The Peak Oil Crisis: Wall Street Comes To Reality

This is a great read. Please recommend.

1 trillion barrels of oil remaining per oil company ads on tv

85 million barrels per day consumed--expected to rise to 120 million barrels per day by 2020.

This means that we've got about 25 years left of oil.

I notice that even during Nixon's administration planning to seize oil fields in Saudi Arabia that 10 years was a British intelligence estimate of how long 'we' had to occupy the area,

"The British warned in their assessment that any occupation of Saudi Arabia, Kuwait and Abu Dhabi might have to last as long as 10 years. The use of force would also anger and alienate Arab countries and irritate the Soviet Union, although a military confrontation with the country would be unlikely, the document stipulated."

Document reveals Nixon plan to seize Arab oil fields
'70s embargo sparked 'last resort' measure, says British memo
by Lizette Alvarez, New York Times
Friday, January 2, 2004

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/01/02/MNG8G427D61.DTL

Hubbard's Peak is merely the point at which demand exceeds supply. Some believe it is coming. Some believe it actually has passed. Hubbard's own projections were that it would occur in the 1970s and some agree with that. It depends on how you look at it. There have been reserves discovered since Hubbard put forth his theory. But those reserves have not significantly affected the problem of demand exceeding supply.

Depletion of a reserve requires replacement of the reserve. So far replacement has not really been necessary simply because of the larger reserves throughout the world but that is changing and changing more quickly than anyone anticipated. Mexico is the focus of what is happening. Its major reserve is being rapidly depleted. The other reserves are also being depleted. It could be 2 years, it could be 5 years. Pemex has used 5 years as the point of depletion. The problem with reserves is there is no gauge to tell you how much oil is left. There are changes in the grade of oil and its composition. It becomes harder to extract. Suddenly, one hole in one of the fields no longer produces. Then another. And out of 50 holes in one field, you may only have 5 that are still producing. Those 5 may continue producing for another 10 years. Or they could stop producing in 10 months. Again, there is no gauge.

To say that there are 1 trillion barrels of oil in known reserves that are available is not really accurate. There are an estimated 1 trillion barrels of oil. The reason why there is no gauge to tell you how much oil is left is because there is no gauge to tell you how much oil is there to begin with. Proven reserves, a term used commonly, is really projected reserves. It really is here today, gone tomorrow.

Some believe that it will not matter because there is so much oil in other regions and new reserves being discovered and new fields being drilled. The problem is they do not provide replacement at the point of depletion. Why is replacement so important? In the case of Mexico, Mexico will have to begin to import all of its oil. But the United States will also have to find new sources of imports to replace the imports from Mexico. Which have been between 15 and 25% of our imports. Saudi Arabia is indicating that it will not increase production significantly. Some believe it is an attempt to drive up the price. Others believe Saudi Arabia is facing what Mexico is facing and wishes to conserve what oil it has left. For itself as well as for export.

Without a massive reserve being discovered in the Arctic, which of course raises immense questions with regard to environmental obstacles, and without successful deep-water and deep-land drilling becoming more feasible although as oil goes beyond $100 a barrel it will be, we are facing a major shortage of oil within the next 5-10 years. The industry itself in one report believes it will happen in 2015.

This may come as a shock to the average American. It is not a shock to our government. Which has known about the problem of peaking from the moment the oil industry first began to talk about it in the late 1950s.

We simply have not planned for it. Iraq is just a portent of what is coming. The war in Iraq is a war for the oil. Beyond the greed of the oil industry is the reality of the need for secure replacement.

The problem with the present policy is that millions of lives are not worth millions of barrels of oil.

The only two countries that seem to have planned for the peaking and the eventual shortages and the eventual depletion are Iran and Brazil. Iran is intent on its nuclear power program. Brazil is intent on its biofuels program. They may survive the coming crisis. We may not.

Not to be too picky, but the man's name was M. King Hubbert.

"Hubbert's peak" is typically given as the point at which 50% of total estimated production has been reach. At this point, the production rate is assumed to be at peak, and then to irreversibly enter decline. Demand might be more or less than supply at any point in time - resulting in economic corrections. Hubbert's work was focussed on the geologically limited behavior of production, which over the long term has proven more reliable than predictions based upon economics.

Hubbert's prediction of peak oil in the early seventies referred only to US production, and proved to be factually correct.

Pemex's production decline rate leads to the likelihood that Mexico will no longer export oil after 2013. Domestic supply is another issue - self-sufficiency is not so difficult with conservation and still large reserve potentials.

There is a gauge to know, field by field, how much oil is left. I would not underestimate the expertise and professionalism of oil industry engineers and geologists. Field by field, and country by country, the figures are largely known. There is, however, no requirement that what is known be made public, and there has over the years been a number of reasons to keep "two sets of books" on national oil reserves - one set to publish for nationalistic or corporate economic purposes (reserves being accepted as formal assets, and usable as collateral against IMF and other loans), another set for the boots-on-the-ground industry. One of the problems with predictions has been the tradition of skewed data, resulting in the differences between ASPO and CERA predictions, among others. A great deal more work has gone into this in the past couple of years, and all estimates are growing more reliable and consistent.

But a good overall post, and no disagreement on your larger conclusions.

My what interesting times: global warming, global dimming, and the end of the petroleum era all coinciding. Maybe there really is something to that Mayan 2012 prophecy or whatever.

The predictability of the global reserves is also dependent on the accuracy of an industry that has a history of wishful thinking compounded by inaccurate exploration methodology and models.

