Guest Post: Doug Casey Uncovers The Real Price Of Peak Oil

Tyler Durden's picture

Submitted by Doug Casey of Casey Research,

Doug Casey Uncovers the Real Price of Peak Oil

Doug Casey, chairman of Casey Research and expert on crisis investing, is on the search for real wealth – not investments in companies that push around paper. In this exclusive interview with The Energy Report, Casey shares his pragmatic take on what's next for oil, gas, and nuclear power.

 

The Energy Report: There will be a Casey Research Summit on Navigating the Politicized Economy in Carlsbad, California, in September. At the last conference, Porter Stansberry caused some excitement with his argument that oil could go to $40/barrel (bbl). What's your view?

Doug Casey: We like to have a range of defensible views represented at our conferences. But personally, I don't think it's realistic to suggest oil prices will drop as low as $40/bbl.

I am of the opinion that the Hubbert peak-oil theory is correct. In the 1950s, M. King Hubbert projected that US oil production would start declining in the 1970s, and he was accurate. Then he projected that in the mid-2000s, the world's production of light, sweet crude would start declining. He was quite correct about that, too.

There will always be plenty of oil at some given price, but to produce oil – even conventional, shallow, light sweet crude – now costs close to $40/bbl in many places.

It's extremely expensive to produce oil through unconventional techniques like horizontal drilling and fracking. Producing oil from tar sands is very expensive and problematical.

Drilling 15,000 feet under the ocean is very expensive and has a lot of risk.

Drilling in politically unstable jurisdictions with sparse infrastructure is neither cheap nor fun. We're talking about production costs of at least $80/bbl in many cases.

I don't think oil is going down much from here.

Let's not, in addition, forget that it's the most political commodity in the world, and that most of it still comes from the Middle East, where tensions will remain high.

I'm neutral to bullish on oil. I'm not bearish at all.

TER: How will US natural gas impact oil prices?

DC: The thing with natural gas is that it's almost an entirely local market. Oil is very transportable, very fungible – it's a world market. Oil prices are relatively consistent – say within 20-30% worldwide. But the price of gas differs by hundreds of percent around the globe because it's not very transportable. It doesn't seem that's going to change in the near future.

The price of gas is going to stay low in the US for some time because of new technologies, namely horizontal drilling and fracking, which allow the exploitation of vast new deposits. These deposits can produce large amounts of hydrocarbons, albeit at relatively high cost. As soon as prices start to rise, however, wells that have been shut because of low prices will start producing again – and that will keep a lid on gas prices for some time to come.

TER: Do you see potential for the US to become a natural-gas exporter at some point in the future?

DC: The problem with gas is that, unlike oil, it's hard to move and inconvenient to export. There are basically two ways that you can move gas. One is via pipelines. That doesn't work very well across oceans. The second is by liquefying it and putting it in liquefied natural gas (LNG) tankers and then transporting it to some place where it is re-gasified again, but that is expensive and it's actually quite dangerous because the LNG tankers are almost like floating bombs.

I'm not convinced that gas is ever going to become a truly international commodity – at least not until it's much more expensive.

The idea of the US becoming a huge gas exporter is a politically driven fantasy. The government throws ideas out if it makes them look good. We bat them back when we weigh up the realities, then it's up to the reader to decide. It's why I think our summits and the world-shaping topics we discuss are so important.

TER: Can we assume that you're not as bullish on gas as you are on oil?

DC: Yes. I'm much more bullish on oil. Oil is a much more concentrated energy than gas. Oil is needed for cars. It's needed for airplanes. It's needed for everything. Gas is mostly used for utilities and heating. Oil is both a much denser energy and a much more important form of energy.

TER: Speaking of concentrated types of energies, you have called nuclear "the safest, cheapest, and cleanest form of mass power generation," yet we still haven't seen the uranium price return. What's your view on the future of uranium?

DC: I have to be bullish simply because of reality. It really is the safest, cheapest, and cleanest form of mass power, but unfortunately it's also the object of mass political hysteria. Many misinformed but well-funded nongovernmental organizations simply hate uranium, for purely ideological reasons.

Actually, thorium would be an even better form of nuclear power than uranium. We've been using uranium primarily because you can't make nuclear bombs out of thorium, and the US was building up its nuclear arsenal from World War II on. This is how uranium came to be used for nuclear power plants instead of thorium, but that's a whole different discussion.

Of course, now the disaster at Fukushima is held up as proof that nuclear isn't viable; the Japanese and German governments are panicking and shutting down their nuclear plants as quickly as they can. But doing so is extremely foolish.

