Wednesday, August 15, 2012

Quotation of the Day

"Why are peak oil-ers like Jehovah’s Witnesses? Answer: When the definitive JW prediction of the ‘Day of Wrath’ failed in 1914, they did what false prophets have done in every generation: shifted the goalposts (to 1975 in the case of JW’s—and wrong again). It’s what false prophets do to save face, enabling them to keep fleecing the inherently gullible. Peak-oilers do likewise.

Having written their headline-grabbing, money-making blockbusters predicting the imminent collapse of an oil-driven industrial world, peak-oilers like to maintain a ‘fluid’ approach to their predictions. In the case of oil, however, that’s becoming a tougher proposition, as their ignorance of energy, economics and the sheer ingenuity of man is increasingly revealed in the looming global oil boom."

~Peter Glover in the Canada Free Press

38 Comments:

At 8/15/2012 2:36 PM, Blogger Danny Haszard said...

The Jehovah's Witnesses (like peak oil fallout prediction)are one of two major groups that sprang up from William Miller's failed prediction of the return of Jesus Christ in 1844. The other major group that formed from the Millerites was the Seventh Day Adventists. The failure of Miller's prediction has come to be known as "the Great Disappointment." There were thousands of true believers who had given up everything they had fully expecting to be taken up with Jesus back in 1844. Much like the recent failed prediction of Harold Camping.

The JWs are still around after numerous failed predictions of the second coming. I think the most recent was 1975. Since then they have given up on setting the date and reverted to an "any day now" policy. That one is nice and convenient because it never expires.

The JWs are not without scandals. Child abuse, sadistic mind control tactics, sex scandals, money scams, general bad behavior.
Watchtower society false prophets declare Armageddon end of world in 1874, 1878, 1881, 1910, 1914, 1918, 1925, 1975, and 1984....
---Danny Haszard

 
At 8/15/2012 3:27 PM, Blogger Methinks said...

This comment has been removed by the author.

 
At 8/15/2012 3:33 PM, Blogger Methinks said...

Yeah, well, as T approaches infinity the probability of any event occurring approaches 100%, right?

Paul "in the 1970's hundreds of millions of people are going to starve to death and there's nothing we can do about it" Ehrlich uses the same tactic. He and his buddies have never been right about anything and yet he insists that he's right about everything.

We were just talking about this in the comment section at Cafe Hayek.

Remember the 70's? I learned English just in time to be taught that we're running out of oil. We were supposed to fry in the Southern heat to save on air-conditioning. They were getting ready to cover the ice caps in soot in order to melt them and prevent the impending Ice Age and Ehrlich's prescription for saving the world in "The Population Bomb" was to throw contraceptives in the water and Americans were supposed to provide the means for forced sterilization of those pesky Indians so they wouldn't reproduce like rabbits because they're too dumb to feed themselves. Humans, he said, are a cancer and the only way to make humans better off is to cut out the cancer. This guy has no sense of irony.

The world's population has roughly doubled since the publication of his stupid doom book and human welfare is orders of magnitude better all over the globe than it was at the time of publication. Yet, Ehrlich and his buddies maintain that we're all in a state of Chaos and both on the brink and in the midst of disaster. How he can say this without a single one of his policies being implemented is beyond me, but..

Ehrlich maintains that "perhaps the most serious flaw in The Bomb was that it was much too optimistic about the future"

One of the greatest ironies is that it was Julian Simon, not Ehrlich, who suffered from crippling depression.

 
At 8/15/2012 3:43 PM, Blogger Rufus II said...

Yeah, well why is that, with the Eurozone in Recession, Japan at stall speed (1.4% the last quarter,) the U.S. having cut its petroleum consumption by 4.5 million bbl/day, Brazil and India slowing to walk, and even China slowing,

Brent Crude, and Louisiana Light Sweet are at $114.00/bbl??

 
At 8/15/2012 4:05 PM, Blogger Methinks said...

Because that's the price that balances supply and demand, Rufus.

If you think that's too high, you can help the correct the price and make a killing in the process by selling some crude contracts. Put your money where your mouth is.

Let us know how that goes.

 
At 8/15/2012 4:39 PM, Blogger Rufus II said...

You missed the point, entirely, methinks. Obviously, if the price of oil goes from $9.00 and change in 1999 to $114.00 in 2012 Supply is Not keeping up with Demand.

If you have the price of oil got from $55.00 in 2005 to $114.00 in 2012 with virtually No Movement in Supply, that might be a sign that we're getting close to the maximum rate of extraction.

