NationStates Jolt Archive

Video. (http://www.theoildrum.com/node/2239)

Short. Only a few minutes long from an interview by Bloomberg. (http://www.bloomberg.com/)

Matthew Simmons, chairman of Simmons & Co. International in Houston, talked yesterday with Bloomberg's Rhonda Schaffler about the need to address energy use, his view that global supply has peaked and the likelihood oil prices could reach as much as $300 a barrel. (Source: Bloomberg)

Excerpt:

Q: Tell me how you draw your conclusion that at this point we've hit Peak Oil.

A: If you look at the numbers and you follow what's going on starting with Mexico's giant Cantarell field which is now in a very serious state of decline and then you look at the North Sea and you see just the UK and Norway, it's pretty obvious to me that those three areas alone could actually decline by between 800,000 and 1 million barrels a day in 2007.

That pretty well wipes out almost all the production gains coming onstream and in implicit in that it assumes that everyone else is flat.

So I think basically too many of our oil fields are too old. Too many now are in decline. The Middle East is basically out of capacity. they're some projects that are being worked upon, but most don't hit the market until 2008, 2009 and we're running out of time.

... I am firmly of the belief that over the course of the next year or two, this issue of peak oil will replace global warming as an issue that we're all worrying, debating and talking about.

Simmon's and Co. is the world's largest energy investment bank. His clients include The World Bank, Kerr McGee, Haliburton, Dow Chemical, GE and more of the world's largest corporations and governmental organizations. Over the last four years he has risked his reputation and his enormous list of clients to get the message out that we are in serious trouble. His book, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," is a an analysis of all of Saudi Arabia's key fields and their propuction potentials which he feels have been vastly and purposfully over estimated by the Saudis.

Investment banker Simmons offers a detailed description of the relationship between Saudi Arabia and the U.S and our long-standing dependence upon Saudi oil. With a field-by-field assessment of its key oilfields, he highlights many discrepancies between Saudi Arabia's actual production potential and its seemingly extravagant resource claims. Parts 1 and 2 of the book offer background and context for understanding the technical discussion of Saudi oil fields and the world's energy supplies. Parts 3 and 4 contain analysis of Saudi Arabia's oil and gas industry based on the technical papers published by the Society of Petroleum Engineers. Simmons suggests that when Saudi Arabia and other Middle East producers can no longer meet the world's enormous demand, world leaders and energy specialists must be prepared for the consequences of increased scarcity and higher costs of oil that support our modern society. Without authentication of the Saudi's production sustainability claims, the author recommends review of this critical situation by an international forum. A thought-provoking book.

Here's Simmon's website: http://www.simmonsco-intl.com/

Clienty list: http://www.simmonsco-intl.com/company_clientlist.asp

Simmons knows his shit; I don't know about $300/bbl, but if the situation continues to deteriorate I think $100 by the end of the year isn't out of the question. Judging from the data, we're either pretty damn close to Peak or at it. I think we'll probably see leveling off rather than the start of a decline in the next couple years due to new supply coming online, but I think after that it's probably going to be all downhill from there. Of course, one good thing about Peak Oil is that declining consumption of fossil fuels will do a lot to solve global warming.

Well, time to start saving up for my Prius...

Simmons knows his shit; I don't know about $300/bbl, but if the situation continues to deteriorate I think $100 by the end of the year isn't out of the question. Judging from the data, we're either pretty damn close to Peak or at it. I think we'll probably see leveling off rather than the start of a decline in the next couple years due to new supply coming online, but I think after that it's probably going to be all downhill from there. Of course, one good thing about Peak Oil is that declining consumption of fossil fuels will do a lot to solve global warming.

Well, time to start saving up for my Prius...

Somewhere around 90 barrels of oil go into the production of one car. That Prius is going to get very expensive. Where do you work? Is your job oil dependent? Is it dependent on customers who themselves are oil dependent?

So, Dan...

Wouldn't post-peak oil solve the GHG emissions problem for us?

So, Dan...

Wouldn't post-peak oil solve the GHG emissions problem for us?

Depends on how much we substitute coal. If we substitute a lot of coal it will make the problem exponentially worse.

I think, though, that we won't because we are not ready to and it will probably be too expensive to build the infrastructure necessary to make a coal to liquids industry - or a corn to liquids or soy to liquids or nuclear to transportation industry for that matter - without oil.

And poorer countries (like China) should be in even a less good position to do that. Emissions should collapse as global society, for the most part, abandons small-scale transportation.

Somewhere around 90 barrels of oil go into the production of one car. That Prius is going to get very expensive. Where do you work? Is your job oil dependent? Is it dependent on customers who themselves are oil dependent?

Relatively speaking. I'm going in to finance, most likely commodities.

But you also have to remember that the average car uses a hell of a lot more oil running than it does to make it; if we switched our car production to more efficient vehicles, the savings would be vastly greater than the amount needed to make the car.

Depends on how much we substitute coal. If we substitute a lot of coal it will make the problem exponentially worse.

I think, though, that we won't because we are not ready to and it will probably be too expensive to build the infrastructure necessary to make a coal to liquids industry - or a corn to liquids or soy to liquids or nuclear to transportation industry for that matter - without oil.

