and the tech itself is old hat. It can be used to produce a suite of liquid fuels that have similar burn properties to oil distillates. On the other hand there is very real concern about the environment vis CO2 production. The set up costs are very high. The USA has truly massive coal reserves, and indeed, by good fortune coal is well distributed throughout the earth. In the interests of fairness I should however point out that there are peak coalers out there. Ive seen quite variable efficiency ratios vis tonne of coal to barrel of fuel; this seems to depend on the compositional properties of the coal. This affects the hydrogen input needed. The US could ramp this up, but it would come at great initial cost.

This outfit

http://www.worldcoal.org/

Have a substanital leaflet on it somewhere on their website.

 
At Monday, October 13, 2008 at 1:16:00 PM PDT, Anonymous Nick G said...

"there are peak coalers out there."

Yes, but their analysis is flawed.

See http://energyfaq.blogspot.com/2008/06/are-we-running-out-of-coal.html

 
At Monday, October 13, 2008 at 8:12:00 PM PDT, Anonymous tesla said...

I've seen a few different estimates for the cost parity of coal liquefaction and oil. Most are around $50 / bbl. The general consensus is that it would be cheaper than what we have been paying for oil as of late. Nazi Germany did CTL, as did apartheid South Africa. It's a proven fuel source, unlike bio-fuels. The cost depends a lot on the quality of coal. In America we are fortunate to have huge deposits of high-quality coal (mainly in Wyoming and Montana).

As far as "peak coalers"... they're even nuttier than peak oilers.

So why not just go ahead with CTL? First, the coal industry has been reluctant to go ahead with $1B+ refineries if oil prices are going to drop a bit (which seems to be the case since the speculative fever has abated). Second, there is political uncertainty about CO2 emissions. One can do carbon sequestration but this adds to the cost.

CTL would probably have a large net-positive effect on the American economy. As we have so much coal in America we wouldn't have to rely on foreign sources. Our trade defecit would be reduced by hundreds of billions of dollars per year, lots of high-paying American jobs would be created, and the main funding spigot for Islamic terrorism would be closed.

Obviously there are trade-offs with CTL (as with any other fuel source) but it's a definitely a viable option to oil.

 
At Tuesday, October 14, 2008 at 6:38:00 AM PDT, Blogger Ari said...

OK, I'm going to be a fly in the ointment here.

I think CTL is just another band-aid fix. The gaping wound known as "fossil fuel use" is the problem, and replacing one fossil fuel with another one isn't the damn solution.

UNLESS we're talking about a bridge here. In my mind, our short-, mid-, and long-term goals should be:

1. Electrify all transportation, personal or otherwise. Focus should be on workable transit systems.

2. Electrify ground-based shipping (trains for long- and mid-distance transport, short-range electric trucks for local shipping)

3. Nuclear as the linchpin of electricity generation

That's not to say that I don't think that CTL can't serve as a good bridge to that awesome future, but I'm tired of hearing how many years of this or that fossil fuel we have left when we could potentially focus on making a kickass electric future instead.

Let A HUNDRED MILLION PHEVs roll. May every train be electrified! Let thousands of nuclear reactors bloom!

Onward, friends, to a really awesome future. First casualty: fossil fuel industry.

(until peak electron hits, and then we're all screwed)

 
At Tuesday, October 14, 2008 at 6:26:00 PM PDT, Anonymous jd debunked said...

jd, a simple query only tangentially related to this post but one i was hoping to goad you into answering-

i'm a farmer in tennessee. it is an organic farm. however i speak with other conventional farmers on a regular basis, and the report is that ammonia nitrate fertilizer is three times more expensive this year than last. this is because the fossil fuels which are used to create it are three times more expensive than this time last year. they don't know what on earth they are going to do.

my question- will this not effect the prices of food, and if not why? are farmer's lives so financially stable that any aspect of what they do can be tripled in price in the course of one year (i'll give you a little hint since you live in japan and yet seem so intimately familiar with the plight of working class people in my country and whether or not price increases mean they can't sustain their lives- no, this cannot happen to farmers without overarching ramifications).

since it seems you are american but live in japan, you either married a japanese, are some kind of expatriate, or you must be independently wealthy or involved in a line of work at which you are well compensated and don't have to work very hard. from this i draw the conclusion that you don't know shit about being poor and what happens when the price of basic things inflates overnight, so shut up you elitist bastard. i doubt you've ever ridden in an afghan trolley, which you cheerfully advocate.

oh, and for the record, though it won't fit nicely into your preconceived notions, i do not believe in a die off, i do not believe in doom, and i do not believe everyone will be a happy yeoman farmer like me in 10 years. isn't it telling that people have to state that to this group in order to not be completely misrepresented (though in fact i'm sure based on the experience of p50 i will be)? but what do i know, being an american farmer is just my line of work? i'm sure folks in japan know more about it.

 
At Tuesday, October 14, 2008 at 10:02:00 PM PDT, Blogger JD said...

i doubt you've ever ridden in an afghan trolley, which you cheerfully advocate.

I frequently ride something far worse. Check it out:
Link a dink

 
At Wednesday, October 15, 2008 at 5:22:00 AM PDT, Blogger JD said...

jdd,

Regarding your agriculture questions, here's the latest (Oct. '08) FAO update on world grain production:

With the global cereal harvest in 2008 now set to turn out considerably larger than earlier forecast, a significant improvement in the global supply and demand balance for cereals in the 2008/09 season can be expected. Even allowing for a larger increase in utilization than was predicted in July, an 8 percent increase in world cereal stocks could now be possible. [...] Against this background of generally improved supply prospects, international cereal prices have weakened significantly since their record high levels earlier this year. [...] FAO’s forecast for world cereal production in 2008 has been revised upward since the previous report in July, to 2 232 million tonnes (including rice in milled terms), 4.9 percent up from last year and a new record. The forecast has been increased mostly on account of better than expected harvest results for grains throughout Europe, for maize in particular in the United States and also for coarse grains and rice in Far East Asia.Source

As you can see, the highest oil and fertilizer prices in recorded history haven't had much effect on farmer productivity. Cereal production has been climbing at a rapid clip through 2006, 2007 and 2008 despite high energy prices, so I'm not sure where the problem lies. Ag commodity prices are dropping, not rising. Wheat, soybeans and corn are all down about 50% from their highs. So when you ask: "Won't high fertilizer prices affect the cost of food?" The answer would seem to be "Not really". At the moment, prices are dropping regardless of fertilizer costs due to the glut of product. Which just goes to show: realworld economic phenomena behave in weird ways you wouldn't expect.

If you're asking me what farmers should do under these conditions, I think they should get creative and improve their operations. Farming is a tough, risky business. If you can't handle it, quit. Nobody's putting a gun to your head. US farmers already receive massive taxpayer handouts, so whining about money is a little obnoxious.

As for the poverty thing, I'm probably one of the most austere people you've ever interacted with in your life. When I came to Japan about 5 years ago, I carried everything I owned in one suitcase. I've been riding bicycles and living in hole-in-the-wall apartments my entire adult life. In fact, I still conduct almost all my business by bike and foot, and the apartment I live in is about half the size of your fucking garage. I've always enjoyed being poor, you know, like Jesus in the Bible.

So, yah, I'm an "elitist". LOL. Maybe you've been watching too many McCain campaign ads.

 
At Wednesday, October 15, 2008 at 7:50:00 AM PDT, Blogger Ari said...

jd debunked,

How much of the price rise in ammonium nitrate is solely from the input, and how much is from the restrictions placed on it by the federal government?

Sure, the price tripled. But it's not JUST because of the price of oil.

http://aes.missouri.edu/pfcs/research/prop105a.pdf

 
At Wednesday, October 15, 2008 at 10:21:00 AM PDT, Blogger Barba Rija said...

and the apartment I live in is about half the size of your fucking garage.

That's astonishing, JD. Would you send us a picture of your apartment, if that's not too intimate? I'd like to see how's life in Japan...

 
At Wednesday, October 15, 2008 at 10:24:00 AM PDT, Blogger Barba Rija said...

oh, and for the record, though it won't fit nicely into your preconceived notions

That's a funny remark that comes right after your own preconceived notion of who JD is and how he lives. What a moron you are sir!

 
At Wednesday, October 15, 2008 at 11:57:00 AM PDT, Anonymous scudFDL said...

A point about Saudi oil production: If they really wanted to, I'm sure that they could pump out as much oil as they wanted to. There is some truth to what Simmons says about pumping it out too quickly and risking a massive collapse later. However, that's less of an issue than causing the price of oil to crash by pumping out too much supply.

