free html hit counter Peak Oil Debunked: 403. DMITRY ORLOV CONCEDES HE'S AN IDIOT

Friday, June 19, 2009


Still on vacation, but I couldn't resist this one. A couple of days ago, Dmitry Orlov posted a new presentation on his website, well-larded with his usual asinine assertions about the imminent end of industrial civilization etc. etc.

The funny part is that much of it is based on this concept:
François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil, leaving no money for putting it to any sort of interesting use. At that price level, we can't even afford to take delivery of it. In fact, at that price level, we can't even afford to pump it out of the ground, because the tool pushers, roughnecks and roustabouts that make oil rigs work don't drink the oil, and there would no longer be room in the budget for beer.

And so, the actual limiting price, beyond which no economic activity is possible, is certainly a lot lower, and last summer we seem to have experimentally established that to be around $150/bbl. which is something like 25% of global GDP.
Scary stuff, except the figures are totally bogus.

$150 oil would not constitute 25% of the world's GDP.

The world consumed 84 million barrels/day in 2008 (from the BP statistical review 2009). At $150 per barrel, that comes to $12.6 billion a day, or $4.6 trillion per year.

The CIA Factbook 2009 gives world GDP for 2008 as $69.49 trillion.

Therefore sustained $150 oil would only account for 4.6/69.49 = 6.6% of world GDP, not 25% as Orlov fraudulently states.

Similary, if oil rose to $600 a barrel, that would cost roughly $50 billion/day, or $18.25 trillion per year.

Clearly $600 oil cannot consume the entire world's GDP because

$18.25 trillion < $69.49 trillion

It would take something a little closer to $2240 per barrel to consume the world's GDP.


You can see where Orlov screwed up if you compare his comment with the original analysis by Cellier. Here's the quote from Orlov:
François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil, leaving no money for putting it to any sort of interesting use.
Here's the source quote from Cellier:
This means that, if ever the price of energy should rise to a level of $0.37/kWh, we would spend our entire GDP just on the procurement of energy. This corresponds to an oil price of $590/barrel.
Notice the little switcheroo there boys and girls?

The really funny part is that he delivered this presentation at some cheesy doomer jamboree called The New Emergency Conference and NOT ONE PERSON bothered to check his figures. Then he posted the presentation on his blog, and it was commented on by more than 40 fawning idiots, and NO ONE bothered to check his figures. No critical thought was anywhere to be seen. Nothing but wall-to-wall brown-nosing: "Fabulous, Dmitry." "What an absolutely amazing and thoughtful essay." "Marvelous" "Brilliant!"...

I submitted a comment pointing out Orlov's mistake on his blog. However, Orlov heavily moderates the blog, and buried the comment by not posting it. Apparently the facts are not welcome at ClubOrlov.

This incident really speaks volumes about sycophancy and gullibility in the peak oil community.

2009/6/20 update:

Orlov has now formally conceded that yours truly gutted him like a fish, and his figures are complete bullshit (Read down in the comments. Orlov calls himself "kollapsnik". Hat tip to LoneSnark for smoking him out.):


Some people have pointed out that I misquoted François Cellier:

"François Cellier has recently published an analysis in which he shows that at roughly $600/bbl the entire world's GDP would be required to pay for oil..."

Here's the analysis:

Please substitute "energy" for "oil" and $590 for $600.
I said "oil" whereas I should have said "energy". [...] I don't care about arithmetic very much at all.
2009/7/2 update:
Another (more formal) apology from Kamrade Orlov.
Reading the comments to the blog article, I was amused to see that Dmitry had a presentation (tickets: $20-30) scheduled in NYC for July 11, 2009, but it was cancelled due to lack of interest. Apparently only 18 people in the entire 5-borough area expressed any interest. LOL
by JD


At Friday, June 19, 2009 at 9:05:00 AM PDT, Anonymous Londondude said...

Great article JD, thanks.

Hope you're enjoying your vacation too!

At Friday, June 19, 2009 at 9:36:00 AM PDT, Anonymous AndrewRyan said...

