Is Peak Oil Waiting for Godot?

Waiting for Godot was a two act play by Samuel Beckett where two men kept waiting for Godot and they just kept waiting and waiting and waiting… And no, I don’t think we will be kept waiting and waiting like the characters in that play. Peak oil is about to arrive, in my opinion anyway.

Way back in 2005 we thought it likely that crude oil production had peaked at just under 74 million barrels per day. During the preceding three years C+C production had risen by 6,481,000 barrels per day or 2,160,333 barrels per day per year. The reason for that dramatic increase was a doubling in the price of oil from $25 per barrel in 2002 to $54.43 in 2005.

So oil production depends, to a great extent, the price of oil. The more money the more oil. However…  The C+C data in all charts below are in thousand barrels per day.

Brent Price Vx. Production

 You can see that another doubling of Brent oil price in the next 8 years brought only 2,283,000 bp/d of new oil on line, or an average of 285,375 bp/d per year.

So where did the increase in C+C come from between 2002 and 2005, and where has it come from since.

Change Since 2002

You can see the major addition to World C+C between 2002 and 2005 was from Eurasia, (FSU) the Middle East and Africa. The only major decline was from Europe, primarily the North Sea. Since 2005 the major gainers were North America followed by the Middle East and Eurasia, which we used to refer to as FSU. But 8 years is a long time, what has happened during those 8 years.

Change since 2005

This is the chart that really tells the tale. During the last three years the lions share of all gains in C+C production has come from North America. The Middle East has shown some increase but everyone else is flat to down except for a slight increase from Eurasia, or primarily Russia. So lets look at the combined production of those five geographical areas.

Eurasia et al

These five geographical areas, all except North America and the Middle East, product 51% of the world’s oil, down from 54% in 2010. They are down over two million barrels per day since 2010 and they, combined, are clearly in decline. In fact Russia, the world’s largest producer of C+C, is believed to be in decline, starting this year.

Leaving out the Middle East for a moment, the question is: Can North America continue to increase production as fast as these five geographical areas decrease production? With Russia now likely to join the decline club, I think that is extremely unlikely.

The Middle East is a question mark. Iraq is likely to increase production but by no great amount. Iran is a political question mark but I doubt if anything will happen there within a year or so. And when sanctions are finally lifted they will still not produce what they did before sanctions. They were clearly in decline before sanctions but a good maintenance contractor could get them back to 3.75 million barrels per day in a few years. That is about 1 million bp/d from where they are today.

I don’t expect any huge drop in Middle East production any time soon. By the same token there is not likely to be any great increase in their production either. Every nation there, including Saudi Arabia, is producing every barrel they possibly can. Kuwait and the UAE have had huge infill drilling programs going for several years now and that has increased their combined production by about 400,000 barrels per day over what they were capable of producing prior to the collapse of 2008. But they both show signs of peaking and will likely see a decline this year.

But what I am trying to show is that every nation on earth is straining to produce every barrel they can. With Oil pushing $110 a barrel they are not holding back. And they are spending a lot more money in that attempt.

Kopits Capex

The combined capex of the 11 majors listed under this chart has increased 5 fold. And for all that money their production has declined by over 2 million barrels per day. Steve Kopits says:

• Costs have outpaced revenues by 2-3% per year. Profitability is down 10-20%.
• The vast majority of public oil & gas companies require oil prices of over
$100/bbl to achieve positive free cash flow under current capex and dividend
• Nearly half of the industry needs more than $120/bb. The 4th quartile, where
most US E&Ps cluster, needs $130/bbl or more.

The bold lines on the chart below are mine. I want to show the difference in what was spent in 2005 and today outside North America for no gain in production.

Upstream Capex

Capital expenditures continue to rise yet the price of oil hasn’t increased for over three years. And notice the chart above, from Steven Kopits slides, shows the lions share of capex is being spent outside North America yet 2013 C+C production outside North America is actually below where it was in 2005.

Outside North America

Production is not rising. The price of oil is not rising. Capital Expenditures are rising dramatically. This cannot continue.

 It is my opinion that Godot will arrive no later than 2017 but I expect him a year earlier.

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332 Responses to Is Peak Oil Waiting for Godot?

  1. Perk Earl says:

    Great article, Ron! Particularly like the ‘Upstream spend – actual and forecast’ chart which puts a visualization to rising cost of capitol expenditures to compare with the next graph on production. This is the face of peak oil.

    You mention the price of oil has stagnated. For six months Brent has floated in a very tight range but never seems to go much above 110 before dropping back below that number. Pretty sad state of affairs when 110 is not enough to exploration. In view of these developments, will governments recognize future oil supply is threatened and offer increased subsidies for exploration? And I wonder what the ramifications of that will be, i.e. would that extend end game a bit longer?

  2. SuddenDebt says:

    Nice post. Thanks!

    The link below is to an EIA summary about upstream oil and gas spending for 42 U.S. and international oil and gas companies.
    Have a look at figure 2.

    Although oil prices remained relatively flat in 2012 and 2013, rising costs contributed to a decline in cash flow from operations. Nonetheless, cash spent on investing activities, which tends to lag changes in cash flow, increased slightly in 2013 as companies increased debt to maintain investment, taking advantage of interest rates that have been low since 2009. Companies have increased debt every year since 2006, with long-term debt increasing 9% and 11% in 2012 and 2013, respectively.

    • Unfortunately, this EIA report does not show the actual oil/gas production of those 42 companies analyzed. That would tell us how much debt is accumulated per barrel produced

  3. Doug Leighton says:


    Excellent summary. And, “The combined capex of the 11 majors listed under this chart has increased 5 fold. And for all that money their production has declined by over 2 million barrels per day.” is a very telling statement indeed.


  4. Caelan MacIntyre (Tribe Of Pangaea- First Member) says:

    From Ron’s previous post, we have a reply:

    dohboi’s response:

    Re: Want to Stop Climate Change? Take the FF Industry…

    Unread post by dohboi » Sat 26 Apr 2014, 09:46:24
    RP, I was talking about the ability to insulate oneself from the cold in the absence of ffs, not about food availability. In fact the main point was that food availability will be a bigger deal than not dying from the cold. But neither will be easy. Sorry you chose snark over understanding.

    No response from RP at time of writing. 😉

    • I wrote, bold added:
      Yeah, all we need to do is stop the production of climate change is stop using fossil fuel. Problem is the cure would be far worse than the disease. We would all starve to death within a few weeks. And if that did not kill us we would all freeze to death this winter.

      We are totally dependent of fossil fuel for everything we eat, everywhere we go and for the basic necessities of life like heating and cooking fuel.

      You said:
      I’ll just point out that much of industrial agriculture, the type most dependent on ff and their derivatives, is devoted to crops that are not directly eaten by humans. Nearly all corn grown in the US goes into animal feed, cars, and other non-human-food products (or into products like HFCS that actually makes humans sick when we do consume it). So most of that could go away and not have much affect on humanities ability to feed itself.

      Eskimos have managed to live in the coldest temperatures on earth for millennia, most of that time completely without recourse to any fossil fuels, so presumably that is possible for the rest of us, too.

      You did not say you were only talking about temperature. You are saying, whether you intended to or not, that the rest of us could live like the Eskimos. No we could not.

      And a lot of corn does go for food. Also almost all wheat grown goes for food. It is silly to just say “Stop feeding the animals and there will be plenty of food to go around.” Nonsense! Fossil fuels are used in every step of grain production, from the plowing to the planting and the fertilizer used in planting. And fossil fuel is used to harvest the grain and dry the grain and haul the grain and process the grain and on and on and on.

      And it is obvious we could not live in such cold climates even if you were talking about the temperature. They, the Eskimos, are adapted to such climate by thousands of years of evolution. They eat the right diet. They kill seals and walruses for fur and food. What would we kill for fur and food? We would all freeze to death the first winter.

      I get so fed up with people who have not a clue as to what the hell they are talking about saying something to the effect: With only a little hardship we could very well get along without fossil fuel.” No we could not. We would starve and the few who survived on bugs, rats and weeds would still freeze to death the first hard winter.

      • Patrick says:

        I agree with you, I also get fed up, the problem being that there are MANY people whom “have not a clue as to what the hell they are talking”!
        There is also a lot of mining work for everything, and people don’t see it. Mining is oil. Take a solar panel, which is supposed to save us, I was amazed to see that they require arsenic, bauxite, boron, cadmium, coal, copper, gallium, indium, iron ore, molybdenum, lead, phosphate, selenium, silica (Silicon dioxide), tellurium, and titanium dioxide for manufacturing. Amazing list and a lot of mining, which reminds us that no one can build and transport a solar panel with the sun. Equally if you want to build, transport and maintain a windmill, you need oil. I call it the orange parable.

        • Doug Leighton says:


          What do you want a solar panel for, just use seal oil — like the Eskimos. No mining involved. Why don’t we all just live like Eskimos?


        • Dennis Coyne says:

          Hi Patrick,

          When do you expect there will be no oil? Before that occurs (assuming it does not happen instantaneously) would you expect that prices for liquid fuels will rise?

          If there are any substitutes for those liquid fuels which are based on crude oil, would those substitutes become more competitive if crude oil was more expensive? If the answer is yes then there might be a transition to those alternatives as demand for them increases. A lot of things can be done with electricity when that becomes the only option, but that may be 5 or more decades away, people are pretty innovative, many things once thought to be impossible are now reality. I am pretty sure no physical laws need to be broken here.

          And no I do not think growth can continue forever, I believe that there will be a transition to negative population growth worldwide as has happened in Japan and several other advanced economies. At that point growth per capita (real GDP/capita) can continue while overall growth declines.

      • Doug Leighton says:


        “Eskimos have managed to live in the coldest temperatures on earth for millennia, most of that time completely without recourse to any fossil fuels, so presumably that is possible for the rest of us, too.”

        This is perhaps the dumbest comment yet to appear on your Blog, and with respect to all your varied contributors, that’s saying a lot. There were probably never more than 50,000 Eskimos at any given time and they were basically stone age people. Don’t assume that I’m putting these people down because they were amazingly resourceful: fuel = seal oil, etc. However, to suggest we, even if you’re speaking metaphorically, could survive in the traditional Inuit fashion is pathetic: modern Eskimos couldn’t survive. God Almighty: it’s is a rare person that can handle the mosquitoes and black flies without nets and chemicals much less finding one who could feed and shelter himself. Ship this guy to central Greenland.


      • OldTech says:

        “Stop feeding the animals and there will be plenty of food to go around” Yes this is Nonsense in more ways than one.

        Our current low-fat high-carb diet is slowly killing a lot of us and not feeding the animals would slowly kill even more of us. It is this low-fat high-carb diet that is causing the diseases of ‘civilization’ including diabetes, heart disease, obesity, Alzheimer, …

        Our ideal diet that we evolved with is low carb, moderate protein, and high fat. Of course if we are switched in mass to that diet it would mean a lot of us would die because we would not have enough to eat.

        BTW: It was a shock to me when I was diagnosed with type II diabetes and everyone ‘knows’ that diabetics should not eat sugar because that raises their blood glucose. What I quickly learned is that all carbs, including sugars, grains, root crops, fruit, and most processed foods also raise blood glucose. To control my blood glucose I now eat a low carb (20 to 30 grams), moderate protein, high fat diet. This mean all that sugar, wheat, 7 grain, pinto beans, soy beans, oatmeal, dried fruit, … that I have stored now have a skull and crossbones on the labels at least for me.

        Furthermore, like the Eskimos, I need (and I think all humans need) a high fat diet for optimal health (good fats like fully saturated and mono fats and no vegetable or hydrolyzed fats). To control my blood glucose I need to eat a low-carb high-fat diet where 70 to 80 percent of my nutrition is coming from fat.

        Some References:

        1)Grain Brain: The Surprising Truth about Wheat, Carbs, and Sugar–Your Brain’s Silent Killers
        2)The Art and Science of Low Carbohydrate Living: An Expert Guide to Making the Life-Saving Benefits of Carbohydrate Restriction Sustainable and Enjoyable
        3)Good Calories, Bad Calories

        • Dennis Coyne says:

          You can get plenty of fat from vegetable oils and nuts, no animals needed.

          I agree with you on the high carb diet, just not on the we must eat meat to survive,
          meat in moderation is fine, but in an energy constrained world poultry and grains and nuts are more efficient.

          • OldTech says:

            Yes, you can get fat from vegetable oils and nuts, but that is not the same as fat from animal sources.

            I consider vegetable oils toxic (mostly corn and soy) and a contributor to the causes of the diseases of ‘civilization’. From the plant kingdom only olive, coconut, canola oil can be classified as ‘good’ (and canola oil is a not that good).

            What our bodies evolved with over 2 million years is saturated and unsaturated animal fat. Vegetable oils have only been in use less than 100 years.

      • Old farmer mac says:

        Ron is basically absolutely right.

        I am a farmer born , bred, and university trained ; and also old enough to remember helping my folks raise crops by hand and with draft animals-I am just old enough to catch the very tail end of the horse powered era as it breathed its last in the mountains of Appalachia. I can’t remember when we didn’t have a tractor but I can easily remember cultivating the corn with a mule.I did it myself a few times.I even plowed a few furrows behind a mule but by the time I was old enough to work a mule without supervision all the plowing except small garden spots was done with a tractor.

        There are not enough draft animals in the world to farm without tractors and it would take a human generation at least to breed enough. Even then it would still be impossible to farm with them considering that most of our staple foods such as wheat and corn ( consumed mostly in the form of dairy, poultry, pork and beef to be sure) is necessarily grown hundreds or thousands of miles from the population centers where it is consumed.Without trucks it would be impossible to get it to market even if we could coerce a few tens of millions of suburbanites into assuming a farm laborer’s life style.THAT would not be easy to say the least.

        The people who get the most indignant about farm labor are all to often the same ones who would like to do away with mechanized farming. If they ever get their wish it will include some stints in the fields Chairman Mao style. Given that most of them have never had a callus unless it resulted from playing a guitar they would just lie down and die in the field unless the overseers whip them to death first.

        Farms it distant times past were almost miniature ecosystems in terms of maintaining soil fertility and so forth. Not much actually left the premises.Farms today are dependent on chemical fertilizer inputs because almost everything does leave the premises and virtually none of it is returned. Stop and relieve yourself in a corn field these days and you are apt to get arrested.

        I could go on all day but it is so patently obvious that arguments about doing without oil are utterly unrelated to reality that the only reason to refute them is to keep people who know even less from swallowing them.

        Someday we are probably going to be farming with without using very much oil- that is true enough.But that time is far distant in the future and the population is going to be a very minor fraction of what it is now unless we master the fusion power problem or wind and solar get cheap enough to use renewable electricity to manufacture synthetic oil.

        My personal guess is that we will be burning liquid coal within my lifetime.It is going to be expensive as hell both in terms of money and pollution but it will be an infinitely more desirable solution than starvation.

        Of course if we had the will we could ration oil and there would be plenty for truly essential needs for another few generations if we really worked at using it efficiently.
        That would allow us time to really make some progress in lowering the cost and upping the output of renewable energy industries.

        Personally I do not doubt we COULD build enough renewables to live quite comfortably if less extravagantly than we do now. But we can’t do it in less than a couple of generations and even then it would take a continuous war footing effort- an effort we are not apt to make until it is too late.

        We could also grow enough extra oil seed crops to manufacture enough synthetic fuel to run our farms in the US at least and run enough trucks to get the food produced to the cities via rail most of the way.That would actually take less land than growing feed for draft animals which have to be fed every day.

        The tractors I use to plow and harvest sit for months at a time sometimes consuming nary a drop of oil except what little might leak out or evaporate.And when I do run them -I can plow all day on fifteen gallons of diesel with my small tractor. That would be fifteen gallons of soybean oil processed minimally to use it as tractor fuel.

        It would take several times that amount of calories not to mention proteins to feed men and animals sufficient to accomplish the same days work.We are talking about at least six teams and six plowmen after all.Remember they have to be fed on days they don’t plow.

        I would not bother posting such elementary information except for the fact that there are probably some people reading this blog who are unacquainted with it thru no fault of their own.

        A country boy may embarrass himself in downtown NYC but a lifetime city slicker would be apt to have a fatal accident within hours on a farm without an escort.

        • Dennis Coyne says:

          Could tractors run on propane, natural gas, or electricity (the last seems pretty impractical but imagine 50 years into the future)?

      • Caelan MacIntyre says:

        Hi Ron,
        I am not dohboi.
        As for my contention, which seems to be yours, we may have worked ourselves into a corner and are ‘playing pretend’.

    • SuddenDebt says:

      In a stunning admission by Germany’s Economics Minister and Vice Chancellor to Angela Merkel, Sigmar Gabriel announced in a recent speech that the country’s once highly ballyhooed transformation to renewable energy, the so called Energiewende, a model that has been adopted by a number of countries worldwide, is “on the verge of failure“.
      Speaking at an event at SMA Solar, Germany’s leading manufacturer of solar technology, Gabriel even dropped yet another admission bomb:
      The truth is that in all fields we under-estimated the complexity of the Energiewende.”

      • RegEx Wald says:

        Wind and solar are breaking the European economy. The main reason is that these flawed sources of energy are only temporary–the wind stops blowing and the sun does not always shine. Just about the only thing windmills and solar panels are good for are being prolific bird killers.

        Germany, France, Spain, Italy and others are finally wisely cancelling wind and solar contracts as they are simply going broke from the extreme costs.

        Wind and solar look good on paper in the offices of the environmental elitists but the reality is the vast number of people living in cold climates simply cannot, and will not, pay for energy that is fundamentally unreliable and expensive.

        Fossil fuels remain the only sensible way of the future unless private industry, free of ideological interference from extreme leftists, comes up with something more useful that works.

        • Coolreit says:


          • Doug Leighton says:

            I second that.

            • Dennis Coyne says:

              Hi Doug,

              So you see fossil fuels as the way forward? A little surprising, I imagine all fossil fuels (oil, then natural gas, and finally coal) will decline at some point (say by roughly 2050 for all three) and that it would be wise for humans to attempt to find alternatives should that assessment prove correct. But that is just me, a flaming centrist.

              • Doug Leighton says:


                How in hell did you conclude I see fossil fuel as the way forward? I see fossil fuels (current and projected scale) destroying the planet via global warming. However, I do see Peak Use (oil, gas and coal) arriving (much) sooner than you because I doubt there is enough available at a realistic cost to sustain production levels. In my limited experience, I’ve seen oil deposits “creamed” creating an illusion of sustainability, gas a poor alternative to oil and coal (and tar sands) a serious CO2 polluter. I also see solar and wind helping a bit but inadequate to look after 7 billion people. I also foresee the Four Horsemen of the Apocalypse galloping across the plains before we find a sustainable solution — not ff the way forward.


                PS: don’t know if you caught it but that reference rou asked about is :

                • clifman says:


                  I agree with your position as you state it here, but I was apparently as confused as Dennis was by your seconding of this statement: “Fossil fuels remain the only sensible way of the future…”


                  • Doug Leighton says:


                    This happens to me all the time. I really must learn to insert those yellow faces.


                • Dennis Coyne says:

                  The amen in your previous comment made it seem that you agreed with the comments that preceded.
                  Maybe you meant to put in a 🙂 and forgot.

                  I don’t have any idea how soon we will see a decline,
                  sooner would be better, but just because I wish something were true does not make it so.
                  Since 1972 real oil prices have risen at an average annual rate of 5.5% per year. If that trend continues for 20 years then oil prices increase by a factor of 2.91 over 20 years. We will call it $300 in 2033, I think if real oil prices rose that fast it is likely to crash the economy (though it depends how fast oil efficiency rises with the rising prices.)

                  World Real GDP has grown at about 3.5%/year from 1999 to 2012, if real oil prices rose at that rate, the economy would have a better chance of not crashing or doing so at a later date.

                  The above scenario roughly doubles real oil prices over 20 years.

                  If the 3.5% rise in real oil prices occurs, I think the decline in C+C output could be moderate and the economy might adjust. Moderate is 0.5% decline to 2030 and 1% decline from 2031 to 2045.

                  • Dennis Coyne says:

                    It was not an amen it was I second that.

                    And the smiley is just a colon folloed by a left parenthesis ‘:)’.

            • dolph says:

              You people do realize that infinite growth in population, combined with ongoing relentless depletion of the planet’s resources to make bankers an infinite amount of fake money is a thoroughly right wing idea?

              If you disagree, I would welcome a list of top Republicans or Tories who have something different to say about it.

              I’m not saying I’m a rabid environmentalist or opposed to “keeping the lights on”. But the one thing which Reaganite and Thatcherite right wingers have NOT done for the last 30+ years is conserve anything. They are, to the core, anti-conservative and only interest in business profit.

              Only on the margins of the left wing do you find any serious debate about sustainability, but it’s gotten nowhere in the face of overwhelming banking and fossil fuel fiat money. On the right, even the hard money, libertarians and Austrian economic thinkers are not serious about sustainability.

              The right wing always and everywhere has the same message: give already rich people a ton more money and we will all live forever and prosper until the end of time (other than those we need to bomb out of the way). An idea that has NEVER been true, and never will.

        • Old farmer mac says:

          I suppose it is POSSIBLE that private industry will come up with something that will work if we can just tar and feather all them there commie leftie environmentalists creating all that ideological interference.

          It may be news to you but if it weren’t for them there commie leftie environmentalists of days gone by you would have to live on beer or wine instead of water or milk because a drink of water if you live in a city a swallow of water would be apt to kill you. A little milk would be apt to infect you with tuberculosis or worse.

          If it weren’t for those same lefties I might just sell you some grain or meat from my farm so heavily contaminated with lead based pesticides you would eventually die a slow miserable death from lead poisoning.

          But unless it is a gargantuan build out of nukes any solution discovered by ”private industry” will require throwing out about four or five hundred years of established science starting with physics.

          Reinventing the sciences from the ground up is quite a job. Even the superheros of comic book fame would have their hands full with that assignment.

          It may not have occurred to you but the nuclear industry was created by the government- not private industry. It would not exist without government support.

          IF you happened to know doo doo from apple butter you would know that there are basically no large scale sources of energy available to us other than fossil fuels, nukes, and renewables.Fusion as opposed to fission nukes may be possible in another fifty years minimum but my opinion – admittedly that adopted from others who are knowledgeable about the difficulties involved- is that fusion will not become a commercial reality during the lifetime of anybody reading this blog today.

          Unless you have lived in an isolation tent or a monastery where you are not allowed any contact with the outside world at all and are less than a legal adult in age you simply must know that coal and oil and natural gas come out of holes in the ground and that we have been cherry picking the best holes faster and faster for two hundred years plus in the case of coal and over a century now in the case of oil and gas.

          Now it may be hard to comprehend for somebody drunk on Koch Brothers brand koolaid but more and more people punching more and more holes in the ground faster and faster chasing after less and less remaining coal and oil and gas year after year is not a state of affairs that can continue forever.

          As a matter of fact the history of the prices of these three fossil fuels indicates that we can expect the prices of them to keep on going up indefinitely, on average.You may never have purchased heating oil or diesel fuel or gas to heat your home but I have and I can remember buying oil for seventeen cents a gallon that sells for almost four bucks today.

          You must be leading a very sheltered life indeed if you are not aware of these things – or maybe you only listen to Fox news and read only papers such as the Washington Times.

          We don’t have any choice about switching to renewable energy. The only real question is whether we will manage the switch before the affordable fossil fuels are all used up.

          Then there is that pesky old warming hoax of course. I am sure you know that according to the people who are opposed to renewables that it supposedly is not getting any warmer.

          But the energy is pouring in from the sun at the same old rate and it is being held trapped here on the ground by all that co2 in the same fashion as the sweater and cap your mother put on you when you go out on a chilly day.

          Right now the excess heat is mostly going into the waters of the oceans.Pretty soon it will start being released into the air when the next el nino happens and warming will accelerate in hurry.

          Renewable energy is expensive for sure but the cost of it is falling where as the cost of coal,oil, and gas have nowhere to go but up.

          In the end renewable energy is not just going to be expensive.

          It is also going to be PRICELESS.

          • Jeju-islander says:

            >” it may be hard to comprehend for somebody drunk on Koch Brothers brand koolaid”

            I am also puzzled as to why the koolaid drinkers are gathering at a peak-oil site in the first place.

        • Until nature takes terrible revenge. We can see that happening already here in Australia in hot summers when large areas burn away and even threaten coal fired power plants.

          Victoria’s Hazelwood coal mine is still burning, nearly three weeks after it started from a grassfire during severe fire conditions. Police are currently investigating the original fire for arson. Meanwhile health concerns continue for firefighters and residents in the nearby town of Morwell, with air quality very poor due to particulates produced in the fire.

          Hansen argues for nuclear power

          Statement of Dr. James E. Hansen
          Testimony before the Senate Foreign Relations Committee on the Keystone XL Oil

      • SRSrocco says:

        What an unbelievable announcement by the German Govt on Green Energy. I knew Solar & Wind aren’t commercially viable enterprises… I just thought I was missing something.

        After several email exchanges with mechanical Engineer Jerry Garf, I found out that just about all of the Solar & Wind projects in the U.S. won’t pay back the initial investment over the depreciated lifespan of the project.

        The only way Solar or Wind makes sense if the Govt pays a large part of the construction and forces regional utilities to pay 2-4 times the going wholesale rate for electricity on a long term contract. Which means the total EROI of Solar & Wind, when we factor in extraction of materials, manufacturing, construction and maintenance… is much lower than Shale oil at 5/1.

        If this is really true coming from the Germany Govt… this is just going to force the world to move back to dirty, low EROI energy sources like Lignite.

        The German town of Immerath on the Dutch border was wiped clean last year and its 900 inhabitants were relocated to make room for the second stage of the massive Garzweiler II Lignite Mine run by RWE.

        Here is a picture of one of the massive Bucket Wheel Excavators being transported to the new mine location in Germany.

        Lignite, known as brown coal has the least amount of energy content and a great deal more sulfur than all the different types of coal… it’s ranked DEAD LAST.

        I gather the Germans will be relocating more towns to make room for increased Lignite Mining now that GREEN ENERGY just hit the WALL.

        Mother Nature and the Climate ain’t gonna like this one bit…


        • They could have at least kept some nuclear power plants going which were prematurely turned off. I have calculated how much capacity in MW they have thrown away:

          PV on our rooftop works well. We export more electricity than we import. If more hydropower storage were built, we could solve a lot of problems.

