Peak oil a hoax? Prove it.

[JD]

Furthermore, I have argued that even if Peak Oil were actually upon us as of yesterday, scare mongering about our impending "economic collapse" and how our "entire way of life" is at stake without putting the "crisis" in the fundamental context of who is managing it to what effect and why is counterproductive to progressive and perfectly aligned with mega-corporate driven authoritarian ends.

Hmmmm. Who's saying that? Perhaps if you READ what other people are saying it'd help. From my last post:

We can't supply continued growth forever, finite resource. This is simply another way of saying Hubbert's Peak.

This is such a simple concept, how come the wing nuts can't get it?

Let's cut demand, put in renewables, CONSERVE energy. This will buy us a few decades of energy security.

Oh and for the stereotypers out there; did you expect an oilman to say that?

Does this sound like Chicken Little? No it doesn't. So why am I being accused of "chicken-littling"?

I have never claimed that Peak Oil is a hoax.

Oh.......... Thanks for that clarity. I read back on your opening statement to see if could get additional clarity:

Why is it incumbent on me to DISPROVE a scare mongering tactic that just happens to be perfectly aligned with increasing short term Big Oil profit margins?

Yes, I am skeptical about Peak Oil. Does that mean that I think that the current rate of growth of oil consumption won't someday outpace the oil that can be extracted from the Earth more cheaply than alternative energy sources? Of course not.

Well, no one commanded you to DISPROVE peak oil. A challenge was set. You have tried to meet it. You haven't succeeded. Yes you can be skeptical about Peak Oil. That's fine. But if you can't PROVE it is a hoax, then just say that.

As I can see it, you could simply say: "You know, sometime oil will peak in production output. I don't know when, and I'm not sure if anyone else does either. In the interim I'm worried about what the philosophy of peak oil may mean for public policy, and whether or not Oligarchs will profit from the meme." Yeah, if that's what you are saying it's a reasonable position, and can be stated in a couple of sentences with which everyone would nod their heads. I have no idea that it is your position, though.

And that'd be done with it. Why waste all the bandwidth on the tirade against the "chicken-littling" and bad oilmen and such? As I've shown above in quotes, I for one haven't been "chicken-littling". I haven't seen Wintler doing it either. So why is the crap from the sky falling on our poor little "chicken-littling" heads.

[wintler2]

...As I can see it, you could simply say: "You know, sometime oil will peak in production output. I don't know when, and I'm not sure if anyone else does either. In the interim I'm worried about what the philosophy of peak oil may mean for public policy, and whether or not Oligarchs will profit from the meme." Yeah, if that's what you are saying it's a reasonable position, and can be stated in a couple of sentences with which everyone would nod their heads. I have no idea that it is your position, though.

I'm nodding right now, i agree with the statement, as i did back in 05 when Dreams End eventually came out with something similar, after we haggled for some months over HIS 'peak oil is a Big Oil hoax' claims.

..Why waste all the bandwidth on the tirade against the "chicken-littling" and bad oilmen and such?

That is the $64,000 question: why is stickdog99 creating so much noise for so little signal, all the while pushing the Big-Oil-is-all-powerful myth?
Who benefits from stickdog99s rhetoric? Big Oil.

[slow_dazzle]

It is a half hour talk by Matt Savinar, hosted off Sue Supriano's site. Sue's site is full of good stuff btw.

Set aside depopulation conspiracies for a moment and ponder what Matt Savinar is saying. Above all, try to think in terms of how money works and the effect of PO on a growth-based economic system.

Constant growth is the philosophy of the cancer cell imho and it is against the natural cycle of life. In nature everything goes through a birth-life-death cycle so maybe that is something worth reflecting upon. But I digress people.

The signs of PO are likely to manifest themselves as military adventurism of the most desperate sort. And that's what is happening right now in the ME and, increasingly, Africa. It's just that we are so caught up in it and so close to it we don't recognise it for what it really is.

If we are to continue this debate let us focus on what it really means if PO is a reality. Wintler2 has started a debate on a subject we should really home in on.

If anyone wants to pick up on what Matt Savinar said we might move the debate forward to the economic issues which underpin the PO phenomenon.

http://www.suesupriano.com/article.php?&id=78

[stickdog99]

JD, I realize that you were not chicken littling about Peak Oil. In fact, you sound like a typical energy utility monopoly public service message. You seem to hew your path down the middle of the road, assuring us that ever rising petro end product prices from now to the end of time are completely natural and advising us to "conserve" as your solution. The idea that Big Oil has drafted plans to manage the "looming Peak Oil crisis" to maximize both its profits and world energy market control at the expense of end consumers, soldiers, innocent civilians and the sovereignty of various weaker nations strikes you as an absurd and outdated conspiracy theory. If I am wrong, please correct me.

wintler2, how exactly does my "rhetoric" benefit Big Oil? All I am trying to do is to put the Peak Oil in its correct historical context -- the context of a Big Oil/Western military partnership to ensure that petroleum end product costs continually remain as high as the various end consumer markets will bear without engendering political rebellion while keeping both the lion's share of the world energy market profit and, even more importantly, the control of the world energy market in the hands of Big Oil.