Hah, I was hoping you'd point this out, JD. Orlov's website was linked yesterday on LATOC, and propped up by Savinar. Of course, like you mentioned, no one bothered to check the actual numbers. Those darn, pesky, facts can get in the way of doomer prophecies.

At Friday, June 19, 2009 at 9:42:00 AM PDT, Anonymous AndrewRyan said...

Oh yea one more thing, I went to Orlov's website to check out the comments when I stumbled on this little gem by "kathy harrison":

If every high school in every city in every state in this nation were to make this essay required reading perhaps we would stand a chance. As it is, with your permission, I am going to give a copy to each of my children for their next holiday gift along with some seeds and a book on small scale farming

You just can't make this stuff up.

At Friday, June 19, 2009 at 9:47:00 AM PDT, Blogger TJF said...

Welcome back from vacation. We missed you.

At Friday, June 19, 2009 at 10:32:00 AM PDT, Anonymous LoneSnark said...

That is a nice little switch he pulled. Peak Oillers are unlikely to realize that most of our energy comes from sources other than oil. Coal is a poor substitute for oil and will therefore never cost as much as oil.

At Friday, June 19, 2009 at 11:04:00 AM PDT, Anonymous Anonymous said...

Collapse, massive over-something, extraordinary, failing fast, immediate and very real threat, grotesquely, urgently, rapid …


At Friday, June 19, 2009 at 11:16:00 AM PDT, Anonymous goofy said...

JD- you should do a post on matt simmons and his "natural gas cliff" that went bogus do to the new drilling techniques. just yesterday they had news about how nat gas reserves spiked hugely do to...TECHNOLOGY!

run doomers! run! another JIT technofix.

At Friday, June 19, 2009 at 12:19:00 PM PDT, Blogger gsanford said...

I totally agree with you, JD. If you're going to be a peaker, keep your nose clean and your facts straight, otherwise your credibility is irrevocably shot to hell. Peakers are indeed too gullible and just because there are outspoken people talking about peak oil doesn't mean all their arguments hold water.

At Friday, June 19, 2009 at 12:48:00 PM PDT, Anonymous Anonymous said...

"Therefore sustained $150 oil would only account for 4.6/69.49 = 6.6% of world GDP, not 25% as Orlov fraudulently states."

What you and Orlov both seem to overlook is that "$150 oil" sustained over the course of the whole year of 2008 would have put an even bigger crimp in the world's GDP, knocking it down much lower than even the CIA's guesstimate.


At Friday, June 19, 2009 at 2:48:00 PM PDT, Anonymous John said...

Perhaps it is time for "Peak Matt Simmons?" Any volunteers?

At Friday, June 19, 2009 at 2:58:00 PM PDT, Anonymous Steve in Hungary said...


The trucks that run into your local supermarket - you know, the ones that deliver the food that you need to buy and eat in order to survive - what do they run on?

Think about it! I don't have to. If push comes to shove I can well survive here with both food and booze :)

At Friday, June 19, 2009 at 3:17:00 PM PDT, Blogger Ari said...


And you seem to miss the concept of elasticity of demand.

You also have a very very strange concept of how GDP works.

At Friday, June 19, 2009 at 11:18:00 PM PDT, Blogger Ari said...

Steve In Hungary,

So now we are going to have so little oil that we won't be able to have trucks run food to local stores?

Also, JD already showed that trucks can be run on batteries or hybridized. I'm not terribly worried about trucks running out of fuel locally.

But feel free to worry for all of us. :-)

At Saturday, June 20, 2009 at 5:57:00 AM PDT, Anonymous Anonymous said...

"You also have a very very strange concept of how GDP works."

Do I? Please enlighten. I was of the impression that high oil prices had contributed to a contraction of global GDP.

If demand were as elastic as you think it is, shouldn't we still have $20 oil?


At Saturday, June 20, 2009 at 6:17:00 AM PDT, Anonymous Henry Wolff said...

We don't need no stinkin' math!

thanks for puttin' pencil to paper JD. Give 'em hell.

At Saturday, June 20, 2009 at 7:39:00 AM PDT, Anonymous Steve in Hungary said...


No, no - the trucks will continue to run. But when oil hits $150 again how much of that cost do you think will get transferred to increasing costs of food?