          • TechGuy says:

            “They could have at least kept some nuclear power plants going which were prematurely turned off. I have calculated how much capacity in MW they have thrown away:”

            Getting rid of their nuke plants before the energy crisis unfolds is the smart approach. As cheap energy disappears there won’t be any money to decommission reactors and there will be a lot of pressure to keep nuke operating when they have serious issues. Once energy become expensive operators will cut maintenance costs and serious issues will be overlooked, eventually it will lead to a major disaster. This is already happening in the US and we haven’t hit the big energy crunch yet.

            I much rather do without electricity than glow in the dark.

        • Doug Leighton says:


          As I said to Dennis above: “I also foresee the Four Horsemen of the Apocalypse galloping across the plains before we find a sustainable solution”. Paint me as a doomer but, solutions are difficult, expensive and time consuming and humans almost always take the easy way out.


          • SRSrocco says:


            I just watched the Sci-Fi move Elysium with Matt Damon about the dark future on the planet. I have seen other movies that show the future world continuing to get Darker and Dirtier as we ramp up industrial activity.

            I don’t think we would ever get to that level, but after reading about the FAILURE OF RENEWABLE ENERGY by the Germans… I can see us being that stupid enough to actually try to get there by using this low EROI, dirty energy.

            It is truly amazing to Google “Garzweiler II” and see some of these numerous towns that were wiped off the map and relocated in Germany… as well as the ugly huge open coal pits that are left behind.


  5. Watcher says:

    Perhaps it would be useful to note what Godot will be wearing when he arrives:

    1) Booms. There will be “oil booms” all sorts of places. An oil boom is defined as big activity and employment jumps on an oil field. What comes out is not as important for headlines. The phrasing will be . . . what are you talking about . . . what Godot . . . JUST GO THERE AND LOOK AROUND AND TELL ME IF YOU DON’T SEE AN OIL BOOM.

    2) The price won’t move. Might be lower. It’s measured in some currency or another, and that measure can be adjusted via how much QE a central bank chooses to execute, or . . . maybe chooses to unwind its balance sheet. The BOJ will be first. This can cause a price decline, along with decline in all salaries associated with the work. Most measurements aren’t valid because the yardstick changes its length.

    3) The second C of C+C will be heavily leaned on in buoyant graphs showing relentless growth, and won’t hold any diesel. China’s oil consumption growth is 35% diesel. Scarcity in stores will appear as everyone is reassured that there is plenty of this or that — and “local shortages” will be blamed on some evil someone or other.

    4) China will not accept scarcity preventing it from taking its proper place in the world as dominant power, given population. They will divert tankers at sea enroute Tokyo and send them to Shanghai. That’s an extra 4 million bpd they can tap. China will never be guilty of firing the first shot. Some Japanese 18 year old will do that.

    5) The US govt will order activity to resume in dead fields. They still have uneconomic oil in them, but economics are trumped by necessity. It will be ordered done, losses will be subsidized, and presto, production growth. This will cause buoyant headlines and graphs showing how oil output is growing from dead fields because of “technology advance”.


    • Watcher says:

      oops, when will there be an editor?

    • TechGuy says:

      Watcher Wrote:
      “Perhaps it would be useful to note what Godot will be wearing when he arrives:”
      I’ll take a guess: A black robe and a scythe in one hand.
      FWIW: Not as a die-off, but the downfall of a lot of businesses that need cheap and abundant oil to exist. Airlines will probably be one of the first heading for the chopping block. I think there are a lot of business that are bearly holding together. Any prices increases or decline in revenue, will force them to drastically change or go out of business.

  6. Duke of Oil says:

    Below your first graph you write: “You can see that another doubling of Brent oil price in the next eight years brought only 1,283,000 bp/d of new oil on line…” Shouldn’t that number be something closer to 2,000,000 bp/d (roughly 76,000,000 – 74,000,000)?

    • Yes thanks, I have made the correction. Sometimes I get so wrapped up in creating the post that I make mistakes. I always do that but when I don’t catch my mistakes it really upsets me.

      Thanks again.

  7. Coolhand says:

    So the problem appears to be how to raise price in a time where price is already too high to drive increased demand.

    History shows us how the US did it in 1971 – currency system change: yank gold’s backing of the dollar, gold prices proceed to rise 9-10x off the lows in the next 10 yrs, bringing Alaska, North Sea, Cantarell all into play…

    What would happen to the price of oil if the dollar was dumped as sole oil currency?

    Oil would skyrocket in usd terms, a la 1971-1979.

    can produce more at $200-300/bbl? I think its very likely, for a bit at least.

    • Tim E. says:

      What would happen to the price of oil if the dollar was dumped as sole oil currency?

      Therein lies the conundrum because we are measuring things in a pure fiat currency that is backed by the military power of The United States.

      The U.S. Dollar is purely an abstract mental constraint in which we measure physical resources and time by. That is why the dollar will be destroyed, but only in a metaphysical sense. Once you free your mind from money – you will discover that the physical world still exists and functions.

      Obviously, Oil supplies as well as all other resources, still have limits – but in the end they won’t be measured in Dollars. It will result in the end of the West’s hegemony. That transformation is occurring right now.

      • Anonymous says:

        Tim, are you suggesting the US dollar stands in the way of continued BAU? I don’t disagree that the West’s hegemony is waning, but don’t see how going from USD’s to some other currency keeps the oil taps going longer. The dollar may be an abstract construct but retailers accept them, so apparently they do have value. I would suggest when the USD falls, calamity ensues and out of that scramble some other currency leads the way but with lower overall world economic activity.

        It’s all becoming very tenuous, from reducing oil profits and capex to QE to hold the banks steady a while longer. Doesn’t seem like much will be needed to initiate another recession and when it hits, the price of oil drops making the situation even worse, and how we could ever make another charge up BAU hill from there is anybody’s guess, but I’m not betting on it.

        • Tim E. says:

          I absolutely agree with you.

          The abstract measure of resources will change.

          The physical amount of resources won’t change.

          Projecting into the future with “currency” is a mind trick to buy time.

          That “time” is coming due faster and faster.

          • coolhand says:


            You have a very rich understanding of currencies v. physical plane and you are exactly right IMO…

            This all happened in 1971. The price of oil is a function of currency. The utility of a barrel of oil has not changed from 1971 until now, yet it’s price has risen from $4 to $110. What changed? The currency. Oil priced in gold hasn’t moved much in 43 yrs – most of the time it has been b/t 10-20 barrels/oz.

            This is why the US created paper oil & paper gold futures, in dollars. He who controls the currency in which oil & gold is priced, controls supplies of the underlying physical. Google “China oil gold priced in yuan Shanghai” to see the next iteration of the game.

            Russia could say “We’re pricing our oil in yuan.” Then China says “We’re devaluing the yuan against gold to$32,000/oz (1000 bbl/g)”.

            What is more valuable? Physical gold yielding 0% but with limited supplies or US Treasuries also yielding 0% but w/supplies growing exponentially ad infinitum?

            If you were an oil exporter – you would answer “Give me the gold.” Up until peak cheap oil, you couldn’t say this without getting killed by the US military, there was too much excess oil supplies.

            The reality of peak cheap oil is that Russia/Iran/China now control the strings.

            End the petrodollar system, and the price of oil in dollars will skyrocket, but not in euros or other currencies made strong in gold. If you kill the petrodollar, you kill the oil consumption of the American driver who is singlehandedly responsible for what, 3-5mb/d?

            If you end the Petrodollar, the world will have found the equivalent of 50-1o0% of a Ghawar. US banks & multinationals who derive most of their profits from overseas will see a whole new mkt of (primarily Asian) consumers created for years to come.

            And at $300/bbl, US oil reserves & production will skyrocket…but with the petrodollar dead, that doesn’t mean oil is $300 globally…just in the US…

            • dolph says:

              This is a line of thought too sophisticated for most American, right-wing, “patriotic” types who can’t see past the next Fox News or Rush Limbaugh broadcast, and the oil patch is largely made up of such characters.

  8. Fred Magyar says:

    All I want to know is how soon before can I feel safe riding my bicycle in the express lanes of I95?
    When that finally happens I know Godot will have arrived…


  9. • Costs have outpaced revenues by 2-3% per year. Profitability is down 10-20%.
    • The vast majority of public oil & gas companies require oil prices of over
    $100/bbl to achieve positive free cash flow under current capex and dividend
    • Nearly half of the industry needs more than $120/bb. The 4th quartile, where
    most US E&Ps cluster, needs $130/bbl or more.

    Ron sez 2017 or so.

    Triangle of Doom indicates later this year or early next year if the bosses don’t make policy errors. The oil price that causes economic dislocations is declining and is likely at the level that is uncomfortable for drillers right this minute. The majors not being able to finance their own costs is telling, it means their customers are unable to.

    The real problem is on the consumption side of the equation: driving in circles from gas station to gas station is non-remunerative. Costs must all be met with more and more debt: we’re debt-saturated and have run out of options.

    Too bad. It was fun while it lasted …

    • The Wet One says:

      I’m going to say it will happen sometime in the 2020s


      Simply to be contrary. Also, because we won’t know exactly when TSHTF except in retrospect.

      In other words, I’m more conservative about my forecasting TEOTWAWKI. I don’t doubt that it’s coming (how on earth could I?), I’m just skeptical of putting too precise a point on it. Plus I want to actually feel like I have a future for the next little while even though I probably don’t. I’m getting married and planning on having kids (insane I know). I want to stick my head in the sand for awhile longer to enjoy a few years of married life. If I think Ron is 100% correct, that will be hard to do with my lifelong tendency towards depression.


  10. Sourabh Jain says:

    Thanks Ron, Excellent post as always.

    We should start preparing our cities the way Cubans did.

  11. Paulo says:

    Thank you so much for this interesting post for a quiet Sunday evening. I had just finished watching “Deadliest Catch” about Bering Sea crab fishing and flashed up the computer. As a person who loves to fish and as someone who has worked in horrible weather flying the BC Coast and north I continue to be fascinated by those who make a living in such a harsh environment. Their efforts are humbling. For the last few seasons all I have been able to ask is how much do fuel costs impact this fishery and how long can it continue? Obviously, we don’t need crab legs to feed the world, or airlines that fly to vacation spots when the discretionary dollars wither, or the toys people still seem to buy.

    The above examples are really fringe fossil fuel uses, but as Farmer Mac points out diesel powered tractors are an absolute necessity for any kind of real food production. We just can’t do without it if we are going to grow food efficiently. We have a small home type food system where I use a BCS walk-behind tractor. I also use a small Belarus tractor. The BCS runs an awesome roto-tiller, but it also runs a sickle mower and a chipper. It can power a small dump cart, a snow blower, almost anything off of its quick release PTO system. It powers maybe 20 different implements, all interchangeable in minutes and using an 11hp Honda engine. The Belarus Titan tractor uses a 13 hp Honda. Today I used it to pull a trailer with 1 ton of firewood. For non-commercial type growers, or for small ‘truck farms’, these walk-behind tractors are the way of the fuel constrained future.

    Those graphs tell me two things. One…Ron is right and we will see some admitted decline in very short order. Two…Ron is right but the high costs of fuel kill the economy before decline is visible and low fuel prices brings expensive and/or new production to a screeching halt. I suppose this is Gail’s version. Regardless, it is inevitable. I urge readers to continue with realistic preps, not to circumvent this decline, but maybe to get along during the first few years of crunch.


  12. EnergyData says:

    I’m linking here a summary of the BGR’s latest estimates of global fossil fuel resources and reserves

  13. Calhoun says:

    The Boredom Factor

    As a long time and loyal member of the Peak Oil Club, I worry a lot about the future, especially my 14-year-old son’s future. If it were up to me, we’d be buying some land upstate and preparing for a low energy future. What stops us? Boredom. My wife gets the PO story but when it comes to preparing for it, she’s not interested. Why? Because it’s boring. Let’s face it, a low energy future is going to be boring. No air travel, no cruises, no driving around on weekends just to kill time. And if you have to live in the country to make a go of it, that’s a total non-starter. No Costco, no Whole Foods, no asian food markets, no shopping malls. Just boredom.

    So her attitude is that we’ll deal with PO when it happens and until then we’ll just keep doing what we do to keep from being bored. And maybe she’s right. How do I know how the PO future will unfold? Maybe preparations made today will come to naught. Maybe we should just enjoy the energy while it’s here, don’t worry and be happy.

    I drive a Honda Insight. Even at $4 a gallon, a weekend of extensive driving might cost us $40 — it would cost more than that to take the three of us to a movie with popcorn. We can still get reasonably priced air fares, if you watch the fares as closely as my wife does. Cruises are still a great deal when you factor in the value of the food and lodging. Fortunately I take mass transit to work and my wife works from home – we use very little gas during the week.

    In a very real sense, even at today’s prices, using oil is our best entertainment value. In fact, I would say that our habits would change little even if gasoline were double today’s prices. Why? Because the alternative is sitting at home watching the hands of the clock move. Boredom. Anything to avoid boredom.

    In my opinion, oil prices will have to go much much higher before they have a real big impact on our lives … as long as we are employed, that is.

    • Dennis Coyne says:

      Hi Calhoun,

      Interesting comment. Often it is argued that oil prices cannot rise because it will cause a recession.

      I have argued that if real oil prices rise slowly that the economy can adjust. The World’s real GDP grew at an average rate of 3.6% from 1999 to 2012 based on World Bank PPP (purchasing power parity) 2005 constant international dollars.

      Let’s assume this slows a bit to a 3% rate of growth and real oil prices rise on average at about the same rate (3% per year).

      James Hamilton has argued that when world spending on crude oil reaches %5 of World GDP a recession results, but in 2012 this ratio (world spending on crude+condensate/world GDP) was about 3.6% so as long as the economy and oil prices grow at about the same rate in real terms recession should not be a problem.

      When people argue that people cannot afford higher oil prices, I think why not? Businesses will simply pass on increased costs to consumers which will raise prices (a little) and in response wages tend to increase over time to account for this (and I realize that in the US real incomes have not been increasing, but the inflation is baked in to that assessment and this is more of a distribution of income problem which could be solved with a change in tax policy).

      How will they drive their cars? This is where your comment comes in, they can buy a more fuel efficient car. They can’t afford it, buy a used car then and trade in the less fuel efficient vehicle.

      Most people with an SUV that gets about 20 MPG could find a car that gets 40 or even 50 MPG (in the case of a Prius or Insight). This would cut their spending on fuel in half.

      Not everyone can do this, if you have 4 or more children you won’t be able to get everyone in the car in a 2 parent household, if you are in the construction industry, you need a pickup truck (or more).

      For the vast majority, this is simply a choice, for those who have less money and are financially strapped, as gasoline prices increase, they will choose more fuel efficient cars or cut back in other areas.

      Those who think there is no solution that economic decline is the only option, make the assumption that a change in fuel prices will have very little effect on the vehicles that people choose, I disagree with that assumption.

      • SuddenDebt says:

        Dennis wrote;
        ”Often it is argued that oil prices cannot rise because it will cause a recession.”
        Would higher interest rates affect oil consumption and economic activity?

        The world used (and continues to use) massive amounts of credit/debt in recent decades. This allowed to grow aggregate demand and also gave some tolerance for higher oil prices.

        Dennis’ assumptions that struggling consumers (private and public) can continue to take on more debt to pay for higher priced oil rests on some very shaky foundations.
        Dennis’ assume that consumers have the capability to take on more debt to allow oil companies to take on more debt to allow for higher priced oil (energy) to be brought to the market.

        This smells like a Ponzi.

        The US (and other countries) could in recent years continue deficit spending (take on more debt due to low interest policies (ZIRP) and by monetizing debt (printing money). This can continue until it can’t and even central banks are aware that there is a limit to how far they can pursue these policies.
        Does the above sound like a basis from where more debt can be assumed?

        Keynesian Cargo Cultism has run its course.

        Dennis wrote;
        ”Those who think there is no solution that economic decline is the only option,…… ”
        We are not faced with options, but a predicament.

        Now let us all head for the beach and sing Kumbaya. 🙂

        • Dennis Coyne says:

          I said nothing in my comment above about debt, I said that consumers will make different choices when prices rise.

          Let’s say gas prices double and I own a nice SUV worth $15,000 at trade in value.

          I sell the SUV and buy a used Prius for $15,000. Where is the debt here?

          So let’s say I drive 10,000 miles per year and gas has gone up to $7/ gallon, if the SUV I sold averaged 20 MPG that’s $3500 per year in gasoline purchases.
          With my new Prius fuel costs only $1400 per year and I am still spending less on fuel than before prices doubled, I can even use the extra $350 to pay down some debt.

          In a previous comment I spoke of the lack of an issue with government debt up to at least 200% debt to GDP, in the face of GDP well below potential, such spending makes perfect sense, when unemployment is reduced, tax revenue increases and government spending on the safety net decreases and deficits are reduced.

          • SuddenDebt says:

            ”I said nothing in my comment above about debt, I said that consumers will make different choices when prices rise.”
            Neglecting the role of debt (private and public) will limit the value of any analysis.
            Micro economic analysis misses the Big Picture!

            ”In a previous comment I spoke of the lack of an issue with government debt up to at least 200% debt to GDP, in the face of GDP well below potential, such spending makes perfect sense, when unemployment is reduced, tax revenue increases and government spending on the safety net decreases and deficits are reduced. ”

            Can you point to one country that now has a government debt to GDP ratio around 200%?
            And if there is such a country on here on Earth how well is their economy doing?
            And when it comes to debt, ALL DEBTS needs to be considered, private, corporate, public.
            GDP numbers have been inflated by growth in total debt!

            How should the increased deficit spending by governments be used to grow WEALTH?
            The problem now is that much of the deficit is used for CONSUMPTION.
            The reply is just more Keynesian cargo cultism.

    • Jb says:

      Hi Calhoun,

      Ditto here: wife and 15 year old son not interested in PO (or gardening) and I work from home with an Insight that mostly occupies the driveway. When she’s not working, my wife reads books on her iPad. It keeps her happily distracted. We rarely go to the movies.

      When we can no longer afford to waste oil ‘driving from one gas station to the next’ a lot of other things are going to become unaffordable at the same time, including the latest personal technology. For now, people who still have jobs can buy more fuel efficient cars and switch from PCs to less expensive, portable tablet devices. Similar shifts from ‘more’ to ‘less’ are underway and I dare say for most of us, it’s permanent.

      The big question of course is whether or not another significant drop in oil prices will take production off-line. And if so, is it permanent?

      Best –

    • Doug Leighton says:

      Hi Calhoun,

      Good post, nice to see a squirt of realism in a sea of theory. I continually rant-and-rave about PO, global warming, etc. We recycle, drive a small car and minimize trips to the city and feel good about it. Then we jump on a plane and go to a concert in NY, fly off to visit our oldest Daughter who lives in Italy, or visit family in Norway. Is this responsible: probably not. Do I feel guilty about it: not really (maybe a little). Is you’re bored wife being unreasonable? Doubt it. Maybe we can rationalize that the various military forces of the world waste trillions, that the one percent blow billions, whatever. Who knows.


    • hole in head says:

      Cal,several years ago I listened to a talk by Dimitri Orlov who said that we must prepare “to do nothing”because “there will be nothing to do”once the oil age is over . We must prepare for boredom once the good days are over .
      My second take is that the delivery of oil to the final consumer is a closed loop system comprising of the oil producer,oil pipeline+tankers and refiners .A breakdown in any part of this loop will mean the consumer is without the liquid gold . Looking at the current situation the refiners are the Achilles heel of the system since they are loosing money in a big way (at least in the Western world) and I have a feel that some will go out of business in a few years . What happens then ? Are we in the West going to ship crude(after buying it in the middle east) to India/China etc to get it refined and bring it back to Frankfurt/Brussels ?? Further I think the world should hit the wall on diesel first .With the European car park at +60% diesel and also I know in India the car park is + 50% diesel and as I understand that excluding the America’s most shifted to diesel because of the price difference between petrol and diesel in the devolping countries . Diesel is the workhorse and once we get into a problem on this,we will be in trouble .
      By the way, Ron thanks for the excellent post .
      P.S: Just learnt that Reliance in India the world’s largest refiner made 40% of his profits from treasury operations and not from refining .So it seems that the refining business is in not in good health worldwide.

    • Joel Caris says:

      Boredom? Really?

      It won’t be boring. There will be plenty to do. I would recommend people who think a post-oil world will be boring go check out a small-scale, diverse, working farm that utilizes hand labor, not strictly tractors. It’s not boring. There’s lots to do. There will be more to do in a post-oil world than there will be willing people to do it, I imagine, though as things really crunch and people are scrambling to feed themselves, they’re suddenly going to be a lot more willing to get in the dirt if it will provide that evening’s dinner.

      Honestly, this is the boring world. How much time do people spend sitting around staring at a screen of some type or another (he typed)? A post-oil world will be one that’s far more rehumanized and full of far more meaningful work than the top-of-the-heap industrialized countries currently sport.

      This isn’t me romanticizing, mind you. I’m not looking forward to the continued transition away from cheap fossil fuels. I’m worried as hell that I’m not nearly prepared enough, because I’m not. I don’t look forward to the convulsions, the pain and suffering, the harsh realities of transitioning from the abundance of cheap fossil fuels to a far poorer, far less crowded world running on renewable resources.

      I fear what I’m going to see over the next 40 or 50 years, assuming I stick around that long. And the few hundred years after that will be just as harsh, probably worse.

      Some odd centuries down the line, I imagine humans will have cobbled themselves together a far more interesting world than the one we’ve given ourselves now–at least here in the industrialized countries, with our screens and idiotic distractions–though it will of course have its own challenges and failures.

      But boredom is not our problem. Our belief that a post-oil world will be boring is part of our problem, but that belief is flat wrong. There will be plenty to do, and the world is going to be anything but boring as we tumble down the backside of the peak.

      • Hole in the head wrote:
        We must prepare for boredom once the good days are over .
        Joel replied:
        There will be more to do in a post-oil world than there will be willing people to do it,

        Boredom will be the least of our problems. Food will likely be the number one problem, followed closely by clothing and shelter. But defending what you have will also be a big problem, that is if you have anything. Millions of starving people will be willing to do anything to feed themselves and their families.

        And Joel, I don’t know about people not willing to do what is necessary to keep themselves alive. I suspect that the vast majority of people will be willing to do just about anything to survive. But it is best not to dwell of some of the things they might do.

        • Joel Caris says:

          Ron, you’re right. That sentence would have been far more accurate as “There will be more to do than hours in the day to do it.” Or “more to do than people who understand what they need to do.”

          “More to do than people willing to do it” is an accurate description of the present. Probably won’t be of the future. People will do a heck of a lot once they’re hungry, or losing the roof over their heads, or watching their family suffer.

          Those who aren’t too busy drinking themselves to death, anyway.

          I do hope we can mostly avoid the roving hoards, though. To be honest, I think we largely will. A lot of people are going to get deep into the descent while still believing all the comforting lies from various leaders. Good times will always be just around the corner. A chunk of the population will continue to believe that–at least those in a position to keep barely scraping by while they wait for a recovery that will never come.

          I imagine a lot of the coming violence will arrive via a domestic insurgency aimed at the federal government. I don’t savor that possibility, living in a rural area surrounded by a lot of federal land that’s managed in a way a majority of the locals don’t appreciate. The Cliven Bundy situation is just one more of the opening salvos of that future conflict.

          But yeah, boredom is not at all what we need to fear. And those who can’t fathom a life without abundant, cheap fossil fuels as being anything other than boring (or apocalyptic) aren’t helping get the infrastructure in place that we desperately need for the descent. Honestly? Gardening, farming, raising animals, working the soil in some manner or another, canning and preserving, and just generally learning and engaging the vast array of common skills of a pre-oil life isn’t really boring. It’s actually pretty fun and entertaining if you’re doing it with enough leeway that you’re not constantly on the verge of starvation. Also, working, engaging, and living with other humans is pretty great as well. Far better, in my experience, than interacting with screens. And working, living, and engaging with other humans will be a necessity in the future.

          And if you get the added bonus of boosting your chances of avoiding starving or drinking yourself to death in the coming decades, then why not get to learning some of these skills? The more people who do, the better we’ll be able to cushion the decline as a society.

  14. J. Robert Oppenheimer had more to do with the development of nuclear than the gov, all the gov did was provide money and materials.

    Oppenheimer provided the brain power, the gov has no brains.

    Peak Oil is here now, development of renewables is a symptom of peak oil and just exacerbates the predicament, does nothing else. Wind and solar more or less promote increased oil consumption and does nothing to curb it.

    It is unavoidable. Humanity has been enslaved by a single resource. The hole is dug and the only way out is to dig deeper. The more you dig the peak peaks more.

    A Catch 22.

  15. Coolreit says:

    Another important post, Ron.


    Why not address the reason why oil prices have been flat for the last 3 years? Could the fix be in? TPTB want low oil prices to run the economy. The banksters have been prosecuted for manipulating every major commodity market. However, since the banksters own most Western gov’t’s, nothing material will happen in the prosecutorial realm. Oil shortages will develop because the majors have no choice but to cut back e&p spending because as costs have risen the past 3 years, profits have fallen given a static oil price. With falling e&p spending, falling oil production will surely follow. Also, notice also how the WTI/Brent spread just reopened back up to nearly $10, DESPITE continued falling Cushing inventories? How convenient for the banksters. Unfortunately, 30 million barrels is the approximate minimum threshold for base oil inventories at Cushing and we are nearly there. Another source of future shortages.

    • Coolreit, thanks for the post but we have a difference of opinion. No, I don’t believe any fix is in. The only to control the price of oil is to control supply. OPEC could do that by cutting supply but they could not lower the price by raising supply because they are all producing flat out right now. No one else has the power to control oil prices.

      As to the bankers being prosecuted for manipulating every major commodities market, I think that is a slight exaggeration. You are apparently referring to the Libor scandal.

      F.D.I.C. Sues 16 Big Banks Over Rigging of a Key Rate

      The Federal Deposit Insurance Corporation has sued 16 big banks that set a crucial global interest rate, accusing them of fraud and conspiring to keep the rate low to enrich themselves.

      The banks are accused of rigging the London interbank offered rate, known as Libor, from August 2007 to at least mid-2011. The F.D.I.C. also sued a trade group, the British Bankers’ Association, that helps set Libor.