All anyone has to do is examine what is happening in Iraq and why to realize the folly of discussing Peak Oil without considering Big Oil's plans to to manage this "looming crisis."

[stickdog99]

It is a half hour talk by Matt Savinar, hosted off Sue Supriano's site. Sue's site is full of good stuff btw.

Set aside depopulation conspiracies for a moment and ponder what Matt Savinar is saying. Above all, try to think in terms of how money works and the effect of PO on a growth-based economic system.

Constant growth is the philosophy of the cancer cell imho and it is against the natural cycle of life. In nature everything goes through a birth-life-death cycle so maybe that is something worth reflecting upon. But I digress people.

The signs of PO are likely to manifest themselves as military adventurism of the most desperate sort. And that's what is happening right now in the ME and, increasingly, Africa. It's just that we are so caught up in it and so close to it we don't recognise it for what it really is.

If we are to continue this debate let us focus on what it really means if PO is a reality. Wintler2 has started a debate on a subject we should really home in on.

If anyone wants to pick up on what Matt Savinar said we might move the debate forward to the economic issues which underpin the PO phenomenon.

http://www.suesupriano.com/article.php?&id=78

Matt Savinar = "The sky is falling! The sky is falling! Fall down on your knees and praise Jesus if all that happens is that petroleum end product prices quadruple because nothing less than the survival of the world as we know it is at stake here!"

Matt Savinar's website: http://www.lifeaftertheoilcrash.net/

[stickdog99]

http://www.manhattan-institute.org/html ... il_oil.htm

Wall Street Journal.

Oil, Oil, Everywhere . . .
January 27, 2005

By Peter Huber and Mark Mills

The price of oil remains high only because the cost of oil remains so low. We remain dependent on oil from the Mideast not because the planet is running out of buried hydrocarbons, but because extracting oil from the deserts of the Persian Gulf is so easy and cheap that it's risky to invest capital to extract somewhat more stubborn oil from far larger deposits in Alberta.

The market price of oil is indeed hovering up around $50-a-barrel on the spot market. But getting oil to the surface currently costs under $5 a barrel in Saudi Arabia, with the global average cost certainly under $15. And with technology already well in hand, the cost of sucking oil out of the planet we occupy simply will not rise above roughly $30 per barrel for the next 100 years at least.

The cost of oil comes down to the cost of finding, and then lifting or extracting. First, you have to decide where to dig. Exploration costs currently run under $3 per barrel in much of the Mideast, and below $7 for oil hidden deep under the ocean. But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.

To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that's trillion -- over a century's worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.

Then you have to get the oil out of the sand -- or the sand out of the oil. In the Mideast, current lifting costs run $1 to $2.50 per barrel at the very most; lifting costs in Iraq probably run closer to 50 cents, though OPEC strains not to publicize any such embarrassingly low numbers. For the most expensive offshore platforms in the North Sea, lifting costs (capital investment plus operating costs) currently run comfortably south of $15 per barrel. Tar sands, by contrast, are simply strip mined, like western coal, and that's very cheap -- but then you spend another $10, or maybe $15, separating the oil from the dirt. To do that, oil or gas extracted from the site itself is burned to heat water, which is then used to "crack" the bitumen from the clay; the bitumen is then chemically split to produce lighter petroleum.

In sum, it costs under $5 per barrel to pump oil out from under the sand in Iraq, and about $15 to melt it out of the sand in Alberta. So why don't we just learn to love hockey and shop Canadian? Conventional Canadian wells already supply us with more oil than Saudi Arabia, and the Canadian tar is now delivering, too. The $5 billion (U.S.) Athabasca Oil Sands Project that Shell and ChevronTexaco opened in Alberta last year is now pumping 155,000 barrels per day. And to our south, Venezuela's Orinoco Belt yields 500,000 barrels daily.

But here's the catch: By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap. Oil prices gyrate and occasionally spike -- both up and down -- not because oil is scarce, but because it's so abundant in places where good government is scarce. Investing $5 billion dollars over five years to build a new tar-sand refinery in Alberta is indeed risky when a second cousin of Osama bin Laden can knock $20 off the price of oil with an idle wave of his hand on any given day in Riyadh.

The one consolation is that Arabia faces a quandary of its own. Once the offshore platform has been deployed in the North Sea, once the humongous crock pot is up and cooking in Alberta, its cost is sunk. The original investors may never recover their capital, but after it has been written off, somebody can go ahead and produce oil very profitably going forward. And capital costs are going to keep falling, because the cost of a tar-sand refinery depends on technology, and technology costs always fall. Bacteria, for example, have already been successfully bioengineered to crack heavy oil molecules to help clean up oil spills, and to mine low-grade copper; bugs could likewise end up trampling out the vintage where the Albertan oil is stored.

In the short term anything remains possible. Demand for oil grows daily in China and India, where good government is finally taking root, while much of the earth's most accessible oil lies under land controlled by feudal theocracies, kleptocrats and fanatics. Day by day, just as it should, the market attempts to incorporate these two antithetical realities into the spot price of crude. But to suppose that those prices foreshadow the exhaustion of the planet itself is silly.