To start, Fukushima used 50-year-old technology. That plant was – like most plants in the world today – an antique, two generations behind current designs. It was also poorly located. It should never have been put right on the ocean. Other design mistakes were made. Still, even over the next decade, only a few people will die from radiation released, whereas at least 20,000 died from the earthquake and tsunami.

But the real question is: if nuclear is not going to be used for mass power generation, where is the power going to come from?

Most of the world's power is generated by coal, but coal is extremely dirty and dangerous in every way possible – in the production process, and in the residues that it leaves both on the land and in the air.

In an industrial world with seven billion people, the only energy source that makes sense is nuclear power. Sure, you can use wind and solar from time to time and in certain places. But those technologies are extremely expensive, and they absolutely can't solve the world's energy problems. Certainly not when electrical grids start going down, as they did in India last month. That's why India and China will be building scores of nuclear plants in the years to come.

TER: Doug, thanks for sharing your insights. I greatly appreciate it.

DC: Thanks for having me. I encourage your readers to attend the Navigating the Politicized Economy Summit. If you can't make it, the audio collection is a great way to benefit from the information the conference's 28 expert presenters will be sharing – and if you preorder, you can save $100. It's a great deal.

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Abraxas's picture

Interesting but irrelevant.

12ToothAssassin's picture

You lost me well before "Still, even over the next decade, only a few people will die from radiation released, whereas at least 20,000 died from the earthquake and tsunami."

 

Huh?

Badabing's picture

“Sure, you can use wind and solar from time to time and in certain places. But those technologies are extremely expensive, and they absolutely can't solve the world's energy problems.”

Oh yes they can! Once put in place solar, wind, geo-thermal, or hydro  will produce power indefinitely.

Most systems have a return on investment in under 3 years.

Even small independent solar kits like this one http://www.harborfreight.com/45-watt-solar-panel-kit-68751.html will run a small freezer by adding a few deep cycle batteries and an inverter. And the ROI is about a year and a half. Don’t hook up to the grid you need a transfer switch that’s costly and the power company makes a profit selling you back the power you made with the equipment you invested in!

DCFusor's picture

Been off the grid on solar myself since about '80, and now even charge my electric car off it.

It works.  It won't work for all, I've got the roof space for it - an apt dweller never will.

This BS about thorium not being able to make bomb material is bogus, and yes, I AM a nuclear physicist.  Th-232 has to be bred into U-233 via neutron capture to get something directly fissionable, just like the case of U-238 capturing neutrons to breed into Pu 239 (after a beta decay in either case).

U 233 is pretty simple to chemically separate from a breed blanket, just like Pu is in a conventional reactor - no fancy centerfuges required.

The issue is, and always has been, proliferation, else we'd be reprocessing our fuel rather than ditching it after using only about 8% due to the buildup of nasty other stuff in it.  That reduces tons of hot waste into tons of reusable fuel, and ounces of "truly nasty byproducts" - but note the ratios, ounces are a little easier to store, and their short half life of the truly nasty stuff means you don't have to store it long either.

So much BS, so little fact in any of these debates.

FEDbuster's picture

Given all the concern about the waste from spent nuke fuel, couldn't we just shoot a rocket full of the stuff into the sun?  Given what I have read and seen about our sun, a rocket full of spent fuel rods wouldn't even be noticed by the sun's own explosions which are thousands of times greater.   I know there would be an uproar about sending our garbage out into space, but wouldn't that be a cost effective way to get rid of the stuff?

Also what about the reports that the Bakken field contains more oil than the Mideast?

Citxmech's picture

And what happens if/when one of those rockets fails. . . ?

Vlad Tepid's picture

You'd need a space elevator or a rail gun cargo system before that would be safe...thems is a long ways off at our current state of deevolution.

Bicycle Repairman's picture

"The problem with gas is that, unlike oil, it's hard to move and inconvenient to export."

Not a problem at all.  This keeps the manipulation down.

Freddie's picture

Where did you get your solar panels? 

monad's picture

I don't anyone who said you couldn't. Its my understanding that a small amoutn of pu239 is the only final product of the thorium process, and that another major advantage is that thorium reactors operate at low pressures = much safer. The plutonium can be used. The only question I have is how well reactor materials hold up to molten thorium salts. It would be very handy to figure out to dispose of spent fuel in a breeder reactor...