      Although the interest rate does affect the commodities markets, the bankers were attempting to make money off interest rate manipulation, not to profit from commodities trading.

      I agree with the rest of your post however. It is true Cushing inventories are the lowest since October of 2009 yet total US inventories are the highest in history. I can’t figure that one out.

      • Jeffrey J. Brown says:

        I suspect that high US “crude oil” inventories are a result of high condensate inventories. Note that net US crude oil imports remain relatively high, despite record high oil inventories.

        • Dennis Coyne says:

          Hi Jeff,

          You are correct that the US output is too light for most US refineries, I would think the high imports would reflect the fact that the refinery mix in the US is not right for the output from the Bakken and Eagle Ford. It would probably make sense to just allow it to be exported to places that have the proper type of refineries (Europe?).

          • Jeffrey J. Brown says:

            I could be wrong, but unless the condensate is lightly processed in a splitter, I don’t think that it can be exported, which would of course contribute to increasing condensate inventories.

            However, isn’t some condensate being shipped to Canada? Is Canada exempt from export restrictions on crude?

            • toolpush says:


              Canada is a NAFTA country, along with Mexico and the USA. as I understand it, it would be illegal to make it illegal to export anything to Canada.

              While I am here, does anyone have graph or figures for USA crude imports – Canadian imports. The reason I ask is as Canadian Tar sand oil imports increase, it would be interesting to see how other heavy oil imports are pushed out of the US market. Mainly Mexico, Vz and Saudi Arabia.

      • coolhand says:

        Ron – the rigging of interest rates lower is intimately involved in the production of oil…the shale plays are all bleeding cash with rates artificially (Fed QE, LIBOR rigging, whatever) pegged at 0%.

        An underappreciated (IMO) aspect of the shale boom is that it would impossible if the cost of capital wasn’t at its lowest in 150 years thanks to Fed QE.

        Ask any oil hand or energy banker what would happen to their operations if we just took Fed Funds rates to their 50-year avg of 3% – they would tell you their cost of capital would rise and therefore their cash flow would fall and that would lead to a drop (collapse?) in unconventional production.

        The corollary to this that few are talking about (yet) is that until the currency system changes (kill the petrodollar & production will rise), the Fed absolutely CANNOT raise rates without killing oil production growth in the US.

        • Coolreit, I understand all that but the oil patch, or the oil futures market for that matter, had nothing to do with why the banks conspired to keep interest rates low. They make their money by borrowing money at one rate and lending it at a higher rate. If they could keep the interest on the money they borrow at an extremely low rate but still loan it out at a much higher rate, they make money, they make a lot of money.

  16. Coolreit says:


    I don’t make these stories up.

    Bloomberg on Brent price manipulation:

    Zerohedge/Wall St. Journal on foreign exchange price manipulation: and

    Zerohedge on Libor rigging (LIBOR is the global interest rate base):

    Zerohedge on Manipulating aluminum,copper and
    gold prices … on a daily basis :

    • Okay Coolreit, calm down, I never accused you of making things up. Your first link is extremely vague but the best I can understand a group of traders were trying to manipulate the Brent crude oil market. It did not state what market they were talking about but I assume it was the very thinly traded spot market. The actual Brent oil supply is very small and getting even smaller every month. In other words they were trying to control supply and by controlling supply they could affect the futures market. The Brent futures market is way too large for any group of traders to control. Even if they all buy at the same time, running up the price, they still all must sell. Some will make money if they sell at the top but others will lose their shirts as the selling causes prices to plunge.

      If one, anyone, claims that the futures market is manipulated they must explain exactly how it is done. Every trade is a zero sum game. For every buy order there must be a corresponding sell order. And every contract must be closed out by or at expiration. I have been hearing about people manipulating the futures market for years yet no one has explained exactly how it is done.

      All your other links are about claims to control the Forex market that sprang from the Libor Scandal. All banks could all agree at the same time to hold interest rates down. I don’t know what affect that would have on the Forex however. The volume on the Forex is five trillion dollars per day. No one has enough money to actually manipulate the Forex market with trades.

      Understand that the Forex is a spot market, not a futures market. Every trade is just a trade, not a contract like the futures markets. There is no expiration. If you can guess the trend of a particular currency you can make a bundle. But you can also lose your shirt if your trend turns on you right after you trade.

      • Coolreit says:

        Gold is just one example of massive price manipulation:

        The flows of yellow gold to the far east for the past 2 years has been massive. Yet, what has the price of gold traded on Western markets done? It has aallen hard. What is the economic logic in that? Economics dictates that rising demand for a product and flat supply dictates higher prices. The opposite has happened.

        • Old farmer mac says:

          Sometimes things are simple. Sometimes they aren’t. The price of gold is one that is or can be both very simple and very complex.

          I do not claim to be an expert on gold but I have worked out a way to decide who to trust on abstract matters requiring expertise. It basically involves finding out what a person believes and advocates on a few subjects which I do know a lot about.

          If a person believes as I do about global warming, peak oil, agriculture, human nature and a couple of other topics then I presume he is a smart fella ( Like ME !!!! ;-)) as opposed to a fart smeller. In that case I am apt to put some weight on his opinions involving gold if he puts a good bit of time into studying gold markets.

          So I won’t name them but a couple of guys who are into gold and impress me as having working brains believe the price of gold in western countries is controlled by the fear of problems with banks and fiat money more than anything else. So the price of gold shoots up when gold buyers get to believing that cash and the bau economy is in big trouble and that money in the bank might not be there if you want to withdraw it.

          When the big troubles don’ t arrive then the price gradually falls off to some much lower level.So we can think of most westerners in the gold market as being in it on a relatively short time frame of weeks and months and maybe in a few cases looking a few years ahead.

          Easterners don’t think about gold as an investment to be traded or sold but a form of secure long term storage of their wealth far safer than fiat money or real property which can be taxed beyond bearing the taxes or outright confiscated or lost in a war.As far as stock markets go they don’t trust them either – with good reason in my opinion considering what I know about eastern governments.

          A Chinaman with a traditional mindset will sell or spend only a very little of his gold stash and only then in a bad pinch.

          Then there is the possibility that the Chinese and Indian governments are afraid the dollar is a dead currency walking – in which case they want gold to back up their own currency so it will be gladly accepted on world markets.

          I am agnostic about the Chinese making plans to crash the dollar but that could be a part of the mix too.

          At any rate the time to buy anything for the long term is when it is at a market bottom and the people of the east are noted for being long term thinkers and planners.

          There may be somewhat of a firm price floor for gold that relates to the cost of mining it.I am not sure about that but some gold is used up and lost and if mining stops the supply will gradually shrink putting up pressure on prices.

          One guy says the price of gold can be explained in one sentence. He says westerners believe in speculation and are afraid of fiat money disappearing due to deflation or inflation and that easterners just pure and simple believe in gold because it is the one thing that has never failed them.

          There are some very good reasons given why a gold backed currency – one that the issuing government will freely redeem in gold no questions asked- will not work but explaining them is more than I want to type up.

        • coolhand says:

          Coolreit – what has gone on in the gold mkt makes perfect sense if you understand the structure of the gold market and gold derivatives in the “price of gold” you see quoted daily.

          Imagine a giant umbrella-check room with 100 umbrellas & 100 claim checks on day 1. After awhile, the manager realizes that most days it doesn’t rain & so no one asks for their umbrella and so if he prints up & sells a few more umbrella claim checks as “rain insurance” to increase revenues.

          Occasionally it rains a bit, but never long enough create a “run” on umbrellas. So the manager sells more umbrella claim checks.

          Eventually there are 100 claim checks outstanding for every umbrella and are so liquid that the manager now sets up a “umbrella futures exchange” establishing a price of umbrellas. All is well and good and people come to buy umbrella futures any time it looks like a big rain storm may come to hedge their risk of getting wet.

          Eventually, it becomes common knowledge that there are 100+ claim checks outstanding for every umbrella – if just 1% of claim check holders demanded delivery, the manager would have to declare force majeure & file bankruptcy.

          What then would happen to the price of “umbrella claim checks” if China suddenly began buying the equivalent of 80-100% of annual global umbrella production? The price of claim checks would absolutely collapse, b/c everyone knows that once just 1% of claim checks were settled in physical, all the umbrellas were gone.

          If you understand that, then you can understand what happened to the price of “gold” last year in the face of record physical demand for gold.

          • Coolreit says:

            You can talk about umbrellas all you want, but it doesn’t change the facts of record/massive Chinese and Asian gold demand coupled with a falling oil price. That behavior is totally contrary to standard economic behavior. Period! Umbrella or no umbrella!

          • Tim E. says:

            The markets behind the markets.

            The gold must flow.


      • Coolreit says:

        Eric Sprott On The Implications Of The “Chinese Gold Vortex”
        Tyler Durden’s pictureSubmitted by Tyler Durden on 04/30/2014 18:40 -0400

        Central Banks China Eric Sprott Exchange Traded Fund Germany Hong Kong Sprott Asset Management Switzerland United Kingdom

        More proof of massive gold price manipulation
        Submitted by Eric Sprott via Sprott Global Resource Investments,

        After a long and agonizing winter which was attributed to the so-called “Polar Vortex”, we thought it would be appropriate to highlight for precious metal investors the implications of what we call the “Chinese Gold Vortex”. Over the past year, we have been very vocal about what we consider an aberration: the complete disconnect between gold supply and demand fundamentals and the actual price of the metal.

        We have shown in February Markets at a Glance (MAAG) that, for all of 2013, demand from emerging markets, particularly China, was extremely strong, outstripping world mine supply by a fair amount. But this extreme tightness in the physical market was not reflected in gold prices. We have since then discussed many signs of manipulation in both the paper and physical gold markets (ETF flows, Indian intervention, LBMA fixings, to name a few).

        This month’s Markets at a Glance presents an update on the demand dynamics in China, discussion around new evidence of manipulation and concludes with an illustrative example of the opportunity in gold equities.

        Supply and Demand

        While the year is still young, we have been able to gather a few data points from China and they are truly impressive. The table below shows Chinese net imports of gold for the first two months of 2014.1 So on average, each month this year, China has imported about 204 tonnes of gold, up from about 143 tonnes last year.2

        Chinese data is taken from the Hong Kong Census and Statistics Department. Swiss data is taken from the Swiss Customs Administration, which started reporting gold exports to specific countries in 2014.

        To put these numbers in perspective, for the full year 2013, total mine supply excluding China and Russia averaged 192 tonnes per month (see the February 2014 MAAG for details on the methodology).3 Basically, China is currently vacuuming, on a monthly basis, all of the world’s mine production plus an additional 10 tonnes. But that is only China; anecdotal evidence from other countries suggests that demand remains strong in other Emerging Markets, where Central Banks keep adding to their gold reserves. Moreover, whereas last year’s ETFs contributed (unsustainably) to supply, this year has so far seen net inflows into gold bullion ETFs.

        What immediately comes to mind is: where does all this gold come from? As we have long argued, gold to Emerging Markets has been supplied by Western Central Banks for many years.4 Recent data substantiates this claim. A closer look at Swiss import and export data shows that it imports most of its gold from the US and the UK and exports most of it to China and Hong Kong. For example, in the first two months of 2014, the UK has exported over 233 tonnes of gold to Switzerland; this is more than half of the Chinese net imports over the same period (remember the UK doesn’t produce any gold). Similarly, the US, which has a monthly gold production of about 19 tonnes, has exported, in the month of January alone 56 tonnes, most of which went either to Switzerland or to Hong Kong directly.5 So where does all this gold come from? It is supplied by Western Central Banks, which according to our analysis have very little gold left.

        While it is still early, the Chinese Gold Vortex is firing on all cylinders and data so far this year suggests that demand will far outstrip supply.


        The topic of gold price manipulation seems to be making its way into the mainstream. Regulators in Germany made the first foray into gold manipulation with their investigations of the London Bullion Market Association (LBMA) now infamous Gold Fixing.6 Now, we hear that the CME Group (which owns the COMEX, where paper gold trades) has been sued by three traders for allegedly selling order information to HFTs ahead of the broader market.7

        Simultaneously, academic studies have found evidence of manipulation in the gold market and a consultancy (Fideres) even claims that “global gold prices may have been manipulated 50% of the time between January 2010 and December 2013”.8

        We have long suspected manipulation, but it is now clear to us that both the physical and paper bullion markets have been tampered with for quite some time, to the advantage of those that are naturally short gold (i.e. the bullion banks and other gold dealers). With the increasing amount of scrutiny from the public, academia, regulators and now lawyers, manipulators should have a progressively more difficult time preventing gold from reaching fair value.

        The Opportunity

        The stars are aligned in 2014 for a significant re-rating of the gold price. In our opinion, the best way to participate in a return of the gold price to fundamentals is to invest in junior gold miners. The tables below show EPS estimates under various gold price scenarios and the associated stock price targets, assuming a price-to-earnings ratio of 10x, for both a major (Barrick) and a junior (Crocodile) miner. From the table, it is obvious that junior gold miners have much more leverage to the price of gold.

        Estimates are for FY2014. Price returns assume a P/E ratio of 10x. All figures in USD.
        Source: Sprott Estimates and RBC Capital Markets
        For illustrative purposes only, Eric Sprott and Sprott Asset Management Funds beneficially (directly or indirectly) may own in excess of 1% of one or more classes of the issued and outstanding securities of the above securities.

        In summary, the tailwinds are twofold for gold: the Chinese Gold Vortex is putting an undeniable pressure on the physical market, while focus on price manipulation makes it progressively harder for price manipulators to operate. The reversal of this anomalous, yet explicable market dysfunction could provide astute investors with multi-hundred per cent returns.

  17. Coolreit says:


    More confirmation of your story on EF oil peaking based on nat gas peaking:

  18. Dennis Coyne says:

    Hi all,

    I created some scenarios using Webhubbletelescope’s Shock Model back in Sept 2012. The one below assumes a World URR of 2900 Gb which is a little higher than Mr. Laherrere’s recent estimate of 2700 Gb (2200 Gb W-XH and 500 Gb XH) where XH is extra heavy oil from Canada and Venezuela. I have updated only the 2012 and 2013 annual data points for C+C (EIA data), the lower scenario assumes extraction rates cannot rise above the 1973 world level of 3.05% and the “low2” scenario assumes extraction rates can continue to rise to 4.75% by 2100. Note that Norway has maintained 12% extraction rates for 13 years, so 5% is well within reason especially over a 90 year period.

    Chart below

    • Dennis Coyne says:

      Chart for low2 scenario in MMb/d

      • Doug Leighton says:


        According to your projections we are going to carry on more-or-less as we are for another ten or twenty years. Personally I think that is totally unrealistic but let’s not go there. My question is: Do you think the planet can sustain CO2 (and increasing methane emissions) burning oil, gas and coal at current levels for this time period, without irreparable damage?


        • Dennis Coyne says:

          No. As I said before wishing that something is true, has no affect on the outcome.
          I think the more interesting question is why do you think it is unrealistic?
          The difference in URR between my scenario and Laherrere’s is pretty small (7.4% higher). Hamilton estimates that less than 5% of spending on GDP should be ok, the scenario shows a peak in 2013.

          What does a realistic scenario look like in your opinion? You can just describe with words what seems realistic. Note that the oil decline=economic decline has not proven correct on a worldwide basis very often.

          In 1980 to 1982 when oil output decreased by 17% over a three year period, the world economy grew by 1.8% on average over those three years. The economy does slow down, on that I agree so if we mean oil output decline is equal to slower economic growth, then we are in agreement.

          Maybe you think that prices will spike and cause a financial meltdown, I agree that is a possibility (but not certain), I would not agree that any economic downturn would be permanent. We could of course prolong any economic downturn by becoming obsessed with budget deficits in the face of high unemployment, that would be unfortunate but by no means far fetched in today’s political environment.

          To me, the best solution is gradually increasing prices which makes alternatives to fossil fuels more competitive so that we gradually (faster is better) switch away from fossil fuels. The more this happens, the higher fossil fuel prices can go without crashing the economy and this the reinforces the switch, it will not happen smoothly and will not happen without recessions, but recessions will tend to slow the process of transition so are better avoided if possible.

          • Doug Leighton says:


            OK, I’ll have a go at this and live with your ridicule. Let me start by saying I know absolutely nothing about economics: Never did figure out the difference between a debit and a credit and have no intention of doing it out now. My background is Engineering Physics followed by studies in Geology and Geophysics. This led to a varied professional career that included meeting and working with a lot of chaps in the oil patch: some contacts have been maintained. What I’m being told is that throughout the world, oil deposits are being “creamed” (let’s not go into this complex argument now) to maintain production levels, leading to ever increasing depletion rates which will result in sudden production collapses of many important fields, fields that already have be credited with unrealistic reserve numbers. Therefore, assumptions, to be realistic, must reflect this reality. I don’t think yours do. That’s the simple answer.


            • Old farmer mac says:

              Hi Doug,

              I am a farm boy-professionally educated in my field to be sure- rather than an economist but I did get the basics back in the dark ages and I don’t think anything basic has really changed.

              The question of continued growth in the face of declining oil supplies boils down to this in a ” steady state ” or ”everything else held equal” academic discussion – so far as I can tell.

              IF we can increase the efficiency with which we use oil faster than supplies shrink then growth can continue no doubt.

              Growth can also continue even if supplies shrink a little faster than we increase the efficiency with which we use oil because of the substitution of other sources of energy for some of the oil.Furthermore the economy as a whole can and will become more energy efficient – not just the portions of it directly dependent on oil such as transportation.

              The big money question is how fast supplies can shrink without shrinkage outrunning efficiency and substitution- in academic terms.

              But in real world terms- I don’t think any body has anything more to go on than gut feelings because so far as I can tell all the pundits and bankers and economists and other talking heads are basing their projections on linear changes in the economy.

              But if I have learned anything since the Dark Ages it is that the economy does not operate in a linear fashion when a big change takes place in certain key areas.

              The projections for the number of draft animals in this country for the year 1960 in an old book I have someplace – copyrighted in the 1890’s – were off by a factor of about twenty five.If it weren’t for the fact that a few farmers don’t like tractors and a few more enjoy having a horse or mule around for a hobby there wouldn’t have been hardly any draft animals at all by then -maybe a few horses would still have been used in ranching out west and logging on small sensitive tracts of land elsewhere.

              A shortage of oil that comes about in a shark fin fashion could very easily trigger some very nasty positive feedback loops that might cause sky daddy alone knows what sort of troubles.I don’t have any trouble imagining these troubles escalating all the way to WWIII.

              A shark fin drop in oil supplies scares the hell out of this old farm boy.

              The least we can expect in that case is a super duper depression.My personal middle range projection for that would be martial law in many places in the USA. The worst case would be mad max with WWIII thrown in for good measure.

              I hope Political Economist has something to say about this scenario of a shark fin oil supply decline and my personal opinions as well.

              • Dennis Coyne says:

                The idea od a sharkfin decline is intriguing. If gradual decline, assuming no asteroids hit the earth or nuclear war, is the way things start from here, I have a hard time seeing what the basis is for the sharkfin decline granted we will reach a red queen stage worldwide where supply cannot increase, but unless there is a severe depression or everyone in the oil industry contracts the bubonic plague, I just don’t see how the sharkfin happens, can someone explain it to me as it seems to be an article of faith for many.

                • I think a shark fin decline curve is far the most likely. First as Doug pointed out all the giant fields are being creamed. That is they all have massive infill drilling programs where they run horizontal laterals near the top of the reservoir. Therefore the field does not start serious decline until the water reaches those laterals at the top of the reservoir. Then it is almost over.

                  And another thing, when it becomes very obvious that we are on a decline curve, many and perhaps most, exporting nations will start to hoard their oil. Most will still export but will hold back to keep enough oil for themselves.

                  And third, let’s not forget about Export Land. When the decline sets in, if a country consumes half their production and their production drops by 5 percent then their exports drop by 10 percent.

                  And fourth, as things get tough in those third world exporting nations, the people start to revolt like they are doing in Libya and Syria right now.

                  I see absolutely no way we can possibly avoid a shark fin decline curve. Unless of course that I take my prescription specs off and replace them with my rose colored glasses. Then a very slow decline curve where everyone slowly adjusts to less and less, seems quite likely. 😉

                  • Dennis Coyne says:

                    So they will all get to the point that the wells run dry simultaneously? Wow.

                  • Dennis, now you are making things up. Nowhere did I even hint that all wells would run dry simultaneously. A shark fin curve does not require that all wells run dry at the same time. Just one of the four things that I pointed out above are required for a shark fin curve. Just one!

                    And just one nation needs to go into serious decline for a shark fin curve to be apparent, if one of those nations are one of the big three, Saudi Arabia, Russia or the USA.

                • Dennis Coyne says:

                  Hi Ron,

                  I was referring only to the idea of creaming.

                  No you did not specifically say all run dry simultaneously. Wells run dry all the time, horizontal wells with long laterals have been around a long time, why have we not seen a shark fin decline world wide except in the rare cases of the Arab oil embargo, only a one year decline so a relative blip, and the more serious decline due to the Iran Iraq war.

                  On the hoarding of oil, doubtful unless they find edible sand in the Middle east, the oil exporting nations need to export just as much as we need to import, I find the hoarding idea unpersuasive.

                  Export land model same argument as above, and as oil gets more expensive oil exporting nations may start to get more inventive about how to reduce their oil use, because there is no sense wasting a scarce resource. Everyone will use oil more efficiently including oil exporting nations.

                  On things being bad in the oil exporting nations, I expect as oil output declines oil will become more expensive, the countries with national oil companies will be flush with revenue, even at lower output, so there will be plenty of money to spread around.

                  The last is the most persuasive however, especially since ther are already two oil exporting nations (Iraq and Libya) in relative chaos (with no shark fin decline), and another being embargoed (Iran). Now I suppose there could be chaos in all OPEC countries (I forgot Venezuela which is not doing so well either).

                  So I disagree that a shark fin decline is likely.

                  How do you define a shark fine decline? 5% decline in output per year for World wide C+C output? We might be agreeing without realizing it, if your definition of a shark fin decline is something like 2% per year.

                  • Wells run dry all the time, horizontal wells with long laterals have been around a long time, why have we not seen a shark fin decline world wide except in the rare cases of the Arab oil embargo, only a one year decline so a relative blip, and the more serious decline due to the Iran Iraq war.

                    Strange sentence there Dennis. It includes horizontal wells, shark fin decline, Arab oil embargo and the Iran-Iraq war. The Arab embargo and the Iran-Iraq war have nothing to do with horizontal wells or any shark fin curve so I really don’t get the connection.

                    Yes horizontal drilling has been around for a long time but horizontal oil collecting laterals have not. Until the late 90s the wells in Ghawar were all vertical wells. Ditto for just about all the wells areound the world. Saudi installed infill horizontal wells in Ghawar and their other giant fields in order to cut down on the water cut.

                    Kuwait, the UAE and others followed Saudi’s lead a few years later. Other countries around the world, for their larger fields, have done the same thing with infill drilling. So why haven’t we seen a shark fin decline world wide? Because the giant fields still have oil to produce…. obviously.

                    On the hoarding of oil, doubtful unless they find edible sand in the Middle east…

                    Dennis, I specifically stated that they will keep exporting oil but just holding some back. Please do not change my argument to suit your reply.

                    Saudi has already said they will keep some oil in the ground for future generations. And Russia could very easily export less oil especially if the price goes up like you expect it to.

                    Okay, so you don’t believe in the Export Land Model. I do and I think the fact that exporting nations are now exporting less oil proves it.

                    I expect the decline to start very slow, around 1 to 2 percent for four or five years. Then when the fact that the oil supply is most definitely declining, that is when nations will not export as much. And they will not cut back on their own consumption just to please Western nations. I expect the decline to go from 1 to 2 percent to 3 percent to 4 to 5 percent after 5 to 7 years or so. Then a few years after that all hell breaks loose.

                  • Dennis Coyne says:

                    Hi Ron,

                    Thanks for the reply. Just to be clear on a couple of points.

                    The export land model assumes that oil consumption in oil exporting countries is unaffected by the price of oil on world markets. It has nothing to do with pleasing Western nations. It is a simple calculation by the governments that control National Oil Companies, they can sell gasoline at 7 times less than the global average (see ) or they can raise prices so that their economies become more efficient in their use of petroleum. One way to accomplish this would be to give away “gas stamps” to the less affluent which could be bought and sold, for everyone else they can afford to pay the world price. In any case by selling oil products at home for much less than the world price, a lot of money is being left on the table. It would make more sense to let fuel prices rise and just give money back to the people to use as they wish rather than subsidize the fuel.

                    On your decline scenario that sounds fairly reasonable, I don’t think it is correct, but nobody knows, it might be exactly right.
                    If Robert Hirsch’s prediction of a 2016 peak is correct, your scenario has a slow decline to 2020-1 (if 2016 is the peak) and then increasing out to 2026-7, with all hell breaking loose by 2028 at the latest. That is not how I picture a shark fin so I misunderstood you.

                    The main difference I think is that I think during the slow decline part of your scenario that prices could rise at 3% per year without sending the World economy into chaos. Oil companies respond with increased drilling effort (which may slow the decline, but is unlikely to reverse it) and consumers will respond by buying more efficient vehicles (both used and new), using more public transportation, and driving and flying less all of which reduces demand.

                    You also seem to think that I believe this will all be painless and I do not, I think there is a good chance that your assessment may be correct, but if some of the things that I suggest are correct that reality may be somewhere between what I think you envision and some of the scenarios that I have laid out.

                  • Dennis, a shark fin decline curve is pretty simple, it looks like a shark’s fin, gradual up slope and a much faster down slope. I thint the “all hell breaks loose” will happen before 2028 but like you said, it is really unpredictable.

                    But a shark’s fin curve will happen even if oil production declines gradually, that is the effective oil available to consumers will look like a shark fin. And it is happening right now in importing nations. Our production is costing us more and more to produce and we are importing less.

                    The “net oil available” in the chart below resembles a shark fin.

                    Shark Fin photo SharkFin-1.jpg

            • Dennis Coyne says:

              Hi Doug,

              Do your friends “in the know”, think it likely that all of the wells in the fields being “creamed” will run dry simultaneously?

