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Guest Post: Former Shell Oil Chief Predicts $5 Gas by 2012
Submitted by Mac Slavo of SHTFplan.com
Former Shell Oil Chief Predicts $5 Gas by 2012
Though he’s no longer running one of the largest companies in the
world, former President of Shell Oil John Hofmeister warns that the
outlook for gas prices in the coming decade is not looking good:
I’m predicting a worse outcome over the next two years,
which takes us to 2012 with higher gasoline prices, uncertainty as to
the future of hydrocarbons, more regulation on the hydrocarbon industry
based upon who the administration is today…And what I fear the most is that by 2012 prices are so high that we
have a backlash from the electorate and we go into reverse and we go
back to a hydrocarbon only type of a future, maybe with some nuclear,
instead of moving on in the 21st century.…
I’m predicting, based upon the moratorium in the Gulf of Mexico, up
to a million barrels a day of US production gone because of the politics
of freezing drilling in the Gulf.The headline is the moratorium is lifted, the reality is you can’t
get a permit… I’m expecting no new drilling for two more years at least.…
If we stay on our current course, within a decade, within ten years, we’re into energy shortages in this country big time. Black outs, brown outs, gas lines, rationing - that’s my projection based upon the current inability to make decisions.
…
When the American consumers are short, or when prices are so high - $5 a gallon for gasoline by 2012 - I believe that’s going to happen
- that’s going to set a new tone, it’s going to be panic time on the
part of the politicians, they’re going to suddenly get some kind of a
sense we better do something.
The scary thing is that Mr. Hofmeister is basing his $5 per gallon
gasoline prediction on supply/demand issues, not even taking into
account the unfettered digital creation of dollars by the Federal
Reserve.
If we’ve learned anything in the past few years, it should be that
government is totally incapable of taking the necessary steps to prevent
a problem before it happens. We saw it in the housing crisis in
2007/2008 and we’re seeing it now in the state budget crisis. Meredith
Whitney explained it best in a recent 60 Minutes interview
when she was asked why government wasn’t taking action to mitigate the
state budget crisis, “because they don’t pay attention until they have
to.”
If Mr. Hofmeister is correct about supply tightening over the next
couple of years, we’ll begin to see global oil shortages. This is not
only going to raise the price of gas, but everything else dependent on
oil, which is, well, just about everything else - manufacturing,
transportation, food, you name it.
Watch John Hofmeister discuss oil shortages and the coming energy crisis:
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Really?
What portion of this is untrue?
Please be specific and relevant.
Thanks.
The New Pessimism about Petroleum Resources: Debunking the 'Hubbert Model' (and Hubbert modelers).
Misinterpretation of CausalityThe primary error for Hubbert modelers is the assumption of geology as the sole motivator of discovery, depletion and production. In the work of Campbell, Deffeyes, and Laherrere, they go further, equating causality with correlation. This is one of the most basic errors in (physical or social) scientific analysis.
Figure 3 Forties Production, Annual vs. Cumulative.
“Oil is ultimately controlled by events in the Jurassic which are immune to politics” (Campbell 2000) and “…discovery and depletion are set respectively by what Nature has to offer and the immutable physics of the reservoirs.” (Campbell 2002) The idea that production is influenced by oil prices (which determine the amount of capital available for drilling) and by policy choices in producing governments, which decide when exploration will be allowed, and/or set production ceilings, is considered foolish.[13] And yet, they do acknowledge restrictions on operations, particularly in the Middle East.
The argument that the drop in global discoveries proves scarcity of the resource is the best example of the importance of understanding causality. While it is true that global oil discoveries dropped in the 1970s from the previous rate, this was largely due to a drop in exploration in the Middle East. Governments nationalized foreign operations and cut back drilling as demand for their oil fell by half, leaving them with an enormous surplus of unexploited reserves. It is noteworthy that none of those pessimistic about oil resources show discovery over time by region, which would support this.