The cost of extracting oil from the earth has not gone up over the past century, it has held remarkably steady. Going forward, over the longer term, it may rise very gradually, but certainly not fast. The earth is far bigger than people think, the untapped deposits are huge, and the technologies for separating oil from planet keep getting better. U.S. oil policy should be to promote new capital investment in the United States, Canada, and other oil-producing countries that are politically stable, and promote stable government in those that aren't.

[stickdog99]

Richard Branson on why nobody is building any oil refineries:

http://news.bbc.co.uk/1/hi/uk/4255156.stm

Governments should aim to build 10 refineries as soon as possible to counterbalance oil companies and the oil cartel, Opec, which kept prices high, he said.

"Opec is effectively an illegal cartel that can meet happily, nobody takes them to court," he said. "They collude to keep prices high. The western world should have a counterbalance to that. If $20 billion was put aside to build 10 new refineries, oil prices would start to collapse again. The oil companies realise that and they are not getting out there investing the money to build those refineries. In a sense, as free marketeers why should they? But governments should intervene to make sure that happens."

A "two-pronged" government attack was needed to tackle the problem, he said.

"If they intervene in the short term and do something too radical to stop growth, we will have an incredible recession."

Governments should encourage companies to buy fuel efficient planes and trains and give tax breaks to companies which produced fuel efficient hybrid cars, he added.

[stickdog99]

Dave McGowan explains his theory:

http://www.the7thfire.com/peak_oil/peak ... lation.htm

... The Peakers claim that we will very soon be facing a world where chaos reigns supreme -- a world of war, famine and death on a scale unknown in recorded human history. And that does, in fact, appear to be the case. And we're not talking about the distant future here, folks; we're talking about the very near future.

But the Peakers also claim that this global "die off" will be a regrettable, but quite natural, and entirely unavoidable, consequence of the world's oil taps running dry. And that is the really big lie. That is the lie that will very soon be used to rationalize the killing off of hundreds of millions, possibly billions, of the world's people. There are, you see, simply too many people in the world who, by merely being alive, are standing in the way of the aspirations of the global elite.

The people that the 'Peak Oil' pitchmen are fronting for are deadly serious about selling 'Peak Oil' to the masses -- and not just in theoretical terms, as a cynical ploy to raise prices and increase profits. No, it has become clear that the real goal is to actually cut off most of the world's oil supplies under the ruse that the oil simply no longer exists. The desired result is massive social unrest, widespread famine, and endless war. The majority of the world's people will not survive. Those that do will find themselves living under the overtly authoritarian form of rule that will quickly be deemed necessary to restore order. And if you think that we here in America are exempt, you are sadly mistaken.

In order to pull off this stunt, all the world's major oil producing regions must be solidly under the control of the U.S. and it's co-conspirators, otherwise known as 'allies.' In other words, the puppet-masters have to control all the major oil taps, so that they have complete control over the flow of oil -- or lack of it. And that, in a nutshell, is the real reason for America's recent military ventures. The goal, you see, is not to steal Iraq's oil, or the oil in the 'Stans, or in the Sudan, or in Venezuela, or anywhere else. We don't want to take their oil, because the truth is that we don't really need it ( http://www.oilandgasreporter.com/storie ... ions.shtml ). What we want to do is sit on the taps so no one else can get to the oil.

The Peakers have claimed that the Central Asian adventure - launched with the invasion of Afghanistan, but certainly not limited to Afghanistan - has largely been a bust. We have all heard the spin: the hoped-for reserves aren't there, what has been found can't be extracted economically, the grand plan simply didn't pan out, yadda, yadda, yadda.

Fr ankly, I find all of that a little hard to believe. After all, hasn't Central Asia been the subject of intense interest and study by geologists and the petroleum industry for the last century or so? You would think that the lords of oil were operating on more than just a hunch when they drafted this gameplan. And I couldn't help noticing that the United States has established a massive military presence in the area, and it looks very much like it was designed to be a permanent military presence. If the oil and gas aren't there, then what exactly is it that our troops are standing guard over?

At least one researcher has doggedly claimed that the Central Asian and Middle Eastern military ventures are but a prelude to military confrontations with Russia and China. But that hardly seems to be the case. It does not appear as though there is any urgent need for 'regime change' in Russia or China, since the West seems to already have 'friendly' regimes in place in both countries. And I have to add here that if the ruling regimes of Russia and China really are enemies of the United States, they will undoubtedly go down in history as the stupidest enemies of all time for watching approvingly as the United States entrenched its military machine in their backyards on the most transparent of pretexts.

Contrary to conventional wisdom, I believe that the Central Asian adventure has been wildly successful. True, the West hasn't reaped the bounty of the region's oil and gas reserves -- but I don't think that was ever the goal. To the contrary, I think the U.S. has done exactly what it set out to do: deny anyone else the opportunity - by force if necessary, and it will become necessary - to exploit the area's resources.

Also contrary to conventional wisdom, I believe that the Iraq adventure has also been successful. Again, the goal was not to steal Iraqi oil; the goal was to shut down or severely limit the flow of Iraqi oil, and that goal has obviously been accomplished. Indeed, some reports have held that American troops (and American mercenaries) are responsible for at least some of the pipeline bombings and other attacks on the Iraqi oil infrastructure. ...