That's why you don't do it that way, you ration it and you force people and companies to conserve wherever possible while pouring as much as possible in to alternatives. If the situation gets bad, it will take New-Deal scale construction projects combined with wartime-style rationing of energy to solve this problem. We have a lot of resources we can conserve and a lot of manpower to mobilize.

And poorer countries (like China) should be in even a less good position to do that. Emissions should collapse as global society, for the most part, abandons small-scale transportation.

Small scale transportation? It's large scale transportation that will go. No more winter oranges from Argentina and Chile.

Relatively speaking. I'm going in to finance, most likely commodities.

But you also have to remember that the average car uses a hell of a lot more oil running than it does to make it; if we switched our car production to more efficient vehicles, the savings would be vastly greater than the amount needed to make the car.

Not true. The average car takes about as much oil to produce as it will burn in it's lifetime.

Small scale transportation? It's large scale transportation that will go. No more winter oranges from Argentina and Chile.

I actually don't know about that. Remember that long-distance transportation is a lot more efficient in terms of ton-miles per gallon since the ships run on cheap and easy to produce residual fuel oil, whereas short-distance transportation relies on trucks and other less efficient means of transportation.

Rails and ships are going to do very well while planes and vehicles are going to do pretty badly.

And also remember that about 85% of the oil we use in transportation goes to light-duty vehicles. Everything else is minor compared to the amount wasted in cars and light trucks,

Small scale transportation? It's large scale transportation that will go. No more winter oranges from Argentina and Chile.

He means most people might be unable to afford easy, small-scale transportation in the form of a personal car to carry you around wherever you want whenever you want at the cost of much fuel. Mass transit is going to have to grow in importance in order to compensate that, since by nature it's immensely more energy-efficient than personal transportation.

Not true. The average car takes about as much oil to produce as it will burn in it's lifetime.

Then it's pretty clear that we need to stop relying on so many cars and find ways to cut out as much of the oil for the ones that remain as possible. I mean, if we took the money and resources wasted on cars and put it in to public transportation, we could greatly reduce our dependence on LDVs.

I mean, a barrel of oil used to build a wind turbine, solar panel, bus or train is going to be a lot more useful than one burnt producing another Expedition.

That's why you don't do it that way, you ration it and you force people and companies to conserve wherever possible while pouring as much as possible in to alternatives. If the situation gets bad, it will take New-Deal scale construction projects combined with wartime-style rationing of energy to solve this problem. We have a lot of resources we can conserve and a lot of manpower to mobilize.

If the oil isn't there, you can't "government bond" it into existence. Also, the New Deal was financed by the sale of huge amounts of government debt. Do you think people will be willing to buy that debt in a world with little if any growth potential? If the fed offers me the investment opportunity I won't be buying it.

I actually don't know about that. Remember that long-distance transportation is a lot more efficient in terms of ton-miles per gallon since the ships run on cheap and easy to produce residual fuel oil, whereas short-distance transportation relies on trucks and other less efficient means of transportation.

Rails and ships are going to do very well while planes and vehicles are going to do pretty badly.

And also remember that about 85% of the oil we use in transportation goes to light-duty vehicles. Everything else is minor compared to the amount wasted in cars and light trucks,

Efficiency doesn't matter in the long run. The fact is that sending things long haul is going to cost a lot of money even if the per gallon or per mile cost is lower. It may cost me only $1 a mile to drive to New York and $3 a mile to drive to Hollywood, but that means driving to Hollywood costs $90 and driving to New York costs $3,000.

If the oil isn't there, you can't "government bond" it into existence. Also, the New Deal was financed by the sale of huge amounts of government debt. Do you think people will be willing to buy that debt in a world with little if any growth potential? If the fed offers me the investment opportunity I won't be buying it.

Well, if the choice is between buying the bonds and food shortages, losing electricity or heat, or economic collapse, I would say people are going to buy bonds. Patriotism and peoples' desire for a decent standard of living are powerful motivators.

The point where we would be out of oil is a long time away, and unless we intentionally try to screw ourselves over we'll have enough oil for these kinds of projects. Not to mention the fact that the US produces a pretty significant amount of oil; that can be used first and there's a lot of it for our needs.

Then it's pretty clear that we need to stop relying on so many cars and find ways to cut out as much of the oil for the ones that remain as possible. I mean, if we took the money and resources wasted on cars and put it in to public transportation, we could greatly reduce our dependence on LDVs.

I mean, a barrel of oil used to build a wind turbine, solar panel, bus or train is going to be a lot more useful than one burnt producing another Expedition.

Sure, but we didn't. Now the resource needed to build those things may be going into decline - maybe steep decline - and it may be too late to do it.

Efficiency doesn't matter in the long run. The fact is that sending things long haul is going to cost a lot of money even if the per gallon or per mile cost is lower. It may cost me only $1 a mile to drive to New York and $3 a mile to drive to Hollywood, but that means driving to Hollywood costs $90 and driving to New York costs $3,000.