And two recent discoveries, Kashagan in Kazakhstan and Azedagan in Iran, reportedly would together equal over ten percent of Campbell and Laherrere’s estimated remaining undiscovered oil. Statistically speaking, this is unlikely. Laherrere’s argument that the Middle East is near the end of its undiscovered oil is entirely based on the assumption that the observed fall-off in discoveries was due to a lack of geological opportunities, rather than government decision-making. (Laherrere 2001b) To an economist, the drop in exploration reflects optimal behavior: they do not waste money exploring for something they will not use for decades.
A more technical example is telling. Laherrere notes that the first 1920 new field wildcats in the Middle East discovered 723 billion barrels by 1980, while by the year 2000, a subsequent 1760 had found a mere 32 billion barrels. From this he concludes that the Middle East is essentially played out, extrapolating the falling returns to drilling and stating that “This graph shows clearly that the belief by some economists that the Middle East has a great potential left is wrong” (Laherrere 2002, p. 10). He achieves similar results for OPEC as a whole.
There are three primary errors here. First, the assumption that the discoveries in 2000 will not be revised upwards (an error as discussed above), but more important, the presumption that geology is driving the trend and thus, it is immutable. But finally, the third error is more basic: equating all wells in the Middle East, regardless of location. In fact, analysis of country drilling activity shows what should be obvious: drilling in Iran and Iraq dropped sharply in 1980, following the Iran/Iraq War, and sanctions have kept Iraqi drilling at a minimum in the past decade. At the same time, lesser provinces like Oman, Syria and Yemen have seen increased amounts of drilling. Thus, by lumping them together with Saudi Arabia, Kuwait, etc., as “Middle Eastern,” treating all wildcats as equal and extrapolating the success rate of pre-1980 and post-1980 wells yields fallacious results.[14]
Figure 4. N. Comorant Production Curve.
And Deffeyes, relying on global production and the declining growth in production as evidence of resource scarcity is falling into a similar trap. National or regional production may reflect resource scarcity, but global production is driven by demand, and the declining demand growth since the price shocks in the early 1970s is evidence of greater efficiency and fuel switching, not scarcity. He is confusing geology as the driving factor, not demand.
This is easy...and I've explained this shit a billion times.
RESERVES DO NOT IMPLY RATE OF PRODUCTION.
Peak is when PRODUCTION peaks, NOT WHEN RESERVES PEAK. I knew right off the bat in your FIRST article when they mentioned Tupi's reserves but NEVER its expected flow rate.
Morons confuse reserves with production from those reserves because they don't understand SHIT about oil production.
Like I said, man, you need to get educated. Don't come onto oil threads and post this nonsense. The authors of these articles do not know a fucking thing about oil! These things are an embarrassing joke.
Even someone with a CURSORY knowledge of this subject would not make such elementary errors.
If you're really interested in not embarrassing yourself, go over to theoildrum.com and stop wasting time posting the same shit that got laughed at last week and the week before that and the week before that. What is amazing is that you think that the stuff you're posting is somehow new or hasn't been beaten to death already; like you have a revelation for us all.
Something new huh...OK, but not like it's going to be up to the rarefied polemical analysis of the Genius of the Trav ™ but it can't be, 'cause it's something new
http://www.thedailybell.com/1362/Peak-Oil-Bites-the-Dust.html
http://www.philipbrennan.net/2010/06/11/abiotic-oil-what-they-dont-want-you-to-know/
http://en.wikipedia.org/wiki/Eugene_Island_block_330_oil_field
http://www.nytimes.com/1995/09/26/science/geochemist-says-oil-fieldsmay-be-refilled-naturally.html?src=pm
And where was the Deepwater Horizon drilled?..Oh yeah, now I remember
http://www.subseaiq.com/data/Project.aspx?project_id=562
The Macondo prospect is located on Mississippi Canyon Block 252 in the Gulf of Mexico, here:
http://georgewashington2.blogspot.com/2010/06/visualizing-gulf-oil-spill-site.html
and the Eugene Island Block 330 location?