In order to carry out the 'Peak Oil' agenda, the powers-that-be need to have all the major oil producers on board. Some of them have been on board all along. Some have to be recruited through military force (Iraq, for example). Some will be compelled to join the team through covert operations (e.g., Venezuela). And some are being brought on board through threats, intimidation, and saber rattling.

The two most sought after recruits, of course, are Russia and Saudi Arabia, since they are the world's two top oil producing nations. As of this past April, Saudi Arabia apparently hadn't yet received the latest memos on 'Peak.' Much to the consternation of Ruppert and his handlers, Saudi officials announced on April 28, 2004 that the Kingdom's estimate of recoverable reserves had nearly quintupled! ...

Note that the oil reserves claimed by Saudi Arabia alone (1.2 trillion barrels) exceed what the Peakers claim are the total recoverable oil reserves for the entire planet. Let's pause here for a minute and think about the significance of that: one tiny patch of land, accounting for less than than 1/2 of 1% of the earth's total surface area, potentially contains more oil that the 'Peak' pitchmen claim the entire planet has to offer! Is there not something clearly wrong with this picture?

Needless to say, that sort of candor by the Saudis could put a serious crimp in Washington's plans to sell the 'Peak Oil' scam. Perhaps that is why, just three days after that announcement, the Saudi oil industry was attacked by some of those terr'ists. Not to be deterred, however, Saudi officials announced three weeks later, on May 21, that the Kingdom still intended to dramatically increase its petroleum output. And a week after that, on May 29, those crafty terr'ists launched yet another brazen attack on the Saudi oil industry. Shit happens, I guess.

At that very same time, and in the months that followed, the U.S. was sending clear signals that it would not hesitate to set its military dogs loose on the Kingdom if necessary. Michael Moore's "the Saudis are the real enemy" movie, for example, splashed across America's screens. Various voices involved in both the official and unofficial 9-11 investigations were pointing the finger toward the Saudis as well. The message couldn't have been clearer: "we can easily drum up public support for 'regime change' if you won't play ball." The Saudis, it would appear, have now fallen in line.

Meanwhile, in Russia, the regime of Western puppet Vladimir Putin has been working diligently to transfer control of Russian oil production to what the L.A. Times referred to as "more complaint owners." ...

That reminds me of a story about a guy who was lost in the desert and spent days wandering aimlessly in search of water. This guy - we'll call him Peak Oil Man - was followed by a circling vulture, who occasionally spoke to him. At one point, the vulture asked Peak Oil Man why he kept ignoring all the succulent plants along his route, from which he could extract life-saving fluids. "A waste of time," said Peak Oil Man, "must have water." Later in the journey, Peak Oil Man stopped to relieve himself in the sand. "Why do you not capture and drink your urine, Peak Oil Man," asked the vulture. "It could save your life." Ignoring the vulture, Peak Oil Man pushed on, still muttering his mantra: "must have water." Eventually, Peak Oil Man - emaciated, severely dehydrated, and barely clinging to life - stumbled upon a stranger, and the stranger extended his hand and offered Peak Oil Man a container of water. Peak Oil Man raised the vessel to his lips and began to drink, but quickly spat out the offending liquid. "Is that fucking tap water!?" asked Peak Oil Man. "Where can I get some bottled water around here?" And the vulture said: "But Peak Oil Man, how can you afford to be so picky at a time of such great need? How can you turn away not only viable alternatives to water, but even water itself if the water offered to you doesn't meet your high standards? It is almost as if you don't really need water at all." Peak Oil Man just smiled and continued on his way. ...

It will no doubt be determined that it is not economically feasible to extract the oil in the Gulf of Mexico. After all, Reuters has reported that, "Oil from deep-water reserves could cost $4 a barrel to extract, nearly double the cost of oil from shallow water." And we certainly can't expect any responsible corporation to shell out $4 a barrel to extract something that they can then trade for $50 a barrel, can we?

Or maybe the Peakers will claim that the oil doesn't even exist -- that Mexico, like Saudi Arabia, is lying about increased levels of reserves. There seems to be a lot of that sort of lying going around these days. ...

The real problem with the Saudi crude, as near as I can determine, is that the Saudis and the 'Peakers' have entirely different ideas about what the price of crude oil should be. At the time of the attacks in Saudi Arabia, it was hovering at about $40.00/barrel, and is now at about $50.00/barrel. The Saudis would like to bring it down to $25.00/barrel. And the 'Peakers' would like to see it raised to - are you ready for this? - a whopping $182.00/barrel -- which would, quite obviously, place oil out of reach for the vast majority of the world's people. ( http://news.bbc.co.uk/1/hi/business/3777413.stm )

The $182.00/barrel figure was provided by Matthew Simmons to a BBC reporter at the 'Peak Oil' conference held earlier this year in Berlin. According to Simmons, "Oil is far too cheap at the moment ... we need to price oil realistically to control its demand." Simmons is described in the BBC article as "an energy investment banker and adviser to the controversial Bush-Cheney energy plan." He is, in other words, a perfectly credible source -- if we choose to overlook the fact that everyone connected to the Bush-Cheney team reeks of corruption and outrageous lies. ...