But there's also the fact that residual oil costs a lot less to produce and is very easy to produce from non-petroleum sources; unlike the fuels used in trucks or planes, it requires next to no refining and it's pretty much just the leftovers from other processes.

It's a lot more energy positive and cheaper than refined products; the advantages are pretty huge and they make it extremely cheap and efficient to ship goods by container ship.

Sure, but we didn't. Now the resource needed to build those things may be going into decline - maybe steep decline - and it may be too late to do it.

No reason to give up, though; it's only going to be too late if we do nothing.

We can do this if we need to; like any other turning point in history, people and societies who refuse to change their habits will decline and collapse, and those that do will survive and thrive after oil.

Well, if the choice is between buying the bonds and food shortages, losing electricity or heat, or economic collapse, I would say people are going to buy bonds. Patriotism and peoples' desire for a decent standard of living are powerful motivators.No, people will buy the food that is there and they'll make do provisionally. When you have very little money and you have a person with some food in front of you and a person with a piece of paper you buy the food - especially when you have no confidence in the piece of paper.

The point where we would be out of oil is a long time away, and unless we intentionally try to screw ourselves over we'll have enough oil for these kinds of projects.based on what numbers? You do realize that the very last drop of oil we produce will have to be divided betwen 6 billion people? The two last drops before that will also have to be divided so basically you'll get 1/3 billionths of a drop and after that 1 6/billionths of a drop and then nothing.

It doesn't matter when the last drop is produced, the point is that our energy base will be in terminal decline so costs will continually rise as people bid higher and higher for an ever decreasing resource. When the last ten barrels are produced before the final nine you'll have to divide that by 6 billion, the final four by 6 billion and so forth.


Not to mention the fact that the US produces a pretty significant amount of oil; that can be used first and there's a lot of it for our needs.
We're in terminal decline and most of our production is in the Gulf Of Mexico. Have a great Summer. :)

http://blog.lewrockwell.com/lewrw/archives/Hurricane%20Isabel2.jpg

But there's also the fact that residual oil costs a lot less to produce and is very easy to produce from non-petroleum sources; unlike the fuels used in trucks or planes, it requires next to no refining and it's pretty much just the leftovers from other processes.

It's a lot more energy positive and cheaper than refined products; the advantages are pretty huge and they make it extremely cheap and efficient to ship goods by container ship.

And regardless of which part of the oil quality column it's on there will be less and less of it and more and more demand for it. You seem to not be able to grasp the concept of PHYSICAL supply limitations. It isn't increased production cost and price that decreases supply. It's decreased supply that causes increased price. The fact is that no matter how expensive you make oil cost you will not make more oil appear on the market. Right now, a Dodo bird will sell for 250 trillion dollars. Now go find one and sell it.

Somewhere around 90 barrels of oil go into the production of one car. That Prius is going to get very expensive. Where do you work? Is your job oil dependent? Is it dependent on customers who themselves are oil dependent?

Everything is oil dependent. $100 a barrel would mean massive extra costs to ship everything.


Look at it this way, from Winchester, VA to Shelbyville, IN we get paid $637.36 to haul a full load. Now tack on some fuel surcharge, at the current rate it's $.25 per mile, double the price of oil and you're in the 50-60 cents per mile range. That adds 50% to the cost of the freight. Imagine a 50% added cost to shipping everything. Prices would jump overnight.

Trains and ships we can power with coal. Cars and planes not so much.

http://img104.imageshack.us/img104/3787/ohshitwf2.png

Trains and ships we can power with coal.Except that we don't have any of those left so we'd need to build a whole new fleet - and not like the fleet we used to have when there were 50 million Americans and the rail necessary to service them existed. We have to build a fleet of train and ships that can carry enough to service 300 million Americans and most of our rail and waterway infrastructure has been torn up or is in disrepair. Cars and planes not so much.yeah...

Except that we don't have any of those left so we'd need to build a whole new fleet - and not like the fleet we used to have when there were 50 million Americans and the rail necessary to service them existed. We have to build a fleet of train and ships that can carry enough to service 300 million Americans and most of our rail and waterway infrastructure has been torn up or is in disrepair.
The reduced efficiency of using coal rather than oil already has me thinking these would end up being luxury products (much as they were in the 19th century), so you don't really need to serve 300 million.

As for the rail infrastructure, all you need to build that is labour.

The ships... well, Japan has a head start on you there.

And regardless of which part of the oil quality column it's on there will be less and less of it and more and more demand for it

Demand isn't going to keep going up; it will level off and fall as prices rise and people start to consume less, replace it, use it more efficiently, or simply can't afford it. There will never be a supply shortfall because demand is always going to be regulated by price; if demand outpaces supply, price rises until demand falls.

You seem to not be able to grasp the concept of PHYSICAL supply limitations. It isn't increased production cost and price that decreases supply. It's decreased supply that causes increased price. The fact is that no matter how expensive you make oil cost you will not make more oil appear on the market. Right now, a Dodo bird will sell for 250 trillion dollars. Now go find one and sell it.

Well, that's not necessarily true. Some oil will be produced from things like coal or oil sands; however, it's not going to be enough to even remotely replace that which is lost because the supply of oil is inelastic.

