Peak Oil- what it is and how it will impact your life

We're all "Peakists" Now

from;

http://www.davidstrahan.com/blog/?p=42

We are all peakists now - Schlesinger
Posted on Monday, September 17th, 2007

Former US Energy Secretary Dr James Schlesinger today claimed that the intellectual arguments over peak oil had been won, and that in effect ‘we are all peakists now’. In the keynote speech at the first day of an oil depletion conference hosted by the Association for the Study of Peak Oil in Cork, Schlesinger said that oil industry executives now privately concede that the world faces an imminent oil production peak, and argued that a recent report by the US oil industry grouping the National Petroleum Council constituted "a backdoor admission that in the next decade or two we face a moment of truth".

In a wide-ranging interview with Lastoilshock.com, Dr Schlesinger - who was also Defence Secretary and CIA Director - explains why he thinks "the battle is over, the peakists have won", and discusses the delusions of US energy policy, Iraq, Iran and $100 oil.

Hear the interview with Dr James Schlesinger

 

Re: Peak Oil; what it is and how it will impact your life

How can it be that the howling about the price of gas continues? How can a congressional (or any other set of hearings) possible repeal the laws of supply and demand? Or have I missed something somewhere along the last umpteen years since my formal education ended? Ye gods and little fishes --

 

Re: Peak Oil; what it is and how it will impact your life

September 19, 2007​

From Greenspan to Kissinger
Oil Warriors
By ROBERT WEISSMAN

Alan Greenspan had acknowledged what is blindingly obvious to those who live in the reality-based world: The Iraq War was largely about oil.

Meanwhile, Henry Kissinger says in an op-ed in Sunday's Washington Post that control over oil is the key issue that should determine whether the U.S. undertakes military action against Iran.

These statements would not be remarkable, but for the effort of a broad swath of the U.S. political establishment to deny the central role of oil in U.S. involvement in the Middle East.

Greenspan's remarks, appearing first in his just-published memoirs, are eyebrow-raising for their directness:

"Whatever their publicized angst over Saddam Hussein's 'weapons of mass destruction,' American and British authorities were also concerned about violence in the area that harbors a resource indispensable for the functioning of the world economy. I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

His follow-up remarks have been even more direct. "I thought the issue of weapons of mass destruction as the excuse was utterly beside the point," he told the Guardian.
Greenspan also tells the Washington Post's Bob Woodward that he actively lobbied the White House to remove Saddam Hussein for the express purpose of protecting Western control over global oil supplies.

"I'm saying taking Saddam out was essential," Greenspan said. But, writes Woodward, Greenspan "added that he was not implying that the war was an oil grab."
"No, no, no," he said. Getting rid of Hussein achieved the purpose of "making certain that the existing system [of oil markets] continues to work, frankly, until we find other [energy supplies], which ultimately we will."

There's every reason to credit this view. U.S. oil companies surely have designs on Iraqi oil, and were concerned about inroads by French and other firms under Saddam. But the top U.S. geopolitical concern is making sure the oil remains in the hands of those who will cooperate with Western economies.

Henry Kissinger echoes this view in his op-ed. "Iran has legitimate aspirations that need to be respected," he writes -- but those legitimate aspirations do not include control over the oil that the United States and other industrial countries need.

"An Iran that practices subversion and seeks regional hegemony -- which appears to be the current trend -- must be faced with lines it will not be permitted to cross. The industrial nations cannot accept radical forces dominating a region on which their economies depend, and the acquisition of nuclear weapons by Iran is incompatible with international security."

Note that Kissinger prioritizes Iranian (or "radical") control over regional oil supplies over concern about the country acquiring nuclear weapons.

One might reasonably suggest that Greenspan and Kissinger are only pointing out the obvious. (Kissinger himself refers to his concerns about Iran as "truisms.")
But these claims have not been accepted as obvious in U.S. political life.

The Iraq was "is not about oil" became a mantra among the pro-war crowd in the run-up to the commencement of hostilities and in the following months. A small sampling --

Said President Bush: The idea that the United States covets Iraqi oil fields is a "wrong impression." "I have a deep desire for peace. That's what I have a desire for. And freedom for the Iraqi people. See, I don't like a system where people are repressed through torture and murder in order to keep a dictator in place. It troubles me deeply. And so the Iraqi people must hear this loud and clear, that this country never has any intention to conquer anybody."

Condoleeza Rice, in response to the proposition, "if Saddam's primary export or natural resource was olive oil rather than oil, we would not be going through this situation," said: "This cannot be further from the truth. He is a threat to his neighbors. He's a threat to American security interest. That is what the president has in mind." She continued: "This is not about oil."

Colin Powell: "This is not about oil; this is about a tyrant, a dictator, who is developing weapons of mass destruction to use against the Arab populations."
Donald Rumsfeld: "It's not about oil and it's not about religion."

White House spokesperson Ari Fleischer on the U.S. desire to access Iraqi oil fields: "there's just nothing to it."

Coalition Provisional Authority Paul Bremer: "I have heard that allegation and I simply reject it."

General John Abizaid, Combatant Commander, Central Command, "It's not about oil."

Energy Secretary Spencer Abraham: "It was not about oil."

"It's not about the oil," the Financial Times reported Richard Perle shouting at a parking attendant in frustration.

Australian Treasurer Peter Costello: "This is not about oil."

Former Secretary of State Lawrence Eagleburger: "The only thing I can tell you is this war is not about oil."

Jack Straw, British Foreign Secretary: "This is not about oil. This is about international peace and security."

Utah Republican Senator Bob Bennett: "This is not about oil. That was very clear. This is about America, and America's position in the world, as the upholder of liberty for the oppressed."