Simmons is a member of ASPO (Association for the Study of Peak Oil), founded and led by 'Peak Oil' guru Colin Campbell and promoted relentlessly by Michael Ruppert, who boasts of having "a great many friends in ASPO." According to the BBC, ASPO includes in its ranks "a diverse range of oil industry insiders," including a good number of "oil executives" and "investment bankers." Just the sort of salesmen we should trust, in other words, when shopping for a suitably apocalyptic future.

And make no mistake about it: the future that has been scripted by the architects of 'Peak Oil' is not going to be pretty. Massive population reduction has always been a key component of the 'Peak Oil' agenda. ...

[stickdog99]

http://www.aramcoexpats.com/Content.aspx?ContentID=701

Water, Water Everywhere (but not a drop to drink)

Author: Michael C. Lynch, President, Director Petroleum Services February 27, 2004

Released: 3/6/2004

GLOBAL Petroleum SEER Alert:

This week saw a most unusual spectacle, resulting in a spate of news articles that may be difficult for the uninitiated to understand. Matt Simmons, an investment banker based in Houston and a longtime oil and gas price bull, presented an extremely alarmist view of Saudi Arabia’s oil production capacity and was rebutted by two officials from Saudi Aramco, which historically has been extremely reticent to release any details of its operations. The arguments presented are interesting not for their content but for the nature of the debate (reliance on inference instead of analysis) and the provision of data from Saudi Aramco about their operations.

Much of the work done by Matt Simmons in the past few years on global oil and gas has relied heavily on inference, suspicion, and concerns while containing little or no real data. Yet, he claims that his new report is based primarily on readings of nearly 200 technical papers published by Saudi engineers and various publications of the Society of petroleum engineers (SPE). Although there is no reason to doubt this, the nature of the information he has collected must be questioned. A quick perusal of the draft report shows that there are virtually no tables or diagrams relating to Saudi oil fields, and the only hard information consist of scattered numbers, anecdotes and facts. Few if any are presented in any type of context.

(Much of his presentation on Tuesday followed a similar pattern, with lots of general remarks about the world oil industry and the importance of Saudi Arabia therein, but instead of providing information supporting his concerns, he tended to provide leading questions. For example, he mentioned a visit to Saudi Arabia and the view of some of their large petroleum installations, adding “Where is the extra capacity hiding?” The implication is that the extra capacity should have been readily perceptible to his tour group, and his failure to notice it implies that it might not exist.)

* The primary concerns he raised were as follows:
* Saudi production comes from a few old oil fields;
* The Saudis rely on far fewer wells to produce more oil than the US and Russia do;
* Over time, the problems described in the technical papers appear to worsen;
* The error of the easy oil appears to be near nearly over some call;
* Vertical wells are obsolete and no longer used;
* The Saudi’s rely on MRC1 wells, which caused production in Oman’s Yibal field to collapse;
* The Saudis have only found the few relatively large oilfields in recent decades;
* The big five oilfields account for 90% of production and all use water drive;
* If BPs 1975 estimates of the Saudi field reserves are correct, then Ghawar has produced 90% of its oil;
* Saudi Arabia is now intensively explored;
* 85 of its oil and gas fields are untested; and
* Abqaiq and Berri are near the end of their production.

He added a number of ‘observations’ about oil production, including “oil passed over is gone forever” and “technology accelerates the production in existing fields but doesn’t seem to add two recoverable reserves”. Both of these statements are at best questionable.

His conclusions from this were quite startling: Saudi Arabia is leaving a lot of oil in bypassed pockets, the remaining oil deposits will be smaller and harder to find and produce, capital expenditures in Saudi Arabia will soar, and within two to three years we will know if world oil production has peaked. He also remarked that he expects reserve write-offs to be widespread, largely representing companies thinking that new technologies, like MRC, would increase reserves but that this is not the case.

Two officials from Saudi Aramco presented a detailed look at the situation in Saudi Arabia (Nansen Saleri, Manager of Reservoir Management and Mahmoud Abdul-Baqi). Although they were not directly responding to Matt’s arguments, they contradicted a number of things that he said and explained away virtually all of his concerns. The primary points included the fact that Saudi reserves are, in fact, the very conservatively estimated, with proved reserves been more even conservatively estimated then called for by the definitions created by professional organizations (SPE, AAPG, WPC), which are relied on by Western companies. Saudi depletion rates are quite low, even when broken down by field and subfield, running at about 2% or so.

The production practices that so concerned that Simmons, such as the use of MRC Wells, reflected the behavior of a nonprofit maximizing organization, i.e., a state oil company. The Saudis are attempting to maximize recovery, not value in their fields. They are willing to produce more slowly and with the best possible technology in virtually every instance, even if that means not producing it economically optimal rates. That is to say, the net present value of production in the field is reduced by some other practices, even though the ultimate recovery of physical oil is maximized. The Saudis pointed out that the Yibal field in Oman suffered from the use of the MRC Wells, specifically because the producing company had not done the type of expensive geological modeling which is now common practice in Saudi Arabia.

