Peak Oil?

[HenryTo]

Dear all,

I would like to start a discussion/argument on the validity of the Peak Oil theorists on this board. One of my subscribers had asked me to do this - and I believe it will be a very well worthwhile discussion!

I know there has been a lot of literature written about this - including recent books - but one thing that I find lacking is the fact that many of the commentators talk about the industry in VERY BROAD terms. That is, economists who are working with questionable data - questionable because of the lack of transparency in the oil markets, not because it is their fault.

I feel that Matt Simmons had done a great job in his efforts to focus on the Saudi oil machine. He spent an entire book just writing about the Saudi oil industry, and makes a very good argument which discredits the Saudis' claims that they can ramp up to 15 mm barrels a day in a few years. In all likelihood, he argues, Saudi oil output has peaked or is near peaking. We need similar analyses for the Russian oil industry, the North Sea, Iranian, and Venezuelan oil production.

Going forward, this author is bullish on the price of oil in the long-run, as I believe oil demand growth in both China and India will surpass the ability of the world to pump more oil - given current constraints and the lack of new, impressive discoveries.

I would definitely like everyone to chime in.

Best,

Henry



[[/img]

[rffrydr]

From the Broker, Russian Oil:

[rffrydr]

Pickens said on May 20th that prices could hit $150 by year-end and that speculators had nothing to do with high oil prices. Soros said on May 27th that soaring prices were the result of speculation and that the market had the look of a bubble. That leaves the market with the choice of following the billionaire who’s been right on oil or the billionaire who’s been right on the dollar.
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Today is the Tomorrow you worried about Yesterday!

[chestnutstime]

Cheney & Co's solution for peak oil has been crystal clear since 2000.

The latest development bears attention.

Bush 'plans Iran air strike by August'

http://www.atimes.com/atimes/Middle_East/JE28Ak01.html


Chestnut
[/url]

[BlueDaze]

Commodities, Oil Bubbles Are Reason to Celebrate
Commentary by Matthew Lynn

http://www.bloomberg.com/apps/news?pid=20601072&sid=a0sG1tzq.qQg&refer=energy

May 28 (Bloomberg) - Anyone filling up the tank of their car right now will be cursing oil speculators. Likewise, anyone loading up a shopping cart with food for a family may feel angry with hedge-fund managers pushing the cost of wheat, rice and other basics through the roof.

Prices of oil, commodities and food have exploded in recent months. Although there are some solid foundations to that, the boom has now turned into a bubble. Prices are starting to race far ahead of anything that can be justified by the fundamentals of supply and demand. Predictably, that is creating a backlash against the financial markets that are pushing prices up.

We should all leave the speculators alone. The world needs a massive change in the way it uses raw materials. Politicians are too timid to bring that about. The markets are doing the job for them, and if it takes a bubble to change people's energy consumption, then so be it.

Oil now costs more than $130 a barrel. Nobody expects the price to come down fast anytime soon. Instead, it may go higher. Goldman Sachs Group Inc. analyst Arjun N. Murti has said the price may reach $200. So has Svein Rennemo, the chairman of Norway's StatoilHydro ASA, according to the Finansavisen newspaper. After the increase over the last three years, it would be a brave investor who bets against $200 oil.

What is true of oil is true of many other basic commodities. Copper and iron have soared in the past few years. Wheat, corn, rice and soybeans all peaked this year: At one point, rice was a record $25.07 for 100 pounds. That has sparked riots from Haiti to Egypt. Some people may go hungry.

Indian Ban

Not surprisingly, that has triggered action against speculators. This month, India expanded its ban on trading of food futures, including soybean oil, potatoes and chick peas, in an attempt to curb price increases. In the U.S., Joseph Lieberman, chairman of the Senate Homeland Security and Government Affairs Committee, has said legislation may have to be passed to limit big investors taking positions in commodities.

Plenty of Germans would like to do something similar. ``The biggest cause of the soaring food prices is the financial speculators, and in this case they truly are locusts,'' Gerd Sonnleitner, the president of the German farmers association, said this month. ``The locusts don't care about rice or milk or people. They only care about the fluctuations in the market.''

In one sense they are right. The ``locusts'' -- shorthand for hedge funds -- have been at work. As OPEC Secretary General Abdalla el-Badri pointed out this month, speculators are playing an ``important role'' in surging oil prices. The same is true of commodities and food.

Buying Frenzy

Yet they are wrong in thinking it's a bad thing. Here's why.

First, oil production needs to expand. The International Energy Agency estimates global oil consumption will rise to 98.5 million barrels a day by 2015 from 84.6 million in 2006. By 2030, it will be up to 116.3 million. To get that out of the ground and into the pumps is going to involve more exploration, production, refining and distribution. There is only one way that scale of investment will be mobilized: by causing a price increase that starts a buying frenzy in oil assets.