Hybrid/battery trucks. Yep - fine for short hop local deliveries, but how far does your average item of food get transported these days? Hundreds if not thousands of miles. Much of my food travels all of fifty metres (here to the garden). The apples have to come a bit further - that's about 150 metres ;) The walnuts are only 30 metres :o

Worried? Not me!

At Saturday, June 20, 2009 at 10:28:00 AM PDT, Blogger Ari said...


Oil prices contributed, but once again you are ignoring the demand side of things. What you seem incapable of realizing (and James Hamilton at UCSD has pointed this out before) is that demand is affected by price. Once oil hits a certain price, demand goes down. People change their behavior based on price. In fact, as he points out, it's at about 6% of income that people start changing their behavior.

If demand were as elastic as you think it is, shouldn't we still have $20 oil?

Why $20? I don't get why you've picked $20 as your figure? Why not $25? Or $30? Elasticity is sensitive to price, but clearly demand is not so elastic that we stop buying oil at $70/barrel. It's not that complicated.

Steve in Hungary,

Nothing stops hybrid trucks from traveling long distances. That's what makes hybrids great.

Besides, what's to stop us from using, I dunno, more trains? Or modifying behavior?

Honestly, the biggest supposition of the peak oil dooooom people is that people don't modify behavior. That's clearly not true, and has been demonstrated, I dunno, for the past few thousand years?

At Saturday, June 20, 2009 at 1:14:00 PM PDT, Anonymous goofy said...

"but how far does your average item of food get transported these days? Hundreds if not thousands of miles"

what you doomers never contemplate is WHY food travels hundreds if not thousands of miles. it's because it's very cheap to ship food. wherever the food is grown and shipped hundreds of miles is wherever some other costs besides shipping are the lowest and where the food can grow in the BEST climate.

think about that.

we could grow food more locally but for all we know the food could be much more expensive. land and labor could be much more expensive. water might be a problem. the general climate and soil conditions might be a problem.

doomers don't take those into account but you can sure bet real farmers in the real world and on the real ground take those into account. the ivory computer tower doomers don't!!!

At Saturday, June 20, 2009 at 8:57:00 PM PDT, Anonymous Anonymous said...

This actually makes me pretty angry. How was he allowed to give a presentation on this without even checking simple figures?? I don't believe this was an accident. I believe it was done on purpose to continue to push his agenda and whip the masses in a panicked frenzy. If this doesn't make doomers question what the motive of people like Orlov and the like truly is, I don't know what will.

It was also posted on the oil drum and no one questioned it there either, at least since I checked last.

Most doomers I have come across want humans to power down regardless of the facts. They are hoping billions will die, since they see humanity as a parasite. It's a disgusting attitude, to say the least.

At Saturday, June 20, 2009 at 11:55:00 PM PDT, Anonymous Anonymous said...

He might technically be right in a manner that he does not understand. If oil is taking up 100% of the global DISCRETIONARY SPENDING, the economy will be unable to function. I suspect global discretionary spending IS closer to 6%, but that's just at a glance and I invite any and all to point out the flaws in my 'theory' :P

At Sunday, June 21, 2009 at 5:01:00 AM PDT, Anonymous Lucario said...

It all goes to show that those who can't do the math properly should sit down and shut their mouths.

Besides, oil prices tend to plummet when they reach about $150/bbl, due to - guess what - decreased demand.

At least Mr. orlov realized his error, and said it was about energy in general, not just oil. This begs the question: how much is a kilowatt of, say, nuclear or wind power in barre;s-of-oil equivalent?

At Monday, June 22, 2009 at 7:50:00 AM PDT, Anonymous Anonymous said...

Steve in Hungary

Doing some local gardening is smart and can be fun, if you enjoy that kind of stuff.

But as a side note, most delivery trucks (at least in the US) don't run on oil...they run on diesel fuel. Which we've known how to make from, if nothing else, coal, for a long time. Never mind the fact that short-hop transport, as you've noted, can be electrified.

If your point is that long-haul trucking could become more expensive, I'm sure you're right. In that case we need to shift more of our long-haul freight from them onto a proven hybrid/electric technology that's more than 3 times as efficient: trains. Trains that are already in use, no new tech for trains required...and yeah, they're already hybrid deisel/electric.