 
At 8/15/2012 5:15 PM, Blogger DWPittelli said...

One important difference between the second coming of Jesus (or Armageddon) and the timing of peak oil is that it is possible that Jesus will never return (and possible that Earth's secular Armageddon is a billion years or more in the future) whereas there will come a time when oil production peaks and declines, and that time is probably within a couple hundred years. (Hopefully we've all agreed on a design for safe and reasonably cheap nuclear or even fusion power plants by then.)

 
At 8/15/2012 5:19 PM, Blogger Methinks said...

Oh, I'm sorry, Rufus. You're right, I did misunderstand what you were trying to say.

So, here's my new response:

The maximum rate of extraction is, of course always on the horizon and the horizon is an imaginary line in the distance that moves further away the closer you get to it.

Your strange analysis of cherry picked nominal data does not get you to the conclusion to which you'd like your data mining to take you.

In 1980, the nominal price of oil was almost $40/bbl (more than $40/bbl in 1999 dollars) and remained between slightly more than $30/bbl and $28/bbl right through the ugly recession in the early 80's.

During the dot com boom of the late 1990's, when the economic party was in full swing and everybody who was anybody was getting a private jet of their own, oil price tumbled from around $22/bbl in 1996 to scratching $10/bbl in 1999, dipping very briefly to just below $10/bbl. In 1980's $$ that price is, of course, lower. Oh, it was disaster. The oil companies I covered were shutting in wells and getting Prozac prescriptions for all the top executives.

So pointing out the ups and downs of oil prices and economic cycles is pretty meaningless. I can get hydrocarbon out of the dirt in your back garden. It'll cost a whole lot more than $114/bbl, but we have the technology to do it. There are oil seeps all over the ocean. We just can't get to them right now because they're too deep for our current technology. In fact, we will not be at maximum extraction until we run out of planet earth.

Oil will outlast humans on this planet. The cockroaches will be figuring out how to extract it after we're all blown to bits by a meteor.

 
At 8/15/2012 5:23 PM, Blogger Methinks said...

Oh, more wisdom while I was clacking away at my keyboard responding to Rufus. Okay, I give up, Mark Perry.

This myth will never die because on an infinite time horizon, anything is possible.

Of course the time horizon for the Draconian "fixes" to these fantasy problems in the distant future is NOW NOW NOW!!!

 
At 8/15/2012 7:20 PM, Blogger juandos said...

"You missed the point, entirely, methinks. Obviously, if the price of oil goes from $9.00 and change in 1999 to $114.00 in 2012 Supply is Not keeping up with Demand"...

Well rufus were you not able to put gasoline in you car recently?

Strait of Hormuz and Oil Price Rise
2012/07/30

Why Is Gas Price Remaining High When Oil Price Is Going Down?
2012/06/18

 
At 8/16/2012 12:11 AM, Blogger Ian Brett Cooper said...

Putting gasoline in a car is still going to be possible long after the global peak of liquid fuels has been and gone. It's just a question of whether you'll be able to afford it.

Some people, it seems, have peak oil staring them in the face, yet can't see it.

 
At 8/16/2012 6:56 AM, Blogger Methinks said...

It's just a question of whether you'll be able to afford it.

I'm pretty sure you have no idea what you mean by "afford", but suppliers generally don't supply things that people cannot buy. If you're able to fill your tank still it'll undoubtedly be because people are finding ways to "afford" the product.

 
At 8/16/2012 8:11 AM, Blogger VangelV said...

I'm pretty sure you have no idea what you mean by "afford", but suppliers generally don't supply things that people cannot buy. If you're able to fill your tank still it'll undoubtedly be because people are finding ways to "afford" the product.

I think that you missed our friend's point. After the peak there will still be plenty of gasoline for those who are able to bid up the price high enough to squeeze out the marginal users out of the market. At some point it will make sense to move out of that large house in the suburb and move to a small apartment in the city that is close to work because the gasoline prices will make it uneconomic to commute.

It is sad that so many people write about Peak Oil without having a clue about what the proponents really mean by it and what the implications are.

 
At 8/16/2012 8:52 AM, Blogger Methinks said...

I do, Vange. They (and you) mean that although advances in technology have allowed us to extract more oil cheaply and use hydrocarbon more efficiently, there will be no advances going forward. That is the idiocy that has been the underpinning of the falling sky philosophy of peak oilers.