Despite what many people seem to think, the Saudis are hardly rolling in the dough from $100+ oil. The fact is that while America needs oil for our economy to function, they (and other Middle East coutries) need US dollars so they can buy food with it. The price of food is going up so the extra money from the spike in oil just goes to buying food at a higher price. So it's a real catch-22 isn't it? If they don't pump out oil fast enough, the price goes up but so does the price of food so they don't really get any added profit.

Also, don't read to much into whatever OPEC (officially) says anymore. If you'll recall, the last time OPEC got together and decided to cut production in an attempt to stop oil from falling, Saudi Arabia essentially gave them a big "Screw you!" and stated that they would pump what oil they saw fit. OPEC is dead.

 
At Wednesday, October 15, 2008 at 1:20:00 PM PDT, Anonymous Brother Cadfan said...

I know from personal experience that the Saudis aren't fond of Iranians, nor of Venezuela. I don't think they are fashed on the idea of Iran arming itself to the teeth with war toys on the back of high oil prices. As has been aluded to elsewhere, the Saudis have been trying to establish a petrochemicals industry that alledgedly runs at a loss when oil is over $100.

 
At Wednesday, October 15, 2008 at 2:02:00 PM PDT, Blogger ema said...

he price of food is going up so the extra money from the spike in oil just goes to buying food at a higher price. So it's a real catch-22 isn't it?

No it's not. Read JD's last comment so you can see that life is a lot more complex than simplistic mechanisms.

 
At Wednesday, October 15, 2008 at 6:07:00 PM PDT, Anonymous jddebunked said...

no, ema, jd is wrong as my next post is about to show.

 
At Wednesday, October 15, 2008 at 6:10:00 PM PDT, Anonymous jddebunked said...

ari-

i don't claim any knowledge of economics so i can't say what the cause of the increase in farm inputs can ultimately be attributed too, which i'll grant you. i don't suspect the gov. would enact any practice which artificially raises the price of farm inputs.

 
At Wednesday, October 15, 2008 at 6:33:00 PM PDT, Anonymous jddebunked said...

jd,

to whom will the rising costs of farm inputs be passed, or can they be absorbed enron style? you can't dodge this. farmers make money in such marginal ways in this country they will not absorb this cost. somebody therefor must- so who? i think behind these numbers you are hiding from something which common sense might indicate. in the words of homer simpson, statistics can prove anything and 67% of people know it. i told you about something from real life, the territory and not the map of stats you've made. behind all of this there is a lack of familiarity with an industry- in my first response i was referring to fertilizer bills currently being paid, not the ones which grew the spring and summer crops of 2008. your numbers are meaningless to my questions, and its unbecoming to lecture people about industries which you know nothing about because you are liable to be embarrassingly wrong. saying conventional farmers should stop whining for money proves that you know nothing about the last 40 years of u.s. agricultural history and how and why food is grown for profit (specifically corn), so you'll have to do better there too. granted, *i've* never practiced petro-chem farming on anything like the kinds of farms that are run in this country, so my perspective is not much less lay than your own, i think i'm just not so blinded by my own intelligence and belief system.

i did watch your video, and while it seems impossible that the time packing people in is ultimately the most efficient arrangement, i'm sure it is. i guess that seems comfortable enough for sardines and people who enjoy claustrophobic environments, but don't expect a nation of spoiled americans to embrace anything but our un-sustainable lifestyle in the near future, and to support political sugar daddies who tell them they can keep the fiasco rolling along. if you've ever lived in the bible belt, the experience obviously never stuck with you. logistically as well as psychologically, the idea that america will switch over to an afghan style carpool is unthinkable if you have a basic familiarity with how we conduct our business in necessary ways (obtaining the goods and services of life, earning a living, etc.). we are all heading too many different places too far away from one another for that to be workable. i have lived in various parts of a fiasco unique in the history of human civ known as the american southeast, which must been seen and lived in and driven through to be believed.

jd you seem like a thoughtful and informed person. i have too much of a real life to spend much time in a back and forth which lacks civility or an engagement with the topic at hand, but i have so far been given a decent treatment compared to poor old p50 and i'll keep tugging at this thread. my background with peak oil is kind of limited. like you, i feel it will be a non-issue in my life but probably for very different reasons than you. i live in a place which is town sized, i know the people, etc., and i have a measure of financial security regardless of economic climate due to my line of work. there is a university nearby and my food is served in the dining hall. i have the opportunity to engage with students who help out which is improving my nation by spreading good ideas which will have a profound impact on the world if adopted by facile young minds. i'm not just chatting with my peeps on teh internets about how the doomers should all commit suicide. what uncivilized behavior from people who cast themselves as the defenders of civilization and technology against the online doomer menace! you clearly need to do some john mccain style crowd control.

i'm with you in thinking i'm in great shape, and not because our civ is doomed, just because i live in a nice place that has been here for many years by this country's standards and not too much has 'progressed,' which is nice. the campus is stone masonry and designed after oxford, not a strip mall. the median income is low and so are housing prices in the vicinity, so no bubble. nobody has gotten rich in my part of tennessee lately, though i've witnessed the rich moving here in droves from cities over the last 10 years and the poor people staying that way, myself included in their lot. .

at any rate i stumbled unto your page unintentionally and read a few posts, got to the discussion that was started with p50, then read the background material. and let me tell you, there are clearly some more hilarious and ironic things about the people on the fringes of this debate. there are also many chimeras bandied about by people outside of their sphere of knowledge, and i suspect illusions are propagated mercilessly on both your extreme and the doomers. looking at my own life, i can tell you one illusion is that 'green revolution' ag has any hope for feeding the world 15-20 years from now. another is that today's world could feed itself organically. these are the only two alternatives. soil, another most precious resource, is not in good shape. it takes time to create a healthy farm-scale organism which requires limited external inputs given decent circumstances. working with chemically spent land is another matter. that most modern consumers aren't fit to do it nor do they know how nor would they ever want to is also another matter. americans are quite fat and lazy including many of the armchair eco-warriors involved in ridiculous fatalism couched as a return to 'nature's roots' or some other new age bromide. you ought to read the peak oil work of david holmgren and check out his latest website, which is sort of a realistic, nonrabidly smarmy matrix of possible peak oil outcomes rather than an example of certain extreme outcomes presented with a self-satisfied air of 'told you so.' he is also a tremendous permaculturalist.

i love how adamantly you cling to the hope that the return to certain limits isn't going to be painful, and i also love how your site is dedicated to the idea that limits are a reality but our return to them won't be. or at least presenting anyone who thinks to the contrary as a 'doomer.' how absurd. for example as a man unashamed to admit to a lesser intelligence and grasp of the facts and factoids pertaining to this issue, but one who has brewed beer, i can see the capacity for various degrees of overshooting a resource base in a limited environment when organisms consume resources extravagantly. catabolic collapse. while not much more sophisticated, i do think that humanity will possess the ability to deal with the realities of scarcity in slightly more constructive ways than yeast cakes, but it will require major revisions in our current notions and practices. i have no crystal ball about how bad and how long and what outcome these revisions will take. the system is too complex to make accurate predictions, or have you not witnessed the world's banks melting into goo? does that make me a doomer, or do we agree?

i don't support mccain, nor have i ever voted for anything other than amendments to a state constitution because of my disgust with american poltics and the lack of respectable candidates. i do have a car hole, well a car port that's been closed in, which adjoins my trailer, which houses one farm truck shared by myself and the co-manager of the farm. the trailer is much smaller than my one barn, which is 100 years old. i live in something apartment sized, because our winters on the mountain are sometimes cold and this is a cheap arrangement. i grow a lot of what i eat and my friends make a lot of the rest. like you, i can also ride a bike and often do. shall we have a thrift off?

i apologize for the tone of the previous letter, but i do think the thrust of this blog is wrongheaded and if anyone outside of your circle of admirers really cared it would be dangerous to people making legitimate claims about peak oil (admittedly there are few) which are constructive rather than the tone of your work which is to attack kooks and reasonable people in one broad stroke of the keyboard. the way your minions interacted with p50 was particularly rude, but i think you are ultimately reasonable and intelligent people, more so than people who call for a return to the world of the dark ages. i also apologize if you aren't in fact wealthy, intelligent, and well-educated but i don't recall saying anything about the size of your house so my point remains uncontested. in a better mood i'd have simply implied that because you are among humanity's elites you have a perspective colored by that. your blog kinda made me mad, which is a poor excuse. but i wrote because i think reasonable people can differ. and sorry if this unedited mess is unreadable and misspelled. i'd hate for somebody on the internet to call me a moron.

barba rija- i hear by submit a resolution of takes one to know one. i believe that my notions about jd will prove correct, preconceived or otherwise. but we'll have to see if he'll own up to being educated and wealthy or involved with a japanese. somehow i wonder...

oh and reality will continue to conflict with your worldview. thhhbbbt!