              I have no doubt that this is happening, but I have my doubts that the timing will work out such that a sharkfin decline is the result, as old fields deplete new fields are developed which has always been the case. Eventually there will not be enough new field development to make up for the declines in old fields, I just don’t see the timing working out the same way that you do. Do you think we will go from the present 76 MMb/d to a 7% decline overnight? (7% tends to be the decline rate of older wells.) Or does that sound too optimistic?

              • Doug Leighton says:


                Now you’re just being silly. I refuse to be drawn into a schoolboy’s pissing contest.


                • Dennis Coyne says:

                  Hi Doug,


                  You think the scenario is unrealistic because the decline is too slow (in part), what decline rate would you define as realistic?

                  Also the reserve numbers are followed quite closely by Mr. Laherrere, his 2700 Gb World estimate takes account of the reserves in the Middle East, I think his estimate is probably the best there is. Do you find his estimates too optimistic?

                  I am also pretty sure that Mr. Laherrere is aware of the creaming problem you refer to.

                  I re did the analysis with a URR of 2700 Gb rather than the 2900 Gb in the first charts I presented and attempted to create a scenario with a faster decline. At the bottom of page 3.

              • Do your friends “in the know”, think it likely that all of the wells in the fields being “creamed” will run dry simultaneously?

                Dennis, no one in their right mind would believe such a thing. And no one, to my knowledge has ever suggested such a thing. Well one person has, one Dennis Coyne but no one else in the world.

                Saudi started this infill drilling with horizontal wells near the top of the reservoir first so they are likely to be the first ones to feel the effects. And most reservoirs are an anticline so very few of the horizontal laterals will be at the same depth. Meaning almost none of the wells will be hit with a high water cut at the same time.

                However I must admit that this “simultanious” guy made a handsom straw man. But you have thoroughly slain him.

                About that shark fin curve, it has already begun with BP and a lot of other majors.
                BP warns on oil output as profit falls

                BP’s production for the three months ended March 31 fell 8.5% to 2.13 million barrels of oil a day and the company warned that second-quarter production will be lower, mainly because of planned maintenance in the higher-margin North Sea and Gulf of Mexico regions.

                8.5%, now that is one hell of a drop.

                • Dennis Coyne says:

                  Yes that is correct, a one quarter drop,but as we are talking about world wide output over several years, I remain un convinced that we are near a shark fin decline.

                  So far the only time there has been a sharp drop in Saudi output is when they have chosen to reduce output. This does not mean there will be no decline in Saudi output ever, I just doubt we will see a shark fin decline(again nobody has defined this but lets say a 5% annual decline or more) in Saudi output soon, except due to war or revolt, those would cause such a decline, but I would have difficulty forecasting those.

                  • clifman says:


                    I’m late to this discussion, and I probably have the least technical grasp of oil production of anyone on here. But I will just offer this. When there are nations or regions that are still increasing production, then that serves to offset the others where production has peaked and gone into decline. With each passing day, we are ever nearer the point where all regions/nations will be past peak and in decline, and something much akin to a shark fin will be more likely to manifest in that scenario, than when some entities were still increasing, hence your reference to no shark fins in the past is more or less a straw man.

                    While I’m here, I’ll also offer that the effect of declining EROEI seems largely missing from this debate. Even as gross production glides gently downward, as more and more of it comes from ever lower EROEI sources like deep water, tar sands & the like, the net available for useful work declines even more rapidly than if it were all that nice, easy 1930’s 100:1 oil…

                  • Dennis Coyne says:

                    Hi Clifman,

                    The fact that the timing of when different countries reach their peaks do not line up is the reason that the decline tends to be gradual, it was not intended as a straw man, it is the way these peaks tend to go especially in large countries like the US.

                    Think of it this way, the US peaked in 1970 but as far as I can see there was no shark fin decline. I think the World output profile will look more like the US from 1985 to 2008 (in shape) than a shark fin.

                    Note that the oil price was mostly falling from 1985 to 1998 and the decline rate was about 2.8% and the rate slowed to 2.2% from 1998 to 2008 as oil prices rose.

                    Main point, if oil prices rise gradually (3 to 5% per year in real terms) the decline in World output may be 1 to 2% for a decade or more (2030 to 2040), by that time it may be possible to reduce the economy’s dependence (notice reduce not eliminate) in petroleum so that a further 3-4% decline may be managable, though it will be difficult.

          • Watcher says:

            “In 1980 to 1982 when oil output decreased by 17% over a three year period, the world economy grew by 1.8% on average over those three years. ”

            World less dependent on oil, then. Invalid argument. What was the dependency coefficient?

            • Dennis Coyne says:

              I agree we don’t have a lot of episodes where this happened. What is a dependency coefficient? Oil spending as a % of gdp was quite high.

        • Dennis Coyne says:

          Hi Doug,

          The chart shows production falling to 2000 levels by 2035, if extraction rates can rise, if not (or if they cannot rise very much), the lower path might be followed,
          there is no way to know what the extraction rates will be, the extraction rates have been increasing since 2002 from 2.2% to 2.6% in 2013, the increase in extraction rates is likely to continue as long as there is demand for oil at a price that makes investment in new oil wells attractive to oil companies, if these conditions are no longer met due to economic recession or because substitutes start to cut into the market share of liquid petroleum (which I hope will happen, but does not seem realistic except in the very long term say 20 years in the future), then the scenario fails. There may also be an upper practical limit to how high extraction rates can go, I arbitrarily set this at 3% in one scenario and 5% in the other. I may try 2700 Gb for a URR and not increase extraction rates above present levels, also note that this is the potential supply if the demand is there, for those that think the economy must fall apart soon due to debt, rising oil prices, or whatever reason, these scenarios will not match your vision of the future. Think of it as what may be possible, based on estimates of World URR Jean Laherrere and then applying a model based on producing oil from mature reserves (reserves which have started producing oil) at a given extraction rate. If we assume there are some other reasons that either demand or supply of oil will go down such as war, financial crisis, high or low oil prices, then the oil will not be produced as laid out in the scenario. I have no ability to predict how events will unfold in the future.

          • Dennis Coyne says:

            “based on estimates of World URR Jean Laherrere” should have been
            based on estimates of World URR by Jean Laherrere.


      • TechGuy says:

        I doubt the decline slope will be that shallow. Economics will play a huge roll and the decline slope will be much steeper. Consider that Oil majors are cutting CapEx. While this will not have much of a short term impact it will have a dramatic impact in the future. The majority of Cap-Ex is used to for projects that take 3 to 7 years to bring oil to market. Let’s assume that all of the Oil majors stop investing in new projects and just invest capital in projects already under way. At some point there will not be any new production and the decline slope will follow the decline slope of existing fields in production, which is about 7% (Although the decline rate of existing will likely increase from 7%)

        I would presume that C+C peaks between 2015 and by the end of 2016. Then we have a short plateau that will last to about 2018-2022 and then a steep decline (reflecting CapEx cuts that began this year). At some point a tipping point, will be breached because the supply of Oil is insufficient to maintain the basic infrastructure and production quickly drops to zero, in a matter of months. It takes a lot of people and stuff (high-tech alloys, complex machined tools and equipment) to drill and pipe Oil and natGas. A lot of the stuff needed, is supplied thousands of miles away. When there is insufficient energy to support the system need to supply Oil and natGas production with the resources required, then its not possible to continue to drill or even maintain the existing production. This means that production will come to a complete stop in a short period.

        • Dennis Coyne says:

          Hi Techguy,

          Interesting, my guess is that there is always an ebb and flow to capex spending, a cut in capex spending this year does not preclude an increase in spending next year, let’s imagine an obvious decline in C+C output starts by Jan 2015, would you expect oil prices to decrease?

          Let’s say they increase, now some projects that were unattractive at lower prices are more attractive and capex goes up.

          Actually I give up. You are particularly difficult to persuade. So I will not waste space.

          • Dennis Coyne says:

            Hi Tech guy,

            As far as capex being reduced I found this


            “E&P Spending to Top $700 Billion Globally: Global E&P spending is poised to reach a new record of $723 billion in 2014, up 6.1% from $682bn in 2013. 2014 should mark an acceleration of growth in North America to over 7% (led by the U.S.) coupled with continued solid growth (+6%) in international markets, particularly in the Middle East,
            Latin America, and Russia. We estimate capital budgets in the U.S. and Canada will rise 8.5% and 3%, respectively, up from 4% and -2% in 2014. Companies are basing 2013 spending plans on oil prices of $98 Brent and $89 WTI and U.S. natural gas prices of $3.66. These projections suggest our early look at 2013 spending levels likely
            underestimates total spending given current commodity price levels.”

            • Dennis Coyne says:


              “Spending rise follows increases by 70% of companies in 2013

              Nearly two-thirds of oil and gas companies are planning to increase their capital spending in 2014, a quarter of them by 10% or more, according to a global industry survey by UHY LLP Certified Public Accountants and PennWell Publishing’s Oil & Gas Financial Journal.

              Next year’s planned increases come on the heels of capital spending hikes in 2013 by 70% among the survey respondents, of which one-third were increases of 10% or more. For 2014, one-in-four survey respondents report plans to expand capital spending by 10% or more; 18% expect their companies’ capex to expand 15% or more.”

          • Dennis Coyne says:

            Another thought,

            How quickly do you expect the fall from the plateau in 2018-2022 at say 76 MMb/d until output is reduced to 30 MMb/d, you say quickly I think could you give me an estimate in years?

            I have updated my model on page 3 if you are interested, I am pretty sure you will think the decline is not steep enough, how steep makes sense to you as an annual percentage rate?

            • I know you are addressing that question to Tech Guy but I will give you my two cents worth. You seem to assume that the decline will be linear whether it is a normal decline or a shark fin. I think that is extremely unlikely. Once we get to the point where “all hell breaks loose” nothing will be linear and nothing will be predictable. And that point will likely be reached well before we reach 30 million barrels per day.

              • TechGuy says:


              • Dennis Coyne says:

                Hi Ron,

                It was 30 billion per year and I stated that was an example with the actual output at 28 billion per year.
                28 billion/365 days=77 million barrels per day and that is due to rounding it is 27.7 billion=76 MMb/d.

                The model results in something close to a linear decline if URR=2700 Gb od C+C as Mr Laherrere estimates and extraction rates remain at 2013 levels.

                Note that the model has a problem that I plan to correct in the future.

                The 2200 Gb of C+C-XH (where XH=extra heavy oil) should be separated from the 500 Gb of XH oil, I plan to try this at some point with the Shock Model.

    • Dennis Coyne says:

      A chart showing a 0.5 % decline from 2015 to 2030 and a 1% decline from 2030 to 2045.

      In the presentation above Robert Hirsch predicts a decline by 2016 (similar to Ron’s prediction, except I think Ron calls it a peak and I think he expects a decline to follow closely, rather than a long plateau).

      Hirsch also suggests that a decline of 1% or less might be manageable.

      It is interesting that the presentation focuses on 1973-4, I guess the second crisis in 1980-82 was a little less surprising or the US was distracted by events in Iran.
      Note that World production decreased by 5.5% in 1975 and by 5.4%/year over the three years from 1980 to 1982.

      • SuddenDebt says:

        Nice charts and thanks for sharing.

        Was it production or demand that caused the decline in 1975 and 1980 to 1982?
        And if it was demand, could this have been (oil) price related?

        • Dennis Coyne says:

          Hi Suddendebt,

          Yes, higher prices affected demand for oil. My point was that decline in oil output is thought to lead to economic decline, which I think of as negative growth, growth was not negative in 1980 to 1982, though it was slower and on a per capita basis might have even been negative, I didn’t look at per capita data.

          It is usually not clear from the data what is the cause of a production decline.

          Also note that over the period in question(1980-1982) prices were $87, $77, and $67 in 2005$ so one would expect that price would have caused demand to rise rather than fall, though there seems to be a lag in consumer behavior so the doubling in oil price from 1978 to 1980 may have caused demand to fall in 1980 to 1982, also falling prices in 1980 to 1982 may have lead to less production by oil companies, but it was mostly the Iran Iraq war that caused output to fall and had little to do with demand for oil.

          • SuddenDebt says:

            Early 80’s a lot of wheels came into motion with the higher oil price.
            Energy efficiencies and substitution away from oil to natural gas (and nuclear).
            Lots of low hanging fruits to be picked back in those days, more difficult these days.

            Fed’s Paul Volcker fought inflation (late 70’s early 80’s) with taking the interest rate (double digits) higher.
            Higher interest rates does something to demand (consumption) also for oil since the US was the world’s biggest consumer of oil.

            • Dennis Coyne says:

              I agree, adjusting will be difficult, I doubt we will see 5% declines right away unless there is some external shock, like a severe financial crisis or war in the middle east or a major world war, unlike some I do not take these as a given, and I certainly cannot predict when they will occur, but I do not disagree that any of these things could happen, then the famed shark fin is easily explained, without one or more of these types of events, I am doubtful.

          • SuddenDebt asked:
            Was it production or demand that caused the decline in 1975 and 1980 to 1982?
            And if it was demand, could this have been (oil) price related?

            Dennis replied:
            Yes, higher prices affected demand for oil.

            Now wait just a cotton picking minute here. The 1975 dip was caused by the Arab oil embargo. And the decline that started in 1980 and lasted for several years was the Iran-Iraqi war and the subsequent “Tanker Wars” in the Persian Gulf.

            The dips were all “supply driven”.

            • SuddenDebt says:


              In 1979, and according to BP Statistical Review 2013, OPEC production was 30.0 Mb/d, oil price (Brent) @$32/bbl, by 1985 OPEC production had declined to 15.9 Mb/d oil price @$28/bbl.

              Iran+ Iraq production in 1979 was 6.7 Mb/d, in 1985 3.6 Mb/d.
              I would like to know more behind the rationale that these movements in OPEC production was ”supply driven”.

              • No, no, no, you completely misunderstood my point. The decline in production was supply driven. They cut supply not because the price was too low but for other reasons entirely. They cut supply in 75, because they were pissed off at the US and our allies for supporting Israel. And they cut production in 1980 because there was a war going on. Iran threatened to sink tankers in the Persian Gulf.

                Things were going on and OPEC deliberately cut supply for reasons that had little or nothing to do with the price of oil.

                I was implying that the price of oil was not responsible for the dips in 1975 or the cut in supply in 1980 or for the rest of that war.

            • Dennis Coyne says:

              I focused on the 80 to 82 episode and said it was mostly due to Iran Iraq war. You will have to get those rose colored glasses checked 😉

      • Watcher says:

        There is no relevant history prior to 2007, except as regards human nature.

  19. Political Economist says:

    Ron and Dennis, great work!

    I’ve done some country by country HL analysis. Will post them later.

  20. Tim E. says:

    Imagine the cost to society.

    Much less being on the “cutting edge” as a member of the Emergency Room.

    April 28, 2014: 4 Dead, 35 Wounded In Weekend Shootings

    Four people were killed and at least 35 have been wounded in shootings across the city since Friday night.

    The most recent fatal shooting happened early Sunday in the Logan Square neighborhood, where a 21-year-old woman was gunned down while riding in a car on Fullerton Avenue near Kedzie Boulevard, police said.

    It’s just another Summer weekend in Chicago.

  21. Larry says:


    I have a question for you. I occasionally browse your forum and exchanged messages with you last year. I know that you are expecting peak oil to occur by 2017. There is, however, an event that could happen in the future that you apparently have not discussed. Slim chance of it happening, but still a possibility.

    Our universe with billions and billions of galaxies is more than 15 billion years old. Astronomers at SETI in California are actively searching it and have discovered many planets orbiting other star systems. What would happen if astronomers at SETI succeed in their quest and announce to the world sometime this century that they have intercepted a signal from an alien civilization on another planet. Perhaps it would be from aliens who are more advanced than us by millions of years. The impact of such an event on billions of people would be most interesting to behold.

    Madison, WI

    • hole in head says:

      If wishes were horses beggars would ride

      • Old farmer mac says:

        My Momma who was a blunt old country woman used to say if frogs had wings they wouldn’t have to bump their axxes on the ground to get around.

        If I were a cartoonist my frogs would have hemorrhoids. 😉

    • SuddenDebt says:

      If there are truly intelligent life somewhere out there in the big, big universe, and they become aware of humans on Earth and observe humans for some time, they would likely let the human race go extinct.

      That would be proof of intelligent life in this universe. 😉

      • Dennis Coyne says:

        From Hamlet, Act II Scene 2:

        “I have of late, (but wherefore I know not) lost all my mirth, forgone all custom of exercises; and indeed, it goes so heavily with my disposition; that this goodly frame the earth, seems to me a sterrill promontory; this most excellent canopy the air, look you, this brave o’erhanging firmament, this Majesticall roofe, fretted with golden fire: why, it appeares no other thing to me, than a foul and pestilent congregation of vapours. ‘What a piece of work is a man! How noble in reason, how infinite in faculty! In form and moving how express and admirable! In action how like an Angel! in apprehension how like a god! The beauty of the world! The paragon of animals! And yet to me, what is this quintessence of dust? Man delights not me; no, nor Woman neither; though by your smiling you seem to say so.

    • Larry, the chances of that happening are slim to none. All the close solar systems have been examined, as well as they can be with our limited ability, and nothing has been found. If they do intercept some kind of intelligent created signal it will likely be at least 50 light years away. And if we were to reply in an attempt to contact them it would take another 50 years for our signal to get there. Not much communication can go on with that kind of delay.

    • Watcher says:

      Maybe awareness of an alien civilization would cause mankind to embark on a campaign of killing any and all groups that might present themselves as an embarrassment.

  22. Vineyard says:

    Bit Late reply about the “Energiewende” from me.

    1) Don’t believe a word what Sigmar Gabriel is saying. The guy is a freaking liar and turncoat. I found an old garman article from two years ago where he was praising decentralised energy creation. Tody, now that he is minister he turned 180 and is catering to to big german energy companies and their lignite plants, because they are the last plants they are making money with.

    2) The article quotes “Eike” as source.

    “Europäisches Institut für Klima und Energie (EIKE), the European Institute for Climate and Energy in English, is a German group of climate change skeptics founded in February 2007 in Hanover.”

    These guys are “Energiewende” bashers for years and are also the darlings of libertarian sites, who also hate the “Energiewende”.

    Also the same thing is currently happening in the U.S.
    Renewables are growing fast, so the “Usual Suspects” want to kill it.,0,2718030,full.story#axzz2zRPWf8ks

    That’s my two cents for now.

    • Old farmer mac says:

      The Germans are human like the rest of us – with maybe a touch of some alien genes of some sort ( This remark is intended to be humorous rather than derogatory. ) that makes them Germans and not quite EXACTLY like the rest of us.

      They are super good at looking out for the long run as Westerners go.But everybody gets tired of never ending expense or war or anything else.Most of the ones capable of a little real thinking understand that if their grandchildren are to inherit a rich and prosperous Germany it will be because they and their children manage the transition to renewables.

      But just because they are Germans doesn’t mean more that ALL or even MOST of them are knowledgeable about the realities of fossil fuel depletion in general and Germany in particular.

      I read a few Germans who publish in English and read Der Spiegel regularly but I am not an expert on Germany. But you don’t have to be an expert to understand that the Germans are far far more environmentally conscious than just about anybody else who is dependent on fossil fuels.They are also mostly dead set against nuclear power.

      So the ones who have the data inside their skulls and the will and cpu capacity to analyze it understand they must go thru with the transition.But even though they are Germans that for a wild ass guess is probably not over a third of them.

      In the US my guess is that not over two percent of us are aware of the gravity of fossil fuel depletion- but of course we have enormous reserves compared to most countries including Germany.

      The two thirds ( my guess only!!) of Germans who don’t get it are enough for politicians who are eager to get elected and perfectly willing to sell out the country’s future to do so are more than enough voters to allow the anti renewables guys to get elected.

      And then there is the fact that the subsidies could have been far better managed. Some people are quite reasonably teed off because they are paying a lot more than others who are getting checks and rebates.Some industries are getting dirt cheap juice. Others are paying the high going rate.

      In the end I think the Germans are going to stick it out because they mostly understand that they are avoiding a lot of expense already for imported coal and gas and that a lot of Germans are working in renewables that would otherwise be out of work. They are earning a lot of money exporting renewables tech and goods too and that will count at election time.

      People who are anti renewable seem unable to understand that if an existing wind farm saves their country a certain number of cubic meters of imported gas this year it will also save that same number every year for the next twenty or thirty years and after an overhaul for another twenty or thirty years again.When this savings finally sinks in the upfront cost is a lot easier to swallow.

      They would probably be ” in the tall cotton” if China had not come on so strongly (and so unexpectedly by most people ) and captured so much of the export market for photovoltiacs and other renewables goods.

      I sure wouldn’t want to be a German and thinking about Putin and Stalingrad and imported gas.

    • Jeju-islander says:

      Adding another two cents to the discussion about the German Energiewende.

      “As you all know, in the past years Germany has very aggressively stimulated the deployment of PV by offering high feed-in tariffs. This has proven to be so successful that solar energy is lowering prices during summer months (of course, consumers don’t share the advantage in a culture that revolves around growth/profit). At one point last summer I believe that PV arrays were collectively feeding 40% of demand during peak hours into the grid.

      On the one hand fossil fuel companies are going nuts over this, as they are losing money big time because they can’t shut off their power plants when PV is outcompeting them, and so their lobbying firms (including German media versions of The Sun and the Wall Street Journal) are working overtime to influence politicians and population. On the other hand it is becoming increasingly difficult for the grid (which could use an update) to take up the power that Wind and PV are offering.

      The result of all this is that the German Parliament has decided to reduce the feed-in tariff faster than anticipated. Now all the PV companies are going nuts, of course. On top of that the feed-in tariff only applies to a maximum of 70% of produced energy. This is pushing (home) owners of PV arrays towards options where some of the surplus energy that is produced by their PV array gets stored for later use, to increase total self-use as feeding into the grid is no longer lucrative. The Germans are now designing a storage subsidy to stimulate this trend.”


  23. Political Economist says:

    As I promised, I am going to post some Hubbert Linearization graphs. To begin with, let’s consider a HL graph for the entire world oil production.

    World oil production for 1965-2012 is from BP, extended to 2013 using the latest EIA publication. For 1950-1964, I use the historical oil production data from David Rutledge’s workbook. Before 1950, the cumulative oil production is assumed to be 8 billion tons. BP’s world oil production refers to the sum of crude oil and natural gas liquids and is measured in million metric tons.

    Like in all HL analysis, the horizontal axis refers to cumulative production and the vertical axis measures the ratios of current production to cumulative production. For those who are not familiar with HL analysis, there is a very good post here, explaining all the details:

    A linear regression using data from 1993 to 2013 indicates the ultimately recoveral world oil resources to be 388 billion tons (the cumulative production up to 2013 was 176 billion tons.

    • Political Economist says:

      Typo above: the ultimately “recoverable” world oil resources are indicated to be 388 billion tons.

      Now let’s compare the historical and projected world oil production.

      World oil production is projected to peak in 2018, one year later than Ron’s prediction.

      In term of peak production level, world oil production is projected to peak in 2018 with a production level of 4.1 billion tons, not higher than the world oil production in 2013. In other words, world oil production is projected to stay on a plateau over the following five years. This is similar to what seems to be indicated by Dennis’s graphs.

      HL analysis of course has limitations. The above analysis implicitly assumes that the world as a whole is a single production region. It would be better to look at country-by-country and region-by-region oil production history.

      Below I’ll do a more detailed HL analysis, looking at the world’s ten largest producers and the rest of the world, and then add up them together. We’ll find something interesting.

      • Dennis Coyne says:

        Note that my analysis is for crude plus condensate only so the results should be alittle different, Laherrere gets about 300 Gb for NGL and 2700 Gb for C+C

        So an HL on C+C+NGL (BP data) would give us 3000 Gb. He separates extra heavy (XH) oil from conventional and his C+C-XH is 2200 Gb, XH is 500 GB (with a later peak in 2060) and NGL is 300 Gb.

        If you want to use EIA data for C+C from 1980 the world cumulative to 1979 is 414.423 Gb, NGL has lower energy content than C+C and should be discounted, I am not convinced that using metric tonnes corrects for this properly, but it may be closer than barrels.

        • Political Economist says:

          Dennis, thanks for the comments.

          I think BP converts NGL into oil equivalent when they report “oil” in tonnes. Based on the observed ratio between oil production in barrels (*365) and oil production in tonnes reported by BP, 1 tonne of BP “oil” equalled 7.6 barrels (by comparison, 1 tonne of crude oil equals 7.3 barrels).

          Given the above ratio, 388 billion tons correspond to 2.95 trillion barrels, similar to Laherrere’s estimate.

    • Political Economist says:

      Regression R-square 0.974

  24. Political Economist says:

    Who is the world’s largest oil producer? This is very much a matter of definition. In 2013, Russia was the largest crude oil producer, with an average daily oil production of 10.0 million barrels, followed by Saudi Arabia (9.7 million barrels per day) and the United States (7.5 million barrels per day).

    If “oil production” is defined as the sum of crude oil and natural gas liquids, Saudi Arabia regains the title of largest producer with a daily production of 11.5 million barrels in 2013, followed by Russia (10.5 million barrels per day) and the United States (10.0 million barrels per day).

    Finally, if one is interested in what the EIA calls the “total oil supply” (total liquid fuels including crude oil, natural gas liquids, coal-to-liquids, gas-to-liquids, biofuels, refinery reprocessing gains), then the US was the largest producer in 2013 with a daily production level of 12.3 million barrels, followed by Saudi Arabia (11.6 million barrels per day) and Russia (10.5 million barrels per day).

    I mostly work with the BP data defining oil production as the sum of crude oil and natural gas liquids (though BP defines “oil consumption” as including all liquid fuels). So let’s start with Saudi Arabia.

    I assume Saudi Arabia’s cumulative oil production up to 1965 to be 1 billion tons (based on OPEC Annual Statistical Bulletin 1999, which says Saudi Arabia’s cumulative crude oil production up to 1965 was 7.6 billion barrels).

    The following graph shows the HL analysis of Saudi Arabia’s cumulative oil production. The linear trend using data from 1982-2013, the ultimatley recoverable oil resources are indicated to be 56 billion tons (compared to the cumulative production of 20 billion tons up to 2013). Regression R-square is 0.239.

    • Anonymous says:

      So if I read you right, SA still has 36 billion tons left to produce. That would mean they have only produced 35.7% of their recoverable reserves (20b divided by 56b tons), which means they will be extracting oil for many decades to come at current extraction rates. Is that the gist of your post? If correct, that really puts to shame ‘Twilight in the Desert’ by Simmons.

