I asked this question in a another thread so I'll ask it here....
The market can stay irrational longer than you can stay solvent.--John Maynard Keynes
Narz--maybe you can explain a few things to us novices that peak oil theory is imminent and I emphasize imminent.
Depends what you mean by imminent. I don't know whether it has already begun or it will begin at the latest at around 2030 which is a number produced by geologists on the oil company's bankroll (making their opinion biased) so I wouldn't be able to answer your question. If it has already happened as stated by some experts, we're . .. .. .. . out of luck. If it doesn't start until 2030 we have about another decade to reel from the shock and look into alternative fuels and meet peek oil with a soft thud rather than a crash. At the rate it's going, if peak oil reaches us within the next 10 years, we're in for real bad times ahead. Fact is, peak oil will be reached within the next three decades and there is no doubt about that, I'm hoping that it's in 2030.
Most of the theories I've read say that unrestrained extraction of a finite resouce rises along a bell-shaped curve that peaks when about half the resource is gone. Would you agree with this assessment?
more or less, yes.
[qutoe]If so does this actually mean externalities like regulations, taxes (complex investment structures), technology, policy considerations (Venezuela production decline and key employees moving to Alberta) and even wars (see Iran/Iraq wars impact of offshore wells) don't impact the level of production and exploration?[/quote]
no
The strangest part of the argument to me is how they believe that discovery and depletion is what nature has to offer rather than being influenced by oil prices which then determines the amount of capital available for drilling. It also seems to discount policy considerations whereby governments (see Venezuela again) determines when exploration is allowed, at what economic value and what can be extracted.
Oil companies have in recent years reported record profits yet oil production is beginning stagnate. We reached the peak of new major oil field discoveries 40 years ago and haven't discovered a major oil field in 30 years. Many of the major oil fields being reported today are in fact medium sized oil fields.
"Technology is great, but it can't find what's not there. In the last five years, we consumed 27 billion barrels of oil a year, but the oil industry discovered only three billion barrels a year. So only one barrel was replaced for every nine we used."
- L.B. Magoon, U.S. Geological Survey
I guess as an investor (my own small opinion) would be the drop in exploration reflects sound economic behavior since no one wants to waste money exploring for something that won't be used for decades.
Oil demand is rising faster than the rise of oil production. The reason for the drop of exploration is due to the fact that with todays geographical knowledge of the characteristics of a major oil field, if there was another, we'd have found it by now. As I said, we are draining old oil fields faster than we are discovering new ones.
Last, why am I to believe your theorists over the geologists at USGS or the people who have developed an extremely expensive database at Petroconsultants (IHS Energy). Are your people made up of academics that prove their work like this? I've see a lot of graphs but no citations. If they did have proof I'm sure every oil futures trader would want that database and would pay considerably more than websites and books these guys sell.
Peak oil as defined by M. King Hubbert states that the production peak will occur when half the available oil, give or take a small percentage has been pumped from the ground. Calculating it all requires a bunch of calculus and information on production and estimated reserves, and it works, Hubbert predicted the peak of US oil production 14 years before it happened. It also worked for Canadian oil production, but his prediction for world production was thrown off a few years by production cutbacks during the Arab oil embargo, the Iran Iraq war, and Gulf War II. However with all that complex calculus it's no wonder that many don't understand the theory, how it works, and what it means.
Moving forward a few decades brings us a simplified method from Kenneth S. Deffeyes, a colleague of Hubbert's at Shell Oil way back when. He noted that the oil production curve of a nation and by extension the world is almost the same as the oil discovery curve, it's just offset to the future by a few decades. Find the discovery curve and the peak point on it, then look up data for the production curve, match up the points to find the offset and this allows the peak production year to be predicted. This works out to late 2005.