Perhaps more important, the Saudis refuted several of his interpretations (similar to arguments I have made in the past). The Saudis do not produce many of their fields because they have abundant producing capacity without them for example. Also, Saudi Arabia is not intensively explored and has large areas with petroleum potential that are virtually undrilled. (Matt responded that he was referring to aerial magnetic surveys.) it was also pointed out that Matt’s reference to 1975 field reserve estimates were not relevant: the fields he referred to had already produced more than was estimated as proved reserves in the 1970s, reflecting reserve growth from better reservoir modeling, more drilling, and the use of advanced technology. (Indeed, in responding to a remark about the so-called ‘spurious reserve additions’ in the 1980s, when many OPEC members raised their reported reserve levels without explanation, they responded that they had gone years without revising them even as their own expectations of recovery increased, and had merely decided the time was right to report them more accurately.)

The argument that capital expenditures would be a constraint was countered by noting that costs are, by the most liberal estimate, under two dollars a barrel and more accurately about $.50 a barrel. The Saudi’s admitted to the use of water flooding in their fields but pointed out that the water cut after four decades at Ghawar was below 40%, had been stable for five years, and was far below what Western companies often produce in their fields. The New York Times Article The article in February 24 New York Times is a fascinating and sweeping review of water are referred to as the tired Saudi oil fields.

The only problem is, most of the article focuses on the need for more Saudi oil and a variety of General comments about the difficulties of extracting that oil. These include:

1. It is becoming more expensive to extract Saudi oil;
2. A former Aramco executive stated that the world should not expect more than 12 million barrels a day from the Saudis for a future years; and Ghawar was pushed too hard in the past;
3. An IEA official worries that the Saudis cannot add capacity without foreign investment;
4. Foreign investment faces opposition inside Saudi Arabia;
5. The natural gas deal offered to foreign investors collapsed last year;
6. Oilfield development requires years of planning and work;
7. Saudis are unsure about guaranteeing long-run world oil supply;
8. A Saudi states that raising production to 12 million barrels a day would wreak havoc within a decade by causing damage to the oil fields;
9. A Saudi leading geologists says there are natural declines in global capacity; outsiders for year his retirement would hinder Saudi efforts to attract foreign message;
10. Ghawar is becoming costly to maintain, with an 8 percent decline rate and decline requires several hundred thousand barrels of new capacity every year;
11. Some are questioning the ability of the Company to produce 800,000 barrels a day from the fields Qatif and Abu Safah, saying the goals are unrealistic and that costs are higher than anticipated, including difficulties with hydrogen sulfide, making development “particularly challenging”.
12. The use of submersible pumps at Abu Safah is ill advised.

The Saudis naturally did not address these issues at the seminar, not having seen the article much in advance, but complained privately about the reporter’s heavy reliance on an anonymous Saudi sources and Ed Price, who had retired 15 years earlier. Apparently, the reference to problems with the waterflood at Ghawar referred to difficulties in the 1980s, which the Saudis feel they have long since overcome.

Many of the other comments appear to be either taken out of context or not really relevant to the issue of Saudi field productivity. It is hardly noteworthy if the Saudi official warned that the world should not necessarily rely on Saudi Arabia to guarantee its long-term oil supply needs. Also, complaints about the difficulties of raising production are obviously not to be taken too seriously, since they are completely non-quantitative. When they say the fields are particularly challenging or expensive to develop they are almost certainly making references to their aggregate capital needs, which can be hundreds of millions of dollars, given the scale of these developments.

And again, the comments about the need for foreign investment is simply an old canard. The salaries have operated their fields for quarter of the century without needing new investment, given that their costs are a tiny fraction of the price they receive for the oil. Any concerns expressed about inadequate capital usually relate to oil company executives complaining about the governments allocation of funds to them. The Saudis did not pursue an opening of their oil fields because they did not need either capital or technology from outside. The offering of natural gas projects occurred primarily because the Saudis were looking for investment in a lower return sector of its industry (especially where electric power generation was included, given low electricity prices). That the US majors did not reach agreement with the Saudis reflected the poor rates of return offered, not the lack of gas reserves.

The reference to “submersible pumps” is an odd one, and appears to be a case where the reporter is mixing factors. The Soviets did not, to my knowledge, have submersible pumps and their field problems reflected excessive waterflooding. Submersible pumps can be an answer to a high water cut, reflecting an existing problem rather than the source of it. And the industry widely regards them as a valuable technology for raising recovery rates, not the source of technical difficulties.

There literally seems to be no evidence that the Saudi oil fields are facing any unusual challenges or that Saudi production will be constrained in the future by anything other than policy. All of the concerns appear to be instances where the most pessimistic interpretation has been chosen, such as fields not operating because of technical difficulties rather than weak demand. The use of vague language (“tired” fields, “challenges”) rather than specifics about efforts and costs indicate that this is one more instance of Malthusian bias.