The best recent example of this is the Caspian basin, once thought to be the next Saudi Arabia. The Caspian turned out to be a bust, with few easy returns and sulfur tainted oil as well. Pipelines that had long been planned went back to the drawing board, and geo strategic planning turned to securing different reserves, with different land bridges and shipping lanes for transport, i.e., Iraq.

It has long been thought by many who have studied peak oil, that the industry itself has been caught by surprise by evident peaking decades before they thought it would happen. The industry continues to fold its tents and underfund its exploration in areas that only twenty five years ago were thought to have promise, because the development cost until now has been excessive in relation to industrial economies reliance on 'cheap' energy.

Now with the supply and demand peak pressuring the seemingly un expandable production peak, the price structures for economies are expanding daily. It is why with the coming peak in Mexico, the politicians from both parties are maximizing through the corporate press the negative -- anti democracy and socialist -- propaganda, while preparing to over throw the next closest source of significant reserves, Venezuela.

Capitalist marauding under the veil of the benevolent free society masquerade, is alive and well even if, morally bankrupt.

The oil and gas industry lies in other words. How shocking. If you can't trust an oilman, who can you trust? All eyes turn to the White House.

But of course to do otherwise would be to lose investors. The industry has admitted we are peaking. Somewhere in the future. So vague, really, and of course misleading. As it was meant to be. Could happen in ten months. Could happen in ten years. Might not happen at all. But the industry still admitted we are peaking and that in itself is indicative of how serious the situation is. If nothing else, we can kiss $3 a gallon gas goodbye in this country. $4 may be the norm. And manageable. $5 may prove to be a disaster of epic proportions.

What may be telling is the "war" with Iraq which is really a war over control of the oil reserves. When you think about it, well, Bush really didn't lie. Saddam Hussein really did have a weapon of mass destruction. The oil reserves. And $10 a gallon gas. Our country would come to a grinding halt. We have little in the way of oil reserves of our own. We have to have replacement reserves now that Mexico will no longer be a reliable source for our imported oil.

PEMEX by the way did not say Mexico was peaking. PEMEX said its reserves are being depleted. If I can find the press release I will post it.

or at least their production continues to flag since 2006.

http://www.hubbertpeak.com/mx/

snip --

from Peak Oil Review
Vol.2 No. 5
January 29, 2007
Tom Whipple, Editor

"On Friday PEMEX made it official. Production from Mexico's largest oilfield, Cantarell, fell from 1.99 million b/d in January 2006 to 1.44 million b/d in December. The company's overall crude production in December was 2.98 million b/d, falling below 3 million barrels for the first time in six years. Nearly a year ago, a leaked internal PEMEX study forecast that under the best-case scenario Cantarell's production would fall to 1.54 million barrels a day by the end of 2006 -- almost exactly what happened."

-- end excerpt --

sub link -- http://www.fool.com/investing/dividends-income/2006/02/16/can-oil-still-power-portfolios.aspx

Can Oil Still Power Portfolios?
By Will Frankenhoff February 16, 2006

snip--

"Mexico is in the same boat. Its largest field, Cantarell, which provides 60% of its total production, has gone into irreversible decline this year. Its rate of decline should accelerate to an annual 15% over the next few years. OPEC member Indonesia is even more of a basket case, recently shifting from a net exporter to a net importer."

-- end excerpt --

note: the hubbertpeak.com/mx/ link has many internal links in english and spanish, and they all point to the same conclusion, production has peaked in 2006.

link aspo news letter Oct. 2006 -- http://www.energybulletin.net/21299.html

-- Published on 9 Oct 2006 by ASPO-USA's Peak Oil Review (a free weekly newsletter). Archived on 11 Oct 2006.
Mexico's Cantarell field: how long will it last?
by Tom Standing

~~ no excerpt but this article has a well documented history of the Cantarell decline and is informative ~~


New link (yesterday) -- http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-11-22T213628Z_01_N22295024_RTRIDST_0_MEXICO-OIL-UPDATE-3.XML

snip --

Weather disruption has left Pemex's oil output at an average of 3.113 million bpd so far this year, in line with the company's forecasts but well below average output of 3.256 million in 2006 and a peak of 3.383 million in 2004.

-- end excerpt --

So as of the news up until yesterday, it appears the above articles were accurate as to the 2006 peak and perhaps Pemex is in a bit of denial.

Internationally weak dollars at that, is cheap compared to Canada, Europe, Latin America, and most all of the industrial nations. US citizens don't seem to have a clue at how pampered they have been, how the rest of the world has subsidized their economy and the tank full of gas for their cars, for many years.

There are a couple of notable exceptions, one is a particular thorn in big oil's and US politicians' side. It is that dastardly new socialist country to the south, where the citizens pay the after production cost for the 'national resource'. Publicly owned oil does have its rewards for the citizens, when gas is sold for less than 50 cents a gallon, and the revenues help pay for social services and schools. Damn that dastardly Hugo, what if other countries were to take another look at the public ownership of the natural resources in the public commons. Hell might start a revolution, that needs to be over thrown.

rather than the engineers and geologists. Working with preliminary results of exploratory drilling and models, you get a wide range of probabilities. The corporate marketers want to have the best case scenario to encourage investors, and the political powers then want to double that. The media hears a number and erases out any associated phrases like "range of probability" and "statistically possible" and "projections unconfirmed until further testing" - these are proven sound-bite killers.

www.theoildrum.com

That's All!