 
At 8/16/2012 9:20 AM, Blogger VangelV said...

I do, Vange. They (and you) mean that although advances in technology have allowed us to extract more oil cheaply and use hydrocarbon more efficiently, there will be no advances going forward.

You misunderstand again. The 'advances' that have taken place over the past half century have allowed us to extract oil from reservoirs a lot faster. They have also allowed us to get more out than was previously available. But that is the BIG problem. Many of the reservoirs that would have depleted slowly in the past now have a tendency to fall off a cliff once the water drives reach the horizontal wells. The back end of the depletion curve in conventional reservoirs is not the same as it was before and the decline is not gradual.

That means that the 'new' technology better give us the means to extract new types of resources to replace what is being lost through depletion. But that second part is not happening. What you have are tight oil wells that are depleting at huge rates that are so high that there is no positive payback. That means that people like Mark are preaching salvation by using as an example a method that cannot replace the loss of conventional production except by destroying capital and using more energy than is contained in the final product. That is no path to wealth, prosperity, or salvation yet the preachers of optimism keep at it.

What we need are serious efforts to find new supplies that could be economic. We actually know that there have to be huge reserves of conventional gas reserves in OPEC countries because we did not drill for gas in most of them. The billions wasted in the Bakken could have been spent producing massive amounts of gas in Mexico or the Middle East.

That is the idiocy that has been the underpinning of the falling sky philosophy of peak oilers.

Which Peak Oilers have been pushing a falling sky philosophy again? Many of the people that I have talked to are looking to conventional supplies of gas in places that should have them, to nuclear energy, coal, and even methane hydrates. They know that there is a need to get us through the transition but are frustrated by the charlatans who are pushing narratives that we know cannot work because we have tried them and failed.

I suggest that you look again because you have done little but scratch the surface on this topic.

 
At 8/16/2012 9:34 AM, Blogger bart said...

It is sad that so many people write about Peak Oil without having a clue about what the proponents really mean by it and what the implications are.

Fixed ideologies are so wide pread, regarless of such simple facts.

The Hubbert peak oil deniers will never admit that he was right since they never actually read what he said, which is that he was only talking about conventional oil... which peaked during the exact period he forecast.

 
At 8/16/2012 9:35 AM, Blogger bart said...

And peak cheap oil is alive & well. Even gasoline is now up again over the same period last year.

Then there are also issues around gas tax hikes, the US having one of the lowest tax rates amongst the developed economies.

 
At 8/16/2012 10:01 AM, Blogger Tom said...

Why choose the Mormons? Peak Oilers are Malthusians. They apparently missed the Industrial Revolution and its lessons. When big government gets the hell out of the way, the shortages they created disappear.

 
At 8/16/2012 10:07 AM, Blogger bart said...

Another "the world has infinite resources" pollyanna.

 
At 8/16/2012 10:35 AM, Blogger Methinks said...

I suggest that you look again because you have done little but scratch the surface on this topic

Uh, no thanks. I got enough of that bullshit during my time covering the industry. I don't find digging around in a pile of bullshit such a worthwhile activity.

We actually know that there have to be huge reserves of conventional gas reserves in OPEC countries because we did not drill for gas in most of them.

Sigh. Gas is just overcooked oil, so yah, seeing as the Arabian Peninsula is just one giant ancient seabed blessed with oil captured in super porous and permeable rock, there's 100% probability of finding gas. In fact oil and gas are found together and Arabia flares its gas since it has little use for it. Unless the gas reservoir is enormous enough to build a plant to liquify it, it's not worth it to find gas in a distant place like SA because gases are not easily transported.

But, see, the Saudis are exceptionally savvy when it comes to the commodity that accounts for almost 100% of their output. So, if there's a reason to go poking around for gas, you better believe they'll be doing it.

You've got a lot of malarkey in your comment about reservoir pressures and depletion rates too.


Don't drag anyone else into this "we" thing. If you think it's such an awesome idea, then go for it. Stop yammering about what "we" need to do, raise the capital and do it.

 
At 8/16/2012 10:46 AM, Blogger Methinks said...

And peak cheap oil is alive & well. Even gasoline is now up again over the same period last year.

It's also hotter this August than last August. That's proof we're all going to die from global warming.

 
At 8/16/2012 10:55 AM, Blogger bart said...

It's also hotter this August than last August. That's proof we're all going to die from global warming.


Mo wonder you're a peak cheap oil denier.

 
At 8/16/2012 11:16 AM, Blogger Methinks said...