      But it also begs the question as to why they have infield drilled Ghawar and are now employing CO2 injections if there are as many billions of tons left to extract.

      • Political Economist says:

        Read below. Ron disagrees. But 36 billion tons (about 260 billion barrels) is about the same as Saudi’s current official proved reserves and Aleklett thinks the number is about right, based on the assumption that about 60% of their 700 billion barrels of resources in place can be recovered (implying a ultimately recoverable amount of 420 billion barrels).

        • But 36 billion tons (about 260 billion barrels) is about the same as Saudi’s current official proved reserves…/i

          You use the word “proven” rather loosely here. “Stated” reserves would be more correct. That number is totally absurd and I cannot imagine Aleklett agreeing with it. But if he does his position on the list of oil experts has dropped considerably in my opinion.

          If Saudi actually had those reserves they would not be looking into CO2 injection in Ghawar or would they be searching in the Red Sea under 2 kilometers of water and 7,000 feet of salt for oil.

          The idea that Saudi has 260 billion barrels of proven reserves is a joke.

          • Political Economist says:

            By “proven”, I using the “official” terms of course. Though I should have written “proved reserves”. Aleklett did say that. I left his book in my office. I’ll give you the page numbers where he talked about it tomorrow if you’re interested.

            • Political Economist says:

              I managed to locate some citations. In his 2012 book (Peeking at Peak Oil), Aleklett talked about Saudi oil resources. In page 171-173, he talked about Saudi Arabia had discovered about 700 billion barrels “origional oil in place.”

              In page 172 and 183, Aleklett argued that given Saudi Arabia’s geological conditions (the Saudi oil reservoirs are limestone reservoirs that normally have high recovery ratios) and the Saudi Aramco’s management practices (the Saudi national oil company intentionally keeps production rates from individual fields low in order to achieve high recovery ratios), it was possible for Saudi Arabia to achieve a near 60 percent recovery ratio.

              In page 182-184, it said that Saudi Arabia would be able to sustain a production rate of 12 million barrels per day from now to 2029.

  25. Political Economist says:

    Now let’s consider production. The following figures compares the historical and projected oil production for Saudi Arabia.

    In 2013, Saudi Arabia’s oil production was 450 million tons.

    Saudi Arabia’s oil production is projected to peak in 2028, with a peak production level of 619 million tons (corresponding to a daily production of 13.2 million barrels).

    Ron, are you disappointed (by the projected late peak for Saudi Arabia)?

    • Of course I am not disappointed by anyone’s projected peak of Saudi Oil. I am delighted to read all the projected peaks of Saudi oil as I can find. If you find any more please pass them this way. Saudi produced, in 1980, 9,900,000 barrels of oil per day, about the same amount they produced in 2013. In between those two points their production has been all over the place.

      You must understand that prior to 2013 Saudi always had old mothballed fields that they could bring on line when needed. They were the only nation earth that actually had mothballed fields. Now they have none. And because they had oil actually held off line is the reason no projection into the future, using their past production, is valid.

      Saudi is a very special case. I have studied them for years and actually lived there for five years. No, no, Saudi will not produce 13.2 million barrels per day in 2028, not even close. If they produce half that amount they will be very lucky. But I would guess less than 6 million barrels per day in 2028.

      No, you cannot disappoint me with your projection because I believe I have a better vision of their future production than you do.

      • Political Economist says:

        Excellent! Ron.

        I agree that HL is sometimes a crude tool of analysis. Let me just do this country by country and see how the world look like even if Saudi Arabia is producing 13.2 million barrels in 2028 and even if the US behaves like the EIA projects.

      • TechGuy says:

        Ron Wrote:
        “I am delighted to read all the projected peaks of Saudi oil as I can find. If you find any more please pass them this way.”

        Based upon your comments I was curous to find out how well SA was managing the water cut. I found this article published in 2010 about some of new drilling techiques SA oil was implementing.

        “Water production began in 1998, and it reached 50% water cut by the end of 2007; consequently, the well was plugged back to within 20 ft from the top of the reservoir to minimize water production, with limited success. Due to continued water production, the well was worked over in 2008 and converted to a trilateral well with 37⁄8” short radius horizontal laterals to access the top 20 ft of the reservoir, allowing continued recovery of dry oil.”

        “The initial test rate resulted in 3 thousand barrels oil per day (MBOD) with 44% water cut compared to 1.5 MBOD with 48% water cut before sidetrack.”

        [I know this is only one well but it apparent the SA oil is going to extremes to produce oil. It appears that at least portions of the Ghawar are already watered out and they are targeting the bit of trapped oil with horizontal drilling.]

        This article discussed the “remaining 35ft” of Oil column in Arab-D. Which was back in 2010. My understanding is that the Arab-D formation was the bulk of production from Ghawar.

        I am by no means an expert on SA production so if you have any insight into these articles, please share!

        • Tech Guy, this stuff is fantastic! Thanks a million for posting it. I had read about Saudi plugging their vertical wells in Ghawar and going with horizontal laterals above the water line before but unfortunately that was several years ago and I foolishly did not save the links.

          It is stuff like this that convinces me that Saudi is struggling to maintain current production. The idea that they have a couple of million barrels per day in spare capacity is, in my opinion, totally absurd.

    • Coolreit says:

      Matt Simmons would dispute your conclusion about SA peaking in 2028 if he were alive.

      By the way, I was lucky enough to talk with Matt twice (I had read his book about SA oil production). He had just come back from SA and had been interviewed by CNBC in a disrespectful way. Shortly after he returned from SA, he died at a relatively young age. Some suspected foul play as the Saudi’s wanted no one to doubt their capacity to produce what they said they could.

      • Political Economist says:

        I read Kjell Aleklett’s chapter on Saudi Arabia. He seems to think that the Saudi plateau can last to around 2030 and he thinks Saudi’s official proved reserves number (277 billion barrels or 37 billion tons) is about right. If you add up 37 billion tons with their current cumulative production of 20 billion tons, that’s 57 billion tons, about the same as the 56 billion tons above.

  26. Political Economist says:

    By the BP definition, Russia was the world’s second largest oil producer in 2013. In 2013, Russia produced 531 million tons of crude oil and natural gas liquids. It should be pointed out that all the 2013 production levels are estimated from the EIA data.

    From EIA data, I add up the crude oil and natural gas liquids production in term of daily production in barrels for each country and the world. Then I calculate the growth rate between 2012 and 2013. Then I apply the growth rate to BP oil production data for 2012 to derive the estimate for 2013 production. It is possible that when the BP Statistical Review for this year is published, the oil production levels reported for 2013 are different from what are estimated here.

    From the EIA source, in 2013, Russia produced 10.5 million barrels of crude oil and natural gas liquids per day.

    The following graph shows the result of HL analysis for Russia. Linear gression using data from 2004 to 2013 (a new downward linear trend started to emerge in 2004) indicates Russia’s ultimately recoveral oil to be 68 billion tons (compared to cumulative production up to 2013 being 23 billion tons). Regression R-square 0.956.

  27. Political Economist says:

    The graph blows shows the historical and projected oil production for Russia.

    Russia is projected to peak in 2033, with a peak production level of 596 million tons (corresponding to a daily production of 11.7 million barrels).

    • Political Economist says:

      Minor correction. Based on a recalculation (based on the observed barrel/ton relationship for Russian production in 2012), Russia’s oil production is projeccted to peak in 2033 with a daily oil production of 11.9 million barrels.

      • That is just insane. Even Russia does not expect any such thing.

        Tax Reform in Russian Oil Industry Could Prevent Decline

        “Russian oil production edged up 1 percent in 2013, but under the existing tax regime we expect production levels to stabilize at this level in 2014-2015 and potentially to start falling from 2016-2017,” the agency said.

        Where, dear God, does all these wildly optimistic projections come from?

        • Political Economist says:

          Be patient, Ron!

          First of all, that’s just the currently available data say, which, of course, may actually happen or not.

          Secondly, a little bit humor would be helpful. Let me just add up all these “optimistic” projections for individual countries, and calculate the world total. I hope by then, you will be moderately pleased by the comparatively more “sane” results.

        • Watcher says:

          Putin said just a few years ago that they can hold 10 mbpd for another few years provided they get $25 billion in investment (aka drilling money).

          He wasn’t talking about Rosneft writing a check.

          • Watcher says:

            oops, said it a few months ago, not years. An edit feature would be nice. ZH arranges it so edits are possible up until a comment receives a reply. That’s a very good system.

  28. Political Economist says:

    As I explained earlier, the purpose of this exercise, is to take a more detailed look at different parts of the world using the HL approach. Ron already said, he believes Saudi production in 2028 is more likely to be 6 million barrels per day rather than 13 million barrels per day. Others may also find my above projection for Russian peak in 2033 to be excessively “optimistic”.

    In this post, I’ll keep the “optimistic” spirit and assume that the US will follow the EIA projection from now to 2040.

    Everyone please just be patient. You may be surprised by what happens to the world total once we add up all the individually “optimistic” projections.

    The following graph shows how the US cumulative oil production will look like if the US oil production follows the reference case of EIA AEO 2014.

    The US cumulative oil production was 31 billion tons up to 2013 and will rise to 45 billions by 2040 if it follows the EIA referece case scenario.

    To project the post-2040 development, I do a linear regression of the data for the projected 2031-2040. The implied utlimately recoverable amount of oil is 68 billion tons (the same as the above projection for Russia).

    • Political Economist says:

      Using the BP definition, the US produced 444 million tons of crude oil and natural gas liquids in 2013.

      EIA projects that the US oil production will peak in 2019 with a peak energy content of 24 quadrillion BTUs, which corresponds to 553 million tons of oil. In term of daily production, it corresponds to 12.6 million barrels (including both crude oil and natural gas liquids).

      The following graph shows the historical and projected oil production of the United States. For 2041-50, I assume the US oil production will decline following the trend of 2031-40.

      • Frugal says:

        But most of the current US production increase is from tight oil, which has significantly higher decline rates than oil from conventional fields. So shouldn’t your post 2020 decline curve be much steeper than the 1985-2005 decline rate?

  29. Political Economist says:

    China is the world’s fourth largest oil producer. In 2013, China produced 209 million tons of oil according to the Chinese official data. According to EIA, China produced 4.2 million barrels per day of crude oil in 2013. China does not produce any natural gas liquids.

    The graph belows shows the HL analysis for China. Using data from 2003 to 2013, the regression indicates China’s ultimately recoverable oil to be 16 billion tons. The cumulative production up to 2013 was 6 billion tons.

    • Political Economist says:

      Regression R-square 0.952

    • Political Economist says:

      The graph below shows China’s historical and projected oil production.

      China’s oil production is projected to peak in 2023 at a peak production level of 224 million tons (a daily production of 4.5 million barrels).

      • Perk Earl says:

        “Everyone please just be patient. You may be surprised by what happens to the world total once we add up all the individually “optimistic” projections.”

        Got that summarization?

  30. aws. says:

    California drought order leaves citrus uncertain

    04/28/2014 06:39:00 PM, Mike Hornick, The Packer

    California Gov. Jerry Brown has ordered anti-drought measures that include faster approval of voluntary water transfers. But it remains unclear whether citrus growers along the Friant-Kern Canal will have enough water for their next crop.


    • Perk Earl says:

      I tell you though we almost got our clocks cleaned. At our particular CA locale just north of that giant red drought zone in Napa, CA, it didn’t rain in Sept. or Oct., then only one storm in Nov. & One in Dec. At that point it was looking like it would be a drought of biblical proportions, but alas it rained in Jan-Mar. and next year is predicted (do a Google) to be an El Nino that will probably cause widespread flooding, and fill up the reservoirs.

  31. aws. says:

    Keystone Weirdonomics Means Gas Prices Won’t Be Getting Any Cheaper

    By Tom Randall, Apr 25, 2014 3:40 PM ET, The Grid, Bloomberg/Sustainability

    In Keystone’s weirdonomics, the pipeline would actually increase prices of gasoline for much of the country, according to at least three studies that have looked into it. Keystone would divert crude from Midwest refineries to Gulf Coast refineries, where it would then be shipped to more expensive markets. Bypassing heartland refineries could drive up prices at home.

    For people living in the Midwest, Great Plains and Rocky Mountains, it could add 20 cents a gallon to the price at the pump. From a Bloomberg story in 2012:

    “The Canadian plan was to use their market power to raise prices in the United States (UNG) and get more money from consumers,” Philip Verleger, founder of Colorado-based energy consulting firm PK Verleger LLC, said in an interview. Prices may gain 10 to 20 cents in central states, he said.

  32. Tim E. says:

    The public COMEX market is too small of a sandbox for big oil to play in

    • Perk Earl says:

      That looks like a telltale sign of shorting gold, but it would have taken a huge player, like a central bank maybe?

    • SRSrocco says:

      Tim E,

      Actually, Gold is the largest commodity traded on a daily basis in the world. This is from an older market by GATA:

      1) What is the biggest market in the world for a physical commodity?

      2) Is the gold market one of the smallest markets in the world for a physical commodity?

      I would guess that you answered:

      1) Crude oil.

      2) Yes. Gold is one of the smallest commodity markets in the world.

      If those were your answers, you are wrong. What everybody believes to be the “tiny gold market” is in fact the world’s biggest physically traded commodity market

      The London Bullion Market Association (LBMA) “over-the-counter” (OTC) gold market trades approximately 90 percent of the world’s physical gold trade. The amount of gold sold each day is given at the LBMA’s Internet site here:

      The LBMA reports the net gold traded, which is termed “ounces transferred.” This is not the gross trading volume. For example, if an investor were to sell 1 million ounces in the day and then buy 1.1 million ounces, the trade would be counted as 0.1 million ounces, the net difference between the purchase and the sale and the amount of gold “transferred” to the investor’s account. Therefore the numbers are the amount of gold that changes ownership each day.

      The value of the daily trading for November 2009 is given as $22 billion.

      In a GATA dispatch in October 2009 the market analyst Paul Mylchreest estimated that the gross volume of gold traded on the LBMA each day was about 2,100 metric tonnes:

      That equates to $77 billion each day at 1,150 per ounce. The NYMEX WTI crude oil contract trades 400,000 contracts each day, which is 400 million barrels. At $77 per barrel, the gross value traded is $30.8 billion, which is only 40 percent of the value of the gross trade in gold.


      • Tim E. says:

        It’s a reasonable argument.

        I have no real evidence to the contrary.

        It s merely a thought and an interesting video that presents a contrary view to conventional wisdom. The evidence is overwhelming for your position. Agreed and Accepted.

  33. aws. says:

    Unfiltered voices: Kitimat votes today on controversial Northern Gateway pipeline

    Mychaylo Prystupa, Vancouver Observer, Posted: Apr 12th, 2014

    Today, citizens in the northwest coastal B.C. community of Kitimat are expected to make a record voter turn out for a plebiscite on Enbridge`s $6.5 billion Northern Gateway pipeline.

    Many pipeline communities – such as Prince George, Terrace, Smithers – have passed resolutions against the project. Several Aboriginal communities, including critically the Haisla Nation where the pipeline terminates – are dead set against the project. And yesterday, four Yinka Dene First Nations that represent one quarter of the pipeline’s route also officially rejected it.

    Kitimat’s council did not take a position. So a dramatic and controversial plebiscite ensued, that included a surreal campaign of corporate canvassers versus pipeline-opponent volunteers. There was no limit on ad spending, and Enbridge’s project, backed by oil sands producers and Chinese-state oil companies, clearly had a financial advantage.

    Enbridge loses the Kitimat plebiscite on Northern Gateway

    Can Northern Gateway continue without social license?

    Mychaylo Prystupa, Vancouver Observer, Posted: Apr 12th, 2014

    With a hushed crowd of about one hundred, the unofficial result of the Kitimat plebiscite was read aloud Saturday evening. Instantly, those gathered at the downtown park erupted into screams of joy.

    Enbridge has lost the vote.

    YES 1,278 (41.6%)

    NO 1,793 (58.4%)

    Total 3,071

    Kitimat Council votes 4-1 to oppose Enbridge Northern Gateway pipeline

    Jenny Uechi, Vancouver Observer, Posted: Apr 23rd, 2014

    The District of Kitimat Council voted April 22 to formally oppose the Enbridge Northern Gateway pipeline, upholding the recent town plebiscite to reject the controversial pipeline.

    • Old farmer mac says:

      This will no doubt delay the construction of the proposed pipeline for a good long while.

      But in the end the tens of millions of people who want that oil sold will prevail. It may take a long time but traditional societies just don’t last any more given the iternet and public schools and satellite television and a little money seeping into tradition based communities.

      The old folks will hold the line maybe for another decade or even longer but the younger generation will vote for the money and the oil industry has enough to up the ante to the point every young man gets a ” free ” truck and a road to drive it on and snowmobile and a classy hunting rifle.

      I don’t know just what will ”blow the (young) women’s skirts up” but the people managing the buy off for the oil companies will be experts in this sort of thing.

      I imagine washing machines and vacuum cleaners and computers and maybe a ticket out of the boonies and to a university in a town with a nightlife would be adequate to win enough of them over.

      I don’t really know anything about Canadian law but it is my impression that the Canadian federal government has the power to override local decisions on such matters if the feds are willing to declare the pipeline ”necessary” to the welfare of the country.

      If I am right about this the pipeline may be rammed down the throats of the local people the same way the feds here kicked local people off their land altogether in order to establish national parks.

      No doubt the lawyers on both sides are already looking at personal jet brochures.

      My money says two to one there will be a pipeline to move the oil to market in not less than three years to start construction and not more than ten years to groundbreaking. I would go ten to one there will be a pipeline within twenty years which is more than long enough for the old folks to croak and the young folks to work themselves into a lather over the goodies that will come their way when they vote FOR a pipeline.

      I have watched the same thing happen to the Scots Irish and German communities that formerly dominated in this part of the world.

      The old people worked like dogs to hold onto their land and way of life.

      The youngsters can’t be satisfied to drink and eat at home in paradise. They gotta have a place in city with a night life and a house in the suburbs with lots of restaurants and bars and a job ( if the inheritance isn’t big enough) that involves pink hands and neckties or nylons.

      WATCHING college and professional sports becomes more important than actually TAKING PART in real activities such as hiking and observing nature.

      The young people can’t sellout fast enough when they inherit.

      Some of them just go ahead and spend every nickel they can borrow in anticipation of the happy day Momma and Daddy will be gone.

      It has played out this way in my own extended family on more than one occasion.

      It’s just human nature.

      But if I am right about the repuglithans taking over DC soon then the Keystone will be approved in short order and the other pipelines under consideration may not be built at all.

      The only real hope of that not happening is that they peak too soon. If elections were held this month they would have a lock on the federal government.

      • Doug Leighton says:


        “No doubt the lawyers on both sides are already looking at personal jet brochures.”

        That is funny, and probably true. Maybe its not funny, but sad or sadly funny. Anyway, sometimes I think you misses your calling: Poetry


        • Lloyd /Canuckistani says:

          My recent favourite is (as I recall) ” the light at the end of the tunnel is a fire that is going to consume us all.”


      • Fred Magyar says:

        Hey there OFM,

        “The old folks will hold the line maybe for another decade or even longer but the younger generation will vote for the money and the oil industry has enough to up the ante to the point every young man gets a ” free ” truck and a road to drive it on and snowmobile and a classy hunting rifle.”

        Given that I’m old enough to be one of the ‘Old Folk’ I’m not too sure that I agree with with that view of the ‘Young Un’s’… I happen to have met quite a few recently who have no desire whatsoever to even own a car, let alone a truck and recreational vehicles such as ATVs or snowmobiles are nowhere on their radars.

        Perhaps I’ve just been exposed to a tainted or somehow biased sample of ‘Young Un’s’!
        I’ts highly likely that everything is going to hell in a hand basket but recently I have been given some hope and reason to believe that more than a few of those from the younger generation think differently than your characterization of them seems to imply.

        Cheers old friend >;-)


        • Old farmer mac says:

          It’s good to see you are still around ,Fred.

          I do agree that there are some level headed youngsters around but I am afraid your sample is biased.

          You heard the one about the professor with his pipe dressed in corduroys at some little liberal arts school someplace in New England I am sure. It is old as the hills.Probably apochrypal. I can’t remember how to spell these days.

          At any rate he is reputed to have said ,” I can’t understand how McGovern lost. Everybody I know voted for him.”

          The problem is that once a community has options it loses the glue that holds it together.There may be enough youngsters who believe in the old ways to hold the line a little while.

          But what happened here is illustrative. Once the first boy got a job in town and liked it well enough to stick with it he got tired of working evenings and Saturdays on the farm and eventually moved to town. His kids were brought to the farm often to visit but they never really learned to love the farm. The following generation only visits the farm on rare occasions and some of them have never even seen it.

          Unless the local people can fort up in terms of keeping modern influences out it is all over for them in terms of their traditional way of life.One of the brighter boys will go to electronics or diesel school or engineering school and one of the girls will become a nurse or a teacher or doctor and the younger kids are going to look at their older sibling and the money and status they enjoy and most of them will follow suit if they don’t wind up in jail or the army or find some other way to get away from the work involved in any sort of backwoods lifestyle.

          My own parents grew up with only elementary school educations in depression era Appalachia. They worked their butts off and did ok but they wanted better things for us.

          So they made sure we took school seriously.

          They got what they wanted for us but in the process lost what they wanted for themselves the most- to continue having the family all together in one community and living and working together.

          I went away to college and only visited thereafter until they got so old I came back to look after the farm.My baby sister is a professor now and seldom even visits. Two who stayed nearby took up other professions since farming pays less in terms of cash and living standard than factory work or almost anything else. Both of them are dead.

          One other sister is the personnel manager at a large local business and comes to visit once a week.

          I shut most of the farm down except for a few things I keep going more or less as a hobby. I seldom see any of my nieces and nephews.IF I do it is usually because they want a favor of some sort.

          But my parents generation was part of an extremely tight knit extended family big enough to refer to it as a tribe or clan and bonded by profession, religion, and all around culture.

          It all fell apart in two generations.

  34. Tim E. says:

    Purely as an intellectual exercise, Ron, please consider the enigma known as Pulsars:

    “More than 30 years after the discovery of pulsars, we still don’t know how the radio waves are produced….

    Explaining pulsar radiation is one of the most difficult problems of astrophysics”

    They are… well Odd. To say the least.

    • Tim, sorry but you are off on a wrong track here and so is the website you posted. Pulsars are a very well-known phenomenon. They are simply neutron stars, remnants of a supernova that are spinning very fast. There is one in the center of the Crab Nebula. And they can be found in many different galaxies, all pulsing, or spinning at a different rate. The one in the Crab Nebula pulses at about 30 times a second. Some are found to be spinning much faster than that.

      Over 1600 pulsars have been discovered so far. To suggest that they are distant civilizations trying to signal us by pulsing a signal at a constant rate is bizarre indeed. The energy to send such a signal and have it reach us from another galaxy would be thousands of times all the energy produced by all the power plants in the world. Also, the pulsar in the center of the Crab Nebula can be seen in visible light, switching on and off 30 times a second.

      “More than 30 years after the discovery of pulsars, we still don’t know how the radio waves are produced….

      That is sheer nonsense. The Crab Nebula pulsar was the first pulsar ever discovered and they figured out what was causing in shortly after it was discovered.

      • Tim E. says:


      • Doug Leighton says:


        RE “The enigma known as Pulsars” Ron, sorry but you’re off on a wrong track here. In fact, pulsars are SOS signals coming from planets facing death because they didn’t face up to PO. A magnetar, on the other hand, is a planet of economic analysts: guys (and girls) “proving” there’s nothing to be concerned about. Strangely, there are far fewer magnetars than pulsars. Anyway, you should, pat me on the shoulder, I stayed on topic — for once. Right?


    • Old farmer mac says:


      WHY are you bringing up ” little green men ” scenarios in this forum?

      Are you trying to provoke Ron into making a reply that could be used later to make him look bad in another forum?

      He wasn’t born yesterday.

      Global warming and overshoot and potential new energy related technologies and that sort of subjects are related closely enough to peak oil to be discussed here.

      But I find it hard to see what aliens and pulsars have to do with peak oil.

      Perhaps you will enlighten me?

      As usual when I ask for answers to my questions, thanks in advance.

      • Mac, don’t worry, they are not going to snow me with astronomy questions. I have been an astronomy reader for over half a century.

        There is a slight connection to the population problem here. Some people think the answer to the population problem could be migration to other planets, in other solar systems. But when you point out to them that a trip to the nearest possible habitable planet in another solar system would take many hundreds of years they just look at you with a blank stare.

        • Tim E. says:

          You are correct.

          We all have a moment of weakness and wish that which we know is unavoidable … IS…

          But it’s not.

          That’s part of human nature, and why we have fallen so far.

        • Old farmer mac says:

          I am not worried about anybody snowing you – I have been reading your comments about many subjects getting close to ten years now and I am dead certain that taken all the way around you are one of the best informed people I have ever had the privilege of knowing.

          That’s why I said you weren’t born yesterday. 😉

          I did miss the ”slight connection” to population but I often post some elementary explanations here about some topics for the same reason.

          It is almost impossible to over estimate the ignorance of a lot of people.
          I know that a lot better than most having once been a teacher.

          So I post some kindergarden level stuff in case a kindergarden level person happens to read this blog.

          • Tim E. says:

            It is almost impossible to over estimate the ignorance of a lot of people. I know that a lot better than most having once been a teacher.

            OFM – ain’t nothing wrong with being ignorant.

            Ain’t no such thing as a stupid question.

            It’s asking and answering. I appreciate that and know that.

            Agreed. I got some oddball questions. But I got me some answers. And I am satisfied.

            Ignorance does not equal stupid. Sharing information is vital. And yes, oddball questions as to our origins come out of the blue.

          • Tim E. says:

            It is almost impossible to over estimate the ignorance of a lot of people.
            I know that a lot better than most having once been a teacher.

            Kindergaden. I learned everything I needed to know in Kindergarden.