http://www.searchanddiscovery.com/documents/97015/images/fig1.htm
Wow, probably almost a hundred miles away, not even close unless you drill to extreme depth like say 30,000 feet
Oops...
http://metaoceanic.blogspot.com/2010/06/mystery-of-eugene-island.html
http://www.science-frontiers.com/sf124/sf124p10.htm
Peak oil is complete BS. It is a convenient excuse for many things. When speculators and incompetent governments drive up the price of oil: Peak Oil!! Or when the economy collapses: Peak Oil!!
Peak Oil, because we were all selfish. Peak Oil, because G-d only gave us so much oil. Nothing to be done about it people!! Peak Oil!!!!
Boone Picken's main theme is to get natural gas subsidized and get the price up, since his oil wells out in West Texas dried up and now only produce natural gas.
Lethal delusion.
I agree with this. It's funny how many non-geologists think they are competent to offer serious opinions about oil reserves. Peak oil is a crock of shit. There is more oil in Venezuela alone, if you count the heavy stuff, than in ALL of the ME. We have enough hydrocarbons to support current consumptions levels for tens of centuries.
Seems like a preemptive shot over the bow. The collapse is due to the current administration? Why not, it has worked for the last 10 years.
p.s. - It is entirely plausible that Iraq has more oil than Saudi Arabia.
Iraq has massive proven reserves, and possibly holds more oil than even the Saudis doBut this doesn't comport with the dogma/religion of 'peak oil.'
what the FUCK do RESERVES have to do with PRODUCTION?
Answer? NOTHING.
ALL RESERVES ARE NOT EQUAL.
Tupi, despite being a massive field, is expected to produce AT MOST 500kbpd.
Carioca is an enormous field...what's its production rate gonna be? ZERO.
POSSIBLY, unicorns will start shitting skittles TOMORROW! Possibly, your IQ exceeds room temperature. Possibly, I will be the King of England.
PS, STFU
You are an annoying know-it-all prick, just like all the other Peak Oil dogmatists.
You fail in realizing the basic concept that oil location and extraction methods not only become more advanced, but more cost efficient, with time.
Would you, in all of your Peak Oil fervor, have ever ventured that oil would be recovered from 5000 feet beneath the ocean surface (and deeper), or extracted from tar sands (at a break even point of $55 USD) if asked these questions a mere 20 years ago?
No. You would not.
Because you're a simplistic, Kool-Aid gulping worshipper of a false religion.
Jesus Christ man, could you be any more fuckin stupid?
The US peaked, moron. Even with all the technological advances of the last 40 years, peak happened, and nothing reversed it. It happened when Hubbert predicted it would.
54/65 oil producing nations have peaked and declined.
Who gives a fuck how deep the oil is, idiot? All that matters is the rate of production which is inarguably LOWER from these deepwater fields than from equivalent URR in surface deposits. They peak faster then decline steeper.
Look, it's a total waste of time to try to get through to you idjits, which is why I don't bother doing anything other than insulting you anymore. You show up here, a new one of you, on every oil thread and post the same shit as if it's some kind of fucking revelation.
You do realize that when you claim oil will never peak, that you are claiming that production can grow forever, right?
No, of course you don't...
The IEA already conceded that C&C peaked in 2006, you fucking ignoramus. GFD, pull your head out of your ass
actually, your Iraq argument argues against itself. If there's plenty of oil left in the world, why did we make up shit to invade the last source of easy land based oil? By the way, it's only about one year of the world's current consumption rate Trav, I uh, am starting to understand why you cuss so much.
You are right in that reserves is a theoretical concept of totally existing hydrocarbons, whereas production capability and feasibility is based on many things: technology, access, politics, price, cost of production and delivery, as well as the specific gravity and other aspects that make up the "quality" of the oil.
