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Guest Post: A Long Way From Reaching Our Peak

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Thu, 05/19/2011 - 08:58 | 1290881 HamyWanger
HamyWanger's picture

Must agree with Corrigan on this one. 

Peak oil is a fantasy. Good when you are a doomer who wants to experience wet dreams, but it stops there. 

Our reserves of oil are good up to 2050. 

Thu, 05/19/2011 - 09:10 | 1290902 equity_momo
equity_momo's picture

Cool , so we are good for 38 years and change and then we just start walking everywhere?  Awesome.

Please dont talk to me about alternative energy.

 

Who is Sean Corrigan?

 

edit : i googled him and i see this blowhard on cnbc FAR too much.   he's another pro establishment , pro system , pro fiat , pro status quo moron.  he doesnt possess an ounce of critical thinking ability , he is a slave to his PAYE pay packet.

Thu, 05/19/2011 - 09:22 | 1290961 HamyWanger
HamyWanger's picture

Horse shit can be transformed into oil with a species of bacteries. In fact, nearly every organic matter can be artificially processed into petroleum. It's costly for now, but it will become more affordable when natural reserves deplete themselves and scientists are forced to develop alternative ways. 

So we'll never run out of oil. 

Thu, 05/19/2011 - 09:22 | 1290986 Flakmeister
Flakmeister's picture

It is not about running out of oil, dip shit. It is about the maximum flow rate.

Thu, 05/19/2011 - 11:27 | 1291585 Imminent Crucible
Imminent Crucible's picture

What the Corrigans and Wankers don't get is this: It really doesn't matter whether Peak Oil is correct in absolute terms.

What matters is that the global demand curve is ramping up to meet the global supply line. Whether supply actually falls from here out or not, is immaterial. The moment that world demand rises above sustainable supply, someone doesn't get their oil.

Price will necessarily explode because price is the rationing mechanism. War is the alternative mechanism, and that also guarantees exploding prices and unstable supplies.

Thu, 05/19/2011 - 15:18 | 1292837 JeffB
JeffB's picture

Exactly right.

Steven R. Kopits does a good job of discussing why it was "peak oil" that caused our problems in 2007 - 2008 rather than those dirty "speculators":

Whether Hubert &/or his followers were wrong on one or another or even virtually all of his/their predictions, and whether or not one believes in abiotic oil or scientific breakthroughs that will come to our rescue in the nick of time, there's really no denying that we ran into a brick wall in 2008 when the world could not supply enough oil on a daily basis to meet the burgeoning demand. Mr. Koppits:

http://www.aspousa.org/index.php/2009/05/peak-oil-not-speculation/

"...After many years of solid growth, oil production plateaued in October 2004. Regardless of the price level, the oil supply simply stopped responding, and from then on, the world had to make do with broadly flat supplies. Ordinarily, the expansion of the world’s economy would be accompanied by increased energy consumption and an inelastic oil supply might have been expected to hinder economic development.  It didn’t. In the four years to mid-2008, the world economy expanded by 18%. The global economy boomed, even without new oil.

However, this came at a price. In the absence of oil supply growth, demand accommodation was required. This was achieved by secular prices rises averaging 25% per annum from 2003 to the end of 2007. In other words, the price of oil went up, and this constrained consumption by causing the marginal consumer to drop out of the market. This proved a workable solution for a time, but the global economy could not sustain 25% annual price increases indefinitely, and by second half 2007, the situation was becoming critical. Consumption was being maintained by continuing draws on inventories averaging 1.4 million b/d, and virtually every producer, with the possible exception of the Saudis, was running flat out. By early 2008, even the Saudis were throwing the kitchen sink at the market - all to no avail. On paper, it looked like a peak oil nightmare.

Of course, consumers were responding. From 2005, the EU and Japan began to shed consumption and, from late 2007, US consumption also began to decline as the US consumer sought to escape high oil prices. Notwithstanding, developed economy consumers were not abandoning the market as fast as Chinese consumers were entering it, and prices continued to rise. In early 2008, prices took off and some argue that speculation took over. Still, as inventories continued to fall until May 2008 and all the oil producers were running at full output, the case for market manipulation at that time is hard to make. Indeed, the market was in backwardation most of this time. In backwardation, futures prices are lower than spot prices, the equivalent of the market saying, “Well, prices are high now, but they’ll be lower later.” The market - those very speculators - believed that oil was over-priced but was continually surprised as demand kept pushing up prices.