Dr. Kenneth Noisewater's picture

http://www.americanscientist.org/issues/pub/2010/5/a-thorium-future

It is conceivable that a nation or revolutionary group might expel IAEA observers, stop a liquid-fluoride thorium reactor (LFTR) and attempt to remove U-233. Skilled engineers would need to modify the radioactive reactor’s fluorination equipment to separate uranium from the fuel salt. U-233 produced in a LFTR is a poor choice for nuclear weapons because the neutrons that produce U-233 also produce 0.13 percent contaminating U-232, whose decay products emit 2.6 mega-electron volt, penetrating gamma radiation. That would be hazardous to weapons builders and obvious to detection monitors.

Interesting, perhaps terrorist bomb builders would be happy to sacrifice themselves to Allah in the process of building a holy bomb, but given LFTR's other features they're still the best bet for base load power even if they require the same level of security as a uranium-powered station.

 

I also think reprocessing has politically been a greenie issue in the US rather than a nonproliferation issue.

Nels's picture

 

Oh yes they can! Once put in place solar, wind, geo-thermal, or hydro  will produce power indefinitely.

The question is, and always is, at what cost? 

If you are out in the boonies, and only need a small freezer, a solar panel might be a lot cheaper than building and supporting 20 miles of distribution line.  But it isn't going to power the factory needed to build the solar panel, or the factory needed to build the truck used by FedEx to bring that panel to you.  Those factories need large, steady power flows, and the batteries haven't been built yet that can do that job on a cloudy week.

Your solar panels are cheap because they were built with cheap coal and nuke power, and delivered with cheap oil.  Or, at least these power sources are cheap compared to what power will cost with only solar, wind and .....

o2sd's picture

Oh yes they can! Once put in place solar, wind, geo-thermal, or hydro  will produce power indefinitely.

Sorry, but that is just not true. The mean time to failure for the technologies you mention are (roughly)

PV : 20 years.

Wind: HAWT 5 years, VAWT 15 years

Geo-Thermal: Unknown, but probably the same as coal fired power station. It's a steam turbine after all. Also has a running cost.

Hydro: The cement in most dams will probably calcify and lose compression strength in ~100 years. No hydro dam has ever paid back the cost of capital.

One energy source that can be harvested indefinitely is wood from managed forests. There is a running cost, but it is minimal.



Kayman's picture

Unless EROEI is measured in dollars, not BTU's, it is a meaninless measurement.

Matt's picture

you mean how many $1 bills worth of energy you get back compared to how many you spend?

Measuring EROI in dollars doesn't make any sense.

EROI: Energy Return on Investment

ROI: Return On Investment

two different, useful metrics that should both be taken into consideration. If something provides profitable energy from a dollar stand-point, but produces less energy than it consumes, then likely there are subsidies, taxes and regulations distorting the dollar price.

harposox's picture

Wish I could junk you a second time for this statement. Probably a negative EROEI in it, though. Oh well.

Rasna's picture

It really is the safest, cheapest, and cleanest form of mass power, but unfortunately it's also the object of mass political hysteria.

I can see where hysteria would set in when one is awwaked in the middle of the night by the green glow of your spouse lying beside you in bed.  Just ask the folks in Fukishima.  Or better yet the folks on the West Coast exposed to the steam clouds from reactor number 3.

Casey is an idiot on nuclear power.  I'm guessing that he won't have a problem accepting any of the 100,000 year spent fuel casks into the landfill near his house. 

Unfortunately, we won't see natural gas making any inroads toward making us energy independent anytime soon even though capacity is measured in the TRILLIONS of cubic feet.  That's why the price of NG is so low,  That coupled with flat demand.

 

Big oil and their money is a bitch.  Especially when the spend it to rent congressmen and women.

jimod's picture

Thorium,  LFTR, fascinating technology, which is not uranium and plutonium.

Passively shuts down in the abscence of coolant.  Chemically reprocesses to continually regenerate new fuel.

Fascinating stuff,  discriminate between thorium and fast breeder reactors in order to make intelligent comments.

 

Gordon Freeman's picture

You can put as many spent-fuel casks under my house as you want.  You just have to pay me my price.

GoinFawr's picture

No need. It's already essentially free to just sink 'em in the coastal waters of any nation holdouts still refusing to allow a GS alumni to head their central banks.

Freddie's picture

Or better yet the folks on the West Coast exposed to the steam clouds from reactor number 3.

Hopefully those steam clouds are gently misting Nancy Pelosi's fvvkking wine vineyards in Nor Cal.  2012 will be a good year for her label.  Her merlot as a sparkling hint of cesium and MOX.  

Doug Casey got rich because his old man developed a lot of Beltway real estate due to the explosion of the size of DC Govt post WW2. 

 

 

Death and Gravity's picture

"Casey is an idiot on nuclear power. I'm guessing that he won't have a problem accepting any of the 100,000 year spent fuel casks into the landfill near his house."