That's right, Bart, I'm not neither stupid nor unimaginative enough to buy the load of poo.

 
At 8/16/2012 11:23 AM, Blogger juandos said...

"The Hubbert peak oil deniers will never admit that he was right since they never actually read what he said"...

LOL! Good one bart...

We were wrong about peak oil: there’s enough in the ground to deep-fry the planet...

 
At 8/16/2012 11:36 AM, Blogger bart said...

I love it as the deniers keep digging themselves deeper, keep taking those drugs! LOL

 
At 8/16/2012 12:21 PM, Blogger Ron H. said...

juandos

"Why Is Gas Price Remaining High When Oil Price Is Going Down?"

While reading this article it occurred to me that it seems pretty silly that some folks nod approvingly at the idea of using the Strategic Oil Reserve to influence the market while condemning market speculators.

 
At 8/16/2012 12:38 PM, Blogger bart said...

Not only that Ron, but the whole area of gas prices remaining high while oil goes down completely ignores the actual fact that gas prices go up slower than oil prices.

It's just plain vanilla and normal market lag.

 
At 8/16/2012 1:31 PM, Blogger Ron H. said...

Bart

"Not only that Ron, but the whole area of gas prices remaining high while oil goes down completely ignores the actual fact that gas prices go up slower than oil prices."

Yeah, completely understandable. Few finished products change prices in step with their inputs.

 
At 8/16/2012 2:23 PM, Blogger VangelV said...

Sigh. Gas is just overcooked oil, so yah, seeing as the Arabian Peninsula is just one giant ancient seabed blessed with oil captured in super porous and permeable rock, there's 100% probability of finding gas. In fact oil and gas are found together and Arabia flares its gas since it has little use for it. Unless the gas reservoir is enormous enough to build a plant to liquify it, it's not worth it to find gas in a distant place like SA because gases are not easily transported.

It certainly is worthwhile to look for gas in Mexico because there is a huge market next door that could use economically produced natural gas. And why not look for natural gas in 'stranded' markets if finding a cheap source means the establishment of a successful chemical industry?

The point is that tight gas in shale formations is not economic and will not be economic with the technology that is being used.

But, see, the Saudis are exceptionally savvy when it comes to the commodity that accounts for almost 100% of their output. So, if there's a reason to go poking around for gas, you better believe they'll be doing it.

I agree. The Saudis see no problem with capital destruction in the shale sector. By reducing the likelihood of finding an acceptable alternative it strengthens their position.

You've got a lot of malarkey in your comment about reservoir pressures and depletion rates too.

Really? If you look at the typical shale formation well you will see massive depletion rates. That is a fact that cannot be offset by a few good wells in the core areas of the best formations.

Don't drag anyone else into this "we" thing. If you think it's such an awesome idea, then go for it. Stop yammering about what "we" need to do, raise the capital and do it.

I am investing my money in viable production from unconventional sources. My point is that destroying capital on uneconomic shale winds up reducing wealth.

 
At 8/16/2012 2:26 PM, Blogger VangelV said...

LOL! Good one bart...

We were wrong about peak oil: there’s enough in the ground to deep-fry the planet...


You do know that you are citing George Monbiot, don't you? He knows nothing about Hubbert and Peak Oil. Why not cite Cambpbell, Deffeyes, or someone who knows something about the subject?

 
At 8/16/2012 2:55 PM, Blogger Methinks said...

It certainly is worthwhile to look for gas in Mexico..

Did I tell you not to? Go for it.

The Saudis see no problem with capital destruction in the shale sector. By reducing the likelihood of finding an acceptable alternative it strengthens their position.

Nah. They're pretty greedy and pretty savvy. If they're the ones providing the substitute, they'll happily do so. A super high oil price that promotes efficiencies and makes alternative technology economic is not in their interest. They learned that the hard way in the '70's oil embargo.

As for capital destruction, well...others disagree with you. As long as it's not your capital, it's none of your business. Don't we agree on that?

 
At 8/16/2012 3:16 PM, Blogger Methinks said...

Vange, I think I misread your commentary on the Saudis (actual work gets in the way of my internet activities sometimes).

The Saudis don't have a say. They can only operate on their soil and if it made sense to explore and develop gas fields, they will.

 
At 8/16/2012 3:20 PM, Blogger VangelV said...

Nah. They're pretty greedy and pretty savvy. If they're the ones providing the substitute, they'll happily do so. A super high oil price that promotes efficiencies and makes alternative technology economic is not in their interest. They learned that the hard way in the '70's oil embargo.