Prices are going to rise, and demand is going to have to remain constant or fall in order to balance the two.

Demand destruction.

No, people will buy the food that is there and they'll make do provisionally. When you have very little money and you have a person with some food in front of you and a person with a piece of paper you buy the food - especially when you have no confidence in the piece of paper.

The government can simply ration food. We can ration anything we want if it is necessary to retain control over the economy.

based on what numbers? You do realize that the very last drop of oil we produce will have to be divided betwen 6 billion people? The two last drops before that will also have to be divided so basically you'll get 1/3 billionths of a drop and after that 1 6/billionths of a drop and then nothing.

No, it's going to be divided among the people that can afford it. The price of oil, as it goes up, is going to price more and more people out of the market; the first to go are going to be the 4 billion people outside of the developed world. By the time oil runs out, it's only going to be used by a small number of people.

It doesn't matter when the last drop is produced, the point is that our energy base will be in terminal decline so costs will continually rise as people bid higher and higher for an ever decreasing resource. When the last ten barrels are produced before the final nine you'll have to divide that by 6 billion, the final four by 6 billion and so forth.

It's not going to work that way. People are going to get priced out of oil, so the number of people consuming will decline along with the increases in price; there's no way that 5 of those 6 billion people could afford oil at $200/bbl; I'd be surprised if they could afford $100/bbl without drastic economic effects.

The energy base will be in decline, but at the same time so will the people consuming it.

We're in terminal decline and most of our production is in the Gulf Of Mexico. Have a great Summer. :)

http://blog.lewrockwell.com/lewrw/archives/Hurricane%20Isabel2.jpg

We're declining at a pretty slow rate. That'll last us for a while.

It will be a great summer, though...one hurricane would be pretty nasty.

The reduced efficiency of using coal rather than oil already has me thinking these would end up being luxury products (much as they were in the 19th century), so you don't really need to serve 300 million.No, we'll need it for food, manufactured items, to move labor, etc...

As for the rail infrastructure, all you need to build that is labour.Are they building imaginary rail or rail made out of steel, lumber, etc... :confused:

The ships... well, Japan has a head start on you there.

Don't just want to know how they run, I want to know what they are built out of, where the materials necessary to build them come from, how they are transported to the manufacturing plants, etc...

Demand isn't going to keep going up; it will level off and fall as prices rise and people start to consume less, replace it, use it more efficiently, or simply can't afford it. There will never be a supply shortfall because demand is always going to be regulated by price; if demand outpaces supply, price rises until demand falls. Yes. Because people will not be living lives as prosperous as they have become acustomed to and many may simply die.



Well, that's not necessarily true. Some oil will be produced from things like coal or oil sands; however, it's not going to be enough to even remotely replace that which is lost because the supply of oil is inelastic.

Prices are going to rise, and demand is going to have to remain constant or fall in order to balance the two.

Again with the ignoring PHYSICAL supply constraints. Demand will HAVE to fall because there will be less to demand. If the amount supplied falls, then the amount demanded will have to fall - whether we like SUVs or not.

The government can simply ration food. We can ration anything we want if it is necessary to retain control over the economy.



No, it's going to be divided among the people that can afford it. The price of oil, as it goes up, is going to price more and more people out of the market; the first to go are going to be the 4 billion people outside of the developed world. By the time oil runs out, it's only going to be used by a small number of people.



It's not going to work that way. People are going to get priced out of oil, so the number of people consuming will decline along with the increases in price; there's no way that 5 of those 6 billion people could afford oil at $200/bbl; I'd be surprised if they could afford $100/bbl without drastic economic effects.

The energy base will be in decline, but at the same time so will the people consuming it.Now you get it. ;) we're screwed. You've just described a whole new world that we are not even remotely prepared for but will be upon us, if Matt Simmons is correct, in just couple or so years.



We're declining at a pretty slow rate. That'll last us for a while.

It will be a great summer, though...one hurricane would be pretty nasty.

My point was that the Gulf oil production has to make it through this summer without being hit - and the next one and the next one and the next one and the next one and the next one and the next one and the next one...

Simmons position is based only on short term events, and seems to be assuming the middle east is currently functioning at maximum capaicty which is not the case. In fact due to the current low prices of oil, production CUTS were made to stabalize the current price of oil. Based on those two events which simmons outlined, it is impossible to say how high oil may go, and that 300 a barrel is an obsurd amount. While those prices are POSSIBLe, they would only come about with dramatic geopolitical and ecological events (like a very active hurricane season, continued or increased strife in the middle east, or more hard ball tactics by Russia on restricting oil flows). The high prices of the last few years were made by a culmination of events, all of which have subsided (and with them the current price of oil).

Given the new push for alternative sources of oil, another possible low hurricane season year, and if the temperatures in the North east USA (the largest demander of oil and natural gas) remaine moderate, some anyalist have predicted even further slides in the price of oil for the short term (possible below $20 a barrel) While thats probably not likely.. it goes to show, these issues are far more complicated then what Simmons illustrates.

Simmons position is based only on short term events, and seems to be assuming the middle east is currently functioning at maximum capaicty which is not the case.No it is based on long term trends and an exhastive analysis, the most exhaustive ever done, of middle eastern production trends.