A typical uninformed and hysteric anti-nuclear talking point.

harposox's picture

That sentence stopped me in my tracks as well, 12Tooth. The author's either an unrepentant industry schill, or a drooling imbecile.

AldousHuxley's picture

 

 

they put man on moon and robots on mars but can't figure out a technology to beat oil?

that's because elites want it that way.

 

do you know why elites hate green energy?

 

they can't control it.

 

 

Michael's picture

The Earth makes its own unlimited supply of a-biotic oil, more than we can ever use up in a 1,000 years.

Did you see that geyser of oil coming from the bottom of the Gulf of Mexico ocean a few years ago?

 

The Ron Paul Wrecking Crew showed up at the Republican Nation Clusterfuck Convention yesterday like a bull in a china shop and made history on that date in the year of our creator, August 28th, 2012.

We've Done so much More Damage to the Establishment this Time than Last Time.

You should be proud of yourselves!

Don't you Think?

http://www.ronpaulforums.com/showthread.php?387826-We-ve-Done-so-much-More-Damage-to-the-Establishment-this-Time-than-Last-Time.

P.S.

Thanks for the nice comments for me yesterday on that other thread.

Bay of Pigs's picture

That's pretty funny coming from you Mr Global Warming

Flakmeister's picture

Always glad to provide a laugh...

Would you like to discuss the recent Arctic Ice news and the long term implications on Hadley cells and the position of the Jet Stream?

Bay of Pigs's picture

No, like most here, I wouldn't want to discuss anything with you concerning weather patterns.

You wanna talk gold? 

Flakmeister's picture

Gold will get slammed by Bennie this friday, BTFD....

 

As for discussing climate, yes, that is very wise of you.... Never bring a knife to a gun fight...

UGrev's picture

Sure, as soon as you start talking about Solar Cycles and the unusually high activity of the sun. I would also love to talk about the GROWING Fjords when you're ready. For that matter, I wouldn't mind a talk about the conservation of energy and things like source to sink.. 

or ..fuckit.. 

 

dE/dt = mdot*j(in) - mdot*j(out) + Qdot + Wdot(external)

Flakmeister's picture

Oh goodie....

A cherry picker and a bullshitter rolled into one...

So what has been the net solar forcing over the past 150 years in W/m^2?

UGrev's picture

What.. did you pull that question out of the lefty handbook on how to defend bullshit science?

The sun produces 12.2 TRILLION watt-hours per square mile each year and you fucking morons think that energy goes into some fucking void or some shit.. 

We are gaining more energy than we are losing. 

Your COGNITIVE DISSONANCE..address it.  You eco tards had your fucking pants pulled down and your ass holes fisted with a garden hose on the coldest day of the year with all the emails that came out admitting that the science was being fudged to fit the narrative after the paranoia was proven to be bullshit. 

NONE OF THIS IS MAN MADE!!! we are so trivial compared to the amounts of energy produced by objects that can hold 1600 saturn sized objects in it. 

You bore me. I have software to write.. 

Flakmeister's picture

My what a feeble comeback...

I suggest you get up to speed here

http://www.skepticalscience.com/solar-activity-sunspots-global-warming-advanced.htm

Pay close attention to the solar flux over the past 40 years, i.e. figure 2....

UGrev's picture

What part of EMAILS WERE HACKED AND BULLSHIT SCIENCE WAS EXPOSED did you mis-read? I can review it for you again if you like..

 

YOUR SCIENCE IS FAKE!!!!! FRADULENT!!!! MADE UP HOCKEY STICK BULLSHIT!!!!!

http://www.nature.com/news/2011/110824/full/news.2011.504.html

now stfu and go play in your sandbox..  

Flakmeister's picture

My what an angry fool...

So first, your arguement is that the Sun is so big and hot that it has to be that...

Now you tell me it must be  cosmic rays...Are you are implying that clouds have changed because cosmic rays have changed...

If you actually read the blurb, you would have noted this

The high-energy protons seemed to enhance the production of nanometre-sized particles from the gaseous atmosphere by more than a factor of ten. But, Kirkby adds, those particles are far too small to serve as seeds for clouds. "At the moment, it actually says nothing about a possible cosmic-ray effect on clouds and climate, but it's a very important first step," he says. 