[stickdog99]

http://www.cfr.org/publication/8197/far ... nergy.html

HUBER: You know, one can look for words all over the place. I take refuge in numbers. The oil output has actually increased, with the most modest exceptions like global depression and so on, without interruption for 120 years. All right? Now, it may well be that we are fortunately or unfortunately born at this unique moment in history— and perhaps Paul knows more about the condition of Saudi fields than I do— for a long time, most of the words out there say that under the ground in the Persian Gulf there are 600 billion barrels of oil. Now, they might be wrong. Perhaps there are only 400 billion, maybe 300 billion. We do know that global demand today is 30 billion, OK? So that's a fairly large number, and normally, you don't go looking out beyond 10 or 20 years. You've got to build things, you've got to build pipelines and drills and so on. But usually, you don't go exploring far afield for reserves when you're bottlenecks aren't what's in the ground, but your harbors, your pipelines, your drills, your political instability.

So this talk— this is not you, folks. We could have had this lunch and most of this conversation 20 years ago in the early ‘80s, and we could have had it in 1973, and I can give you literature from the 1890s that sounds exactly like this. So far, they've been wrong. That doesn't prove they're wrong today, but all of the powerful historical trends indicate that I would not, if I were you, bet on long-term oil at $50, OK? We have seen oil drop 60 percent in eight weeks. Seven years ago, oil was $12 a barrel. And I see nothing structurally out there in terms of the poor supply in Europe that says things have changed.

If the Mideast goes up in flames, take it from me, we will see $150 barrel of oil, or 200 [dollars a barrel]. But if democracy breaks out all over the Mideast, and sanity prevails, what a lovely thought, OK, we will see $15 barrels of oil.

...

ZUCKERMAN: This is a question I've always pondered and wanted to get an answer to, although I know it's impossible to answer, but let's try it anyhow. There's another constraint on the market, it's called— there's an artificial control of supply called OPEC. If there wasn't an oligopolistic organization such as OPEC, what do you think the price of oil would be today?

ROBERTS: Well, the number I've heard is around $15 a barrel. That's what the natural price would be if we could— if all oil were available equally, and if the market could actually see what's there or could at least explore. But, as you say, there are a number of constraints, and you know, the constraints aren't all just in OPEC. We have a constraint in refining capacity; we have a constraint in how quickly we can move oil from point A to point B. The natural price is 15 [dollars], but again, oil is intrinsically political. It's worth so much. And it's more than just the value that it supplies, because we can drive with it. There is no replacement for oil in the transportation sector, and that factor alone explains why oil will continue to be the dominant energy issue, regardless of its share, until we get a replacement.

...

HUBER: Higher prices reduce demand, even in relatively inelastic markets. If you wanted to have a serious national policy to reduce oil demand in the United States, you would do what Japan and Europe have done; you would put a serious tax on oil. If you back out their gasoline taxes, they tax their oil as high as $85 a barrel.

And we don't. We couldn't get $1.50 a barrel tax during the first Clinton administration, when both houses of Congress where controlled by Democrats. But let me just follow up on a couple of points. First of all, in our transportation sector, numbers matter, folks. We can say things are completely separate, but then there are numbers. You will not fly planes on anything but oil, I agree with that. That's 0.6 billion barrels a year of our total seven consumption.

...

ROBERTS: I mean, I think that the U.S. will become— if oil appears to [be] going high enough to damage our economy, I don't think we're going to be looking for solutions domestically. I think we will look at some form of intervention in oil-producing countries abroad. I think that's— I think we've made all the— I think there are all the signs that we would do that. And I don't think that it's necessarily a Republican or a Democratic strategy. I think it would become a U.S. strategy.

...

HUBER: I agree with Paul halfway. Our current imports from the Persian Gulf are 0.9 billion barrels of oil a year, about 15 percent of our demand. People think we're— that's— we could displace personally, I mean, forgetting about the rest of the world, we could displace all of that in heartbeat. From Alaska alone we've got 20 years of all of our Persian Gulf imports. But, of course, these markets are global markets, and unless we're going to build a big wall around us and try to be autarkic— that was tried in the ‘30s, it was not a good policy— that we have to contend with the rest of the world.

Europe is horrendously dependent on Persian Gulf oil, OK?--I mean, where it's actually coming from. I know it's a global market. If we do end up intervening there, it will be for much the same reason that we had troops all over Europe during the Cold War. Japan is very dependent on Persian Gulf oil. Our principal allies are very dependent. So we are worried about the destabilization of the globe, and to the extent we're going to be world leaders, then I suspect Paul is right. There is a lot of oil there, and it matters to a lot of people.

But I do think the scenarios that we, personally in the [United] States, are tremendously dependent are not correct. We could easily be oil exporters ourselves today if we chose to go after all the oil that we're choosing not to drill for.

...

[stickdog99]

http://educate-yourself.org/cn/peakoila ... ov05.shtml

It is no one's fault that pernacious tales such as Peak Oil haunt public discourse - they would be far worse, and more immediately catastrophic were in not for the debunking power of this wonderful mechanism of "individual mass communication."

Having said that, here are further points that cut to the heart of the fallacious argument projected by Peak Oil.

1) No one can foretell the future.

The future is infinitely unpredictable in a free-market economy, or even in one such as this that is far, far less than a free market. That is why no free-market economist would engage in a rigorous discussion of the intricacies of such a technical discussion. The Soviet Union apparachicks did so for years and all it got them was bungled projections and a bankrupt society. The beauty of free-market economics is that it depends, as von Mises said, on "individual action" and there is no telling what a single individual may accomplish. And those accomplishments will have nothing to do with bureaucratic projections or numerical assumptions.