In fact due to the current low prices of oil, production CUTS were made to stabalize the current price of oil. Based on those two events which simmons outlined, it is impossible to say how high oil may go, and that 300 a barrel is an obsurd amount. While those prices are POSSIBLe, they would only come about with dramatic geopolitical and ecological events (like a very active hurricane season, continued or increased strife in the middle east, or more hard ball tactics by Russia on restricting oil flows). The high prices of the last few years were made by a culmination of events, all of which have subsided (and with them the current price of oil). the price of oil is back around $60 first of all. Second, you sure place a lot of trust in Middle Eastern governments. You think they have cut production voluntarily? Personaly, and there is a lor of evidence to suggest this, I think Saudi Arabia has cut production because they peaked and are in production collapse.

Given the new push for alternative sources of oil,None of which can make up for an even moderate 5% decline in global oil production. another possible low hurricane season year,Even if the global warming models are wrong, we are due for a 20 year cycle of increased storm activity. and if the temperatures in the North east USA (the largest demander of oil and natural gas) remaine moderate,They are not moderate. We're in the third week of an arctic low temperature system. some anyalist have predicted even further slides in the price of oil for the short term (possible below $20 a barrel) While thats probably not likely.. it goes to show, these issues are far more complicated then what Simmons illustrates.

Simmons is founder and president of the world's largest energy investment bank. You think you know more about the complicatiosn of the energy markets than he does?

Yes. Because people will not be living lives as prosperous as they have become acustomed to and many may simply die.

Many people dying? I doubt it; agriculture's going to get the oil it needs, although seasonality is going to come back for a while and permaculture is going to become a major source of fruits and vegetables.

We may see living standards for many people fall to levels not seen since the Eastern Bloc economies of the 80's? It's entirely possible, even likely if people don't start taking preventative measures.

Not me, though. I know what we're facing and I'm going to plan accordingly.

Now you get it. ;) we're screwed. You've just described a whole new world that we are not even remotely prepared for but will be upon us, if Matt Simmons is correct, in just couple or so years.

Well, we're going to have to do something. Whether willingly or by force, we're going to have to change.

All I hope is that oil prices go up gradually, and keep going up. I'd rather have a stable uptrend of 7-10% per year than have it swing wildly by 20-30% per year.

Again with the ignoring PHYSICAL supply constraints. Demand will HAVE to fall because there will be less to demand. If the amount supplied falls, then the amount demanded will have to fall - whether we like SUVs or not.

I'm not ignoring them, I'm just saying that we can squeeze out some more oil if prices go up. There are some resources we could tap for oil if the price were high enough to justify their production, but they're nowhere near enough to meet our needs.

Many people dying? I doubt it; agriculture's going to get the oil it needs, although seasonality is going to come back for a while and permaculture is going to become a major source of fruits and vegetables. They're already dying, dude. What world do you live in?

http://www.littlemag.com/hunger/pics/raghu.jpg
http://www.denk-mit.info/images/hunger.jpg
http://www.therockalltimes.co.uk/2002/05/13/hunger.jpg
Just because it's not happening here now doesn't mean it can't. Most of the world is desperately poor.

We may see living standards for many people fall to levels not seen since the Eastern Bloc economies of the 80's? It's entirely possible, even likely if people don't start taking preventative measures.Agreed. And people are doing nothing.

Not me, though. I know what we're facing and I'm going to plan accordingly.

By getting a career in finance? Good luck with that.

Well, we're going to have to do something. Whether willingly or by force, we're going to have to change.

All I hope is that oil prices go up gradually, and keep going up. I'd rather have a stable uptrend of 7-10% per year than have it swing wildly by 20-30% per year.

Dude, oil prices make 7%-10% swings in one day, much less a year, and the shit hasn't even hit the fan yet.

Dude, oil prices make 7%-10% swings in one day, much less a year, and the shit hasn't even hit the fan yet.

I'm talking year over year; oil prices might swing by that much in a day, but the overall trend ultimately smoothes out to a more stable rate of change.

No it is based on long term trends and an exhastive analysis, the most exhaustive ever done, of middle eastern production trends.


the price of oil is back around $60 first of all. Second, you sure place a lot of trust in Middle Eastern governments. You think they have cut production voluntarily? Personaly, and there is a lor of evidence to suggest this, I think Saudi Arabia has cut production because they peaked and are in production collapse.

None of which can make up for an even moderate 5% decline in global oil production. Even if the global warming models are wrong, we are due for a 20 year cycle of increased storm activity. They are not moderate. We're in the third week of an arctic low temperature system.

Simmons is founder and president of the world's largest energy investment bank. You think you know more about the complicatiosn of the energy markets than he does?

I'd like to see the lor of evidence suggestiong saudi arabias production collapse (more like they are trying to reach the 60 dollar a barrel price target they set out for 2 months ago) 60 a barrell is still a far cry from 75.