 
At Wednesday, October 15, 2008 at 7:55:00 PM PDT, Anonymous jddebunked said...

i was browsing john michael greer's site after writing you tonight and realized that he could explain my complaint with your blog with just a few sentences-

"the collective imagination of the industrial world these days seems increasingly unable to imagine a future that isn’t either a rehash of the present or a sudden, cataclysmically driven lurch backward into the past. Today’s peak oil debates are a case in point. The mainstream consensus these days treats peak oil as a challenge to be solved by finding some other convenient fuel to power the existing machinery of industrial society; move toward the fringes and you’ll find most discussions center on a return to the past, ranging from the moderate – back to the 18th century – through the extreme – back to the hunter-gatherer lifestyle – to the limiting case – back to a world without human beings, or a step into a mythical imagined future. All these claims, just as much as Fukuyama’s [end of history claim], treat the modern industrial world as the culmination of a historical process that runs in one direction to one foreordained conclusion."

 
At Wednesday, October 15, 2008 at 8:24:00 PM PDT, Blogger Barba Rija said...

jd you seem like a thoughtful and informed person. i have too much of a real life to spend much time in a back and forth which lacks civility or an engagement with the topic at hand...

Yes, I understand you quite well. It's very rude to read others speaking to you like this:

since it seems you are american but live in japan, you either married a japanese, are some kind of expatriate, or you must be independently wealthy or involved in a line of work at which you are well compensated and don't have to work very hard. from this i draw the conclusion that you don't know shit about being poor and what happens when the price of basic things inflates overnight, so shut up you elitist bastard.

Oh wait, that was you! Hmmm... well I guess you kinda apologized:

i apologize for the tone of the previous letter, but i do think the thrust of this blog is wrongheaded and if anyone outside of your circle of admirers really cared it would be dangerous to people making legitimate claims about peak oil (admittedly there are few) which are constructive rather than the tone of your work which is to attack kooks and reasonable people in one broad stroke of the keyboard.

But the key question here is: who are these "reasonable people" that you are talking about? Nate Hagens? Gail the Actuary? Westexas? Really? And what do these reasonable people believe other than the inevitability of our demise? Hirsch? Who are these "reasonable" people? And why should they be out of bonds of critique? Are they dogma or something?


...the way your minions interacted with p50 was particularly rude...

Nice civility going on there, mister. I always enjoy being called a "minion"... wooptedooh. If you really cared though, you'd read that post through to the end, and you'd see that p50 did recognize his errors, and the talk was civilized.

i hear by submit a resolution of takes one to know one. i believe that my notions about jd will prove correct, preconceived or otherwise.

Hmm, well that's another theory that I don't subscribe to. I'm not a crook nor a thief, but I do recognize them quite easily. I also recognize bitter people that are all too eager to shoot themselves in the foot quite often.

...oh and reality will continue to conflict with your worldview

And what's that even supposed to mean, other than appealling to ignorance? That life's more complex than simple mechanisms, like ema said? Don't mind telling the doomers that kind of philosophy though, you'll be treated as an idiot.

 
At Wednesday, October 15, 2008 at 8:26:00 PM PDT, Blogger Barba Rija said...

I agree with Michael Greer's assessment of the issue completely 100%. Not surprisingly, Global Warming is being used in exact same equal fashion. The victims are usual: science / truth and the poor.

 
At Wednesday, October 15, 2008 at 9:27:00 PM PDT, Blogger Ari said...

jddebunked,

You said, i don't claim any knowledge of economics so i can't say what the cause of the increase in farm inputs can ultimately be attributed too, which i'll grant you. i don't suspect the gov. would enact any practice which artificially raises the price of farm inputs.

Read the report I linked to. It's right there, clear as day: "In past years, ammonium nitrate and urea have been the most popular sources of N for spring and
late-summer fertilization. Ammonium nitrate is widely considered the “safest” source of N for
forage production, particularly for late-summer applications, as the N in ammonium nitrate is much
less likely to be lost to volatilization than is urea. However, ammonium nitrate has become a homeland security issue for the fertilizer industry because it can be used as an explosive.
Additionally, few new ammonium nitrate plants have been constructed in the United States over the last 20 years, and given the current economic and security climate, domestic production is likely to decline over the next 10 to 20 years. These factors make ammonium nitrate more expensive than
other N sources."

In other words: the government felt it was a threat, so it stepped in to regulate it. If you recall, Timothy McVeigh brought down an entire building and took 168 lives using ANFO. The use of ANFO by the IRA, FARC, and ETA also led to ammonium nitrate's restriction in other countries.

You don't have to be an economist to realize that restricting its production, and in some cases completely curtailing it, will cause price increases. Hell, it was BANNED in the Philippines.

So yeah, that'll do for the price rises much more than the cost of fossil fuel inputs.

Sources:
http://www.allbusiness.com/legal/international-trade-law-nontariff-barriers/7812669-1.html

http://aes.missouri.edu/pfcs/research/prop105a.pdf

 
At Wednesday, October 15, 2008 at 9:29:00 PM PDT, Blogger Ari said...

Also,

Can you please give scientific studies that demonstrate your arguments? I'd be interested to see some published works that back up what you say.

 
At Wednesday, October 15, 2008 at 11:00:00 PM PDT, Anonymous Babun said...

jddebunked,

You do realize this blog is written to provoke, don't you? Still, the fact remains that JD made some fair arguments which you tried to counter mostly with ad hominem arguments (I tried to look for arguments but if there were any they were far too vague)

I was provoked myself too when I first started reading the blog. I don't think everything on it is good either, but the facts JD manages to find are often pretty interesting and this blog has clearly changed my views.

And a bit of general comments :

BTW, has Matt Simmons ever given a time frame about when he thought Saudi production would start to decline?

 
At Thursday, October 16, 2008 at 3:22:00 AM PDT, Blogger Barba Rija said...

i[sic] was browsing john michael greer's site after writing you tonight and realized that he could explain my complaint with your blog...

I overlooked this. I read Greer's remark and I agree with him 100%. I fail to see how his remark explains your complaint with something I think that JD would also fully agree with. I think it explains better your utter confusion of what this site is really saying. Please, read this site further and try to understand it better. I don't think your assessment is objective. As with p50 when he "arrived", you are just projecting your own preconceived polarizing notions of what this site is about, rather than objectively reading it.

I don't entirely blame you though. As babun has said, the blog is very provocative, which naturally draws people to be very defensive. I do think though that a world without intelectual provocation is a dull and numb world where I wouldn't want to live. That's why I usually don't respond nicely to "pacification" calls or "political correctness". That's the land of the lazies and uncommited.

 
At Thursday, October 16, 2008 at 4:13:00 AM PDT, Anonymous kss said...

It is interesting that Greer comes up. I have not read his new book (just out apparently), but have read a number of his posts, and I, for one, am inclined to question his account and predictions. An excise from a 10/8 post is below, chosen to illustrate Greer's claim that we are headed to inevitable decline. While I agree we that we have a tumultuous transition in front of us, in which we diversify and to a significant extent electrify our transportation sector, I see no reason to accept a narrative of inevitable decline in which our future will always be less than our present. Indeed, once this transition occurs -- and yes -- its going to hurt and there will be plenty of opportunities for costly mistakes, we may well find ourselves in a cleaner, diversified, distributed energy rich environment. This is world powered by renewables, nuclear power, and to some extent (but far less) fossil fuels. I have long assumed that -- JD, pls correct me if i am wrong -- to be one significant gist of this blog.

Here is the cite from Greer. I would be delighted to see his ideas and conclusions addressed here by JD and others.

"Yet this is exactly what the peak oil narrative suggests. If the world’s conventional petroleum production peaked in 2005 and faces imminent declines, as all the evidence suggests; if none of the proposed replacements for petroleum can take up the slack, and many of them, especially the other fossil fuels, are themselves closing in on their own peaks and declines; if the technological revolutions and economic boom of the last three centuries were a product of extravagant use of these nonrenewable resources, not of such impressive intangibles as “the human spirit,” and will not outlast their material basis; if, in other words, human life is subject to hard ecological limits – if these things are true, the narrative of human omnipotence falls, and a popular and passionately held conception of humanity’s nature and destiny falls with it."