Prices did ultimately fall, but not because the supply situation eased, nor because speculators fled the market, and not because inventories were released. Prices fell because the global economy collapsed.

This period then shows us two of the possible adjustment mechanisms in the era of peak oil: oil-less growth characterized by increasing prices and continuous, incremental adjustment; and recession accompanied by a dramatic steep drop in consumption and a collapse of oil prices. The lesson to be drawn is that conservation can work within limits, but at some point, there is a straw that breaks the camel’s back and the whole system collapses. ..."

 

 

Thu, 05/19/2011 - 16:02 | 1292942 Joe Sixpack
Joe Sixpack's picture

JeffB:

 

What you describe does not prove peak oil. What you are describing could be a temporary capacity issue (perhaps driven by unrealistic demand caused by an exponentially increasing derivatives bubble, and a false wealth effect). You could have a proven 10,000 years supply of oil, but if you cannot pump it fast enough this will occur. In industry, when a company runs into this issue, they create a new production line. As the prices go higher, the economic justification for the new capital is justified. The problem is it takes time. I agree the consequences of what you are describing could be as bad as peak oil, but it is not peak oil.

Thu, 05/19/2011 - 16:18 | 1293089 Flakmeister
Flakmeister's picture

Correct, the 2008 collapse does not "prove" Peak Oil occurred There is no ultimate proof except by looking in the rear view mirror.

What we do have is clear evidence that Net Exports have peaked (2005), a clear plateauing of the net liquid Energy produced (starting 2005). We also know that since 2005 the number of wells has increased by 20% while the flow per well has commensurately decreased. We know that the North Sea has peaked (2000), Alaska (1990s) the GOM (1990s) have also peaked. The US peaked in 1970 and is down ~30% since then. We also know that decline of existing fields requires us to find the equivalent of a new Saudi Arabia every 4 years... 

BTW, the rear view mirror tells us that we drilling like crazy to stay in the same supply regime.

It is very clear that growth in supply of liquid fuels is not matching growth in demand.

Thu, 05/19/2011 - 16:21 | 1293101 blunderdog
blunderdog's picture

"Peak oil" means "peak production rate" of oil.  If the production rate is falling, it doesn't matter if there's an unlimited supply.  All that matters is production rate is falling. 

If you're saying that this isn't peak oil because the production rate is going to resume climbing soon, fine, but that does not refute the "peak oil" claim.  It's just speculation. 

Production has started declining.  Until it starts climbing, that WAS "peak oil."

Thu, 05/19/2011 - 23:02 | 1294390 JeffB
JeffB's picture

Exactly. If production peaked in 2004 despite year over year price increases of 25% until 2008 when prices exploded, then I would not consider that "a temporary capacity issue". Saying that it was "perhaps driven by unrealistic demand" makes no sense in the context of trying to say that we weren't experiencing a peak oil issue. The fact of the matter is that the producers could produce no more oil on a daily basis OVER A FOUR YEAR PERIOD despite ongoing major price increases. The *cause* of the demand is irrelevant. The problem is that they could produce no more regardless of the price.

Saying you have a lot of reserves (but you just can't get to them) reminds me of the Moron's Lottery. You could win $5 million paid out at $1 per year for 5 million years. Unfortunately, even if you won it probably wouldn't be prudent to think about retiring any time soon. Having $5 million in reserves probably wouldn't pay your monthly bills, much less your kid's tuition, and I doubt the cruise director would give you boarding passes based on those reserves. Similarly, having a bunch of oil in the ground doesn't do you much good if you can't get millions of barrels to market on a daily basis.

 

Thu, 05/19/2011 - 09:30 | 1291014 Quintus
Quintus's picture

"Horse shit can be transformed into oil with a species of bacteries"

Well then Hamy, you should prepare yourself for your new role as the Saudi Arabia of the 21st Century supplying the worlds energy needs in the form of Horse Shit.