And yes, cold temperatures in the last few weeks have come.. but only after following among the warmest temperatures on record for the north east for over 2 months... only time will tell if the cold temperatures will hold for the rest of the season

Im sure he does know his stuff.. but he does after all work for an investment bank... whose "research" is often based on their current positions in their markets. 6 months ago in the height of the energy cruch people were screaming 400 a barrel possible... 2 months ago, they said 20 a barrel.

I'd like to see the lor of evidence suggestiong saudi arabias production collapse (more like they are trying to reach the 60 dollar a barrel price target they set out for 2 months ago)Are they cutting production because they want to support prices or are they cutting production because they have gone into aggressive decline and can't keep up production rates? Supporting prices doesn't make sense because if you cut too much you have less to sell at higher prices. Saudi Arabia has a history of cheating on the other side, selling more than it agrees to to take advantage of high prices. In this case they are cutting more than agreed to - maybe because they are running out of oil. If they are, hold onto your hats because we're in the shit now.

FUTURES MOVERS
Crude gains on report Saudis will cut output
Natural-gas rallies near a one-week high on bets for big supply decline
PrintE-mailDisable live quotesRSSDigg itDel.icio.usBy Myra P. Saefong & Ciara Linnane, MarketWatch
Last Update: 11:03 AM ET Jan 30, 2007


SAN FRANCISCO (MarketWatch) - Crude-oil futures rose Tuesday morning after a report said Saudi Arabia plans to cut output by 158,000 barrels a day starting Thursday, and that the kingdom has cut almost double the amount it agreed on previously.
At the same time, natural-gas futures rallied as much as 5% as the March contract recovered from the previous session's weakness to trade near a one-week high.
Crude for March delivery was trading up 89 cents at $54.90 a barrel on the New York Mercantile Exchange. On Monday, the contract lost 3% of its value as traders questioned OPEC's commitment to the agreed-upon output cuts.
February reformulated gasoline futures were up 2.9 cents at $1.47 a gallon and February heating oil futures rose 1.81 cents to $1.567 a gallon.
Crude prices moved higher Tuesday after the Wall Street Journal reported that Saudi Arabia, the world's biggest oil producer, has cut production by one million barrels a day in the last six months. The amount is almost double the amount Saudi Arabia had agreed to cut at meetings of the Organization of Petroleum Exporting Countries in October and December.
The Saudi cut is seen as an aggressive move to keep the price of the U.S. benchmark crude above $55 a barrel, the newspaper reported Tuesday in its online edition, quoting Roger Diwan, an analyst at PFC Energy, a Washington industry consultancy. See Wall Street Journal report (subscription required).
The report comes as traders try to figure out whether the other members of the cartel have actually cut production as agreed - OPEC members often produce more oil than they have pledged. The cartel's members, excluding Iraq, were producing 26.9 million barrels of oil per day in December, according to a U.S. Energy Department estimate. The total cuts they agreed to would reduce output to 25.8 million barrels, starting Feb. 1.
The Saudis have been saying that they "were happy with the price of oil and that $50 a barrel was good for consuming countries, and good for them as well," said Phil Flynn, a senior analyst at Alaron Trading, in e-mail commentary.
But "the production cuts the Saudis have already made, more than likely, will drive the price of oil higher than $50 a barrel," he said.
Meanwhile, news reports over the weekend suggested that Nigeria's oil exports will reach their highest level in 14 months in March, offsetting some of the tension raised by increased kidnappings of foreign oil industry workers in the oil-rich Niger Delta region.
Weather support
Cold temperatures across the U.S. are providing further support for oil prices. The National Weather Service is forecasting below-normal temperatures in the Northeast and Midwest for the next 10 days.
Traders will look to the release Wednesday of weekly data on supplies of oil and its products, for signs that cold temperatures are having an impact of inventories, which remain at above-average levels for this time of year.
"The cold weather we are having in the U.S. of late must be accompanied by some draws in inventories in order for this combination to have some impact on prices," said Edward Meir, analyst at Man Financial. "Although last week's market reaction failed miserably on this count when prices rose despite higher builds, we don't think bulls should test the market's forbearance in this respect two weeks in a row."
Analysts at Wachovia Corp. are expecting the Energy Department to report that crude supplies rose by 2 million barrels for the week ended Jan. 26, marking a third consecutive week of higher inventories.
The analysts also expect gasoline supplies to be up by 3 million barrels. But distillate inventories likely fell by 1 million barrels, they said.
Analysts at Fimat USA predict a climb of 280,000 barrels for crude supplies and a rise of 1.8 million barrels for gasoline inventories, but a decline of 2.5 million for distillates.
Natural-gas prices rally
Natural-gas futures rose sharply, recovering from Monday's contract expiration-related weakness.
March natural gas rose 4.7%, or 32.3 cents, to $7.26 per million British thermal units on its first full trading day as a front-month contract. It touched $7.33 earlier, its highest intraday level since Jan. 24.
The February contract expired at Monday's closing, down 3.6% for the session.
"There's no long-term concern there will be a shortage in heating season," said Michael Fitzpatrick, an analyst at Fimat. But "there is a pattern of intense cold over the Midwest and Northeast for the next 6 to 10 days, which will pull down storage."
"Cold to come is finite, and there should be sufficient material to cover it," he said.
Still, early forecasts for Thursday's Energy Department update on natural-gas supplies call for a draw of 200 billion to 210 billion cubic feet, he said. And next week "might see similar numbers ... so the market may take some support from this fact."
Memories in the market of "an early heat wave that ate up a particularly large surplus," should also be fresh, he said, and that's "starting to make us believe that $6 may be safe."
In equities, benchmarks tracking oil-related shares moved higher to reflect the strength in the energy futures. The Oil Service Index ($OSX : Philadelphia Oil Service Sector Index
News , chart, profile, more
Last: 192.07+3.88+2.06%