(one paragraph about faith omitted)

"In turn, the peak oil movement’s problems finding a hearing in the wider discourse of our time has nothing to do with a shortage of solid facts or compelling reasoning; it has both of these in abundance. Rather, I have come to think, those difficulties are rooted in the movement’s failure, at least so far, to address these deeper, nonrational issues. If the peak oil message is correct, then the Great God Progress is dead; however misguided the faith of his votaries may turn out to be in hindsight, it’s a deeply held faith, and those who rely on it to give their lives meaning and hope can be counted on to cling to it until and unless some convincing alternative comes their way. That their clinging may keep our civilization from finding useful responses to a crisis even more challenging than today’s financial debacle is simply one of the ironies of our present situation."

 
At Thursday, October 16, 2008 at 6:38:00 AM PDT, Anonymous Anonymous said...

I checked out Greer's blog.

Conclusion: he is a hard-core doomer that is careful not to sound too stupidly apocalyptic. He is even explicit on that point too; at least he is honest. His typical position:

"I expect a future where energy will be a lot scarcer and more expensive, and machines will no longer be the default option."

Let's be frank about this: the doomer argument is essentially an argument from ignorance.

Time to face the facts of the situation: with a planet literally littered with enough uranium and thorium to last billions (10^9) of years(*), the likelihood "energy will be a lot scarcer (yada yada)" is essentially zero.

The doomers, be they moderate forms like Greer, or the foaming-at-the-mouth nutcases at TOD, they can't get beyond the "fact" that 'liquid fuels come out of the ground'. Once they are "gone", they believe, the end is at hand.

It is 100% nonsense, if only because they ignore simple physics: energy can be converted hither and yon into whatever forms we like. We did this in the past, we do it today, and we'll do it in the future, on massive, industrial, scales. (Example: the natural fraction of gasoline-like stuff in crude oil is something like 20%. Today, 45% of oil goes to gasoline. Guess where is the extra 25% coming from...)

In so far as peak oil is a problem, the problem is this: rather than a lack of energy, or the price of energy, the main issue is simply being able to conveniently carry it around. Hydrocarbons are still the best we've come across, and it's a weird thing that up until about now (and probably a few more decades) we can pump the best forms of stored energy straight out of the ground. In the future, we'll simply synthesize the stuff from some feedstock and a nuclear reactor. (Exactly what forms this will take is unknown. I've been reading Olah, Goeppert, and Prakash's "The Methanol Economy" though, and that looks entirely reasonable.)

Greer wonders why peak oil is not getting the same amount of air-time as climate change. He offers a bunch of pop-psych explanations for this. I humbly put forward a simpler one: while oil will necessarily peak (as per JD), and the consequences will not be a picnic, the remainder of the 'story' around the subject is just unsustainable fear-mongering.

Contrast to the direct argument from core science that climate change comes to, and the potential costs of mitigation dwarf the likely impacts of peak oil.

If anything, the electrification of transport, the super-efficiencies of fossil fuel use, and so on, will ultimately be driven more by consequences of climate change than anything else. That it also solves the "peak oil" problem would be gravy.

If I'm wrong on that, and peak oil drives the solution, then climate change pops out as gravy instead.


This is one of those rare win-win situations. Either way, we have an incredible opportunity here, not some looming disaster. Anyone who feels otherwise, well, how else can this be said: they are not being compelled to endure a life in a modern technological society, and the future prospects it offers.

(*) Note that current models of stellar evolution, combined with (less well grounded) models of the evolution of the atmosphere of the Earth suggest that the biosphere on this planet will be green-housed to death in about 500 million years.

 
At Thursday, October 16, 2008 at 7:55:00 AM PDT, Blogger Barba Rija said...

Interesting, kss & anon. Though a pity that no one shares a link. Tsk tsk.

I fully agree with the paragraph that jdd brought to the table though...

It's very interesting that apparently this guy just blames po fringe status on the irrationality of the people that don't want to listen to him. That's usually a red herring of his own mental meltdown.

 
At Thursday, October 16, 2008 at 8:00:00 AM PDT, Blogger Barba Rija said...

According to the wikipedia, the guy is a druid... what's that supposed to mean? He's a Wiccan?!? And he wants people to listen to him?

LOL

 
At Thursday, October 16, 2008 at 8:18:00 AM PDT, Anonymous PhilBiker said...

Ari said...

OK, I'm going to be a fly in the ointment here. ....


Back to the drift on Coal-To-Liquids.. I agree with Ari's assessment. Long term we need massive nuclear energy and as much "renewables" as we can where they make sense.

Coal either as an electricity generator or as a liquids feedstock is a real disaster on so many levels. Sure, there is plenty of it, but extraction is downright catastrophic to the environment. Google "Mountaintop Removal Mining". In order to really use all the coal we have in the USA, we would eventually flatten the Appallachians.

Not that Uranium mining is clean, don't get me wrong, but the amount of energy extracted per shovel of earth moved can differ by orders of magnitude.

 
At Thursday, October 16, 2008 at 9:48:00 AM PDT, Anonymous jd debunked said...

barba jian-

re:
your comment about greer's religion

funny that someone so familiar with logical fallacies is poisoning the well, eh? maybe you need to go back for another masters degree or something. as much as you annoy me, and anybody who doesn't agree with you i'm sure, my messages were addressed to jd since i couldn't find an e-mail for him on his site and i have no interest in fraternizing with his, yes, minions whose major contribution to the discourse is to come up with new snappy ways to say 'great post jd,' or to call people names and tell them that they should commit suicide. jd actually contributes something of value and i'm interested in hearing what he has to say, not you, so don't expect any further replies personally. that's why i addressed the letter to him. i'm giving you the courtesy of this response since i did send one statement at the close your way in an attempt to out-snark you.

as you admit, i apologized to him for writing in a angry tone and if anything that i suggested was true about him is false. one of my pet peeves is when poor people's problems are glazed over by rich people. another is people who have never raised a ounce of food in their lives talking about how industrial agriculture can keep working, even if we had 1000 years of fossil fuel left. it can't. i don't think i called him anything that won't prove true except a bastard which i have no legitimate reason to believe he is i was just being pissy. i didn't call you anything but a minion, which is an accurate description of your relationship with him, though its interesting that *you* self-identified with that statement when i could have been talking about anyone. i love how you and the other minions breezed past most of the things i said about the real world and latched on to something meaningless in an attempt to defend your hero. i mean you guys are asking me for statistics which would detail an event i described from my daily life! i don't have the time or the interest and it isn't possible. i don't care what the resolution of your little internet conversation was, and i don't think i have to read every single word on this web page to draw an accurate assessment of its tenor. maybe your educated mind will prove me wrong. i don't care, and neither should you, because there is this thing called the real world which i believe i shared my little contribution to. what are you doing besides participating in a smaller more pathetic internet circle jerk than the doomers?

and as someone who lives in appalachia, i can tell you all that philbike is absolutely correct. i submit the corollary to the minion peak oil law which states that anyone who believes in a pessimistic future should kill themselves which goes, 'if you support the use of coal power you have to be a coal miner for 10 years.' it is a horrible soul-numbing mindfuck of a job which most people try to drink their way out of once they've gotten stuck in it. only eggheads who don't know about real work would bother suggesting that we turn our country into a ctl strip mine rather than consume less energy.

 
At Thursday, October 16, 2008 at 10:41:00 AM PDT, Blogger Ari said...

jd debunked,

I asked for published scientific work-- or at least something of that quality-- that shows that modern agriculture is somehow fatally flawed.

I don't think I was asking for too much when you made such a strong claim.

I've lived in farming communities (in Japan), and I know a bit about the quality of life. But I don't know that your world is any more "real" than any of ours. We all like to believe that our situation is somehow exceptional-- it usually isn't. My "world" is where the farming world gets its profits from. Without my world, farmers are out of jobs as well, for better or for worse.

However, I don't believe that I shouldn't be allowed to ask you for proof of a claim; or to demonstrate the inconsistency of one of yours.

and as someone who lives in appalachia, i can tell you all that philbike is absolutely correct. i submit the corollary to the minion peak oil law which states that anyone who believes in a pessimistic future should kill themselves which goes, 'if you support the use of coal power you have to be a coal miner for 10 years.' it is a horrible soul-numbing mindfuck of a job which most people try to drink their way out of once they've gotten stuck in it. only eggheads who don't know about real work would bother suggesting that we turn our country into a ctl strip mine rather than consume less energy.