Thu, 05/19/2011 - 09:33 | 1291030 KlausK
KlausK's picture

+ 254

Thu, 05/19/2011 - 13:00 | 1292117 Milestones
Milestones's picture

How many acres will we need to set aside to feed and care for the  vast number of horses required? Certainly much, much bigger than Hong Kong Hamy.? And water and lawn care for food?Hell, go for the gusto!!     Milestones

Thu, 05/19/2011 - 09:36 | 1291052 Guarded Pessimist
Guarded Pessimist's picture

"It's costly for now, but it will become more affordable when natural reserves deplete themselves and scientists are forced to develop alternative ways."

That's about the most idiotic statement I've ever read. Just because a problem is presented does not guarantee an easy cheap (like oil is easy and cheap, or was cheap) solution will be found. This is simply wishful (or hopeful) thinking. Get real.

Thu, 05/19/2011 - 09:43 | 1291071 BigJim
BigJim's picture

You've been HaMy'd.

Thu, 05/19/2011 - 15:12 | 1292811 asdasmos
asdasmos's picture

Nice Pic

Thu, 05/19/2011 - 09:36 | 1291056 LawsofPhysics
LawsofPhysics's picture

Yes it can, of course it requires ENERGY to do so and it can not be done at the SCALE required to meet demand.  I see we are trolling again today hamy.

Fri, 05/20/2011 - 04:22 | 1294818 Peter_Griffin
Peter_Griffin's picture

Farm water run-off and other debris in the Mississippi create algae which can be turned into crude oil.  I haven't figured out a way to harvest algae from the river without creating a diversion and holding area of some sort.  It would be nice to figure out a way to actually filter the Mississippi to reduce the dead zone in the gulf...

 

But I wonder if a swimming pool would be a big enough area to harvest a sufficient amount of algae to produce oil at home?  Brewery fermenters, from what I understand, can be used to speed up and increase the harvest of algae.  I would imagine prices on fermenters will fall with the economy at first.  BTFD?!?!

 

Anyone made any attempts at DIY oil and fuel production they would like to share?

Thu, 05/19/2011 - 15:09 | 1292780 VyseLegendaire
VyseLegendaire's picture

I'm not sure where we're gonna get hundreds of millions of barrels a day of fresh, ready-to-eat horse shit. 

 

Oh wait, we have your posts. 

Thu, 05/19/2011 - 09:07 | 1290903 Herne the Hunter
Herne the Hunter's picture

We'll never run out of oil because at some point it will become too expensive to pump. See 2008 where $150/bbl caused demand to implode. Now if we can increase efficiency as fast as oil production declines, it's going to be a different story. But as long as we cling to our F-150s to drive 10 miles to Wal-Mart for a 40oz bottle of Mountain Dew, we at least SHOULD be doomed.

Thu, 05/19/2011 - 09:22 | 1290990 Blindweb
Blindweb's picture

I'd argue that the only technology and systems that have a chance of being that efficient are organic in nature.  It aint easy to beat the efficiency of billions of years of evolution with bits of metal and silicone.

Thu, 05/19/2011 - 10:50 | 1291422 LowProfile
LowProfile's picture

I'd argue thorium reactors powering the grid and synfuel plants (coal to liquid fuel) would provide enough electricity and fuel for a millenium, and it would be orders of magnitude safer & many orders cleaner.

Actually, far longer than that, but I don't want to be seen as unreasonable.

Thu, 05/19/2011 - 09:04 | 1290904 samsara
samsara's picture

And You were a geology/physics major?

Ah,  didn't think so.  Earth Science wasn't good to you was it hamy.

Thu, 05/19/2011 - 11:35 | 1291615 Drag Racer
Drag Racer's picture

here is something from the geologists.

Yesterday I was listening to an MIT lecture and the 'insider' giving the lecture stated that BPs estimates are we have used 0.16 of known reserves.

Thu, 05/19/2011 - 11:39 | 1291654 Flakmeister
Flakmeister's picture

Wow, we must be all saved now. Can you quantify what consitutes these reserves?

Thu, 05/19/2011 - 09:05 | 1290911 Herne the Hunter
Herne the Hunter's picture

Also, reserves are a useless metric. It's about flow rates.

Thu, 05/19/2011 - 09:41 | 1291043 xPat
xPat's picture

Quite right. More specifically, it's about the flow rate that can be sustained at an economically viable cost. There's plenty more oil under the deep oceans, but it would cost $200+/bbl to extract it, and the economy can't afford that kind of energy price without serious risk of economic collapse and recession or depression.This author completely misses the point, and seems to be on an adolescent mission to deliver ad-hominem assaults on M. King Hubbert. The guy just doesn't get it.