Oil extraction technology is always evolving, also.
There is no 'fixed' cost of extraction, either, and the myth perpetuated by the Church of Peak Oil that extraction costs will rise over time, rather than fall, is one of the most logically defective claims to ever have been perpetuated, even discounting the fundamental concept of economies of scale (i.e. once the well is dug, and the infrastructure is in place, the marginal cost of extraction of each additional unit declines - it doesn't rise).
Jeezus christ, you are an idiot.
Look at the cost metrics of tarsands or deepwater fields, you moron, or compare EROI at a basic level.
In the meantime, STFU
Breakeven extraction from tar sands is $50 USD/barrel.
But wait, you know more than Philip McPherson, right?
RIGHT?
http://www.ibtimes.com/articles/95843/20101229/oil-gas-shale-exploration...
"The highest cost oil in the world right now is probably the tar sands, where you probably need $50/barrel to break even."
You know more than this, right?
No. No. No, you do not.
My impression of you:
"Jesus Christ, man, you're a fucking idiot, and you don't know fucking shit about economies of scale or business modeling on ROI, okay, you fucking douchebag, blah blah blah...."
Are you 15 years old? Feeling unloved by mom &/or dad? Insecure and all emotionally range bound?
Your vagina is obviously smarting.
Well, deep exploration and production show a spike in capital and operating costs initially, that is proven. Now, that does not mean there are not new shallow deposits that may be discovered and produced at existing technology price structures, And, no doubt if deep production is maintained, it will show economies of scale, but will for a long time cause an increase in product price, since it requires more time and effort to extract. Unfortunately, the largest commodity price-impacter on oil is not production costs, it is politics, the value of the dollar, and speculation.
Oil is a cyclical commodity that front-runs potential increases in use, and falls back on news....the definition of a speculative driven commodity. Oil is, of course, payed for in dollars, so is also sensitive to the perceived value of that fiat trade executor. Nobody knows for sure where technology may take us in the future per oil exploration and production...who knows what lies deeper under the Earth's surface? But, over the next few years, oil will spike upwards, possibly as high as $150.00 per barrel, but it will not remain there, as usage will fall, which will drive the price down. Cyclical, as always. Driven up by speculation, driven down by fundamentals.
The real problem with oil drilling in the Gulf, is likely not going to be the moratorium (which will be lifted), and not the difficulties in obtaining permits, it will be the availability of deep-water-capable rigs still in the Gulf region. Most of them have been towed to other regions. Of course, if oil spikes high enough, the deep-water rigs in production and slated for other areas can be deployed in the Gulf.
I am not an expert in commodities trading, but I did spend a lot of years in the oil business - which alone, does not make my opinion valid, since oil is now subject to a large array of price-moving forces that I never had to deal with. What the US Government does in the future is one of the lynch pins that will determine price. The value of the Dollar, the viability of the US economy, unemployment, inflation and the continuation (or non-continuation) of US "green" technology are all potential movers. In addition, Europe and Asia have a large part to play - especially a potential conflict on the Korean peninsula. Oil is always driven up by strife. My advise - and I probably am not in a position to give any - is be wary of price swings both ways. Oil is, and will remain, a political commodity.
I should have also mentioned that the price of refined products - gasoline, jet fuel and others, are also subject to forces of their own - largely political - especially in the US. Taxes, the split in production ratios, speculation and airline lobbying are among the many factors that determine fractions prices.
I read the same shit (like I'm reading now from the Trav777 crowd) every time oil spikes, and always due to geopolitical strife and/or rampant manipulation of commod markets - NEVER due to supply constraints (even the embargo in 1979 wasn't a true supply constraint from a location/production standpoint; only a political one).
We're so full of oil just in the U.S., the largest terminal in Cushing, Oklahoma is full, as in - they can't store any more oil.
The earth is full of glorious oil, and new methods of location and extraction, on more and more efficient bases, are constantly being developed and refined.