            “These are the things I learned (in Kindergarten):

            1. Share everything.
            2. Play fair.
            3. Don’t hit people.
            4. Put thngs back where you found them.
            5. CLEAN UP YOUR OWN MESS.
            6. Don’t take things that aren’t yours.
            7. Say you’re SORRY when you HURT somebody.
            8. Wash your hands before you eat.
            9. Flush.
            10. Warm cookies and cold milk are good for you.
            11. Live a balanced life – learn some and drink some and draw some and paint some and sing and dance and play and work everyday some.
            12. Take a nap every afternoon.
            13. When you go out into the world, watch out for traffic, hold hands, and stick together.
            14. Be aware of wonder. Remember the little seed in the Stryrofoam cup: The roots go down and the plant goes up and nobody really knows how or why, but we are all like that.
            15. Goldfish and hamster and white mice and even the little seed in the Styrofoam cup – they all die. So do we.
            16. And then remember the Dick-and-Jane books and the first workd you learned – the biggest word of all – LOOK.”

        • TechGuy says:

          Better yet! There is another solution, We just tap the Hydrocarbons from the gas planets and moons. Jupiter alone probably has more oil and gas then then entire mass of the Earth! /sarc

          Anyone want to bet that If PO is widely accepted as a fact that some group will form a company that is going to harvest Oil and Gas from Titan or some other moon? (as a scam since its not going to happen, but a good way to get fools to part with their money)

      • Tim E. says:


        It’s looking for a way out of the end that I know is coming.

        Wishful thinking.

        Even I engage in that from time to time.

        The Turkey is headed to slaughter…. and it’s Thanksgiving time, so some wish for a reprieve.

        • Tim E. says:

          And that brings up that other thing,

          Are we Intelligent?

          Or Clever?

        • Old farmer mac says:

          Gotcha now.

          No offense intended.

          I wonder myself about such things quite often.

          Sometimes I get pretty depressed about what I know people are going to be going thru in another few decades.

          But mostly I am able to remain detached and look at the state of the world as just a random state of affairs signifying nothing.

          Someday the sun is going to expand and VAPORIZE this planet.

          That makes man made warming or a flat out nuclear war look kind of tame does it not?

          The dinosaurs had a good long run.

          There are generations of individuals. It is not an error in principle to think of generations of species although doing so is contrary to the customary usages of the terminology.

          We have been around in a form we would probably recognize as ” human” for a million years.

          Our turn may be about up or we may last another million.

          Personally I do not doubt that considering the size of the universe that there are billions of planets with life on them and millions at least with intelligent life.

          But the odds of there being any intelligent life close by even in astronomical terms are so low as to be negligible.

          But unless you are very young you don’t have to worry about this stuff affecting you personally.

          You and I are very apt to be safely dead before things get bad enough to really matter to us in terms of our personal welfare. 😉

          Find yourself a girl and make some whoopee and you will feel better.

          If you can’t get a girl get a puppy.

          I used to be able to get a girl but in recent decades I have had to settle for a puppy.

          • Tim E. says:

            Thanks OFM.

            Smiley faces.

            Remember I grew up without a Father in the Slums of Racine. So that will answer some of those questions where those out of place questions and answers come from. The City is Evil.

            • Tim E. says:

              My intelligence never lifted me our of the Ghetto.

              These things happen. I lived.

              • Old farmer mac says:

                Hi again Tim,

                I am afraid I committed one of those social errors the name of which escapes me at the moment when I made that remark about it being impossible to overestimate the ignorance of some people. I was at that time thinking about a substantial portion of my former students and their parents.

                The elementary things I post here have to do with agriculture almost exclusively.

                I was not thinking about you and that remark was not directed at you but you have my apology. You may not have a good formal education but you have a working brain as proven by your remarks. Curiosity is a sure sign of intelligence.

                The world is full of educated fools.

                Stupid cannot be fixed but ignorant can.If you will read one popular science book written by a legit scientist a year in ten years you will know more about science than the average lawyer or accountant that graduates from an Ivy League university.

                When I read your original comments I did at that time think you were just spamming this blog.That sort of thing is very common these days.

  35. Political Economist says:

    Let me come back to my exercise. It’s all inspired by Ron’s prediction that peak oil will arrive no later than 2017.

    Unfortunately, my modest effort to be humorous so far has not been very effective and Ron appears to be a little bit upset by my prediction of late peak in both Saudi Arabia and Russia. So some explanations may be helpful.

    I started with a simple exercise of Hubbert Linearization applied to the world as a whole, with a peak year of 2018 and a peak production level of 4.1 billion tons (the same as it was in 2013). This is similar to Ron’s prediction (this is now on page 2)

    But HL has the obvious disadavantage of being constrained by historical data and is simply a statistical exercise. In the past, HL often tends to underestimate the ultimately recoverable amount before peak production actually happens.

    Instead of treating the whole world as one single production region, I tried to look it as the sum of many individual parts. Where existing data allows for reasonable HL exercise, I used HL. In other cases, I used official reserves or official projections. I looked at the world’s ten largest oil producers and the rest of the world.

    So far I’ve shown results for Saudi Arabia, Russia, the US, and China.

    For Saudi Arabia, I find the peak in 2028 and for Russia, I find the peak in 2033. These are considered by Ron as “wildly optimistic” and “insane”. They may be. But these are what the data tell me at this point. Within the HL framework, I don’t see many ways to get around. And Alekelett did say in his book the Saudi plateau at at rate of 12 million barrels per day would last to 2029 (see previous page).

    For the US, EIA projects it to peak in 2019. For China, I find the peak in 2023.

    Next I am going to do Canada, Iraq, Iran, UAE, Kuwait, and Mexico. A few of them may again appear to be wildly optimistic.

    Finally, I am going to look at the rest of the world, that is, the world total less the 10 largest producers. The rest of the world currently accounts for nearly 40 percent of the world total and is clearly past the peak.

    The most interesting finding will be, for all the optimistic projections for some of the world’s largest oil producers, it turns that these will not be sufficient to offset the decline of the rest of the world in the coming decades.

    As a result, when we add up all of the above projections together, the world total will peak in the near term (I will reveal the specific year later).

    • Dennis Coyne says:

      I see a potential flaw in the “rest of the world” part of the analysis and for any Hubbert Linearization.

      There are often petroleum resources which are known to exist, but have never been developed because there have been easier resources to extract. Canadian Oil Sands, the Orinoco belt are two obvious areas, others could be deep water Gulf of Mexico, offshore Africa and South America, Alaska, Siberia, possibly others, I am not a geologist. Hubbert Linearization is best used on areas that have been producing for many years and not based on forecasts and such (as the forecasts might have used Hubbert Linearization without admitting as much and then using HL to confirm the previous HL does not add a lot of information, even if this is not the case often official forecasts seem to assume demand will grow at a given rate and the supply magically appears to satisfy it.)

      My analysis of course suffers from the identical flaw, in that I assume that Mr. Laherrere’s estimate of World URR is approximately correct and it may not be. In the past his estimates have been a little low (because he reasonably expected that things like LTO, extra heavy oil, and deep water oil production would not be as successful as has been the case). I imagine in 1990 he did not foresee oil prices rising by a factor of 3 without a severe depression (though 2009 to 2013 was pretty bad World real GDP still grew at 2.8 per year over these 4 years.) For this reason I expect my scenarios may be on the pessimistic side unless Mr. Laherre’s estimates prove to be optimistic.

      Another flaw with my analysis is that extra heavy oil should be modelled separately because it takes longer to develop and the shock model that I use was really set up to model conventional oil.

      My plan is to rework the analysis to model 2200 Gb of conventional C+C(LTO will be lumped with conventional as will deepwater) and model the extra heavy oil from Canada and Venezuela separately (500 Gb half form Canada and half from Venezuela), there is pretty good information on Canada, Venezuela I will have to guess at (not much data available on Orinoco specifically) and will use Canada as a model and delay Venezuela by 20 years(though this could be 30 or 40 years nobody knows.)

      An interesting exercise though. I wonder how you have dealt with Canadian and Venezuelan extra heavy oil in your analysis, there has not been a lot of production so far, but the resources are quite large, and I trust that the Canadian reserves are corrct, my guess is that Mr Laherrere has enough faith in the Venezuelan Orinoco belt estimates to put them at 250 Gb.

  36. Political Economist says:

    According to EIA, in 2013, Canada produced 4.0 million barrels per day of crude oil and natural gas liquids, making Canada the world’s fifth largest oil producer. As Canada’s oil production has grown rapidly, it could overtaken China to become the world’s fourth largest oil producer in just one or two years.

    Given the rapidly growing Canadian oil production, it’s not possible to apply the HL analysis (unless by applying to the “excess production”, an approach I demonstrated under some of Ron’s earlier posts).

    Canada’s official proved reserves as of 2012 were 28 billion tons (including 27 billion tons are oil sands, of which only 4 billion tons are under active development). Canada’s cumulative oil production up to 2013 was 5.5 billion tons. I simply assume that Canada’s ultimately recoverable amount of oil will be 33 billion tons.

    As a result, Canada’s oil production is projected to peak in 2051, with a peak production level of 352 million tons (or a daily production of 7 million barrels).

    Again, all “oil prduction” referred to in this exercise is based on the BP definition, including both crude oil and natural gas liquids.

    • Again, all “oil prduction” referred to in this exercise is based on the BP definition, including both crude oil and natural gas liquids.

      Bottled gas ain’t oil.

      • Dennis Coyne says:

        But propane is a very good substitute for home heating oil in rural areas where natural gas is unavailable, so it makes sense to include it, by doing the analysis in metric tons, it adjusts for the lower energy content per unit volume of NGLs so on an energy basis it is a good method (better than using barrels). It would be nice to exclude the ethane which is mostly used in the chemical and plastics industries rather than as an energy component, I believe at least some (50%?) of the butane is added to liquid fuels at least in the US.

  37. Andy Hamilton says:

    There are getting to be some unusual posts on this blog.
    Meanwhile BP just reported costs going up, and production declining. Somehow they thought it was wise to increase their dividend off the back of this:

    BigOil is really starting to show the pressure.

    • Old farmer mac says:

      Given the naked ape’s attention span and the nature of the stock market this is no doubt a wise move from the pov of corporate management which gets paid in very large part based on the price of the stock.

      The truth will out eventually of course- it is the elephant being used as the coffee table and hiding in plain sight- but for now management continues to collect seven figure and even higher compensation.

      Ya can’t fool all of them all of the time but it is certainly easy to fool enough of them for a while and sock away a few more millions.

  38. Watcher says:


    This is amusing. Of course, no one would ever lie about an oil production amount anywhere other than Libya.

    A rising wave of strikes and protests led to a sharp reduction in oil output in 2013, however. In mid-October 2013, former prime minister Ali Zeidan announced that Libya was producing between 600,000 to 700,000 bpd thanks to the return online of more than one-third of its oil production. This assertion was false. In September 2013, production was 150,000 bpd. In the second half of 2013, Libya produced only an average of around 250,000 bpd. In January 2014, production recovered as the government announced that Libya produced about 582,000 bpd in the week ending January 18 (Libya Herald, February 6). That was just a temporary development, as production collapsed again, with the National Oil Corporation (NOC) announcing that production stood at 155,000 bpd at the end of March (Reuters, March 28).

  39. toolpush says:

    OFM one for you,

    CSIRO and partners to test Direct Injection Carbon Engine to reduce brown coal emissions by up to 50%

    CSIRO (Australia’s national science agency) and its industry partners plan to conduct a A$1-million (US$930,000) trial of the Direct Injection Carbon Engine (DICE) in Victoria’s Latrobe Valley—the second largest and lowest-cost brown coal resource in the world—with the aim of reducing emissions from brown coal-generated electricity by 50% compared to current technology.

    DICE involves converting coal or biomass into a water-based slurry (called micronised refined carbon, MRC) that is directly injected into a large, specially adapted diesel engine. The fuel burns to produce intense temperature and pressure in the engine, which provides highly efficient power to turn electrical generators.


    You have mentioned before about large low speed diesel engines could run on pulverized (black) coal. Well, it appears that Brown coal (lignite) is now being looked as a direct feed stock to diesel engines. Don’t know what the end result will be, but it is a demonstration that as supply, price and pollution pressures rise on current FF, then people will work on all aspects of the problem. The results may not end up with what we expect. Very few predicted the shale oil/gas production, I suspect very few will predict the next big change, apart from the decreasing supply of conventional oil. Time and money will tell.

    • Old farmer mac says:

      Thanks Toolpush.

      It has been well known for a century that coal can be pulverized and fed to a diesel but it has not been done to my knowledge commercially to any significant extent because oil has always been available and cheaper and easier especially for mobile machinery.

      It had not occurred to me that burning coal in a diesel would be cleaner than burning it in a furnace but even at first glance the idea resonates due to the high compression and temperatures achieved in a diesel compared to burning the coal in a boiler furnace.The furnace may get just as hot but the fuel and air would likely never be mixed so well or the coal so finely pulverized and cleaned of contaminants to the same extent.

      It is possible to build a reciprocating engine well enough for it to run continuously for decades on end without an overhaul job and if this experiment works out it may be that coal fired boilers and turbines will be displaced to some serious extent by diesels.This would make modular power plants feasible and cheap and fast to build compared to a conventional coal plant.And there would never be a need to shut the entire plant down for maintenance.It could be done piecemeal one unit at a time.

      This could also at first glance also go a tremendously long way towards solving the problem of using coal fired generation for load balancing.

      You can keep a huge diesel up to running temperature very easily and for a truly trivial cost in energy by using the cooling water from one running under load to keep another one hot on standby. It should be a trivial problem to ramp one up this way from a dead start in less than ten minutes and from a running idle in less than a minute.

      The coal could be delivered by slurry pipeline and my guess is that the water consumption of a diesel powered coal fired generating plant would be trivial.The slurry water can obviously be reused indefinitely.

      Such plants could be built on a small scale in places with a high demand for space heat and the waste heat from the engines fed into a community heating system. This is not possible for conventional coal fired generation because it does not scale down that far.

      It might also turn out that there are industries that can make use of the low grade waste heat from the engines to preheat materials that must be heated substantially for further processing. A furniture plant for instance could use the exhaust heat and coolant heat to run it’s lumber kilns.

      That would free up the sawdust now burned to heat the kilns to be used in manufacturing various other wood based products such as paper and particle board.

      There must be dozens of industries that could put the combined electricity and heat output to good economical use.

      If no other use could be made of it, it could even be used to purify water by boiling it. This kills microbes of course and steam condenses easily enough. Hence you could boil salt water and condense pure potable water if the plant is located in a coastal area.

      A big farm could install a coal fired diesel generator- assuming the properly prepared coal can be trucked to the farm- and use the waste heat from the engine to dry grain and heat the farm buildings such as a dairy barn.

      It is likely that the success of the project will hinge on the cost of processing the coal into the very fine clean particles needed to feed a diesel. This may not be cheap enough to be practical compared to burning the coal in a boiler.

      • toolpush says:


        I was surprised by the efficiency of the low speed 2 stroke diesel engine. 54.4%, quiet impressive. If they could get the same using coal, there would be a major drop in CO2 emissions, and decreased running cost from the Rankin cycle (steam) generators.
        Wikipedia was an interesting read. It states that the original diesel engine was designed to run on coal dust rather than oil. Though at a test in France it was requested they run in on vegetable oil, which it did unmodified.

        It will be interesting to see if low speed diesels take off burning coal black or brown for electrical generation.

        Fuel economy[edit]
        The MAN S80ME-C7 low speed diesel engines use 155 grams (5.5 oz) of fuel per kWh for an overall energy conversion efficiency of 54.4%, which is the highest conversion of fuel into power by any single-cycle internal or external combustion engine[1]

        It is often reported that Diesel designed his engine to run on peanut oil, but this is false. Patent number 608845 describes his engine as being designed to run on pulverulent solid fuel (coal dust).

        • TechGuy says:

          “I was surprised by the efficiency of the low speed 2 stroke diesel engine. 54.4%, quiet impressive. If they could get the same using coal, there would be a major drop in CO2 emissions, and decreased running cost from the Rankin cycle (steam) generators.”

          Its unlikely if you consider that diesels run under 10 MW, where as turbines can produce 100’s of MW. You will need 50+ very large diesels to equal the output of a single turbine engine. Two to four large diesels will cost the same as a single turbine.

          Coal Plants can be very efficient as a supercritical coal plant can reach 46% efficiency and an IGCC (Integrated gasification Combined Cycle) Plant can reach 50%.

          I also see issues with direct coal\carbon engines (which is nothing new). The problem is that the containments will accumulate in the engines causing, fouling , abrasion on the valve and cylinder seals. They would be “high” maintenance engines.

          • toolpush says:


            Thanks for the feedback. Currently the need for low speed diesels is restricted to ships, and the size of the engine is restricted by ship size v speed requirements. Do you know if it would be technically possible to scale these low speed engines by an order of magnitude for power generation?
            I do see your point about high maintenance cost, as turbines traditionally have been lower maintenance high fuel cost v high maintenance lower fuel cost. As the cost of fuel increases, we will see how this balance gets adjusted.

            • TechGuy says:

              My point is that you can probably get the same efficiency using a turbine instead of a diesel and at a much lower cost. Plus, high combustion temps needed to burn the carbon efficiently lead to nitrates which is a pollutant.

              That said, I don’t think it really matters since in the West there is a war on coal. In th US, the EPA has essentially mandated closures of all Coal fired plants by 2024 unless they sequester CO2 emissions. “Power Engineering” magazine hinted that the new regulation (now delayed until after the mid term elections) will even require some CO2 sequester with NatGas turbines.

              I am now just waiting for this to all blow up when Nat Gas prices rise back into the double digits again causing permanent rolling blackouts in the US.

    • Perk Earl says:

      Over time wouldn’t the unspent (and maybe even spent) pulverized coal gum up the cylinders? After all, even unspent liquid fuel over time gums up cylinders. At minimum it would probably reduce mileage between rebuilding engines. Is this yet another facet of diminishing returns? Ideas like this indicate just how desperate things are going to get.

      What about a truck, and instead of using the bed to haul stuff, it has a kettle for burning coal, to produce steam, to turn a turbine to generate electricity? Instead of filling up with fuel, you drive into a station, open the kettle and a crane with a bucket drops in coal. You stoke the fire with pulverized coal, build up good steam pressure and down the road you go! Ok, so it’s a little smelly in bumper to bumper traffic jams, but the radio & AC works, so hey, what the heck, it’s BAU forever!

  40. There is an excuse for ignorance, but not for stupidity.

    In the words of the goat roper, Will Rogers: An ignorant person is somebody who doesn’t know what you just found out.

    If you want to see stars, use a pair of binoculars and you will see stars you never thought were there.

    It would be nice to have a reservoir of oil that is 1000 km x 1000 km x 1000 km giant pool and would be right at ground level. Just have a giant ladle and start dipping into the oil pool.

    A cubic meter of oil will contain about how much oil? 6.3 barrels.

    How much oil is in 1 billion cubic kilometers? 6.3 barrels per cubic meter, a kilometer cubed will contain 6.3 billion barrels. 1000 x 1000 x 1000 meters would be my kind of oil patch. That’s just one km cubed.

    Times 1 billion cubic kilometers is going to be enough oil, but it still won’t be free.

    6 300 000 000 000 000 000 barrels of oil looks like enough. 2 million times more than the estimated reserves. I can dream and make it look like it is a matter of fact.

    An answer to the prayers and peak oil is over before it ever got started.

    It’ll keep things going for a little bit longer.

    • Watcher says:

      “A cubic meter of oil will contain about how much oil? 6.3 barrels.”

      Depends on the oil type. And temperature.

      • Watcher says:

        haha except hahahah a cubic meter is a volume measure and so is a barrel

        So I’ll add another variable. Barrel design.

  41. Old farmer mac says:

    This is an extremely well written article in every respect but one and well worth reading. It has a good all around discussion of electricity prices and the reasons they are going up.

    But as usual in anything you read in the mainstream press the author avoids the elephant in the room as comically as the referee at a professional wrestling match avoids seeing the bad guys cheat.

    There is no meaningful mention of depletion of coal and natural gas. It looks as if the authors and editors of the msm press have had meetings with owners and advertisers and been told to sort of forget to mention depletion. I am not a conspiracy nut but it is hard to come to any other alternate conclusion other than that reporters and writers who are supposedly capable of and paid to research their work are too stupid to do so.

    Now I do understand that the world is well supplied with coal for now and for the immediate future meaning the next century or so but that is not much comfort to people who have to pay five or six times the mine head price of it after shipping when their electricity bill arrives. The coal industry will be a historical artifact in nearby West Virginia before too much longer simply because what is left is deeper and deeper and harder and harder to get at in meaningful quantity.

    The supply of gas is another matter altogether and it is already price rationed to the point some people are going to freeze to death next winter.

  42. Political Economist says:

    Dennis, thanks again for your comments and thoughtful discussion and the strengths and weaknesses of various techniques.

    Please note that my HL exercise using the world as a single region produces ultimately recoverable amount similar to Laherrere’s.

    About the rest of the world, please note that the “rest of the world” does not include Canada. The rest of the world is world less less the top ten producers. But since you mention Venezuela, which is now the eleventh largest producer, I will exclude Venezuela as well.

    For Canada, if you see the graph above (still on this page), I used official reserve number 28 billion tons (about 200Gb). about 27 billion tons of that is tar sands.

    For Venezuela, however, their production is now in clear decline. Even if the political situation stabilizes (which will not happen in the short run), there could still be infrastructure and production difficulties that will limit the annual flow extracted from the theoretically large reserves. For Venezuela, I think it’s safe to use HL now.

    Finally, while the rest of the world HL analysis may suffer from the inability to include future unconventional resources (though other than oil sands and oil shale, currently no other large unconventional resources are known to exist; oil shale does not look like it’s going to become commercial and is mostly in the US; deep water has been explored for many years and has not been a game changer), it should be noted that the possible pessimistic risk is now balanced by the more optimistic projections for Saudi Arabia, Russia, US, and Canada. Ron has defined them as “wildly optimistic”.

    So I’ve made some effort to balance the risks on the upside and downside.

    • Dennis Coyne says:

      Hi PE,

      Still an interesting exercise. Also note that production does not usually follow the logistic function very closely on either the upslope or downslope. Many of your analyses show this pretty clearly on the upslope, I expect the downslope and position of the actual peaks may be very different (from the Hubbert curve) as well.

      • Dennis Coyne says:

        On Venezuela, the decline is primarily a political problem, if that ever gets sorted (which I assume you think is very unlikely) then China hopes to step in and get the oil flowing from the Orinoco.

  43. Dennis Coyne says:

    Hi all,

    Thanks for the helpful comments on my World C+C Scenario.

    I redid the analysis with a URR of 2700 Gb matching Jean Laherrere’s estimate
    relevant chart is on page 13 of the PDF.

    Model B assumes that extraction rates remain at the 2013 level and rise no further. Model B assumes the increase in extraction rates follows the trend from 1994 to 2013 which is extended to 4 % in 2060 ( from a rate od 2.65% in 2013. Extraction rate is the rate that oil is produced from producing reserves (Webhubbletelescope, who developed the Shock model calls these “mature” reserves). So if Worldwide producing reserves were 1000 billion barrels and the extraction rate was 3% then annual production would be 30 billion barrels (I used round numbers in the example, actual 2013 production was about 28 billion barrels and the extraction rate was 2.65% so producing reserves were about 1050 Gb.) Chart below.

    Sam Foucher did a nice review of the Shock model at the link below:
    A fuller treatment is in “The Oil Conundrum” which can be downloaded at context earth (link below)
    A link is at the top of the page.

    • Political Economist says:

      Dennis, great work! Your points on HL are well taken.

      All statistical exercises are an approximation at best. The purpose is to gather as much information as possible to know the direction we are heading.

    • Dennis Coyne says:

      Hi all,

      The Oil Conundrum by Webhubbletelescope(WHT) is very long(730 pages). The most relevant section for the Shock Model is Chapters 5 to 8 (pp. 58 to 144). The reading is quite mathematics heavy, so if you do not like Math(s), you should skip it. Note that there is interesting discussion on the Shock Model and Dispersive discovery up to page 266 (Chapter 13 where there are a number of examples).

      Also note that the World Models by WHT mostly used fallow, build, and maturation times of 8 years, I decided to reduce these to 5 years for these times which coincides with what works well for Norway’s North Sea oil production.

      My thinking is that to model future output the time from discovery to first production will be closer to the Norwegian model (a 15 year time frame) rather than the longer 24 year fallow, build, maturation favored by WHT. The longer time may reflect historical extraction rates more closely, but I think it would lead to higher extraction rates in the earlier period (1972 to 1979) which would lead to an overestimate of how high these extraction rates might rise in the future.

  44. Political Economist says:

    Finally, I’ve something Ron might agree with (at the risk of inviting criticisms from Dennis). HL analysis suggests that Iran may have passed the peak permanently.

    For many years, Iran was the world’s fourth largest oil producer. In 2013, Iran was overtaken by China and Canada and reduced to the world’s sixth largest oil producer. According to EIA, in 2013, Iran produced 3.4 million barrels per day of crude oil and natural gas liquids, still the second largest oil producer within OPEC.

    The following graph shows Iran’s cumulative oil production. The linear trend using data from 1990 to 2013 indicates Iran’s ultimately recoverable oil resources to be 17 billion tons. Iran’s cumulative production up to 2013 was near 10 billion tons. Regression R-square 0.884.

    • Political Economist says:

      The graph below compares Iran’s historical and projected oil production. The theoretical peak took place in 2008.

      By 2050, Iran’s oil production is projected to decline to 88 million tons (about 1.8 million barrels per day).

      For those who are not familiar with the measure of tons, a rough conversion ratio is that 1 million barrels per day corresponds to 50 million tons a year. So a country that produces 100 million tons of oil a year is a producer producing 2 million barrels per day.

      The precise ratio varies from country to country and depends on the share of natural gas liquids. For the US, 1 million barrels per day corresponds to only about 45 million tons a year; for Iran, I used 1 million barrels per day = 48 million tons/year.

      • Anonymous says:

        Hi PE,

        With the caveat that an HL analysis for an OPEC nation that adjusts output based on quotas is unlikely to give a very accurate picture of future production, Iran may well be beyond its peak output. If the nuclear issue ever gets resolved and sanctions are lifted we will have a better idea, my guess is that the larger drop in output for the last two data points may be due to a combination of decline plus sanctions, but it is impossible to tell how these effects are divided (50/50 or 30/70?).

      • Dennis Coyne says:

        Anonymous comment above is me, I forgot to sign in. Sorry.

