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Peak Oil hits the New York Times.

by ericy Sat Aug 20th, 2005 at 11:32:26 PM EST

There is a good article in the NYT this morning.  In the magazine section.


The author is Peter Maass, who is in the process of writing a book on the subject.  He gives good mention of Matt Simmons too.  He has the opportunity to ask Saudi officials about Peak Oil, and the Saudis seem to be somewhat sensitive about the issue.

''You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia,'' he said. ''The kingdom and Ghawar field are not the problem. That misses the whole point. The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You're leaping by two million to three million a year, and if you have to cover declines, that's another four to five million.'' In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day -- at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. ''That's like a whole new Saudi Arabia every couple of years,'' Husseini said. ''It can't be done indefinitely. It's not sustainable.''

I suspect you need to register if you haven't already in order to read the article.  If you don't feel like registering, use www.bugmenot.com to bypass this nonsense.

But price jumping to $60-80 will put a serious crimp in that 3 MMBD/year growth rate.  Big SUV sales are already getting crushed.  

I think oil price will hit $40 before $100 (just a dip before the next leg up), but we will be at $100 in the next 1-5 years.  That price level got us to create CAFE standards and push energy conservation in 1980 and will again.  Maybe Jimmy Carter can get out the sweater for old time's sake.

by HiD on Sun Aug 21st, 2005 at 06:02:39 AM EST

Demand for new SUVs may be crushed, but the cars have an engineering lifetime of 10-15 years.  The more well-off can afford to dump the things in favor of a more fuel efficient car, but then what happens to the SUV?  If they keep the thing parked in the driveway then it is't a big deal, but if they sell it, then some other poor soul is stuck with it.

In the case where the SUV was leased, then the car reverts to some subsidiary of the manufacturer, and they will want to push the thing back out on the market.

by ericy on Sun Aug 21st, 2005 at 06:27:35 AM EST
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They will be parked and replaced.  Or bought dirt cheap by people like me that only drive 5K miles/yr such that MPG econs really don't matter all that much.  Either way, the economic hit has already happened.  You can either try to sell a gas hog for the sweet FA it will bring or drive it until the gasoline econs get you.

If you drive 25K miles/yr, dumping a 16 MPG pig for a 30 MPG vehicle saves you 730 gallons/yr or $2200 at $3/gallon and prob a bit more on insurance/tag for smaller vehicle.  $200/mo is a decent motivator for people to just go ahead and realize the loss on the big pigs and move on.

Have you seen how cheaply the car companies are dumping new production on the market?   I finally broke down and bought a new truck when the AC died on the old one.  I had been holding out hoping someone would make a hybrid light truck. Got a  Nissan Frontier with 4 cyl and a stick (26 MPG with air on at all times -- damn hot here in summer).  Only cost $13.5K brand new.  Only the second new car I've ever bought but I couldn't find a used one as cheap as new once you factored in the price of the miles already driven.

by HiD on Sun Aug 21st, 2005 at 06:45:08 AM EST
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http://ogj.pennnet.com/articles/article_display.cfm?Section=ONART&C=GenIn&ARTICLE_ID=234882& amp;p=7

Article from OGJ (bible of petroleum industry) stating that US deliveries of petroleum in July were down 3% due to high prices....

by HiD on Sun Aug 21st, 2005 at 07:17:58 AM EST
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The big news in this article is his interview with Sadad al-Husseini, who recently retired as Aramco's top executive for exploration and production.  Dr. al-Husseini is a geologist, and his predictions for Saudi production have been considerably less optimistic than the oil minister's.  Nevertheless, Dr. al-Husseini said that Saudi Arabia could sustain a peak rate of 12.5 Million barrels per day (Mbpd).  In contrast, Matthew Simmons thinks that they might not be able to increase production much beyond their current level of 9.5 Mbpd.

But Dr. al-Husseini and others foresee serious difficulties at rates of 15 Mbpd or greater,

"You could go to 15, but that's when the questions of depletion rate, reservoir management and damaging the fields come into play," says Nawaf Obaid, a Saudi oil and security analyst ... "There is an understanding across the board within the kingdom, in the highest spheres, that if you're going to 15, you'll hit 15, but there will be considerable risks . . . of a steep decline curve that Aramco will not be able to do anything about."

by corncam on Sun Aug 21st, 2005 at 02:42:57 PM EST
I'd trust him more than Simmons.  He's retired and not trying to sell books!