But the Peak Oil Church is like the Flat Earth Society, complete with heads buried in tar sands.
Watch what happens when alternate energy actually does threaten oil as the best 'bang for the buck' source: OPEC will turn on the spicket, and bury the new threat under a gusher of oil. It will be $10 a barrel, if that's where OPEC needs to be, just like in 1990, or $35 a barrel, like it was in 2009 (February), if that's where they need to be.
I am not claiming that geopolitical strife is the only factor in the price of oil, just a historically important one. OPEC has lost a lot of its independence, so is no longer a singular factor in determining the price of oil. That is largely political. I, personally, do not know what the world's oil reserves are, nor do I know how much of those reserves we are capable of producing. Nobody does....if anyone claims to know, they are full of shit.
I, personally, do not know what the world's oil reserves are, nor do I know how much of those reserves we are capable of producing. Nobody does....if anyone claims to know, they are full of shit.
I agree 100%, with the only caveats that the reserves are so massive that it will be difficult to catalogue, and that OPEC has never allowed access to their true ACTIVE fields, let alone their proven fields (never mind their potential mapped field data) - why would they, as they don't want anyone to know how much is a feasible amount to invest in alternative energy systems/structures, given their massive initial project costs, as they can keep everyone in the dark on this, and can keep a near monopoly on energy supplies by lowering or increasing oil production (thus lowering or increasing the price) as circumstances warrant.
You are right, except that modern satellites can, to a limited degree (via side scan) visualize oil reserves. Now, again, reserves do not equate to production. The problem Saudi Arabia has, is that they are largely puppets of the US when it comes to their production quotas. And, no large oil producing country in the world wants to price themselves out of the market now. To do so would be to set up a situation where they would soon see declines in usage, and a price drop. And, several years ago, when I was working in Saudi Arabia, a Saudi friend of mine who worked for the Royal Family, told me that the Saudi gov was petrified that if they went too far (this was after 9-11) that western govs might take their oil from them. So, oil is priced from a political (and speculative) basis.
I don't want to go too far astray, but I've made of point in the past of remarking upon the folly of China's "massive investment" in Africa, which contains relatively tiny slice of the world's proven oil supply, while we've established massive centers of operations and logisitics for our military in Saudi Arabia, the UAE, Kuwait and Iraq, with the Middle East having more than 60% of the world's proven oil reserves.
I am speaking of this from a strictly tactical, rather than moral/ethical standpoint, so politics notwithstanding.
http://www.radford.edu/wkovarik/oil/oilcharts.html
Well, you are probably right to a degree, but I think China has other axes to grind in Africa, mainly metals...strategic metals. I may be wrong here, but I think China sees a future where the basic elements that make up electronic technology as being more important than oil. If you can limit other's access to the basic products they need for technology, then oil becomes a captive trade issue...a bargaining chip. In my mind, China knows that oil is important, but they also know that tecnology is something they can control, if they can control the basic elements that allow its production. This is a huge bargaining chip.
While I think the wise really don't pretend to know what the next 100 years hold in store for us, and few have the foresight of an Orwell (at least politically), oil has been here a long time, is here now, and will be an important 'here' component 100 years from now.
Oil is literally the lubricant of modern commerce, as the basic building block of products, as being the fuel to transport the products, and as being the nucleus around which modern cities are designed (talk of modern cities, devoid of carbon-based energy & transportation sources are mostly just that - talk).
I am relatively comfortable with and confident of this.
this "same shit" has been pointed out by scientists of many persuasions long before prices peaked and you were off the pacifier
"Watch what happens when alternate energy actually does threaten oil as the best 'bang for the buck' "
You are totally and completely clueless, please, please, stop posting this nonsense. If you truly want to understand energy and the magnitude of the problem we face trying to replacing oil, study in depth a High School Physics text...