Myra P. Saefong is a reporter for MarketWatch in San Francisco.
Ciara Linnane is markets editor for MarketWatch in New York.


http://www.marketwatch.com/News/Story/Story.aspx?guid={86F52A6E-05E2-480F-AB7B-0F6513C32ED1}&siteid=mktw&dist=nbk[/quote]

60 a barrell is still a far cry from 75.yet still 600% more expensive than it was in 1998 and 400% more expensive than it was in 2003.

But let's ee how much we trust the Saudi's, okay?

Here's the history of their reported oil reserve. Remember, the last time there was an independent audit of their fields was in the late 70s when it was determined that they had about 117 billion barrels of oil in the ground. Also remember that in teh mid 80s OPEC put in new rules that would allow a country to increase it's production based on it's reported reserves. The result was a graph that looks like this:

http://www.kci-com.com/ezine_images/reserves.jpg
One has to wonder where all that new oil that nearly doubled their reserves in the 80's came from and at an average of 8 million barrels/day for the last twenty years one has to wonder why their reserves haven't depleted. Everywhere else in the world reserves seem to drop, but in Saudi Arabia and the other Arab OPEC states there seems to be a sort of magical fearie who comes along at night and refills their oil fields.

They're lying. They're almost certainly going into production collapse and if that happens look for $200/barrle oil by the end of the year and $8 gasoline here in NA when it's available at all. So much for switch grass and cellulosic ethanol. Hope we're ready to produce 8 million barrels/day of it in the next four or five years and I hope you're all ready to go buy a new car.

It's also not just Saudi fields, either.

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.


The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.
Mexico made up for some of the field's decline. Mexico's overall oil output fell to just below three million barrels a day in December, down from almost 3.4 million barrels at the start of the year. It marked Mexico's lowest rate of oil output since 2000.

Mexico's troubles at Cantarell mirror the larger problems in the global oil market. Many of the world's biggest fields are old and face decline, which can be sharp and sudden. Like other big producers, Mexico is struggling to make up the difference because new big fields are in harder-to-reach places like the deep waters of the Gulf of Mexico.

The field's decline is expected to continue, if not worsen, this year, according to most estimates. That will subtract valuable oil from the world market, which is under pressure from rising demand by growing economies like China and India. It also means less oil headed to the U.S. from Mexico, which has long relied on Mexico as one of its top-three oil suppliers.

"This is bad news for Mexico. The field is declining faster than even the government's pessimistic scenarios," says David Shields, an oil industry consultant in Mexico City who has been warning about Cantarell's collapse for the past two years.

The decline is especially worrisome for Mexico's new President Felipe Calderon, who won a narrow victory in last year's election that his main opponent didn't accept, causing brief political unrest. Any major decline in output or prices will force him to cut government spending, a politically unpopular move. Growth in Mexico's economy is already expected to slow this year thanks to a U.S. slowdown.

Mexico's declining production also will raise the pressure on Mr. Calderon to crack open the country's closed energy market to allow private investors to help Pemex find new oil deposits. But the former energy minister will have a tough time convincing an opposition-dominated Congress to rewrite Mexico's Constitution. The country's oil expropriation of 1938 is part of Mexico's self-image.

A year ago, The Wall Street Journal published an internal Pemex study that reviewed possible scenarios at Cantarell. The study's best-case scenario forecast Cantarell's production would fall to 1.54 million barrels a day by the end of last year -- almost exactly what happened.

At the time, top Pemex officials disputed the report and said the study's scenario represented a "do-nothing" or "worst-case" approach that didn't take into account maintenance at the field. Pemex predicted that Cantarell production would only drop to 1.87 million barrels a day by December and that overall output at the company would actually grow to 3.42 million barrels a day.

Since then, Pemex has said it can offset declines at Cantarell with new production from other fields.

Mexico's growing economy is demanding more fuel each year, which is expected to translate to even lower oil exports. Last year, Mexico's daily average oil exports fell to 1.79 million barrels a day from 1.82 million the previous year. Pemex says it expects daily exports to fall to an average 1.65 million barrels this year.

But some analysts say that is too optimistic. December's daily exports were a meager 1.53 million barrels. While that figure may have been affected by bad weather that closed some ports, it was already well below Pemex's estimates for this year.

Based on the state company's track record so far at Cantarell, including its current rates of recovering the oil that remains in the field, Mr. Shields expects the field's output to drop another 600,000 barrels a day by the end of this year. He says that Pemex will likely increase output by 200,000 barrels a day at other fields -- leaving the country with a net decline of 400,000 barrels a day by year's end and daily exports of less than 1.4 million barrels.