Also fits with what the STEM companies were saying/doing in 1980.  Target for Saudi was about 15 MMBD.

STEM = Socal(Chevron),Texaco,Exxon,Mobil -- the Aramco four.

by HiD on Sun Aug 21st, 2005 at 07:04:15 PM EST
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Well, the main point is that no one seriously believes that Saudia Arabia can produce more than 20 Mbpd at any time in the futuure.

And if Saudia Arabia cannot produce at that level, then world supply and demand will be out of balance by 2020, even with very optimistic assumptions about depletion rates.

by corncam on Sun Aug 21st, 2005 at 10:22:08 PM EST
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not necessarily. (and not at all in fact as you cannot have more demand than supply by simple mass balance the piddley amounts in the SPR and european storage don't give you much cushion).

Price will make a big difference in 2010.  These demand growth estimates assume oil demand is inelastic.  It isn't over a 5 year period.

Go back and look at a world demand curve from 1970 to 1990.  In 1979 the curve (when extrapolated) indicated 120+ MMBD demand by now.  Didn't happen.  This current price step change and the soon to come leg up to $100 crude will make a big difference.

by HiD on Mon Aug 22nd, 2005 at 02:18:09 AM EST
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In the 70s/80s you had the easy fix os switching industrial use and power generation away from fuel. THAT's what made the biggest contribution to lower oil consumption. Better mileage and changing driving habits played a smaller part, after a lot of pain. Now the whole demand reduction will need to come from the drivers. it's going to require A LOT MORE pain.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Aug 22nd, 2005 at 03:05:10 AM EST
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It will be ugly; just like taking a toy away from a spoiled kid.  It's not all that hard, but rough on the eardrums.  Is it really all that painful to drive a 60 MPG glorified golf cart 15 miles to work instead of a Lincoln Navigator?  Not if everyone else has to also and no one laughs at you.

US transportation use is still huge and mostly wasted.  
DOE data show US demand at 7.4 MMBD in 1978, 6.5 in 1982 and 9.1 in 2004.  We'll be up to roughly 9.3 this year.  So the last price shock trimmed 10-15% very quickly but then the price crashed right back down.  We've since increased demand by 40-50% even with greatly improved technology available.  We're pigs.  Data at:

Last week's DOE data show 9.8 MMBD mogas production +imports.  That's 12%ish of the entire world's crude production for just 5% of the world's population....  Check any traffic jam.  90% of the cars are single occupant.  Time for reality to bite the American consumer in the ass.

We can easily shave US use in half in 5 years if we have to.  We won't like the price or the laws that motivate people to do it, but it can be done. Most people are just too damn lazy to car pool unless they have to.  Up until now, the variable cost of driving alone was small beer.  A 25 mile commute or 50 miles/day at 20 MPG and $1.50/gallon was just $3.75 in variable cost.  Less than the Starbucks latte.  The cost of the car itself has never been a factor in most people's commuting decision.  You have to have a car or you just aren't a real 'murican.

We all know we can have cars that get 60 MPG.  We just don't like them (your penis might shrink you know) and could afford to humor ourselves. I still lust for a Ferrari 456 with it's 12 MPG--one of my Wall Street buds just dropped $50K for hybrid Lexus SUV that only gets 25 MPG, but it has neck snapping acceleration.  But he makes 5 big ones a year and could care less what gas costs.  When the price of gas or rationing limits us to real transportation needs instead of rolling Viagra, we can cut oil use way back.

The first two years we lived in London, we used the bus/tube almost exclusively.  Didn't even own a car and it wasn't like we couldn't afford one.  My old man took the bus to work in the 60's because he couldn't afford the cost of parking/gas/2nd car for mom.  Welcome back to reality USA.

by HiD on Mon Aug 22nd, 2005 at 05:10:42 AM EST
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I love the line "a deep decline curve that Aramco will not be able to do anything about."

The understated arrogance, just no mystery how this came about.

"The end of all intelligent analysis is to clear the way for synthesis." H.G. Wells "It's not dark yet, but it's getting there." Bob Dylan

by Captain Future (captainfuture is at sbcglobal dot net) on Sun Aug 21st, 2005 at 09:38:14 PM EST
This same story was discussed at the energy industry blog The Oil Drum.  They had a pretty good comments section.
by corncam on Mon Aug 22nd, 2005 at 02:07:24 PM EST

Yes, I just found it myself over the weekend.  They just switched over to Scoop too...
by ericy on Mon Aug 22nd, 2005 at 09:09:36 PM EST
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