But I'm glad you're not worried: neither am I.

At Monday, June 22, 2009 at 10:22:00 AM PDT, Anonymous Hardy Scott said...

HDT, this is interesting,

Ari indicates that:
Once oil hits a certain price, demand goes down. People change their behavior based on price.

But he fails to make the connection that high oil prices cause recessions. What happens when people change their behaviour based on price, lower economic activity… which leads to…

Again, out of both sides of his mouth. High oil prices do not cause recessions when it’s convenient, followed by “people change their behaviour”, rather vague way of saying consume less when that is convenient.

At Monday, June 22, 2009 at 12:49:00 PM PDT, Blogger Bloggin' Brewskie said...

Great post, JD! I was going to do post on him myself (not on this topic), but it look like you beat me to the punch. That means I can concentrate on Simmons again. Good job.

I recall sifting through some of Orlov's crap one time and recalled his recollection of Soviet automobiles: "a good quality car with easily replaceable parts." Hah! It's been said the average Soviet auto lasted 50,000 km. Throw in the poor built, lackluster parts, difficulty obtaining anything needed in a timely basis - plus the Russian drunks who pilfered the roads (and still do) - and you have a fine auto that makes the Chevette look like a fine piece of workmanship.

Enjoy your rest.

At Monday, June 22, 2009 at 4:32:00 PM PDT, Anonymous Anonymous said...

Jay Wee,

Christ, you all are such a bunch of ninnies.

Correcting market collapse from oil/energy at 25% of GDP to 6.6% of GDP makes Orlov's argument 4X more powerful. Doh!

Thanks for making Orlov's piece even better.


At Monday, June 22, 2009 at 9:01:00 PM PDT, Anonymous OilFinder said...


JD already did that a while back.

At Tuesday, June 23, 2009 at 9:37:00 AM PDT, Anonymous Anonymous said...

"But he fails to make the connection that high oil prices cause recessions."

Admitting that connection is tantamount to admitting that the effects of peak oil are real and already being felt, and the techno-utopians on this blog simply cannot concede such a thing.

Because the world as a whole has enough oil reserves to preserve the lifestyle of the typical gas-guzzling American for another 20 years or so, there is no legitimate reason to be concerned with the existential risks associated with importing 2/3 of one's oil supply. Oil is "mostly freely traded," we are told. The fact that oil is no longer cheap has nothing to do with actual supply and demand, or even the perception of supply and demand. The fact that oil prices can produce recessionary shocks in the economy is due only to fearful cynics speculating on oil, and nothing real.


At Tuesday, June 23, 2009 at 10:38:00 AM PDT, Anonymous Anywhere said...


You are assuming that people here concede that Orlov's overall argument about last summer's high oil prices causing the economic meltdown is correct. I doubt most do. I know I don't. Complex systems are, of course, iterative, but I'd say on balance that the high oil prices were a symptom of the meltdown, not a cause.

But that's already been covered on this blog at length. The from several months ago), people here have called him out on his error and he's published the comments and retracted his argument.

At Tuesday, June 23, 2009 at 2:10:00 PM PDT, Anonymous Babun said...

Not to mention the price actually paid for oil is almost always lower than the spot prices although based on them AFAIK.

At Wednesday, June 24, 2009 at 2:02:00 PM PDT, Anonymous Anywhere said...

Heh. The squirrels ate my 2nd paragraph. It should've read:

But that's already been covered on this blog at length. The interesting point is a (prominent?) doomer's inability to do simple arithmetic, his professed disdain for said arithmetic, and the lauds of his fawning supporters who didn't notice the glaring error in his logic.

Contrast that with similar errors made by JD (see his errant derivation of a demand curve from several months ago): people here called him out on his error and he published the comments and retracted his argument.

At Sunday, June 28, 2009 at 6:30:00 AM PDT, Anonymous Anonymous said...

I read Orlov's site recently...

Is it just me or is it code talk for "The Soviet Union will rise again"? I mean, he pretty much seems to state that that system was better and that there was no real difference between the US and USSR.

what a crock of shit. someone send him to the gulag. :P

Actually, i should thank him. Reading that crap got me to doubt the severity of the peak oil situation and question the hidden agendas of those behind these sites.