Super high price? Oil sells for less per gallon than your coffee at Starbucks or mineral water. It is cheap, not expensive. And the 1970s were a time of a lot of spare capacity. Those days are long gone.

As for capital destruction, well...others disagree with you. As long as it's not your capital, it's none of your business. Don't we agree on that?

Of course. I am not saying that others should not be stupid. What I am saying is that Mark does not do his homework. He can't find positive cash flows or stable balance sheets among the shale producers even if the companies have been around a long time. And he certainly got the shale gas story wrong just as some of us predicted that he would. The producers lost money and are now pulling back as they sell off 'assets' to pay back some of the massive debt that they took on. The properties held have more value to conventional players looking to hide the fact that they are losing reserves than to producers looking to make a profit. But that only lasts if the SEC permits 6:1 conversion ratios and the use of EURs known to be overestimated. And that can't go on for much longer.

As I said, some of the players will start to write off their shale holdings and the gas rig counts should continue to decline. The only question is when does the light go on for liquids as it did for gas.

 
At 8/16/2012 3:29 PM, Blogger VangelV said...

The Saudis don't have a say. They can only operate on their soil and if it made sense to explore and develop gas fields, they will.

I agree. And I think that it makes sense to drill and produce gas that can be used as feedstock for chemical companies. It certainly makes sense to use natural gas to generate electricity so that you can save the liquid fuel for a better use that pays better.

My point is similar to what you stated. We know that gas comes from source rock that has gone below the oil window. As such SA and other OPEC nations are virtually guaranteed to have gas fields. I would argue that they are much better plays than tight gas and oil from your typical shale formation. Where Mark goes wrong is assuming that the production from a few good wells in the core areas of the better shale formations are indicative of the typical production that can be obtained from those formations. Because he does not do his homework and does not dig below the surface he is likely promoting a bubble as he was housing.

 
At 8/16/2012 3:58 PM, Blogger Methinks said...

He can't find positive cash flows or stable balance sheets among the shale producers even if the companies have been around a long time.

I covered the independents for years and I couldn't find a single stable cash flow or decent balance sheet. Well...maybe Devon.

Petroleum producers are notorious for having the risk profile of a tech start-up and the balance sheet of a mature cash cow. There's nothing stable about them and never has been. Not ever.

I don't really care what Mark got wrong. Force Energy went belly up just as we had an outperform on the stock. The ice bridge never formed in Canada, it couldn't drill and its creditors drove it into bankruptcy. This is a high risk business and if the environment changes (or in the case of Force, doesn't change), they blow up, take write-downs, etc. When the price of the commodities rises, they revalue reserves and take on more debt.

If you're looking for stability you're looking in the wrong industry. I mean, development wells are (or were in my day) only had about a 70% chance of success. At one point, 50% of Stone Energy's exploration wells produced and we were all doing cartwheels.

I don't think Mark Perry has the power to promote anything unless he's buying houses and investing in petroleum producers. Yes, I've had reservoir engineers explain to me how easy it is to be wrong about how much a formation can produce, but existing wells do inform engineers about the formation and impact the probability of success in development wells.

 
At 8/16/2012 4:02 PM, Blogger bart said...

VangelV said...

You do know that you are citing George Monbiot, don't you? He knows nothing about Hubbert and Peak Oil. Why not cite Cambpbell, Deffeyes, or someone who knows something about the subject?


Not only that, but the actual EIA world production facts show that conventional oil production did peak during 2005-10, as Hubbert predicted.

But it's too simple for those with blindered ideaologies etc.

 
At 8/16/2012 4:04 PM, Blogger VangelV said...

Petroleum producers are notorious for having the risk profile of a tech start-up and the balance sheet of a mature cash cow. There's nothing stable about them and never has been. Not ever.

I am not looking for 'stability.' But I am looking for honesty. When proven undeveloped reserves make up a huge chunk of the balance sheet there is a big problem, particularly when the companies do not write down the reserves as they are expected to because they run into a collateral default problem if they do what they should.

If you have analyzed these companies you should be able to spot the problem easily and without an adequate explanation you would have to reject them.

 
At 8/16/2012 4:22 PM, Blogger Methinks said...

I don't analyze or trade independents anymore. By the time I left the industry behind, I was so thoroughly annoyed that I've avoided them like the plague since. I rarely even read Mark's posts about them. Based on what I have read, though, I think you might be missing the point.

 

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