Well here is the data on cosmic rays for the past 50 years or so...

http://ulysses.sr.unh.edu/NeutronMonitor/Misc/neutron2.html

I pinched the following from the above SKS link:

Numerous studies have investigated the effectiveness of GCRs in cloud formation.  Kazil et al. (2006) found:

 

"the variation of ionization by galactic cosmic rays over the decadal solar cycle does not entail a response...that would explain observed variations in global cloud cover"

 

Sloan and Wolfendale (2008) found:

"we estimate that less than 23%, at the 95% confidence level, of the 11-year cycle changes in the globally averaged cloud cover observed in solar cycle 22 is due to the change in the rate of ionization from the solar modulation of cosmic rays."

Kristjansson et al. (2008) found:

"no statistically significant correlations were found between any of the four cloud parameters and GCR"

Calogovic et al. (2010) found:

"no response of global cloud cover to Forbush decreases at any altitude and latitude."

Kulmala et al. (2010) also found

"galactic cosmic rays appear to play a minor role for atmospheric aerosol formation events, and so for the connected aerosol-climate effects as well."

Low-Level Cloud Cover

Unfortunately observational low-level cloud cover data is somewhat lacking and even yields contradictory results.  Norris et al. (2007) found

"Global mean time series of surface- and satellite-observed low-level and total cloud cover exhibit very large discrepancies, however, implying that artifacts exist in one or both data sets....The surface-observed low-level cloud cover time series averaged over the global ocean appears suspicious because it reports a very large 5%-sky-cover increase between 1952 and 1997. Unless low-level cloud albedo substantially decreased during this time period, the reduced solar absorption caused by the reported enhancement of cloud cover would have resulted in cooling of the climate system that is inconsistent with the observed temperature record."

So the jury is still out regarding whether or not there's a long-term trend in low-level cloud cover.

 

And you still have to explain why the Stratosphere is cooling while the troposphere is warming....

Acet's picture

Thanks. It's a shame that the skeptical crowd is reduced to "We found out some change to the raw data that we can't understand so it must ALL be a conspiracy to deceive us" since most lack the training to understand it.

The funny bit are the claims that there is this huge conspiracy by scientists to make false claims about Global Warming. The "funny" in it is that one can dismiss it simply using "follow the money" logic:

  • On one side there are several multi-billion dollar industries which would go bankrupt if people reduced fossil-fuel consumption to tiny levels
  • On the other side there are a bunch of academy nerds who have little or nothing to gain from being on one side or the other. Most care above all to preserve their good name as doing good science (i.e. their research is not exposed as bogus) and will thus try not to put out crap research (most people don't go into science for the money - for example a Physicist can make something like 4x more money as a Quant for an Investment Bank than as a Researcher)

Who has the most to loose, the multi-billion dollar corps or the scientists? Who has the most resources they can use to "sell" their side to the masses, to make shit up defending their case, to get politicians to side with them, to get the media to promote their ideas, the multi-billion dollar corps or the scientists? Who has the marketting, PR and spin know-how, the corps or the nerds (scientists)?

So what's more likelly a conspiracy of several multi-billion dollar corps who might loose everything if people believe in AGW and are thus buying "studies", airtime, politicians and deploying marketters, PR-men and spin doctors to confuse the masses or a conspiracy from a bunch of nerds (very intelligent yes, but not exactly the most socially adept people around) who will only loose if they defend the wrong side and are proven to be wrong (and in science, everybody is out to prove you wrong) and thus have little a priori natural inclination to defend one side or the other???

memyselfiu's picture

Logic is a bitch....and you just bitchslapped most of these clowns. Well done.

mickeyman's picture

Following the money is more helpful than you might suppose. For some reason there is a lot of money available to fund research into warming, buckets of it are available for creating computer models of climate, yet there is little money and less interest in devising ways to test those models against the natural record.

UGrev's picture

So, you're trying to tell me that the glowing disc in the sky doesn't emit ANY radiation? 

Sun emits radiation

Sun blocks cosmic rays when.. lets just call it "busy" to make it easy for you to grasp

Sun doesn't block cosmic rays when not busy

Sun still transfers 12.2 TRILLION watt-hours of energy per square mile each year. You eco tards should know this because you've been miserable fucking failures at capturing it (Solyndra). 

Flakmeister's picture

With every post you make, you make a bigger fool of yourself...

Show me evidence that it is the sun...

Go ahead make my day....

Death and Gravity's picture

If all else fails, continue by simply ignoring the opponents points.

Jesus H. Christ on a bicycle, you denialists...

Death and Gravity's picture

Unsurprisingly, Ugrev changes the topic into the hysteria og the denialist crowd when he gets a question he can't answer (or haven't even got a clue what means).

NidStyles's picture

LOL! Skeptical Science. Go away troll. 

Flakmeister's picture

Hey, SKS has links to the *real* papers...

Go back and play with Anthony's muppets at WUWT if you can't handle the science...