Alot of the comments here do make me laugh, you don't know how good you've got it with $5 gas, try living in Europe. We pay damn near double that already and in the UK another VAT hike next week adds another 2.5% instantly on Jan 1st.
Here's an idea (which alot of people won't like, including me) but stop driving such huge-ass SUV's around. Drive a car with 50mpg instead of 10mpg and bingo you just battered your fuel costs. It's what people this side of the pond have been doing for 20 plus years. If nothing else it'll buy some time to find a true energy/transport solution.
We're Americans, damnit, and it says right on our birth certificates "Cheap gasoline [petrol, to you Brits] for life."
Even you'd be surprised how many 102 pound hot blondes I see driving 6,800 lbs Escalades around, all by their lonesome, on their way to the salon or gym, and yes, it is quite insane.
Hey 'Truth'. Please just fuck off. You are a DUMB SHIT. Waste of bandwidth. PLEASE bet your all on your FF thesis but stop looking for moral support here.
KSA has used water injection in Ghawar pretty much at the start of production. Last year, they announce CO2 injection in 2013. You can expect Ghawar to pull a Cantarell by the end of the decade.
John Hofmeister? seriously.
This blowhard spews better than Clinton and Obama wishes he could deliver a contrived message half as good.
I believe 5 dollar gas is coming, but the premises upon which it is built is laughable at best.
Comments from John Hofmeister "grass roots organization"-translation-oil industry lobby, "fanning out across the country"-translation-now delivering koolaid to all those that will drink.
------------
Definition of PROPAGANDA
1 capitalized : a congregation of the Roman curia having jurisdiction over missionary territories and related institutions2 : the spreading of ideas, information, or rumor for the purpose of helping or injuring an institution, a cause, or a person
3 : ideas, facts, or allegations spread deliberately to further one's cause or to damage an opposing cause; also : a public action having such an effect
4: John Hofmeister, oil industry lobby.
that is all....
Yep. When someone from the oil industry based his dire predictions from a political point of view rather than geological constraints, you know this is bs. In 2002-2003 Shell was caught cooking its books, overestimating its "proven" reserves.
Drill all you want in the arctic for 2mbd, you need a sustained high price to make it viable disregarding demand destruction that happens anyway.
I live in South Korea, gas is nearly $2/liter. Already used to it!
It's just scaremongering/propaganda from a "big-oil" puppet.
Just watch how exited he gets when talking about drilling for oil in The Gulf...
$5 fuel could be a good thing for the US, as it might finally wake up the population and force-educate them into driving a fuel efficient car, double/tripple pane glazing, insolation etc etc.
Thankful to ZH for bringing the peak oil topic once in a while. However, if people want to get a better grip of this debate - go to oildrum, as some folks here already suggested. If you think that we have an infinite amount of oil - you might as well just not read it at all. Just make sure you are ready for higher prices for everything, though. And no, it's not courtesy of the Fed, you all-knowledgeable-about-fiat-system-trolls. It's the system suffering from higher energy costs.
$5-per-gallon oil by 2010 is a conservative estimate. If you factor in the rate of depreciation of the currency, then oil could hit that price much sooner.
I see that the Church of Peak Oil cult members are out in full force today, with their petty little junking and potty mouth one-liner diatribes.
They are like Koreshians or Scientologists, only worse.
Beware members so devoted to 'groupthink' that they turn mere theory into an emotional appendage, and strain credibility dressing it up as scientific fact.
ironic criticism since your own debate skills are devolving into immature insults as the informed reveal the weakness of your arguments. Time will quickly prove who's right. But as many point out, there are always those whose only coping mechanism is denial.
Even when the world is awash in oil 50 or 75 years from now, there will still be devotees of the Peak Oil Theory-Expressed-As-Fact, trolling and spewing misinformation or disinformation.
Peak Oil, Cap&Trade and Global Warming are all scams worked by different groups, and for different reasons, who are strange bedfellows tolerating each others' lies because to them, the end justify the means.
How about KOG ?