        • Political Economist says:

          I think the last two data points (for 2012 and 2013) are mostly due to sanction. But even if the sanction is lifted, it may take years before Iran regain the red line.

          • Dennis Coyne says:

            I wonder if those last two data points should be excluded? I think that would change things a bit, (higher URR and higher hubbert peak).

            I agree that it will take time for Iran to increase output (2 or 3 years), my point was simply that although the peak has been reached, Iran might be able to maintain previous output levels (from before the sanctions) for a few years or if not, remain at present levels for many years.

            • Political Economist says:

              You’re right. They actually should be excluded. That would give Iran a somewhat higher URR and a theoretical peak around 2011 (rather than 2008)

  45. Perk Earl says:
    ‘Just keeping up’

    That’s an article posted over at

    Here’s my post there:
    “But the broader picture, Mr. Hamilton points out, is one of surprising stability in prices. For most of the last three years oil has hovered around $100 a barrel, and the price of petrol has been correspondingly flat. But there is another way of looking at this stability; prices have remained relatively high in order to temper demand growth and keep it in line with available supply growth.”

    He writes this as if the price was intentionally calculated and moderated to achieve this balance. Instead, I would suggest upward pressure on price has been quelled by demand destruction, at
    a price inflection point. If the price goes higher, demand drops price back down and vice versa. We are at a price ceiling relative to oil flow and economic viability to support that price.

    This long period of oil price stability while costs of exploration have recently exceeded return on investment, means long term supply increases are no longer keeping up with extraction of aging wells.

    Also, without US fracking the descent from peak would have already ensued, is yet another obvious nail in the peak oil coffin.

    We are at the summit of a long period of expansion. Time to check your brakes, golden parachute, food cache, solar panels, seed stores, and whatever other things you can think of before we begin the fast descent down because it’s going to be so fast you’re going to feel the breeze blowing past your face and your heart in your throat.

    • Coolreit says:

      I think this is nonsense. Iran and Sudan lost how much oil production in the last few years? Majors profits are falling as costs are rising for the last 3 years. Oil prices should be rising to pay for rising marginal oil production costs and massive oil production losses! Banksters are suppressing the natural oil price.

      • Old farmer mac says:

        I often see arguments to the effect that various and sundry parties are controlling the price of certain commodities but I seldom find them convincing.

        In this case it could be that ” banisters” really are in effect depressing the price of oil at least temporarily by loaning money at extremely low rates of interest to oil companies that are spending more and more to extract the same slightly greater or even somewhat lesser amounts of oil.

        But if this is true then one of two conclusions would seem to follow- or perhaps a combination of the two conclusions might apply.

        One is that the price of oil must rise sharply in order for the borrowers to repay the loans out of flat or decreasing production . The other is that the loans will not be repaid.

        I am not able to follow all the machinations of bankers working on the top floors of sky scrapers in London and New York and in offices at the fed and so forth.

        But this I do know. Contractor who put men and machinery on the ground or ships and drill for oil or build pipelines actually get paid at short intervals of a few months maximum as the work progresses.

        If they don’t they stop work and turn the bill over to their legal department.

        Further more the vast majority of the oil produced these days is owned and produced by sovereign governments. I think most of these governments operate their own national oil companies if they are large producers and hire out only a portion of the actual drilling and so forth.

        Explaining how a bankster could could control the House of Saud is going to be a tough one.

        But now if you consider the House of Saud to BE the BANKSTER then you might have a case.

        • Old farmer mac says:

          The pesky spell checker has me talking about banisters instead of BANKSTERS.

  46. Coolreit says:

    More confirmation of Jeffey Brown’s ELM:

    China Secures Abu Dhabi Oil Field Deal :

    • Jeffrey J. Brown says:

      To be a little more precise, it’s evidence of the decline in Available Net Exports (ANE, or GNE less CNI), which fell from 41 mbpd in 2005 to 35 mbpd in 2012 (total petroleum liquids + other liquids, EIA).

      • Jeffrey J. Brown says:

        If you want to do an “interesting” exercise, my back of the envelope method of estimating post-export peak CNE (Cumulative Net Exports) is to take annual net exports at peak (in Gb/year) X estimated number of years that it takes for the ECI ratio to hit 1.0 (when net exports = zero, as production equals consumption) X 0.5 (to get area under a presumed triangular shaped decline curve) less annual net exports at peak.

        For ANE, the approach would be as follows (GNE/CNI ratio is analogous to ECI, the ratio of production to consumption).

        Annual ANE in 2005: 15 Gb/year

        2005 to 2012 Rate of decline GNE/CNI Ratio: 9.2%/year (at this rate of decline, the GNE/CNI ratio would theoretically hit 1.0 around the year 2030, when GNE would theoretically equal CNI).

        Est. post-2005 Available CNE = (15 Gb/year X 25 years X 0.5) – 15 Gb

        From 2006 to 2012 inclusive, the cumulative sum of annual ANE was about 95 Gb.

        Est. remaining post-2005 Available CNE would be Est. post-2005 Available CNE less 95 Gb. This would be the Est. remaining cumulative volume of Global Net Exports of oil available to about 155 net importing countries at the end of 2012, if we extrapolate the 2005 to 2012 rate of decline in the GNE/CNI Ratio.

        • Coolreit says:


          Would you explain to me why the global oil price has not risen in 3 years, despite your GNE/CNI ratio declining materially over that 3 year period? In addition would you explain why the oil price has not risen in 3 years, despite rising oil production costs as exemplified by the majors falling profits/rising costs?

          Thank you!

          • Jeffrey J. Brown says:

            The advantage of being an amateur analyst is that one can focus on what one wants to, i.e., what I call “Net Export Math.” Basically, I’m an amateur supply side analyst, and demand side analysis gives me a headache.

            But I think that Steven Kopits pretty much nailed it, and he had an interesting comment over on the Econbrowser post about Oil & Gasoline Prices:


            “For the next several years, the world should be able to continue to increase field production of crude oil, as long as the price stays at current levels. The real message from the new technology is this: oil prices have been remarkably steady over the last several years because of– not in spite of– the important added contribution of tight oil.”

            I might qualify this as, “For the next two years, the world should be able to increase field production…” The IOCs, I think, are headed for a hard landing, and I could more easily make the case for an oil shock in 2016/2017 than for an excess of oil. I’ll have a blog post on this around the weekend, responding to Phil Verleger’s response to my earlier post. (I hope that’s clear.)

            If you use supply-constrained forecasting, it is not given that shale oil has contributed to price stability. Instead, I might write, “GDP growth has been looking a bit better because of the important added contribution of tight oil.” Here’s a bit more on that:

            And finally, instead of “the reality is the price of crude oil has been remarkably stable over the last three years,”, I might write “predictably stable”. A supply-constrained model (and is Jim not intimating that we are supply-constrained?) would anticipate that price volatility, in the absence of supply shocks, would collapse. And it has.

            Note that ANE were basically flat from 2011 to 2012:

            • Coolreit says:

              Tight oil is peaking within a year or two at most. Then what? Higher oil prices coming!

            • Perk Earl says:

              “The price of crude oil has been remarkably stable over the last three years,”, I might write “predictably stable”. A supply-constrained model (and is Jim not intimating that we are supply-constrained?) would anticipate that price volatility, in the absence of supply shocks, would collapse. And it has.”

              JB, would it also be true to state that demand is also constrained? After all, the price of any product is where supply and demand meet. If supply is constrained, but demand increases, price rises, and if demand drops price falls. So it would seem supply & demand are both constrained.

              Here’s the problem though: If supply & demand are constrained, and another recession ensues, oil price will drop. At a lower oil price many unconventional plays will get moth-balled. I suppose if oil price rises again they could be put back into production, but what is it the Fed can do they haven’t already done to jolt the economy back into growth?

              Starting to seem like we are edging towards a descent from peak oil and peak civilization.

          • RalphW says:

            My finger in the air answer would be that demand has been artificially curtailed by IMF , World Bank and the main EUropean banks, by imposing austerity in chosen (victim) countries – ( Eire, Portugal, Greece, Italy, Cyprus etc) in order to choke off enough oil demand to prevent runaway prices. The OECD are allowing the boundary countries to collapse in order to sustain the illusion of BAU in the core countries. If the true losers of derivative swaps and the rest of the virtual world economy were exposed, the whole global financial structure would implode with its own contradictions and the elite would be out of a job.
            I do not know if they are doing this with any awareness of resource limits, or simply doing what is necessary to sustain their virtual finances.

            • Woody says:

              Ralph, I would take the opposite view that demand has been artificially enhanced by the addition of more debt. An unwind of the financial system will lead to demand destruction as the oil trade would need to resort to a form of barter system that would not allow for trade deficits in the importing countries.

            • Coolreit says:

              I agree with your statement and would answer your ending question with: The bansters want to sustain their REAL finances with printed money so they can enjoy the world’s resources without limit!

  47. Coolreit says:

    “Access to the high-yield bond market has enabled shale drillers to spend more money than they bring in. Junk-rated exploration and production companies spent $2.11 for every $1 earned last year, according to a Barclays analysis of 37 firms.”

    Shale production is a pyramid scheme financed by cheap bankster $$$:

  48. Doug Leighton says:


    As you well know, these days, conventional oil fields generally go through various production stages; for instance, simple pumping followed by pressurized water-flooding in conjunction with infill-drilling, gas-cap cycling, enriched-hydrocarbon miscible water-alternating-gas injection; then, finally, horizontal drilling along the upper portion of a production-thinned deposit: a coup d’état. Often, diverse recovery methods are employed in various parts of the same field at the same time. Would a sigmoid (generalized logistic function) sensibly apply to a situation where hydrodynamics keep being changed by shifting production procedures?

    Assuming a person had access to the data (impossible), I suppose you could generate a set of non-linear differential equations and fit them to distinct reservoir areas, as a function of time, and integrate them; you’d have to employ serious kriging but computers facilitate that. I bounced this notion off my wife and she declared it the second dumbest idea I’ve had today, refusing to tell me what the dumbest one was. She muttered: weren’t you taught diagonalizable matrix algebra, which I wasn’t. Strangely, I recall mention of Hermitian matrix inputs on computers on a rig in the North Sea, whatever the hell it meant I’m not sure: Vaguely I remember individual entries can be variables. Yes, I’m rambling. Bottom line: The key objective of this work is optimizing recovery and not looking at issues like future production rates, reserves and depletion so I don’t know who has access to hard data that is doing future projections.

    Another shark’s fin argument comes from the fact small oil fields deplete much faster than giants and super giants. Probably everyone accepts that increasing percentages of oil are coming from smaller satellite fields as their large brethren increasingly expire: North Sea, North Slope, perfect examples. And the argument gets further support from the fact that offshore fields deplete faster than the ones on land. Obviously more-and-more of our oil comes from offshore fields. Finally there’s the additional issues clearly stated by Ron, Jeff and others. All in all, I think you have to take the earlier and rapid decline (Shark’s Fin) alternative seriously.

    So, I guess my basic query comes down to this: Without access to oil-field data (only really available to oil company insiders), do linearizations average out all the variables and give a decent predictive result? Personally, I doubt it. I doubt it for the reasons cited above but mostly because during the horizontal drilling (“creaming phase”), which quite a few large deposits are now in, production rates are deceptively high – for a short time. If you’re using these numbers and projecting production (without building in a shortened future lifetime) results may be skewed in the direction of unrealistic conclusions. Remember, I’m only talking about the conventional oil fields. And also remember, this is just my opinion, nothing more.


    • Another shark’s fin argument comes from the fact small oil fields deplete much faster than giants and super giants.

      And another shark’s fin argument comes from the fact that offshore deep water depletes a lot faster than offshore shallow water reservoirs do. We are everyday moving to smaller fields and shallow water fields to smaller and deeper fields. All this will have a dramatic effect on the decline curve.

      • Doug Leighton says:


        • Dennis Coyne says:

          Hi Doug,

          In your previous comment you referred to the logistic, which aside from using Laherrere’s estimate for World URR (where it comes into play), it was not used anywhere else in my model. I consider Mr. Laherrere’s estimate conservative.

          It is impossible to account for all the changes in production methods, I do not have the data and it would be more than I could do as a modelling exercise.

          Some short summaries of the Shock model are at

          especially the Oil Drum article Part I is a nice summary.

          A much longer treatment is in The Oil Conundrum Chapters 5 to 8link below:

          So I am using dispersive discovery and the shock model only along with oil discovery data and a World URR estimate from Jean Laherrere and a fallow, build and maturation time of 5, 5, 5 or 15 years on average from discovery to production. Extraction rates are chosen to match World C+C output from 1960 to 2013, after that I have presented a couple of different extraction rate scenarios. Is your expectation that extraction rates from producing reserves will decrease? If so by how much in % per year (currently the rate is 2.65%)?

          Everyone thinks the scenario is quite unreasonable, though I am not quite clear on the reason that the rate of extraction would decrease worldwide.

          I understand why the rate of production would decrease, it is argued that in some fields the reserves are being depleted very quickly. The model depletes the reserves as they are produced so this is built in to the model.

          • Doug Leighton says:


            “Is your expectation that extraction rates from producing reserves will decrease? If so by how much in % per year (currently the rate is 2.65%)?”

            I probably don’t understand your question. Extraction rates primarily depend on viscosity so globally, of course, these will decrease as heavy oils become more dominant; numbers for this are totally beyond me. In any case, the question is too complex (for me) to address except in a specific case. To me the more important question is depletion rates.


            • Doug, You are correct, thicker oil would flow a lot slower. But mechanical pumps would produce a given amount per donkey head nod so viscosity would make no difference. However I really don’t think that is what Dennis means by extraction rates. As near as I can tell, he means the percentage of oil extracted each year from the total in the ground. In other words if you had reserves of 10 million barrels and pumped 1 million barrels this year you would have an extraction rate of 10 percent.

              But of course no one really knows what proven reserves really are so there is no way of knowing what the extraction rate really is.

              • Doug Leighton says:


                Thanks, let’s leave it there then. However, for the record,
                “extraction rate” is defined in my old Petroleum Engineers Handbook precisely the way I’ve used it: It’s fixed in my ancient brain that way.


            • Dennis Coyne says:

              Hi Doug,

              Ron does not have extraction rates quite right the closest thing to “mature reserves” in the shock model would be proved producing reserves. Ron is quite correct that this can only be estimated, like most things in the oil industry.

              Let us assume for a moment that Mr. Laherrere’s estimate for a World URR of 2700 Gb of C+C is approximately correct (nobody knows what this is, just like proved reserves, proved producing reserves, etc.).

              Using model A where world extraction rates (% of mature reserves produced each year) increase from present levels (2.65%) to 4% in 2060, I have found the World depletion rate.
              Also shown is Cumulative C+C output and Remaining Resources (C+C) in Gb. Depletion rate is on the right axis. I used the ASPO International definition of Depletion Rate at link below


              where depletion rate is annual oil produced divided by remaining reserves, I have defined remaining reserves as URR minus cumulative C+C output.

            • Dennis Coyne says:

              Hi Doug,

              I may be using extraction rate in a non-standard way, I am not a petroleum engineer.

              In my model mature reserves (those reserves worldwide that have reached their maximum production rate and are beyond the “build” phase and are either on a plateau or in decline) in 2013 are 1050 Gb and in 2013 27.8 Gb were produced, the extraction rate is 27.8/1050=2.65%.

              As oil becomes heavier (thicker milkshake) to keep extraction rates the same we need more straws (more wells), if higher viscosity results in lower flow rates (which makes sense intuitively) more wells will be needed. For extra heavy oil I believe that extraction rates will be lower and plan to model that separately so that there will be a 2200 Gb C+C-XH model and a separate XH crude model with 500 Gb.

              • Doug Leighton says:


                “I am not a petroleum engineer.” Nor am I. A lot of my work was related to seismic interpretation (Geophysics) which had me interfacing with quite a few different people (and places). Most of my PO knowledge is second hand and certainly not very deep. Some things piss me off but for the most part I’m a relatively amiable chap.


              • I may be using extraction rate in a non-standard way.

                Indeed you are, the rest of the world would call it
                Reserves-to-production ratio (Wiki)

                An BP Reserves-to-production (R/P) ratios

                • Dennis Coyne says:

                  The “mature reserves” in my model are not the same as proved reserves, reserves that have not been developed “proved undeveloped reserves” and reserves that are being developed but have not yet reached “maturity”, that is they have not reached their maximum output levels are also not included, they must be on a plateau or declining to be “mature”. In the figure below the mature reserves are those that have reached the plateau or decline (if there is no plateau).

                  • Dennis Coyne says:

                    Also BP reserves include NGL.

                    the mature reserves of my model are 1050 Gb considerably less than proved reserves as reported by BP or the 1525 Gb for 2012 reported by the EIA.

      • TechGuy says:

        One can also make the argument that it tool about 140 years to develop oil extraction technology, yet the amount of oil that can be extracted remains constant. Consider that if you have a container with a fixed volume of fluid. Early on extraction begins with a very small diameter tube. Later on multiple tubes with larger diameters are used. Instead of smooth bell curve, the backend curve has a steep no-linear slope.
        In a bell curve, the extraction rate would need to be constant, but we have leveraged better technology to extract oil faster.

        Consider the post I made yesterday about Saudi Aramco extraction techniques (Page 2). If they use standard technology the extract rate would have slowly declined as the fields watered out. Since SA is using horizontal drilling, they can continue to extract dry Oil at a near constant rate even as the fields are nearly depleted. At some point they are going to go from producing 3 to 4 mmbpd in Ghawar to less than 1 mmbpd in just a few short months as the horizontals all water out. I am sure that this same method is widely used, not just in KSA.

        Advanced Oil extraction techniques are masking depletion. My guess, is that if these technologies had not been implemented the World would have peaked a decade ago, but we would have had a much shallower decline slope. We are burning down the house to stay comfortable for a short period of time. I fear that we will wake up one morning to find production has suddenly collapsed and there is no mitigation plan. ie we woke up to realize we no longer even have a home after we burned it down to stay warm for the night and everything we needed to implement a mitigation program was inside the house!

        • Dennis Coyne says:

          Hi Techguy,

          In my model I explicitly use the rate of extraction and model reserves based on an average rate of development of discovered oil, extraction rates have indeed increased and the overall decline rate will increase at some point, if the worldwide extraction rate were to rise to the levels of Norway (about 12%), we would certainly see the effect you speak of. Extraction rates have not risen very much so far, but if they keep rising or rise at too fast a rate in an attempt to keep output at 76 MMb/d then the decline on the back end will be very steep.

          • Dennis, only in the last week or so have you been talking about “extraction rates”. I have never heard anyone discuss this before in the way you are using it. I googled “crude oil extraction rates” and got zip. Only the IEA used the term once in their description of peak oil:

            IEA FAQs: Oil
            What is peak oil: … snip… Others see it as the maximum possible annual rate of extraction of conventional crude oil, due either to physical resource constraints or above-ground political, economic or logistical factors.

            Everyone is extracting oil as fast as they possibly can. Infill drilling can possibly increase extraction rates at the expense of depletion rates. But the idea that a company or a nation can just increase extraction rates willy nilly is just not correct.

            As near as I can tell you are basing your extraction rates as a percentage of proven reserves. But the proven reserves of any country depend entirely on their politicians. Their proven reserves are what they say they are and they usually give a figure that is way, way too high. And as far as IOCs go, their proven reserves are often less than they say they are. They could get into trouble if they claimed more reserves than they actually have.

            Bottom line, the extraction rate of any field is an unknown quantity because usually have no idea just what the true reserves of a field really are.

            • Doug Leighton says:


              Former Total petroleum geologist Jean Laherrere often said publishing reserve figures is a largely political act. Campbell agreed, attributing economic incentives and the need to deliver satisfactory financial records as a driving force for obscuring technical data (and geological estimates). I guess you’re just picking up the baton.


              • Dennis Coyne says:

                Hi Doug,

                It is Jean Laherrere’s work and that of Webhubbletelescope that informs my analysis. A chart of “mature reserves”, which is an output of the shock model. The model is based on discovery data from Jean Laherrrere with a dispersive discovery model used to fill in the tails before 1900 and after 2008 so that total discoveries are 2700 Gb, and World C+C production data from 1960 to 2013 to determine extraction rates from 1960 to 2013. Fallow, build, and maturation times were 5 years for each stage for a total of 15 years(this last part will only be understood by those who have read up on the Shock model.) Chart with mature reserves below.

            • Dennis Coyne says:

              Hi Ron,

              The extraction rates are the percentage of “mature reserves” that are produced in a given year. Mature reserves are an output of the model and the input to the model is Jean Laherrere’s discovery data and an assumed amount of time from discovery to production as it takes time to go from discovered resources to a producing oil field, historically this has been about 40 years, but I have shortened it to 15 years to reflect the modern ability to go from discovery to production more quickly than in the 1900 to 1970 period.

              Inputs to Model Laherrere discovery data from 1900 to 2008 and then an estimate of the tails before 1900 and after 2008 to give total discoveries matching Mr. Laherrere’s World URR of 2700 Gb. The average fallow, build, maturation times of 5 years for each stage (total of 15 years). EIA C+C production data from 1960-2013. Extraction rates are adjusted so that model output matches EIA data from 1960 to 2013, extraction rates beyond 2013 are obviously a guess, but they have been rising since 1994.
              Model A assumes extraction rates continue to rise at the 1994 to 2013 rate of increase until 2060. Model B assumes extraction rates remain at 2013 levels.

              See Sam Foucher’s Summary of the Oil Shock Model.

              This is developed further with the Dispersive Discovery Model see


              More on Dispersive Discovery and Laplace Transform at link below:

        • CaveBio says:

          Hi TechGuy,

          I completely agree with your assessment. Here is the very simple way I think about this and this is how I explain it to students when I introduce the concept.

          If we assume the x-axis is time and the y-axis is resource consumption and the area under the curve as representing the total available resource, as long as the total available resource remains constant over time (or close to constant–my understanding is that even massive technological input into fields only marginally increases the resource), then increasing the y-axis by definition means a shortening of the x-axis.

          To me the shark fin is a mathematical certainty UNLESS the resource significantly increases. I am not an oil man but it seems to me there are only two ways to do this–1) a lot of new discoveries or 2) increase the URR from existing fields or some combination thereof.

          I have attempted to make a tepid argument that perhaps we survive this production decline for some amount of time if there is a concomitant shark fin drop in demand that is not driven by price. How might this occur? Demand drop in the west due to the rapidly aging population and demand drop globally due to more efficient technologies. This is an admittedly optimistic argument fraught with complications, e.g., Jevons paradox potentially reigns on the later. But for the sake of my four year old son, I desperately hope I am right and that our rapidly aging population and new technologies will allow us time to fix the problem.


          • Doug Leighton says:


            When you have a four year old son, negativism is a total cop out. The world is full of beauty – share it with him.


            • CaveBio says:

              So true Doug….dinosaurs and pirates, bugs under rocks and sea shells on the beach. It is truly wonderful. I got a late start in life, I am 45–I was a bit of a late bloomer. But although I am exhausted by my attempts to keep up with a very active boy, I am glad I have the perspective of age to appreciate the moment.

              His favorite show right now is Cosmos and he wants to grow up to be a paleontologist–he gives me a toy dinosaur to bring to work each morning to use to teach my students. Sorry for waxing nostalgic, he and his mom are visiting a sick grandmother right now and I miss my little buddy.


          • Dennis Coyne says:

            Hi Cavebio,

            The decline is a certainty. What is not certain is a sharkfin decline, the fact that the declines occur at different rates and happen over a period of time over a large area while we continue to drill new wells causes the decline world wide not to look like a sharkfin, it is really just a matter of statistics, but very few seem to grasp this. Try reading up on


            A fuller treatment can be found in

            • CaveBio says:

              Hi Dennis,

              It is important to define terms and I am being very sloppy here. When we discuss a shark fin decline there is a very specific steep slope that is envisioned, and rightfully so. When I say shark fin I am envisioning a slope steeper on the downside than the upside.

              As I noted in my post above, this is a mathematical certainty if we consume the resource at high levels without significantly expanding the area under the curve. So the longer we maintain this plateau the steeper the slope will be.

              Of course, stochastic events could result in a very fast unwinding, but those types of events are outside of the system and so not amenable to modeling.

              Yes declines occur at different rates and at different times but the world is currently on a crescendo of drilling that, in my view, allows one to model the global supply of oil in exactly the simple manner I note above. The slope on the downside is a function of the area under the curve (URR) and the rate of extraction.


              • Dennis Coyne says:


                I think we mostly agree, I am not sure if you saw the models on page 3, but essentially you are correct that the longer we stay on the plateau the steeper the decline, but if extraction rates gradually rise (as they have done since 1994) we will see a fairly gradual decline. If extraction rates remain at the 2013 level, decline will begin immediately, but the ultimate decline will be less steep (after 2040 or so), it remains undeniable that more output today means less output tomorrow because the total oil recoverable is fixed (though we can only guess the amount).

                My other point is that if URR=2700 Gb that a slow decline could be maintained for a few decades if extraction rates continue to rise, but it would be better if the decline begins sooner because the longer we keep production at high levels the more likely a “shark fin” becomes (I think of a shark fin as a decline rate of 4% or higher.)

                • Cave Bio says:

                  Hi Dennis,

                  I think you and I do largely agree and about a 4% decline is also my definition of a “shark fin”. The one piece of information I know the least about (and I would suspect everyone knows the least about) is the URR. One large factor that makes this difficult to determine is due to enhancements in extraction methods. My simple model assumes the area under the curve remains relatively constant. If you can keep “filling the tank” so that the area under the curve expands, that will clearly push the x-axis to the right and therefore reduce the slope of the curve.

                  Ultimately the models can become quite complex, but the underlying idea is quite simple!


            • TechGuy says:

              “That is not certain is a sharkfin decline, the fact that the declines occur at different rates and happen over a period of time over a large area while we continue to drill new wells causes the decline world wide not to look like a sharkfin”

              If I recall, about 40% of Global Oil Production comes from the old super giants, which will eventually all water out. Its seems unlikely that the world can increase drilling sufficient to replace them. Also consider that the decline rate of conventional drilling is now above 7% and will continue to accelerate as the super giants and other large fields water oil.

              Right now, production is be sustained by targeting oil fields with Horizontal drilling that masks the real decline rate. Much of the investment in Conventional Drilling is to apply new tech instead of find new fields. Eventually they are are going to run out old oil fields to use Horizontal drilling, then the production curve will follow is natural trend which is well below the current global production rate. I think even you think LTO production isn’t going to replace Conventional fields.