 

Here's a video for investors about peak oil: http://www.eriktownsend.com/video-1-peak-oil-explained-for-investors.html

 

The video gets it right. The author of this article has a very creative and persuasive writing style, but the evidence simply doesn't support his perception of the world around him.

 

xPat

Thu, 05/19/2011 - 11:18 | 1291552 Urban Redneck
Urban Redneck's picture

Your argument assumes that the OWNER of the oil is willing accept less than 200 pieces of Bernanke fiat per barrel to have his wealth extracted from his land and made available on the open market.  Maximum Flow Rate Reductions can occur much faster as a result of economic or political decisions than as a result of geology and physics.

Fri, 05/20/2011 - 00:05 | 1294571 JeffB
JeffB's picture

Thanks, xPat. I really appreciated the video. He does a very good job in putting it all together in a very straightforward and easy to understand manner.

 

Fri, 05/20/2011 - 05:12 | 1294841 xPat
xPat's picture

Glad you enjoyed it. Check out Chris Martenson too, also excellent. www.ChrisMartenson.com. Watch chapters 17a/b/c from his free video crash course for a broader primer on energy economics.

 

xPat

Fri, 05/20/2011 - 10:26 | 1295294 JeffB
JeffB's picture

I will check it out. I'm a big fan of Chris Martenson and of his "Crash Course", but haven't watched his videos on "Peak Oil". I was already a believer and skipped over those videos. I guess I was a little glassy eyed by the time I got to the #17 videos in the series. ;)

 

Thu, 05/19/2011 - 09:17 | 1290948 legal eagle
legal eagle's picture

Certainly, the now Ex IMF chief has seen his peak, unless CNN decides to intervene and give him a talk show like Spitzer. I am calling peak IMF!

Thu, 05/19/2011 - 09:20 | 1290978 Inspector Bird
Inspector Bird's picture

The issue isn't whether we'll run out of oil or not.  In fact, that's the least of our worries.  We'll, in fact, probably have enough oil to supply whatever needs we have for as long as we need it.

 

The "question" in the discussion of peak oil isn't oil.  It's pricing of energy as a whole.  We have options, lots of them.  All are viable at a certain price.  For some of those options, the price is falling while for others it is rising. 

 

The likelihood of "peak oil" being true or real is slim - because it all depends on how you define what you need and how you choose to get it.  If your assumptions are based on needing the amount of oil we used today simply because that's what today is guding you on, then let's review history:

 

If this was 1000 extended out many years, then "peak wood" would be the point of discussion. 

If this was 1800 extended out many years, then "peak whale oil" would be an imminent problem

If this was 1860 extended out, then "peak coal" would have been a discussion (sure, there's loads of coal, but assuming something else hadn't come along....which is my point)

 

Fact is, we're going to have options, we always do.  We can't sit here and declare that "peak oil" is a problem simply because that's what we believe - we have to have situations which warrant that discussion (so many dry wells and delays in delivery and exorbitant prices ramping up faster than we can imagine).  We have none of this.  Even the price ramp ups are primarily driven by the magnification process of speculative fever driven by excessive monetary stimulus.

So sorting through the wreckage, let's be happy that prices for oil are rising, because THAT is what drives the shift to other technologies.  Were it not for the expense of coal, and the relatively sudden creation of easy oil collection and refining and it's relatively low cost versus energy released, it's likely our cars would be coal driven Stanley Steamers of some sort, our skies would be permanently black, and people would be concerned about "peak coal".

 

 

 

Thu, 05/19/2011 - 09:27 | 1291016 Flakmeister
Flakmeister's picture

If you notice, each transistion that you described was a migration to higher energy density substance. So, oh sage guru, what is next? Let me guess, if we would just let the "Free Market" work, we would all have Mr. Fusions...

Thu, 05/19/2011 - 10:08 | 1291177 Quintus
Quintus's picture

He's just recycling the same tired old 'Free Market will solve everything regardless of the surrounding world' claptrap that would have us believe that if you locked a dozen economists in a room, over time their collective demand for food would give rise to the spontaneous creation ex-nihilo of a tray of sandwiches to meet that demand, because demand for things always results in more supply right?