You'll notice that at least a couple of us have come out strongly against coal as the primary energy source-- myself included.

as you admit, i apologized to him for writing in a angry tone and if anything that i suggested was true about him is false. one of my pet peeves is when poor people's problems are glazed over by rich people. another is people who have never raised a ounce of food in their lives talking about how industrial agriculture can keep working, even if we had 1000 years of fossil fuel left. it can't.

Yes, you are right: the poor are the most often ignored group throughout all of this. They are the ones who are most affected by $4/gallon gas. They are the ones who have the hardest time affording more expensive food.

This is why I've personally gotten involved (inasmuch as possible) with representatives where I live in order to try to get better, more intelligent energy bills sponsored in the Congress. I am not ignorant of these problems, because as a young person with a student debt load, I am very much aware of the pressures of the financial margins being squeezed by energy costs.

i don't think i have to read every single word on this web page to draw an accurate assessment of its tenor. maybe your educated mind will prove me wrong. i don't care, and neither should you, because there is this thing called the real world which i believe i shared my little contribution to. what are you doing besides participating in a smaller more pathetic internet circle jerk than the doomers?

I realize you're directing this toward barbra rija, but I figure I'll respond as well.

What am I doing? I'm advocating. I'm educating. I'm trying to spread knowledge and combat untruths. Am I unto resource allocation as Adams and Hamilton were unto the American constitutional debate? Not really. But every little bit helps.

 
At Thursday, October 16, 2008 at 10:44:00 AM PDT, Anonymous Anonymous said...

Today...proof!!! When Goldman Sachs said " oil will go to 140 and stay their" what they meant was...we are moving money there and that will artificially inflate it until we can figure out where to move our funds next!

So obvious!

Pizzadude

 
At Thursday, October 16, 2008 at 12:22:00 PM PDT, Anonymous benny "peak demand" cole said...

Date Brent spot at $66 today and headed south.
So what is the debate about again?

 
At Thursday, October 16, 2008 at 12:38:00 PM PDT, Anonymous Babun said...

Date Brent spot at $66 today and headed south. So what is the debate about again?

Funny, you say that almost as it were good news.

 
At Thursday, October 16, 2008 at 12:45:00 PM PDT, Anonymous Babun said...

What gets me worried about this rapid decrease is that all the good development that has been taking place will start undoing itself.

Really, have the fundamentals changed this much? Does the oil price have anything to do with fundamentals? EIA still seems to think the market is tight and is projecting prices to average $112 in 2009.

Well, perhaps we will see a rapid upswing as quickly. Anyway, new posts on these crazy ass prices would be nice.

 
At Thursday, October 16, 2008 at 1:21:00 PM PDT, Blogger Ari said...

babun,

Remember that while we're all seeing temporary relief at the pumps, automakers are still shutting down the SUV factories and getting the small cars and PHEVs and HEVs online. Just because gas is down doesn't mean that the companies don't see where the winds are headed.

I don't think all the developments will unravel, but they might slow a bit.

As for prices, I hate to say it, but I think it's seeming more and more as we see the big institutional investors pull out of oil that the price is reflecting both the slowdown but also the fact that A LOT of the run up in prices was due to speculation.

I haven't yet down any numbers-based research, but my gut tells me that $80-90 is about right at the moment. It may be that oil is a bit undervalued right now.

 
At Thursday, October 16, 2008 at 7:22:00 PM PDT, Anonymous OilFinder said...

JD I love your catchy article titles. ;-)

 
At Friday, October 17, 2008 at 2:19:00 AM PDT, Blogger Barba Rija said...

JDD,

funny that someone so familiar with logical fallacies is poisoning the well, eh?

I didn't exactly poison the well, I made a straight up ad hominem attack. I did say I agreed 100% with the paragraph you submitted to this thread. I don't agree with his desperation, as you might guess, which strikes me more of irrational than rational, which is quite funny, because he's the one advocating that people don't listen to him because irrational forces are paramount. And then I discover that he's a druid!

My personal take on religion and fringe religious "masters", as seems the case, isn't our discussion.

what are you doing besides participating in a smaller more pathetic internet circle jerk than the doomers?

Nothing. I actually breathe bits instead of oxygen and the keyboard is already glued upon my fingers. I have machines that feed me and sticks that maintain my eyes open 24 hours a day. My face is hardwired to the screen. The hardest part of my week is when I have to reboot.

jd actually contributes something of value and i'm interested in hearing what he has to say, not you

Ok, buddy. Have a nice life.

 
At Friday, October 17, 2008 at 6:16:00 AM PDT, Anonymous jev said...

A few weeks ago we saw oil spike to $130 in a matter of hours. What that tells us is that the oil price discovery mechanism is horribly flawed. I think I recall JD having talked about this.

When you have $250 billion dollars of leveraged speculative positions riding on $4 billion of actual delivered product (Brent Crude), the resulting spot price is bound to reflect fundamentals only very broadly.

That said, the current price of $70 is really not much different from $140. Both of these prices say the same thing, namely that crude oil is currently hugely, massively, inexplicably (other than by acknowledging imminent PO) more expensive than it's production cost.

Needless to say, I agree with the poster above who said that Simmons predictions are very far from being proven wrong. IMO it will be 2015 before anyone can make that judgement with some minimum of academic rigor, unfortunately.

 
At Friday, October 17, 2008 at 6:39:00 AM PDT, Anonymous Anonymous said...

jev: IMO it will be 2015 before anyone can make that judgement with some minimum of academic rigor, unfortunately.

Do recall that the entire PO hypothesis is that the crash is now, the disaster looms in the near-term immediate, and (most ludicrous of all) there is nothing we can do about it.

If instead we accept your apologetic that it will take 10 years for civilization to perceive clearly that peak-oil is upon it, well, gee, whatever do we need to worry about?

 
At Friday, October 17, 2008 at 6:54:00 AM PDT, Blogger Ari said...

I can't help but wonder if some of the more, shall we say... extreme (is that too mean?) portion of the peak oil community will find a way to show that OPEC's production cuts are further signs of the inevitable decline.

I suspect that production cuts now will add further noise to the ability to see where production will go in the future, but ultimately I think that OPEC will cut back to keep the price around $100/barrel +/- $10. That's mere speculation on my part, but it seemed to me that people weren't totally put off by the idea of $100/barrel oil, and it may be the oligopoly/cartel equilibrium point for oil.

 
At Friday, October 17, 2008 at 7:36:00 AM PDT, Blogger Barba Rija said...

Well, ari, isn't that after all the cornerstone of all the doomsday myths to speculate? People speculate too much, and like conspiracy theorists, they never adapt their theory to reality, instead what they do is try and fit reality to their theories. I am 100% sure that sites like TOD et al, if they didn't do that already (I don't skim them in daily basis), they will surely start questioning the veracity of Saudi's claim that they will produce less because they don't have enough oil, and that the excuse of falling demand is pathetic, because they are actually with production problems, etc., etc.

I would even put my money on it.

 
At Friday, October 17, 2008 at 8:39:00 AM PDT, Anonymous jev said...

"Do recall that the entire PO hypothesis is that the crash is now, the disaster looms in the near-term immediate, and (most ludicrous of all) there is nothing we can do about it."

I believe that the current implosion in the financial markets is due to oil's price rise, which was totally unanticipated by the credit markets and which has made most of the world's debt bad as a result. But we won't be able to *prove* that with any rigor until 2015.

By the way. There are still a good many respectable persons who dismiss the idea that the oilcrises of the '70 had anything to do with the recessions in that period. Likewise, come 2015, given peak oil in the 2005-2015 timeframe, there'll be people like Ari telling us that a presumed world depression going into it's 7th year by that time would have nothing to do with peak oil.

"If instead we accept your apologetic that it will take 10 years for civilization to perceive clearly that peak-oil is upon it, well, gee, whatever do we need to worry about?"

It might indeed take that long to percieve that *peak oil* is the underlying cause of reduced oil production and prolonged economic depression. Until that time most people will maintain that there is no peak oil. They'll maintain there is no peakoil. They'll say it's just too expensive to produce more oil, given the poor state of the world economy! ;)

 
At Friday, October 17, 2008 at 9:16:00 AM PDT, Blogger Ari said...

Jev,

7 years? Doubtful. Even Roubini, who's notoriously less-than-sanguine, said 24 months.

