The market can stay irrational longer than you can stay solvent.--John Maynard Keynes
But the market can't stay irrational forever.
Narz--maybe you can explain a few things to us novices that peak oil theory is imminent and I emphasize imminent.
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?
Sounds right.
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?
Of course they will effect production but Albertan oil is not the same as Venezulean oil. I don't think most peal oil theory advocates claim the curve will be perfectly. New discoveries will effect it, terrorism will effect it, wars will effect it, new technology will effect it. However, given the rate of new discoveries it doesn't seem likely that there will be any new discoveries large enough to significantly alter things. Perhaps new technology will save us but I haven't seen anything revolutionary enough yet.
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.
Well, if we allowed all oil to be drilled immediately and as fast as possible (economic & environmental considerations be damned) it would only worsen the situation, IMO. Better to converse while we still have a choice in the matter to buy ourselves some more time for alternative fuel research.
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.
The arguments I've heard for not building new refineries is that there is no point since there's not enough new oil being extracted to refine it.
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.
Ok, peak oilers aren't my people (anymore than civfanatics are my people. As for the varying predictions, how can you be sure they're accurate no matter who forecasts them? There is obviously alot of fraud in the forecasting industry (for example, IIRC, most of the Middle East suddenly doubled their reserves at one point with no apparent explanation and surprisingly no questioning).
So, did you pay for the USGS forecast? If not, how do you know what they say?
BTW, I'm not an oil expert and you probably (almost certainly) know more about the industry than I do. That said, I am suspicious of the predictions and intentions of those who make claims on both sides (including "my people"
), that said, isn't it better to be safe than sorry? If we underestimate the amount of cost-effectively extractable oil in the ground don't you think we'll be better off than if we over-estimate it? I dare not call myself a "conservative" because of what that word has come to mean these days but I do believe it's better to prepare for the worst and hope for the best then merely to expect the best & only the best (the idea that "the market" will "automatically" solve the problem). This type of thinking seems insane to me. Nothing is solved but thru the effort and change in attitudes & behavior of the masses. The idea that we'll automatically solve our energy concerns seems about as logical as the idea that we'll automatically curtail global warming or even automatically survive as a species. This type of optimism (which I associate with adolescence) can sometimes be a self-fulfilling prophecy (for example, as a young adult I had supreme confidence in my driving & despite being somewhat reckless and, as I was actually a pretty good driver underneath my recklessness I avoided accidents for years) but then again, eventually, inevitably, reality tempers the unrealistic (in my case I got in an accident that would have killed me had I been driving a British car - i.e. : the car was totaled passenger side of the car was crushed, praise Allah I had no one in the car but me).
The abandonment of the gold standard is another example of a short term fix leading inevitably (IMO) to long term negative effects.
Just my limited, subjective, somewhat intuitive perspective.