2) Consumption will continue to increase.

Supply drives demand. This is another neo-classical economic law. In modern, Western society, consumption of all kinds will increase despite the efforts of those who would like Western citizens to live like stone-age Indians. In fact, short of bombing Western societies back to the stone age, there is almost nothing that can be done to curb consumption and the efforts of so many to do so are further indication of the economic illiteracy that afflicts the Green Left and others of less radical stripe as well.

3) Marginal utility demands that the market, not man, decides.

The law of marginal utility which separates classical and neoclassical economics spells doom for those who believe in rational scarcity. Marginal utility is the unconscious economic calculus of the marketplace - one which prices a glass of water higher if sold near a desert than a lake. It is the MARKET that prices such things, not humans, not five-year plans, not propaganda about the diminishment of certain commodities. If oil is somehow running out, then marginal utility will price oil in such a way that either another resource will come along to take its place (human action) or more oil will be discovered (another consequence of marginal utility).

4) The fallacy of classical economics.

Only economic illiterates look at a graph and conclude that a line runs straight ahead forever. Thomas Malthus, a classical economist did so and concluded that England would starve to death within his lifetime, and he lived hundreds of years ago, and England did not starve. Karl Marx was a classical economist and he made rigid, classical assumptions about the value of labor, etc., and all of these proved false. Classical economics is indeed the economics of Peak Oil and it is as rigid and fallacious now as it was Malthus' day. There is nothing in economics as in life that is a sure thing, despite every Keynesian and statistical effort to claim otherwise.

5) Economic literacy must be acquired over time through study.

It is unfortunately almost impossible to pour economic literacy into people's heads simply by stating its principles. Like other forms of literacy it takes time; ultimately it provides the determined student with a rigorous frame of reference that includes certain bedrock principles. As these prove out - and they do - knowledge turns to certainty, though it is a certainty that is hard to convey, anchored as it is in years of study that others have not undergone. Thus, it is convenient (easier) to point out that the rhetoric of Peak Oil is recycled from over 30 years ago - and was in fact a propagandistic effort then as now, and a cynical one at that. Those who float such phantasmagoria are often among the most educated and powerful; they certainly know better - for it is they who have attempted with some success to wipe out all understanding of free-market economics and to substitute elaborate bureaucratic rituals for Mises celebration of private action.

[stickdog99]

A nice collection of "peak oil" links:

http://home.earthlink.net/%7Eroot.man/peak.html

Here's another:

http://www.sourcewatch.org/index.php?ti ... e_have_oil

[stickdog99]

Hey, JD, exactly how much does your "friend working for Aramco" tell you Saudi oil is now costing to extract per barrel?

[wintler2]

wintler2, how exactly does my "rhetoric" benefit Big Oil? All I am trying to do is to put the Peak Oil in its correct historical context -- the context of a Big Oil/Western military partnership to ensure that petroleum end product costs continually remain as high as the various end consumer markets will bear without engendering political rebellion while keeping both the lion's share of the world energy market profit and, even more importantly, the control of the world energy market in the hands of Big Oil.

Peak oil isn't about price, certainly not retail product prices which vary dramatically.
No matter what price, there is still a fixed amount of oil in the ground; at very high prices, more effort (energy & resources) may be put in to extract more of the finite amount, but only assuming costs inflation in the oil industry doesn't eat all the gains. That is a problem now, seen in new infrastructure being late and billions over budget, but is just the money-face on the resource issue. Economists and their journalist syncophants will eventually discover the net energy problem (prob right after stock market crashes) that many less theoretical people are trying to call attention to now. If it takes four barrels to extract five, and you've still got to pump it, ship it, refine it and distribute it, then you no longer have a licence to print money and endless economic-draftees for hire.
Theres alot more on the web about net energy now than a few years ago, http://www.eoearth.org/article/Ten_fund ... net_energy
an excellent place to start.

There are obvious signs of a "Big Oil/Western military partnership" and i would be the last to deny that industrialised violence is necesary to extract the resources at a sweet price. But i think you overstate the dominance of those actors - check out the gradual decline in following US EIA figure

http://www.eia.doe.gov/emeu/rtecs/nhts_ ... geES02.gif
Has this decline been engineered to "avoid polical rebellion"? I would have thought political rebellion in US was less and less likely over that period, so why lower prices as you argue the "Big Oil/Western military partnership" must have done? I look forward to you naming who is this Big Oil and at what levels it interlocks with the military.

All anyone has to do is examine what is happening in Iraq and why to realize the folly of discussing Peak Oil without considering Big Oil's plans to to manage this "looming crisis."

For i think the fourth time, why is Iraqs current <2mbd maybe one day 4mbd so significant in an 84mbd world?

[wintler2]

Its always nice to agree on something, heres some cement on the bond - H.Kissinger keeping it real..

..They [American forces] are in Iraq not as a favour to its government or as a reward for its conduct. They are there as an expression of the American national interest to prevent the Iranian combination of imperialism and fundamentalist ideology from dominating a region on which the energy supplies of the industrial democracies depend.
http://www.khaleejtimes.com/DisplayArti ... inion&col=