My problem with saying that oil's price was THE cause of the credit crisis is that there is VERY little economic evidence that it was oil AND NOTHING BUT OIL. That's far too simplistic, and doesn't account for other factors that are much more likely to have caused people to default on their mortgages.

Remember that the entire basket of commodities rose rather precipitously, and that we see movement of all of them in a roughly uncorrelated fashion(I have not done ARMA or AR1 to deal with lags, but I will if anyone can provide me with month-on-month data of all commodities in the typical basket.) Oil prices also did not rise that much as a PERCENT OF GDP or income. Yes, some people on the margins were pushed over the edge, but for the VAST MAJORITY of people it wasn't the oil prices that killed their solvency, but the fact that these ARMs would go from 5% to something absurdly higher. Gas consumption can be reduced a good deal in a pinch, but what do you do when your mortgage payment nearly doubles in one month?

It's interesting to note that we don't see nearly as many foreclosures in Japan despite the fact that they pay far more for gas as a percent of per capita GDP.

It might indeed take that long to percieve that *peak oil* is the underlying cause of reduced oil production and prolonged economic depression. Until that time most people will maintain that there is no peak oil. They'll maintain there is no peakoil. They'll say it's just too expensive to produce more oil, given the poor state of the world economy! ;)

By the way. There are still a good many respectable persons who dismiss the idea that the oilcrises of the '70 had anything to do with the recessions in that period. Likewise, come 2015, given peak oil in the 2005-2015 timeframe, there'll be people like Ari telling us that a presumed world depression going into it's 7th year by that time would have nothing to do with peak oil.

I never said that the current economic slump has NOTHING to do with oil. I just question the whole "link oil prices to EVERYTHING!" mindset that's so prevalent.

I don't see how the bajillion dollar elephant in the room known as "stupid CDOs" is somehow being ignored in favor of oil prices.

 
At Friday, October 17, 2008 at 12:05:00 PM PDT, Blogger Barba Rija said...

By the way. There are still a good many respectable persons who dismiss the idea that the oilcrises of the '70 had anything to do with the recessions in that period.

Of course it had. But look at the percentage of GDP used on oil then and now. No comparison whatsoever. And oil wasn't everything. Geopolitical tensions and the beginning of globalization through oil markets had also a lot to do with it. The fall of politics and the rise of venture capitalists (the "raiders"). The fallen myth of controlled sustained growth by decree. Etc. Many things added up.

The major was oil.

Of course, if Russia today, which exports a similar value today in percentage that Iran did in the 70s, would announce that they would stop exporting oil, then I would say we were headed to a full-blown recession.

This is not what has happened today. I daresay that the myth that history repeats itself was completely debunked. We are entering uncharted territory. But before you get too worried about that, notice that this has been always the case.

 
At Friday, October 17, 2008 at 2:22:00 PM PDT, Anonymous Babun said...

One important issue regarding the question about whether oil had a lot to do with the current economic downturn is what happened in China? If oil prices were to hurt growth it would seem logical that it all would've started in China - the nation which lead both world economic and oil consumption growth.

 
At Friday, October 17, 2008 at 3:40:00 PM PDT, Anonymous Anonymous said...

jev: I believe that the current implosion in the financial markets is due to oil's price rise, which was totally unanticipated by the credit markets and which has made most of the world's debt bad as a result. But we won't be able to *prove* that with any rigor until 2015.

Per Wolfgang Pauli, you aren't even wrong. Virtually all the debt that has created the current financial wipe-out was created bad in the first place. This blog response box is too small to contain the complete argument, so I'll simply leave you with a whimsical summary:

http://www.youtube.com/watch?v=wFzUR1k3ku4

Keiser is a bit of a kook (he has weird, unsustainable, views in other areas, re: WTC, peak-oil, food, etc -- see his website http://www.maxkeiser.com/), but his entertaining description of the debt situation, a full year in advance of the chain-reaction disaster initiated by the collapse of the sub-prime mortgage market in the USA even before the price of oil spiked, is dead on the money.

 
At Friday, October 17, 2008 at 4:02:00 PM PDT, Anonymous Anonymous said...

babun: One important issue regarding the question about whether oil had a lot to do with the current economic downturn is what happened in China?

I think the "oil had something to do with it" hypothesis needs to pass a simple stink-test before we should entertain questions like this.

Right now, it failed the test: the stench was unbearable!

The reality we are observing today is a nasty consequence of the fact that the financial system has been engineered for maximum profit, not maximum stability. Remember the Challenger disaster? NASA engineers telling people the chance of failure was 1 in 100,000 or something? Yet there in the sky was that undeniable supersonic fireball. "How'd that happen?"

Well, the high priests of risk management, worshiped as gods on Wall Street, were giving us the same story, for so long ... and now the chickens have come home to roost.

The price of oil, the price of wheat, the price of belly-button fluff ... all irrelevant when the issues were deeply systemic, the wealth an illusion, the accounting fraudulent.

 
At Friday, October 17, 2008 at 7:12:00 PM PDT, Blogger Ari said...

anon,

The accounting point you make is particularly interesting to me. I've been saying for a while now that had special purpose vehicles not been allowed, investors would have smacked the i-banks hard for their huge collateralized debts and kept them in line better.

What's almost perverse is how the i-banks managed to get the SPVs approved as being important to financial security/growth, and then ALSO managed to convince everyone that CDOs were a GOOD thing when even the "good" traunches were puke.

I believe that had US-GAAP not been so lax toward these behaviors we might have seen a lot of this stopped a decade ago.

Granted, I remember saying back in 2002 or 2003 that the whole housing market was a disaster waiting to happen because you were socializing the risk of the most risky borrowers across the entire economy. I was still an undergrad then. Maybe I should have been running Goldman or Bear Stearns?

 
At Saturday, October 18, 2008 at 9:47:00 AM PDT, Blogger bc said...

"The doomers, be they moderate forms like Greer, or the foaming-at-the-mouth nutcases at TOD, they can't get beyond the "fact" that 'liquid fuels come out of the ground'. Once they are "gone", they believe, the end is at hand."

If you want to see real nutcases take a peek in the asylums peakoil.com or LATOC. They make TODders look almost reasonable!

You are right though, the failure of peak oilers is in treating it as a single-dimensional problem. Perhaps sometimes you need a laser focus, but you can't hang everything on a decline in liquid fuels. There are alternatives; the question is will they be cost-effective?

When the problem is widened to take in other factors, PO looks better or worse depending on your point of view, but the reliability of any predictions is poor because we just don't know.

I don't care much for psuedo-religious stuff, the man in the street is not persuaded much by mainstream science, so fringe religion is futile. Things might be better if humans spiritually reconnected to the Earth and Nature ("or some shit like that"), but the God of Growth is most connected to our DNA.

Tainter's view of civilisation is that complexity arises as a problem solving mechanism. He says that if the system is working, then individual shocks like PO are not enough to cause collapse. Instead collapse comes from systemic failure.

Therefore the credit crunch is most worrying, as it shows the system has faults. A well functioning economy should be able to transition to alternatives.

Tainter also notes that collapse occurs if it is widely seen that a simple society is more viable. If enough people quit industrial and city jobs and go to work on a farm, society would collapse to a simple state. I don't see that happening any time soon; people like their iPods. They will put up with a lot of shit before giving up on Growth.

Indeed, given the increasing usurping of privacy and freedoms by both government and corporations we are putting up with a lot of shit.

It is not recognised by mainstream economists, but it is known that the economy is a mathematically chaotic system. In the past, people might sacrifice animals to appease the Gods when apparently random shit happens. Today, we are in a position to identify why things happen, and potentially fix them.

There's no guarantee of success, and we may die trying, but historically we are in the best position to be able to fix the problems we face today.

 
At Saturday, October 18, 2008 at 6:19:00 PM PDT, Anonymous mdavid said...

jd,

Simmons was wrong, and his critics were right. You can change the subject, tip-toe around the edges, and spin til the cows come home. But it doesn't change the bottom line: Simmons said Saudi production was going to go down, and it went up.

You are a real treat. Sheese, grow up. Exactly where have I tried to "change the subject" "spin" or whatever else you do here? I merely tried to answer your question.

Why don't you show us an exact quote from TITD where Simmons states Saudi production will fall by 2008?

I read the book, and that's not the message I got, but then again, I was reading it fairly. Simmons seemed quite conservative to me, and was pretty clear that timetables are impossible to pin down over the shorter term (yes, three years is the shorter term for oil production of a country).

I await the quote from the book. Please keep it in context and at least try to be fair, if possible.

 
At Saturday, October 18, 2008 at 9:47:00 PM PDT, Blogger Stephen H said...