              If you look at this chart for Prudhoe Bay You can see how Horizontal drilling plays out with conventional fields:

              For a short period Horizontal Drilling can dramatically improve production, but after its spent, production falls back to it natural trend line. For Prudhoe Bay, It appears that no further Horizontal drilling can be applied that would alter its long term decline trend.

              • Dennis Coyne says:

                Tech guy,

                I agree with all of the above but the fact that different fields and wells within those fields will not water out at the same time will make the decline more gradual, also even though we cannot replace the output from the giant fields, there will still be new production coming on line which will help to mitigate the shark fin that you foresee.

                • TechGuy says:

                  They will all water out in a ten year period. Once the lost of one of two of these super giants happen, its likely that Oil will become less fungible as nations with Oil resources start husbanding and cutting exports to extend them.

                  1. Most of the investment in Conventional drilling is in old depleted fields as the use newer tech (Horizontal drilling, CO2, etc) to extract what was left behind. Sooner or later they are going to run out of oil fields to tap.

                  2. With the exception of the Artic there is no large sources of oil left. Even the Deep sea in the Gulf has largely been explored. There are probably just a dozen or so untapped fields that can be drilled economically. The rest are too small and require too much capital investment.

                  3. So far recent attempts to tap the Artic have been canceled or postponed indefinitely. The US-Russia Dispute is going to block and US-Russia cooperation on Arctic projects. Since any Artic project will take 5 to 7 years to being oil to market, unless they get started soon I doubt an oil supply crunch can be avoided.

    • Political Economist says:

      Hi Doug, these are thoughtful comments. I appreciate them.

      About linearization, it certainly has serious limitations and are approximations at best. However, it is still useful to know about where the existing trend is taking us. Then we try to incorporate other information to decide the likely paths in the future.

      A linear trend can err either on the optimistic side or on the pessimistic side. If, as you explained, many new oil fields are small fields that decline faster, then it’s possible HL analysis will yield results that are two optimistic in term of predicting the future declining path. Though experience from the past suggests that HL tends to underestimate ultimately recoverable resources more often than overestimate.

      • Doug Leighton says:


        Don’t get me wrong, I appreciate your work. I have a fair amount of experience on one level but in most it’s pretty shallow stuff. Keep at it and with luck we’ll have converging conclusions in the not too distant future.


  49. Coolreit says:

    BP takes $520 mil writedown after ditching plan to develop US Utica shale
    London (Platts)–29Apr2014/657 am EDT/1057 GMT

    BP said Tuesday it is dropping plans to develop its Utica shale acreage in northeastern Ohio as it moves to overhaul its poorly performing onshore shale assets in the US.

    BP said it has taken a $521 million write-off relating to the Utica shale for the first quarter of 2014 after lackluster appraisal results from initial well tests.

    “As a consequence of appraisal results. BP has decided not to proceed with development plans in the Utica shale,” the company said in an earnings release.

    The move comes almost two months after BP announced plan to shift its shale-rich onshore oil and gas assets in the US to a new business to better compete with smaller, more efficient companies such as those which spearheaded the US shale gas boom.

    Article continues below…
    Request a free trial of: Oilgram News Oilgram News
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    Industry players, upstream and downstream markets, refineries, midstream transportation and financial reports
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    Request a trial to Oilgram News Request More Information

    BP said it needed a more nimble business model to reap greater value from the assets, with faster decision-making, quicker field developments and more efficient cost management.

    Shell last year announced a strategic review of its US shale portfolio after taking a $2.1 billion impairment on its position due to dire US gas prices.

    In Shell’s case, it is targeting its loss-making Americas and oil-product divisions which are tying up a combined $80 billion, or 35% of its total capital employed.

    BP signed an agreement to lease about 84,000 acres in the Utica/Point Pleasant Shale formation in northeastern Ohio in March 2012. The play is at a depth of about 6,000 feet and is of a similar thickness to the Marcellus Shale, with the potential to deliver “higher liquids rates,” BP said at the time.

    The Ohio Department of Natural Resources estimated a recoverable Utica shale potential of 1.3 billion-5.5 billion barrels of oil and 3.8 Tcf-15.7 Tcf of natural gas, BP has said.

    BP holds a significant portfolio of unconventional resources in the US which are estimated to hold a total of 7.6 billion barrels of oil equivalent.

    The assets, which include stakes in the Fayettevile and Eagle Ford shale plays, cover a total 5.5 million acres and an interest in over 21,000 wells.

    BP currently produces around 300,000 boe/d in the continental US states, also know as the onshore Lower 48, much of which is gas from shale or other unconventional sources.

    –Robert Perkins,
    –Edited by Maurice Geller,

    • Watcher says:

      This perhaps aligns with my interest in assays. “Sweet spot” doesn’t really need to mean quantity of oil to be found. And “quality” of oil means more than API and sulphur content.

      This stuff is hugely amenable to redefinition. BP’s assessment need not have declared they could not “get enough oil out to pay for the cost”. It may have declared “what comes up, regardless of quantity, won’t pay for the costs”.

  50. Watcher says:

    Factoid just encountered:

    US refineries represent 3% of total US energy consumption.

    • Jeffrey J. Brown says:

      That’s one problem with refinery gains metric, to-wit, volumetric output is more than the volumetric input, in terms of liquids, but the process represents a net energy loss, in terms of of energy output versus energy input, although it is of course a necessary energy loss.

  51. Watcher says:

    Been nosing around the various Crude Assay sites. From this article above (the focus was on Bakken shipping content) we have the following quotes:

    “Capline’s latest Bakken assay, dated 14 January, was posted on its website this week, shortly after a Wall Street Journal story on Monday used older Capline data to show Bakken crude carries more combustible gases than other varieties. While Bakken’s ultra-light properties are generally well known, hard data is rarely made public.

    Regulators are seeking more information on Bakken crude from oil shippers and are also conducting their own data collection and sampling. It is not clear when or if those results will be released.”

    and (boomage)

    “Other data sets have suggested not only that the crude is light by its nature – Bakken reserves are rich in so-called “light ends” like butane, propane and other byproducts of petroleum – but that it is also growing lighter.”

    The article is worth reading.

  52. toolpush says:

    Another oil train derailment in Virginia, CNX, breaking news

  53. CaveBio says:

    With all the appropriate caveats noted, U.S. lower 48 production has risen rapidly over the last few weeks. However, this week it is reported to be flat.

    U.S. Petroleum Balance Sheet, 4/25/2014


    • Tom, those weekly numbers are just wild ass guesses. When you see a number that is flat or down, that means they think they made a mistake last week or in the weeks before and got it too high, so they just report no gain that week. The weekly data is never revised but the monthly data is usually always revised. They adjust the weekly data by simply reporting more or less until they are get to the level that they think is right.

      How do I know this? Well I have been watching this data for a lot of years and I think I have finally figured these guys out. You know if they never revise the weekly numbers then they must have a way correcting their estimates when they are wrong. And they have to be wrong from time to time because no oil company or state in the US reports their production numbers on a weekly schedule. So they have to be guessing.

      • CaveBio says:

        Hi Ron,

        Thanks for the feedback. It makes perfect sense that they are guessing and might adjust on the fly. But as far as I know it is the only “real time” data we have on U.S. production and I find it interesting. My sense is that if you get a few weeks in a row of flat or declining numbers that then might suggest a trend–so for instance given this week’s data I will watch next week with some degree of heightened interest. If it remains down my interest will increase as a trend might be developing. For instance, I think the flat and declining weekly numbers last winter certainly exposed a trend of weak production that was likely weather related. If it bounces back up next week then your suggestion of an on the fly adjustment to fix over estimates in previous weeks is likely true.

        Anyway, the release of this information is something I look forward to every week and so I sometimes like to share. If you would rather I not post these data I will refrain.


        • Tom, please continue to post any numbers you wish. And yes the EIA numbers are the only numbers we have but there are different departments in the EIA and they all come up with different numbers.

          For instance if you average the weekly numbers for February you come up with 8,195 barrels per day. But if you go here: Petroleum Overview you get 8,106 bp/d for February. But if you go here: Crude Oil Production you get 8,033 bp/d for February.

          The last two eventually adjust their numbers to match and when they do they are usually closer to the latter than the former. In other words February production, after final revisions, will wind up some where pretty close to 8,033 barrels per day on both of the last two reports. But both could be adjusted, up or down, by as much as 50 to 100 kb/d because all the data from the states, especially the Texas data, will likely be adjusted quite a bit. But the weekly data will never be adjusted, or at least I have never known it to be in all the years I have been following it.

          Again, they all estimate. But the monthly data will eventually reflect exactly what the states report to them.

  54. Very interesting that a private (non-commercial) Peak Oil website has 270 ~ comments. Peak Oil must be in vogue again.

    Along the same lines, when Art Berman and David Hughes appear in an article in Bloomberg you know there is trouble.

    RE: discussion w/ Dennis Coyne and Ron Patterson regarding rates of decline: There are numerous factors including net exports (and amounts available to import) that affect decline rates. One factor rules them all and in the darkness binds them: what oil customers can afford.

    – Customers do not earn anything by use of (wasting of) the fuel. Driving the car does not pay for the car, nor does it pay for the fuel, delivery-processing system or the roads. What pays for these things is debt taken on by the drivers, guaranteed by way of their (pitiful, inadequate, discounted) labor.

    – Because customers cannot earn, what matters is what they can borrow; which is a substitute for earning. As it is, there are no real earnings to industry of any kind: all industries are loss-making. We like wasting fuel the same way we like smoking crack, nevertheless, the activity does not pay for itself. Also important is the (relative) health of finance/credit provender.

    – Because of geology, the driller MUST gain proportionately more credit than the customer at all times, without exception. Take some time and think this through because it is vital to understand. There is no way to ‘adjust’ … or for economies to ‘get used’ to the drillers’ demands for funds, the driller must gain more of the available pool of credit from now until eternity (or until the credit system breaks down). Should the customer ever gain a greater proportion of credit (in a magic land), the driller is starved of funds, there is no more oil!

    – This is because all that remains to us is very expensive oil.

    – Because the drillers are Bogarting credit, they are (slowly) bankrupting their customers! Put another way; the drillers are competing with their customers — and their lenders — for funds. This is exactly the same thing that happens within mercantile economies, BTW; the countries bankrupt their customers, then the countries themselves fail (Japan, now).

    – The ‘credit paradox’: credit is technically infinite because it is intangible and cost-free to produce. At the same time, credit is a finite, material resource that is delimited by the credibility of both issuers and borrowers. As Walter Bagehot famously remarked: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone … “ Multiply this by all the world’s bankers.

    – The quantitative limits to credit are real: at any given time there is a finite amount of credit. This does not mean that the amounts are always the same (they vary instant to instant); it means is that the amount of credit at any particular time is all there is; that it is finite. Of any instant’s available credit, a larger and more costly percentage is directed to oil drillers … otherwise there is no oil!

    – It does not matter if the drillers are catching up or falling behind, whatever the color of their queens or archdukes; what matters is the competition for credit with the drillers succeeding at the expense of their customers.

    – Currently, system credibility is at the point of failure, at that point it is possible that the customers credit worthiness is diminished (as they are not credibly solvent), as are their lenders; it is the same with business managers and government administrators.

    – There is no ‘cheap oil’ to fall back on when the expensive fuels are unavailable. When drilling costs and declining ability to meet them intersect, unaffordable fuels will be ‘shut in’, drillers cannot afford to drill and sell for zero- or negative cash flow; the drilling companies will fall bankrupt! Keep in mind, shortages that occur because fuel is un-affordable will be permanent (shortages do not make customers richer).

    – Because our extractive economy has been so successful for so long — 500 + years — we have, a) become complacent and believe in fairies, b) have extracted and destroyed capital needed to provide alternative outcomes, and c) the consequences of economic success are now indistinguishable from consequences of economic failure: another paradox.

    Energy companies cannot magically start producing $40/barrel oil. When such a price appears it will be because half the people in the US have lost their jobs. Coming soon to a suburb near you.

    • Old farmer mac says:

      Hi Steve,

      I can generally follow your arguments but sometimes I have trouble because I can’t tell when you are exaggerating for effect( as when a real estate agent says a property is in the prettiest neighborhood in the world for example) and sometimes because I am not well enough informed.

      I know for instance that governments at all levels are borrowing like mad and I agree with you about the prospect of these debts not being repaid- the odds of that happening are slim to none. I n my opinion the most likely outcome is that most of them will be repaid in part with severely inflated money.Most of the lenders will mostly get back some small fraction of what they lent in terms of buying things such as energy food and medical care.Some of them will get nothing because some of the debts will have to be written off altogether.

      But is it the governments or the citizens as individuals that are piling on the debts ? It is my impression that consumer credit is not a big deal these days in comparison to government debts.

      I do however understand that a bankrupt government means a bankrupt society.I expect to collect my social security for at least a few years and be able to buy something with the electrons deposited in my account by the SS administration. I expect the younger people to ” enjoy” a big negative return on their ” ss investment” meaning in effect that they are holders of bad government debt.

      Are we basically on the same page?

      I will not argue that the ” business as usual banking and finance edifice might collapse almost anytime in terms of the what we have been accustomed to.

      BUT I do not see things going all the way to hell in a hand basket anytime soon. If there is a sudden sharp decline in available energy then I think the various governments will necessarily impose real austerity measures that will be sufficient to maintain essential public services such as water and sewer and keeping the grid lit up- even if doing so requires the implementation of martial law.

      Now to most people in richer western societies at least that would be ” the end of the world as we know it”.But to me personally ”the end” of the world as I know it would be more on the lines of Somalia or the aftermath of a nuclear WWIII.No grid ,no gasoline, virtually no prescription drugs or processed food and no food unless you grow it yourself. No draft animals and no diesel fuel for the tractors.

      ( I keep enough on hand to live as a subsistence farmer for quite a while.It stores well and the price of it goes up faster than interest on money in the bank accumulates.Beans and corn bread will keep you alive and I can grow enough of both without fertilizers or pesticides to feed myself and a couple of old friends.)

      How bad do you expect things to get in terms of blood in the streets and total unemployment and forced austerity?

      Does ” coming soon ” mean six months or six years or sometime in the next couple of decades in terms of your own best guesses or gut instinct?

      • Doug Leighton says:


        Does ”coming soon ” mean six months or six years or sometime in the next couple of decades in terms of your own best guesses or gut instinct?”

        And the answer is: Yes, six months, six years or in the next couple of decades. You should know that!


      • OldTech says:

        “BUT I do not see things going all the way to hell in a hand basket anytime soon. If there is a sudden sharp decline in available energy then I think the various governments will necessarily impose real austerity measures that will be sufficient to maintain essential public services such as water and sewer and keeping the grid lit up- even if doing so requires the implementation of martial law.”

        I agree! Extrapolation of current trends do not take into account ‘intelligent response”. If you really wanted to see what might happen when resources decline I think that it should be “war gamed”. By that I mean that there should be at least two teams that respond to each other as conditions change.

        • There is more likely (there is) a decline in available credit.

          When there is no credit = there is no ‘money’.

          Without credit there is no industry or other large-scale enterprise b/c all of them lose money and require continuous debt subsidy.

          Fuel price @ $15/barrel would be too high because all the customers would be broke (as they were in 1932). However, there is no $15 oil so there would also be an oil shortage! Here, the absence of oil AND credit feeds into each other; the shortage of one reinforces shortages of the other.

          This dynamic occurred during the early 1930’s in the US and in Europe. It’s happening right now. When the Chinese credit bubble deflates, support for current high crude prices will vanish; all that ‘extreme oil’ from hard-to-access sites will be shut in. China’s credit bubble is deflating b/c fuel costs are too high: the Chinese (and others) can pay but only by ruining themselves (current China credit crisis).

          “We’ll subsidize the drillers!” No … because the previous- and current subsidies to drillers have already bankrupted the customers and destroyed credit.

          Fuel shortage in 2014 = lines at the bank instead of lines at the gas station. Those come later.

          BTW: there is no way to stop this self-reinforcing process, once underway it will play out very rapidly = shark fin. This is a consequence not an ‘event’ such as oil embargo in 1973. A consequence = an apple hitting the floor after falling off the table.

          • OldTech says:

            Steve, what I am trying to say is the projections into the future based on current data and assumptions are not reliable. Mac said that governments would respond to keep essential services going and I think this is a likely response.

            What I would like to see is the scenario you and others propose “war gamed” (simulated may be a better term). I am not saying that they are wrong. I am saying that responses to your projected behavior can be made and likely will be made. Furthermore these responses will change the dynamics.

            For example take your statement “When there is no credit = there is no ‘money’”. I agree that this is true theoretically with our monetary system, but I don’t think that it is how it would play out. Sure we could have panic if credit freezes, but I would argue that governments would then become the lender of last resort. This in fact has been happening since 2008.

            So what I would like to see is a scenario described (fleshed out in some detail) and allow multiple teams to react to it in a back a forth manner. For example, for your freezing credit scenario, one team could represent FED and other central bankers, another could represent governments, still another represent cities and states, …

            Think of this as a doomer’s workbench for testing scenarios.

            • Woody says:

              Internally, debt can be defaulted and new money and credit can be created. Wealth and living standards take a big hit but life can go on.

              The problem comes when a commodity or product needs to be imported. Without credit, trade becomes a barter affair and requires fairly balanced trade between countries.

              The question for countries that run persistent trade deficits then becomes, are there enough resources and manufacturing capability to allow the country to become self sufficient?

              Countries that import a large percentage of their food may find that no matter how good their manufacturing is they cannot find enough takers of there products in countries with a food surplus.

              When it comes to oil, exporters who have lost their sovereign wealth funds to debt default will not be too eager to over produce in the future. This alone could cause a bit of a contraction in the oil supply.

              So, to sum up all this rambling, the effects of a financial crises or the financial stress caused by a declining and more expensive oil supply will vary quite a bit from one country to another depending on how they are situated. This scenario already plays out in many smaller countries. The fight to retain the dollar as the world reserve currency is a fight to prevent this scenario from playing out in the developed world.

    • Doug Leighton says:


      “the consequences of economic success are now indistinguishable from consequences of economic failure: another paradox.”

      Sounds like Buddha himself speaking. I like it. Maybe you and Mac should form a Writer’s Club.


  55. Political Economist says:

    Continue with the HL exercises on the world’s top oil producers. We’ve alreadly looked at Saudi Arabia, Russia, US, China, Canada, and Iran.

    Iraq, United Arab Emirates (UAE), and Kuwait are basically in the same class, eaching producing about 3 milllion barrels per day. According to EIA, in 2013, UAE produced 3.2 million barresl per day of crude oil and natural gas liquids, Iraq produced 3.1 million barresl per day, and Kuwait produced 2.8 million barresl per day. But in term of oil equivalent, Iraq produced 156 million tons, UAE produced 155 million tons, and Kuwait produced 153 million tons. I rank Iraq the seventh largest oil producer, UAE the eighth, and Kuwait the ninth.

    There is a large degree of uncertainty about the future of Iraqi oil production due to both geological and geopolitical factors. I just take Iraq’s official oil reserves, which now stand at 20 billion tons. Iraq’s cumulative oil production has been about 5 billion tons. Thus, the implied ultimatley recoverable amount is 25 billion tons.

    Given this assumption, the graph below shows the historical and projected oil production in Iraq. Iraq’s oil production is projected to peak in 2049, with a production level of 241 million tons (about 4.8 millin barrels per day). This is far less than the Iraqi government’s official objective of a future sustained level of production at 9-12 million barrels per day.

  56. Political Economist says:

    For UAE, HL analysis can be applied. The following graph shows the HL analysis for UAE. Linear trend using data for 2001-2013 indicates the ultimately recoverable amount to be about 13 billion tons (less than 5 billion tons have been produced so far). Regression R-square 0.567.

    • Political Economist says:

      The UAE oil production is projected to peak in 2024, with a production level of 162 million tons, only slighlyl higher than UAE’s current oil production.

  57. Political Economist says:

    For Kuwait, I again rely upon the official reserves (14 billion tons). Kuwait’s ultimatley recoverable oil is assumed to be 20 billion tons.

    Kuwait’s oil production is projected to peak in 2036 with a production level of 184 million tons (about 3.3 million barresl per day).

  58. Watcher says:

    Re sweet spots.

    Assays apparently are done from a field regularly. They inform the refinery what to pay.

    The nature of the oil from a field changes over time as different geology is drained. The selection of where to drill in-field is not necessarily a matter of seeking highest likely flow. The decision will be what sort of fractions are likely in location A vs location B. The priciest stuff is where the drill may drill, even if flow rate is lower.

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  60. If canola is grown for fuel, you can grow 131 barrels per acres.

    2500 lbs of canola per acre at 40 percent oil content, you will be able to produce 1000 lbs of canola. Canola weighs 7.6 lbs per gallon, 1000 lbs will be 131 gallons of canola.

    Canadian farmers already use canola in their diesel engines.

    Rudolf Diesel must have done the math and concluded it could be done, so, while the wait for Godot continues, might as well use Diesel’s choice for diesel fuel and that would be biofuels.

    1000 acres will be 131,000 gallons of canola or about 3000 barrels.

    Bio fuel will fill some of the gap. Corn for ethanol is a waste of time, but if everybody is going to drink themselves to death, might as well keep the Everclear flowing.

    100,000,000 acres of canola crop will yield 300,000,000 barrels of canola. Plenty of room in Saskatchewan and Alberta to grow canola. It won’t supply the needs to fly people and goods around, but it will help, Godot might have to delay the arrival time.

    The BNSF and the Union Pacific Railroads are not going to stop hauling coal and, if they have to, will build steam engines and they can provide plenty of power to pull freight cars full of vegetables, apples, oranges, etc, not just coal trains.

    The BNSF hauled 45 thousand carloads of coal and 10,463 oil tanker cars ending week 17.

    Make fuels from coal with coal gasification.

    Can’t stand on one leg nor can you hold your breath.
    Time to save humanity from peak oil doom and gloom.

    • Bruce Turton says:

      So then, if 167 million acres of total farm acreage is used in Canada, and 100 million acres is to go for Canola based biodiesel, that leaves some 67 million acres for the grains, pulses, vegetables, fruit, and food oil seed products. If about 40% of that 167 million farmed acres was now used for Canola, and the oil from that crop is almost all used for vegetable oil now, then we need to increase Canola production on some 33 million acres and add that to the 67 million acres in order to produce fuel. No more oil as food, and a great many acres of current food production devoted to fueling machines.
      And I thought the corn to fuel fiasco was just a little ridiculous!

      • Yes, it is ridiculous to believe that much input would be required to produce oil for machines and forego growing crops for food. However, canola oil has a use as a fuel, formerly known as rapeseed, and is also a good lubricant.

        Farmers in Canada already use canola oil in tractors and diesel engine cars, so it does work as a biofuel. It is a biofuel now and not a foodstuff.

        In the future, it will be necessary and won’t be considered ridiculous.

  61. oops, meant to write 131 gallons per acre, not barrels. Correction there, please.

  62. Dennis Coyne says:

    Hi All,

    New model of C+C-XH, where XH is extra heavy oil from oil sands and Orinoco belt (estimated at about 4 MMb/d in 2013). Note that the decline might be mitigated somewhat as oil sands and Orinoco belt production ramps up, there are predictions of up to 10 MMb/d by 2035 (6 MMb/d from Canada and 4 from Orinoco). Chart below.

    • Political Economist says:

      Dennis, thanks for the update. If you take my projection for Canada (on page 3) literally, Canada will produce about 6 million barrels by 2035. Virtually all of that will be oil sands.

    • Coolreit says:

      Thank you for all your important peak oil charts/models!

  63. Political Economist says:

    Mexico used to be the world’s fourth largest oil producer but now is reduced to the tenth largest.

    The graph below shows the result of Hubbert Linearization analysis for Mexcio. Up to 2013, Mexico produced a cumulative amount of more than 6 billion tons of oil. If a linear trend is fit just over data from 2009 to 2013, the ultimately recoverable amount is indicated to be about 11 billlion tons. Rregression R-square is 0.999.

  64. Political Economist says:

    Mexican oil production peaked in 2004 with a production level of 190 million tons (a daily production of 3.8 million barrels).

    By 2013, Mexican oil production fell to 2.9 million barrels a day. At the current trend, it will fall below 50 million tons or less than 1 million barrels per day by 2050.

  65. Political Economist says:

    Theoretically, Venezuela has the world’s largest oil reserves (47 billion tons, of which 35 billion tons are Orinoco belt extra heavy oil). In fact, Venezuela oil production has been falling in recent years.

    Hubbert Linearization exercise using data from 1975 to 2013 indicades the ultimately recoverable oil to be 24 billion tons. The cumulative production up to 2013 was less than 10 billion tons.

    • Political Economist says:

      Venezuela is still the world’s eleventh largest oil producer.

      The following graph compares the historical and projected Venezuela oil production.

  66. Political Economist says:

    If we exclude the world’s 11 top oil producers, Hubbert Linearization fits the entire rest of the world very well. Linear trend using data from 1987 to 2013 indicates the ultimately recoverable oil from the entire rest of the world to be 86 billion tons. The cumulative production up to 2013 was 49 billion tons.

    Regression R-square is 0.992.

    • Political Economist says:

      Excluding the world’s top 11 producers, the entire rest of the world produced 1.3 billion tons (27 million barrels per day) in 2013, accounting for 31 percent of the world total.

      The World Less Top 11 peaked in 2010 is in clear decline. At the current trend, it could fall to 340 million tons (about 7 million barrels per day) by 2050.

  67. Political Economist says:

    I have finished posting HL analysis for the world’s top 11 producers as well as the rest of the world.

    Tomorrow I’ll add up the projections for all 12 regions and the projection for the world total oil production.

  68. Cóilín Nunan says:

    Russian oil output down for fourth month in a row

    MOSCOW, May 2 (Reuters) – Russian oil output, the world’s largest, slipped by 0.2 percent to 10.54 million barrels per day in April, declining for the fourth month in a row as production from new fields failed to offset a slowdown from mature deposits.

    This is the longest streak of declining monthly output for years and is a negative signal for the state budget, half of whose revenues come from sales of oil and gas.

    Energy Minister Alexander Novak has forecast oil production will be flat or slightly higher this year.

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