None of this is welcome news in a country that relies on oil exports for some 37% of government revenue. So far, relatively high oil prices have kept the country from feeling the effects of lower output. But prices could continue a recent drop, adding to Mexico's woes from a production shortfall. This year's Mexican budget is based on Pemex's official production targets as well as a relatively high oil price -- about $50 on the world market.
http://www.rigzone.com/news/article.asp?a_id=40538
and

KUWAIT: It was an incredible revelation last week that the second largest oil field in the world is exhausted and past its peak output. Yet that is what the Kuwait Oil Company revealed about its Burgan field. The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years of life, Chairman Farouk Al-Zanki told Bloomberg. He said that engineers had tried to maintain 1.9 million barrels per day but that 1.7 million is the optimum rate. Kuwait will now spend some $3 million a year for the next year to boost output and exports from other fields.

However, it is surely a landmark moment when the world's second largest oil field begins to run dry. For Burgan has been pumping oil for almost 60 years and accounts for more than half of Kuwait's proven oil reserves. This is also not what forecasters are currently assuming.
Last week the International Energy Agency's report said output from the Greater Burgan area will be 1.64 million barrels a day in 2020 and 1.53 million barrels per day in 2030. Is this now a realistic scenario?
The news about the Burgan oil field also lends credence to the controversial opinions of investment banker and geologist Matthew Simmons. His book 'Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' claims that ageing Saudi oil fields also face serious production falls.
The implications for the global economy are indeed serious. If the world oil supply begins to run dry then the upward pressure on oil prices will be inexorable. For the oil producers this will come as a compensation for declining output, and cushion them against an economic collapse.
However, the oil consumers then face a major energy crisis. Industrialized economies are still far too dependent on oil. And the pricing mechanism of declining oil reserves will press them into further diversification of energy supplies, particularly nuclear, wind and solar power.
All this was foreshadowed in the energy crisis of the late 1970s when a serious inflection in oil supply by the year 2000 was clearly forecast. How ironic that those earlier forecasts now look correct, while more modern and recent forecasts begin to look over optimistic and out-of-date with geological reality.
Nobody can change the geology, and forces of nature that laid down reserves of oil and gas over millions and millions of years. Could it be that we have been blinded by technological advances into thinking that there is some way to beat nature?
The natural world has an uncanny ability to hit back at the arrogance of man, and perhaps a reassessment of reality at this point is called for, rather than a reliance on oil statistics that may owe more to political manoeuvring than geological facts. - AME Info FZ LLC.



And yes, cold temperatures in the last few weeks have come.. but only after following among the warmest temperatures on record for the north east for over 2 months... only time will tell if the cold temperatures will hold for the rest of the season

Im sure he does know his stuff.. but he does after all work for an investment bank... whose "research" is often based on their current positions in their markets. 6 months ago in the height of the energy cruch people were screaming 400 a barrel possible... 2 months ago, they said 20 a barrel.[/QUOTE]

http://www.kuwaittimes.net/localnews.asp?dismode=article&artid=37595069

Seems like the whole world - the media, the leader, the people etc are in denial about the looming and impending oil crisis. Our response seems to be "lalalalalalallalalalalalaalla i am not listening i am going to continue living the same way lalalalalalalalala"

Seems like the whole world - the media, the leader, the people etc are in denial about the looming and impending oil crisis. Our response seems to be "lalalalalalallalalalalalaalla i am not listening i am going to continue living the same way lalalalalalalalala"

and in a year it's all they'll think about...

...well...that about ends the final last hope I had of Peak Oil not coming about before I was in my forties or so. If Matt Simmons is saying it, it's happening, from what I can see. I'm sorry Vetalia, but while normally I would be listening to your hopeful views, I'm afraid Dan's right about all of this.

Of course, I still don't know what I'm going to do. I'm still somewhat of a fat useless lump at the moment, spending the last month and a half since I lost my last job playing computer games. Hell, I even spent money recently on a new monitor. (Sure it saves money in the long run on power due to less power consumption than my CRT, but still...) What I suppose I should do is study up on information like how to grow useful food producing plants on my own, how to hunt, ect, because that's the only way I see myself being able to subsist once the shit, to quote Dan, hits the fan. I'm not exactly in the best area to do that either: while hunting is quite good for Colorado, what with our substantial elk and deer population, growing food-producing plants is not anywhere near as easy. We've been basically frozen in snow almost constantly since mid-December this year and there's still no sign of that letting up. Unless I can somehow build a greenhouse and keep it heated for the wintertime I'll have some serious problems along this line.

Of course, that's still the be all and end all of ultimate bad scenarios, which I still am not too certain will happen. But it will still be worthwhile to develop these skills anyway. They can't hurt, eh?

If anyone from the UK is reading this I suggest you sign this petition (http://petitions.pm.gov.uk/peakoil/) now.

If anyone from the UK is reading this I suggest you sign this petition (http://petitions.pm.gov.uk/peakoil/) now.
Nah, that would requite the government doing something unrealistic like taking the people they governs views into account.