Thu, 05/19/2011 - 16:53 | 1293270 malek
malek's picture

Now imagine yourself inthe year 1000, 1800, or 1860 as mentioned above.
And then you'd also ask "So, oh sage guru, what is next?"

Something dawns on you?

 

Thu, 05/19/2011 - 17:01 | 1293331 Flakmeister
Flakmeister's picture

As to what is next, well... you can simply look at energy density. The logical progression was nuclear, we managed to fuck that up. The other way is to look at it to concentrate the flow from low flux sources, that is called solar, and it is not quite ready for primetime...

Your cute riposte missed something rather obvious about coal and oil, the world economy and population was in relative equilibrium at the onset of the hydrocarbon age, ~1800 It is through those hydrocarbons that we have increased the population 7-fold.... If the population was 1 billion and everybody consumed oil at current US rate, this pesky problem of peak oil would years away... 

Fri, 05/20/2011 - 12:42 | 1295860 malek
malek's picture

Well it clearly didn't dawn on you: Such questions are useless.
Note that energy density is only important in some applications, most obvious example are planes.

And who declares it impossible the population is not approaching a new relative equilibrium at 9 billion?

Fri, 05/20/2011 - 12:58 | 1295941 Flakmeister
Flakmeister's picture

Energy density is extremely important.... try powering a semi or a street car on coal...

Those 9 billion require will require ~20 mmbbd of oil for agriculture... Not saying its impossible, just highly unlikely... 

Thu, 05/19/2011 - 09:45 | 1291094 Flakmeister
Flakmeister's picture

You also might want to chew on this for a while.... this is what a real article looks like

http://xa.yimg.com/kq/groups/20593576/885722944/name/Patzek+and+Croft+2010+-+Peak+Coal+2011.pdf

Thu, 05/19/2011 - 09:56 | 1291142 Navigator
Navigator's picture

<<<The likelihood of "peak oil" being true or real is slim - because it all depends on how you define what you need...>>>

The term "Peak Oil" is a contraction for "Peak Oil Production".  It has absolutely nothing to do with "need"...in fact...if the world's "need" for oil decreased because aliens brought us unlimited free portable energy, oil production would plummet and we would (still) be past the point of world peak oil production.

You may want to study a little before you write in public Mr. Bird...it's less embarrassing that way.

Thu, 05/19/2011 - 11:03 | 1291465 dttmei
dttmei's picture

Who is Sean Corrigan?

Not a very convincing argument.  It fails to take into account the politics of transitioning to new energy fuels.  Of course civilization will survive, it is the transition that will be dislocating for all.  And, the negotiation over the rise of winners and losers will determine whether there can be a rational and acceptable agreement over these issues.

Thu, 05/19/2011 - 15:48 | 1292967 RafterManFMJ
RafterManFMJ's picture

I agree. Hydrocarbons are found on other planets and moons. Since we can safely assume they had a low population of ferns and dinosaurs, where did such oil come from?

Oil is continuously generated. See Deep Hot Biosphere by Gold

Thu, 05/19/2011 - 09:00 | 1290885 Herne the Hunter
Herne the Hunter's picture

What is the point of this article?

Thu, 05/19/2011 - 09:06 | 1290901 snowball777
snowball777's picture

We now know Sean had a hard time with PDE in school and carries a grudge over it?

Thu, 05/19/2011 - 10:11 | 1291198 Flakmeister
Flakmeister's picture

Hell, he had a hard time with ODEs

Thu, 05/19/2011 - 09:00 | 1290887 Navigator
Navigator's picture

 

 

This article is junk...but at least it'll be good for a giggle at the comments of the inevitable science deniers who will be duped into thinking it's genius.

Thu, 05/19/2011 - 09:09 | 1290925 kinetik
kinetik's picture

+1

Thu, 05/19/2011 - 09:20 | 1290964 Chris Jusset
Chris Jusset's picture

+1

Absolute junk.

Thu, 05/19/2011 - 09:09 | 1290928 Sofa King
Sofa King's picture

Science deniers, is that like a holocost denier...are we now going to make it a crime to dispell a hypothesis.  Dude, statistical speculation is not science, it's a social engineering tool...much like hope and fear.   Peak oil hasn't been proven and can't be proven which is why it will always remain a theory.  Me, I just trade the trends and make some extra bank so I can drive my gas guzzler around town just for the hell of it.

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