At Monday, June 29, 2009 at 6:34:00 AM PDT, Blogger TJF said...

The IEA just cut 3 million barrels per day for demand for the next four years:

At Monday, July 6, 2009 at 5:57:00 PM PDT, Blogger Hanley Tucks said...

Actually, both JD and Orlov are wrong.

The GDP is not a fixed pool of money which is spent either on this or on that, like my grocery budget. It's a measure of the total amount of money spent - however that money was earned, borrowed, printed or whatever.

So if the price of oil rises, the GDP goes up.

For example, we might have,
GWP = $70,000 billion
Oil consumption = 30 billion barrels
Oil price = $50
Total cost of oil = $1,500 billion
Oil cost as fraction of GWP = 2.1%

Okay, oil price leaps by $100 and stays there for a year.
Oil consumption = 30 billion barrels
Oil price = +$100
Extra cost of oil = $3,000 billion
GWP (old) + extra = $73,000 billion
Total cost of oil = $4,500 billion
Oil cost as fraction of GWP (new) = 6.4%

Of course, as someone else commented, such a rise in the oil price might knock the world into recession, and GWP drops. But recession would reduce demand for oil, so the price of oil would drop, too.

Of course, if the oil price stayed high, then other things would happen.

Chavez in Venezuela would say "woohoo!" and splash the extra cash on bridges and schools, with a little towards some Swiss banks. GWP up.

King Fahd in Saudi would say "excellent!" and build another desalination plant so they can keep growing wheat. GWP up.

Qatar would say, "nice!" and build another skyscraper. GWP up.

Iran would say, "hey USA, if you will now stop sanctions and buy our oil, we can do it cheap," and the US would say, "dude, we don't want that sulphurous tar you call oil, anyway" and Iran would grumble and go and build a heavy oil refinery and polish its enriched uranium. GWP up.

USA would say, "holy crap!" and legislate some efficiency standards or something, GWP flat.

UK and France would say "damnit!" and just go ahead and pay the extra money, maybe kick over into recession, GWP down.

And so on. It's a complex thing. This complexity of the world economy means that things are never as awful as the doomers fear, and never as great as the cornucopians dream.

At Thursday, July 9, 2009 at 12:21:00 PM PDT, Anonymous David Butler said...

I'm not really sure what the point of this blog is.


And Yet the third line says
"This site officially accepts that oil is finite, and will peak someday"

So how can you DEBUNK something that you acknowledge will happen someday?

At Friday, November 20, 2009 at 11:35:00 PM PST, Blogger Unknown said...

Calling Orlov asinine hardly inspires confidence in your own neutrality. And setting out to debunk a theory hardly inspires confidence in your own openness to truth. I give you full credit for getting to the bottom of Orlov's transcription error, but gloating about his failed publicity drive is nasty.
Is your writing supposed to persuade anybody of anything, or just make gluttonous consumers feel better about themselves. What about leaving oil in the ground for future generations instad of squandering it now? We have so many reasons to reduce our oil consumption.

At Tuesday, March 9, 2010 at 7:01:00 PM PST, Anonymous Anonymous said...

"Here's a quick calculation to give you a feel for the problem. Suppose Joe Sixpack gets in his 20 mpg vehicle, and drives 4 miles to pick up a pack of hot dogs at 7-11. This will consume 0.4 gallons of gas per pound of hot dogs (1 pack = 1 pound).
Now, a semi truck gets about 90 net ton-miles/gallon, assuming that it makes the return trip empty. So a semi can deliver a load of hot dogs (20 tons) coast-to-coast and return empty on 1333 gallons. That translates to .03 gallons per pound.
In other word, Joe Sixpack will burn 13 times as much fuel, per dog, driving to 7-11 than the semi which brought those dogs 3000 miles across the country."

Look....Joe sixpack still has to go get that hot dog and burn his gas. The truck is not dropping it off at his house. If the Hot Dog is produced locally you save that 1333 gals of fuel. Its not a question of who is burning less, its about overall reduction in fuel consumption. Please post.



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