There is one observation that Matt has made that deserves discussion. He estimates that 95% of the world's "Proven" reserves have not been audited by a trustworthy, neutral 3rd party. So this means that all of the arguing back and forth about where we are on the production curve is based on 95% speculation.

The most interesting Peak Oil prediction I’ve seen recently was published by Peter Wells (http://www.neftex.com) at the recent ASPO-USA conference in Sacramento. His firm purchased the entire IHS/CERA database for a little over 100k (the same one Daniel Yergin uses), and then augmented it with data from at least 3 other sources, including inside data from KSA. They then used the data to create predictive models for the different geological field types. Its predictions include OOIP, reserve growth, recovery rates, and production rate over time.

They then verified the model by matching its predictions against the historical data from non-OPEC fields. It’s so close (1% to 2%), that it makes me worry that there’s a flaw in it somewhere (See Slide 28). However, while I’m not an expert on this subject, this is the first time I’ve seen the output from a model verified against historical data from existing fields (Be glad to hear of any such prior efforts if you know of any others). All the models I’m aware of use either a historical supply vs. demand model, or were only checked against other models, which is completely useless.

So the upshot of his work is that he finds peak liquids will happen between 2017 and 2023, with peak crude most likely occurring in 2018 and about a 2% decline rate thereafter (See Slide 46. Note: for you data fans, the yellow area is the uncertainty in the forward moving prediction.)

So, by his average projection, peak crude is only 10 years off, which is very close to the prediction made by Fredrik Robelius, who also using categorized historical data for Giant and Super Giant oil fields (1,000 MB), predicted it occurring between 2008 (worst case) and 2018 (best case).

I should also note that all of these dates were calculated before the financial crisis broke, and the pending global recession and/or depression could easily push the peaks out several years due to decreased demand, which would be a very good thing.

Below are the links to Peter’s slides and Fredrik’s report. Both are interesting reading.

http://www.aspo-usa.org/aspousa4/proceedings/Wells_Peter_OPEC_ASPOUSA2008.pdf
http://publications.uu.se/abstract.xsql?dbid=7625

For me the policy to follow is very clear. As I’ve said before, if none of you who post here would invest all of your money in mining company whose assets were only 5% verified, then why would you bet the future of the U.S. on a national energy policy with the same level of uncertainty and risk?

In the 1980’s during nuclear disarmament talks, President Reagan was posed with a problem. The USSR wanted him take on face value their totals for megatonage and missile counts. He instinctively responded with “Trust, but verify.” This is what we should do with oil. We should only use verified data and always error on the safe side. So, using President Reagan’s wisdom, I recommend the following:

1) Go around the world to all of the countries and producers, and ask them for their well logs and geological data. If they supply them, then calculate the OOIP, remaining reserves, reserve growth, and future production rates.

2) If a country, such as KSA, refuses to supply their data, well it’s their oil and their right not to so, however,

3) For all countries/producers who don’t provide data, then use only the most geologically conservative estimates, based on best available data, not optimistic projections, promises or assurances. Just like in the military, always error on the safe side.

4) Base our industrial/energy policy on the predicted Peak Oil date and the subsequent decline rate. Whenever new data becomes available, or an assumption is proven to be off, then correct the model, and adjust our policy as needed.

I feel to pursue any other policy is risky, unnecessary and unwise. I would be interested in hearing from the various posters here.

NOTE: Just as a note about Peter’s predictions. I asked him afterwards what the difference was between his projections of peak date and decline rates vs. those calculated by Peakists using depletion models, and he said it was due to 3 main issues:

1) They predict larger EOR rates,
2) His KSA production rates are larger due to smaller depletion rates in existing fields and greater production from new and rehabilitated fields, and,
3) Larger reserves growth rates over time, especially in KSA.

So there it is. We are all making educated guesses on statistically modeled data. Since small changes in initial assumptions lead to dramatically different supply predictions, shouldn’t our approach policy be guided by caution, rather than hopefully optimism?

 
At Sunday, October 19, 2008 at 5:52:00 AM PDT, Blogger JD said...

"I await the quote from the book. Please keep it in context and at least try to be fair, if possible."

There's no need for the quote to be from the book, aside from the fact that you're playing games. The quote I gave earlier is a perfectly fair and representative example of Matt Simmons' rhetoric regarding the Saudi Oil fields.

"Simmons also suggests that Saudi production is very near its peak. But the feedback he has received from technical people who have read the book, leads him now to believe that Saudi Arabia has "actually exceeded sustainable peak production already."
"And I think at the current rates they are producing these old fields, each of the fields risks entering into a rapid production collapse," he said."Source

Matt Simmons has spent that last 5 years traveling around the world making comments like this, sounding a very shrill alarm about Saudi oil production. Meanwhile, Saudi production kept climbing, and in July reached a level not seen in almost 30 years (stats from the EIA Table 11c Source):

2007
Aug: 8.6mbd
Sept: 8.8
Oct: 8.8
Nov: 9.0
Dec: 9.1
2008
Jan: 9.2
Feb: 9.2
March: 9.2
April: 9.1
May: 9.4
June: 9.45
July: 9.7

The disconnect here is clear and obvious to anyone with an ounce of common sense. Your only substantive response to this has been "we are not out of Simmon's window yet. His predictions are still alive." OR "Simmons seemed quite conservative to me, and was pretty clear that timetables are impossible to pin down over the shorter term (yes, three years is the shorter term for oil production of a country)."

In other words, Simmons' claim (according to you) is that Saudi Arabia will peek and decline someday in the indefinite future. And of course, you are absolutely right, Simmons himself says so:

"The very best criticism — the most detailed and the best written — was called Another Day in the Desert* and was written by a very highly regarded firm in Calgary. But where they went wrong was their assertion that my claim is Saudi Arabia's oil is about to go into a sudden and irreversible production collapse. That's wrong. The summary of my book is the myth that the oil fields could grow forever is false." (Source: interview with Barron's, "Personal Wealth: Twilight for oil?", Jan. 30, 2006)

Which, of course, is Exhibit A of what a farce Matt Simmons' position is. You don't need to write a 448 page book to demonstrate that the oil fields can't grow forever. That's a common sense truism which everyone agrees with. Everyone is predicting that the Saudi fields will decline "someday". Everyone is predicting that the Saudi fields can't grow forever. So what is Matt Simmons' point again?

Essentially, what we have here is a classic case of prediction chicanery. If Saudi production had terminally nose-dived in 2007, as TOD predicted, Matt Simmons would have claimed to have predicted it, and been lionized as a prophet. In fact, if you read the above link, you'll see that Steve Andrews from ASPO-USA actually jumped the gun and made that claim:

"Steve Andrews of ASPO-USA correctly points out to me in email that Matt Simmons began warnings about Saudi Arabia as early as December 2003, significantly before the publication of the hardback version of the book in mid 2005."

So it's going on five years of Defcon 5 warnings about Saudi oil, and Saudi oil production is at a 30 year high. So what do Simmons and his defenders do? They sweep it all under the carpet. "I never said they peaked, I never said they'd collapse, I never gave a specific date" etc. It's a fraud -- the peak oil equivalent of privatize the gains, and socialize the losses.

 
At Sunday, October 19, 2008 at 6:14:00 AM PDT, Blogger JD said...

stephen h:
Thanks for all the interesting links and info.

I feel to pursue any other policy is risky, unnecessary and unwise. I would be interested in hearing from the various posters here.

The question that immediately comes to mind regarding your approach is this: What exactly are you proposing to do in terms of policy? That's the interesting part.

You're simply introducing a back-door way of forcing people to do something they probably don't want to do. For example: "We're going to play it safe everyone, and assume that Saudi oil production might collapse next week. To deal with this contingency we will be launching a strict program of gasoline and diesel rationing." No matter how rational of a case you make for the precautionary principle, when it starts to get intrusive, people will think you're just fearmongering to promote your agenda. Imagine if rationing had been instituted in the last couple of years as a response to Matt Simmons and Twilight in the Desert. People would be on rationing tickets, and Saudi Arabia would still be pumping strong. There would be a huge backlash, and they wouldn't let you get away with saying "We didn't say it really would collapse".

Seems like it just opens up a can of worms. So why not just advocate for the policy directly?

 
At Sunday, October 19, 2008 at 9:04:00 AM PDT, Anonymous Anonymous said...

Since small changes in initial assumptions lead to dramatically different supply predictions, shouldn’t our approach policy be guided by caution, rather than hopefully optimism?