Next, the developed world has to start making itself more fuel-efficient. If China and India begin using as much oil as Europe and the U.S., we won't just need more supply -- we'll need lower consumption in rich countries. And if we are to combat climate change, we'll need to cut down on pollution as well.

Change of Behavior

To make that happen, behavior must change. That means gas- guzzling sport-utility vehicles will have to be replaced with hybrids. High-speed trains should take over from planes as the standard way of covering distances of as much as 1,000 miles (1,609 kilometers). Our houses have to be redesigned to use less energy, and more of it should come from solar and wind power.

All of that is expensive and hard work. Politicians are too nervous to impose the taxes to bring that about. With oil at $50 or $100 a barrel it wouldn't happen. At $200 a barrel, the only place we'll be driving an SUV is to the scrap-metal merchant.

Lastly, agricultural policies need to change. Again, if India and China are to become as wealthy as Europe and the U.S., the world will need a lot more food. That means modifying the way we run agriculture, which, in Europe at least, has been more about preserving farming jobs, and caring for the landscape, than maximizing output. Countries such as Germany with lots of fertile land and falling populations should be turning themselves into major food exporters. But, again, it's not going to happen unless a massive price increase forces it.

It always takes a big shock to the system to change behavior. That is just what the speculative bubble in commodity prices is delivering. It may not be pretty, or comfortable, but it is the market doing the job - which is why we should celebrate the bubble, and not condemn it.

[rffrydr]

The ABS connection (note reference to Keynes filling college basements with wheat) and the finger pointed to Strategic Reserves:

http://www.pkverlegerllc.com/PKV%20December%20Senate%20Testimony.pdf

Though supposedly this is made available for "loan."

Despite CFTC Harris comments that "speculation" has been neutral to prices this is an artefact of COT reporting (see Simons): net new barrels from China in past five years are nearly matched by net new paper barrels.
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Today is the Tomorrow you worried about Yesterday!

[chestnutstime]

Take a good look at the volume of past two days.

http://stockcharts.com/charts/gallery.html?dug

Chestnut

[rffrydr]

Collection of views:

http://finance.yahoo.com/expert/article/stockblogs/84118
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Today is the Tomorrow you worried about Yesterday!

[lion hunter]

Peak oil is real.
The only way we get a substantail retrace in the price of oil is if the entire globe goes into a severe recession. High oil prices are here to stay indefinitely. The world is goin electric as a consequence and was sold the nuclear option as the base load alternative on the false premise that C02 emissions are to blame when in fact global warming is a natural and cyclical phenomenon and peak oil is real and now.

[nodoodahs]

Very strange. Not happening here. It's just a weblink, not a file.

The original article that I quote from is here http://blog.wired.com/wiredscience/2008/02/titans-organic.html
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[emergingwave]

I tried to open your file link above, nodoodahs, and my internet security system said the file is infected with a virus. Very strange.

[nodoodahs]

http://www.billakanodoodahs.com/2008/02/saturns-moon-had-dinosaurs/
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[emergingwave]

Got grease?

http://news.yahoo.com/s/ap/20080520/ap_on_bi_ge/cooking_oil_thefts;_ylt=AsxSwN53vnvcLIao1y3Olshu24cA

[BlueDaze]

http://bigpicture.typepad.com/comments/2008/05/peak-oil.html

One question I never hear answered from Peak Oil believers. If hydrocarbons are produced by decomposing forests from a millenium ago, why does Titan (a Moon of Saturn) have both methane and hydrocarbons in abundance?

Jupiter and Saturn are basically made of hydrogen and methane. The Sun is made of hydrogen. Methane (CH4) is one of the most abundant chemicals in the Universe. However, it just so happens that most of the hydrogen and carbon on Earth are sequestered as compounds which require more energy to extract them than they can liberate (ie. water, carbon dioxide, carbonates in rocks). Buried organic deposits are unique in that they are "reduced hydrocarbons" (ie. not combined with oxygen) and they release excess energy when oxidized, ie. burned.

Posted by: Douglas Watts | May 21, 2008 1:31:42 PM

[HenryTo]

Not a pretty picture for Indian oil marketing companies. The market is now forcing their hand - prices will have to go up and inevitably consumption will come down:

http://www.dnaindia.com/report.asp?newsid=1165640

http://www.business-standard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=323514

[rffrydr]

GaveKal rec Indonesian bonds a buy on this news have been pushed up to 12.5% on this draw to the budget. Also energy producers.
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Today is the Tomorrow you worried about Yesterday!