I'm personally planning on oil peaking in about 5 to 10 years, so this kind of argument doesn't bother me personally.

The next car will be a hybrid. The car after that a PHEV. (I'd buy an Aptera right now, except they won't sell unless you live in California!) Isn't everyone thinking on these lines nowadays? Look at what happened to the SUV market this year: from cash cows to boat anchors in mere weeks. Driving habits similarly, albeit it will be difficult to separate this from the unfolding economic catastrophe (US oil consumption ia now down 9%(!!) from a year ago; http://online.wsj.com/article/SB122418052416641331.html?mod=googlenews_wsj).

So like JD, I'm not convinced that specific policies are required, nor will ever be required, even if oil production did in fact peak in 2005. It looks like the market can 'solve' the problem on its own.

But if a true and ugly crunch began tomorrow, and some Central Committee had to sit and manage the problem directly, it would look at consumption patterns:

http://peakoildebunked.blogspot.com/2008/01/326-detailed-breakdown-of-us-petroleum.html

and notice that 45% of oil goes to cars. Ration use of pure ICE passenger vehicles, make their manufacture illegal, etc. "All" you have to do (he says, waving his hands like this would be easy) is double the fuel economy of the fleet, and US oil consumption drops by 20%. This Master Headquarters of the Command Economy wouldn't even need to worry about trucks, airplanes, plastics, or the rest of it.

 
At Sunday, October 19, 2008 at 2:11:00 PM PDT, Anonymous Babun said...

JD,

It may be that Simmons is a slippery guy regarding his predictions. But the fact remains you can't really completely dismiss those predictions yet. I don't think it's entirely correct to just call it prediction chicanery either because of the uncertain nature of predicting production. While it may be fair to discredit him today, it may be fair to credit him tomorrow.

I'm not expecting Saudi oil to come off a cliff though. Just taking note of the unjustified certainty in your argument.

 
At Sunday, October 19, 2008 at 5:02:00 PM PDT, Blogger Stephen H said...

JD & Anonymous,

I absolutely agree with the overall approach of “Don’t bring in the Government” (that’s with a capital “G”). I don’t want them trying to orchestrate our economy unless it’s absolutely necessary. And no, I don’t think that KSA will suddenly go into sudden decline next week or anytime in the next few years. Their fields are massive, and decline far more gently than smaller fields. What I am worried about, (yes I’ve read Twilight in the Desert, Gusher of lies, and many others) is the same thing that Matt Simmons has been trying to point out in his writings. We must actively plan, we can’t sit back and let the market dictate our actions.

When you use secondary and tertiary (EOR) techniques, you change the shape of the production curve from the more stereotypical sombrero hat, to more of a Double Black Diamond ski slope with a dramatic drop off on the post peak side. This is the lesson he was pointing out with Yibal. Secondary and EOR techniques were supposed to extend its life for many years, and instead it when into a rapid collapse. So his message is that because KSA is so critical to world oil production, we just can’t take the Saudi’s word that everything is fine, especially when Ghawar is showing a 70% or greater water cut. And yes, many fields have large water cuts, but his point was that based on experience, a 70% water cut is indicative of a field near at peak production. Because the super giant fields account for so much of the world’s production, they dictate world supply. (See Fredrick’s paper on Giant fields). (http://publications.uu.se/abstract.xsql?dbid=7625) And if the large fields in KSA are peaking, then their drop-off may be far steeper than presumed 2% due to use water flooding, horizontal wells and other EOR techniques.

The other iceberg that’s floating around in front of us is Resource Nationalism. As producing countries internal consumption gets closer to their declining production, the potential increases for them scaling back exports more rapidly than geology dictates. Again, I’m not saying that OPEC will collapse next year or some other end of the world prediction, but rather that non-linear factor must now be taken into account.

So, what this means is that the situation is too complex to sit back and let events take their course. We need a plan. And to your question of what policy do I recommend is the following:

1) Establish Standards for determining Embodied Energy and EROEI:
Most blog entries are dedicated to arguing what’s the best way to deal with the eventual oil peak. Amazing those who seem to be in most violent disagreement are actually in violent agreement. Both are arguing we should take the most efficient path. The problem is that we don’t have sound data to decide what that is. For example, do you build nuclear power plants, or wind turbines with energy storage systems. According to a number of studies, both have roughly a 30:1 EROEI (Energy Return On Energy Invested). But is that really the case and is either number correct? The answer is you can’t tell, because the methods used to determine the values are so radically different, you can’t equate the two. So, step 1 is for all of the professional engineering organizations (ASME, ASME, ASCE, etc.) to establish standards for determining Embodied Energy and EROEI and review boards to maintain qualified values.

2) Require Embodied Energy reporting for all exploration & production projects:
Again at the ASPO-Sacramento meeting, Matt discussed the recent upturn in U.S. natural gas production, mostly due to the tight gas from Barnett shale formations in Texas. He said prior to the conference, he was in a room with the field managers (15 to 40, can’t remember the exact number) who were making the project go. He asked by a show of hands if any of them felt the EROEI for the wells was positive. Not a single hand went up. Now, this is purely anecdotal evidence, so I’m not claiming that the Barnett wells are losers, but it points up what is needed next. Once standards for Embodied Energy and EROEI are established, exploration and production companies should be required to report them to the EIA. This is not as hard as it seems, because just about everything is tracked by accounting software, adding up the established Embodied Energy values would be automatic. So if such standards and procedures were in place, you might be able to tell me that I was filled with NG myself, and the audited EROEI for Barnett gas was 30:1, and go stuff my and Twilight Matt’s emanations. Unfortunately, right now, no one, not even the production companies, knows the actual answer. In the past, the era of cheap oil made this kind of issue irrelevant. That is no longer true.

3) Collect world oil geological and production data as I discussed in my previous post.

4) Create production models to advise our national energy policy analysts:
The fourth and final item is hiring a number of organizations to create supply models using not just geological factors, but also geopolitical events, Resource Nationalism, economic conditions, industry trends, and consumer behavior. It’s important to have a number of different points of view, so you don’t have sound of just one hand clapping. You then use the models to guide our energy policy. The actual policies required will depend on what required and will range from lazzi faire economics at one end to an all out, WWII style effort at the other. I do not pretend to know which we will need.

My argument here is we cannot afford to be asleep at the switch and must actively plan. It’s not 40 years ago with virtually all of easy oil in front of us. Otherwise, we will be surprised by predictable but unforeseen events resulting from the interaction of highly complex, non-linear parts. You need look no further than the current economic meltdown for a case in point. The crisis was unforeseen my tens of thousands of individuals with decades of experience, not because they were stupid, but because its root causes were buried from view beneath many layers of complexity.

 
At Monday, November 10, 2008 at 10:19:00 AM PST, Anonymous Sam said...

JD,

This is in response to your first response to JDD, WHO I WILL NO LONGER DEFEND DUE TO HIS UNENDING MALICIOUS REMARKS.


Oil prices took part in the credit crunch, and even though prices are low now farmers still don't want to sell because of the loss they'll incure from grain selling at such a low rate. Plus with the credit crunch crushing exports, things don't look good.

SOURCE:
http://www.chicagotribune.com/business/chi-mon-crisis-shipping-1110-nov10,0,725739.story

Your right JD, but you paint a one-sided picture. BTW, I emailed TOD and asked them how they could have promoted the elm with such obvious faults, and about other claims I've seen on here. :]

They still haven't gotten back to me though :[

 
At Sunday, July 8, 2012 at 1:24:00 PM PDT, Anonymous Mike said...

I think Jeff Rubin is on the right track, even though the timing and degree of his prediction was off. In a nutshell, he says that long before there is peak oil, there will be a major shifting the world economy, from global growth models, to more localized independent models, due to expensive oil. It will hit the prices that will hit the world because consumption will increase from China, India and elsewhere, including the exporters of oil who are consuming ever more at highly subsidized prices, while OPEC capacity has been shown to be unable to ramp up past a certain level. This will put pressure on the dirty oil (deep sea, oil sands, etc) which can only operate if oil is above a certain price, and will send oil prices steadily higher. At a certain point, it won't make sense to import dolls from China. Manufacturing, agriculture, and jobs will return home. But...that also means China won't be exporting dolls. They will also turn to their enormous local market. And now, they won't want a weak yuan against the greenback, they will want a strong yuan. So they stop buying US bonds, hence bankrolling their debt, and the US is more than likely going to face a day of reckoning. Unless it responds by blowing up China and other challengers to their unwarranted rule.

 

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