And Washington Post columnist Richard Cohen joined war-monger Richard Perle in calling Representative Dennis Kucinich a "liar" (or at very least a "fool"), because Kucinich suggested the war might be motivated in part by a U.S. interest in Iraqi oil.

What lessons are to be drawn from the Greenspan-Kissinger revelations, other than that political leaders routinely lie or engage in mass self-delusion?

Controlling the U.S. war machine will require ending the U.S. addiction to oil -- not just foreign oil, but oil. There are of course other reasons that ending reliance on fossil fuels is imperative and of the greatest urgency.
More and more people are making the connections -- but there's no outpouring in the streets to overcome the entrenched economic interests that seek to maintain the petro-military nexus.

 

Re: Peak Oil; what it is and how it will impact your life

This is a long read but very thought provoking.


Solving Fermi's Paradox

One of the besetting sins of today’s intellectual climate is the habit of overspecialization. Too often, people involved in one field get wrapped up in that field’s debates and miss the fact that the universe is not neatly divided into watertight compartments. With this excuse, if any is needed, I want to shift the ground of The Archdruid Report’s discussion a bit and talk about Fermi’s paradox.

First proposed by nuclear physicist Enrico Fermi in 1950, this points out that there’s a serious mismatch between our faith in technological progress and the universe our telescopes and satellites reveal to us. Our galaxy is around 13 billion years old, and contains something close to 400 billion stars. There’s a lot of debate around how many of those stars have planets, how many of those planets are capable of supporting life, and what might or might not trigger the evolutionary process that leads to intelligent, tool-using life forms, but most estimates grant that there are probably thousands or millions of inhabited planets out there.

Fermi pointed out that an intelligent species that developed the sort of technology we have today, and kept on progressing, could be expected eventually to work out a way to travel from one star system to another; they would also leave traces that would be detectable from earth. Even if interstellar travel proved to be slow and difficult, a species that developed starflight technology could colonize the entire galaxy in a few tens of millions of years – in other words, in a tiny fraction of the time the galaxy has been around. Given 400 billion chances to evolve a species capable of inventing interstellar travel, and 13 billion years to roll the dice, the chances are dizzyingly high that if it’s possible at all, at least one species would have managed the trick long before we came around, and it’s not much less probable that dozens or hundreds of species could have done it. If that’s the case, Fermi pointed out, where are they? And why haven’t we seen the least trace of their presence anywhere in the night sky?

Fermi’s paradox has been the subject of lively debate for something like half a century now, and most books on the possibility of extraterrestrial life discuss it. There are at least two reasons for that interest. On the one hand, of course, the possibility that we might someday encounter intelligent beings from another world has been a perennial fascination since the beginning of the industrial age – a fascination that has done much to drive the emergence of the folk theologies masquerading as science in today’s UFO movement.

On another level, though, Fermi’s Paradox can be restated in another and far more threatening way. The logic of the paradox depends on the assumption that unlimited technological progress is possible, and it can be turned without too much difficulty into a logical refutation of the assumption. If unlimited technological progress is possible, then there should be clear evidence of technologically advanced species in the cosmos; there is no such evidence; therefore unlimited technological progress is impossible. Crashingly unpopular though this latter idea may be, I suggest that it is correct – and a close examination of the issues involved casts a useful light on the present crisis of industrial civilization.

Let’s start with the obvious. Interstellar flight involves distances on a scale the human mind has never evolved the capacity to grasp. If the earth were the size of the letter "o" on this screen, for example, the moon would be a little over an inch and three quarters away from it, the sun about 60 feet away, and Neptune, the outermost planet of our solar system now that Pluto has been officially demoted to "dwarf planet" status, a bit more than a third of a mile off. On the same scale, though, Proxima Centauri – the closest star to our solar system – would be more than 3,000 miles away, roughly the distance from southern Florida to the Alaska panhandle. Epsilon Eridani, thought by many astronomers to be the closest star enough like our sun to have a good chance of inhabitable planets, would be more than 7,500 miles away, roughly the distance across the Pacific Ocean from the west coast of North America to the east coast of China.

The difference between going to the moon and going to the stars, in other words, isn’t simply a difference in scale. It’s a difference in kind. It takes literally unimaginable amounts of energy either to accelerate a spacecraft to the relativistic speeds needed to make an interstellar trip in less than a geological time scale, or to keep a manned (or alienned) spacecraft viable for the long trip through deep space. The Saturn V rocket that put Apollo 11 on the moon, the most powerful spacecraft to date, doesn’t even begin to approach the first baby steps toward interstellar travel. This deserves attention, because the most powerful and technologically advanced nation on Earth, riding the crest of one of the greatest economic booms in history and fueling that boom by burning through a half billion years’ worth of fossil fuels at an absurdly extravagant pace, had to divert a noticeable fraction of its total resources to the task of getting a handful of spacecraft across what, in galactic terms, is a whisker-thin gap between neighboring worlds.

It’s been an article of faith for years now, and not just among science fiction fans, that progress will take care of the difference. Progress, however, isn’t simply a matter of ingenuity or science. It depends on energy sources, and that meant biomass, wind, water and muscle until technical breakthroughs opened the treasure chest of the Earth’s carbon reserves in the 18th century. If the biosphere had found some less flammable way than coal to stash carbon in the late Paleozoic, the industrial revolution of the 18th and 19th century wouldn’t have happened; if nature had turned the sea life of the Mesozoic into some inert compound rather than petroleum, the transportation revolution of the 20th century would never have gotten off the ground. Throughout the history of our species, in fact, each technological revolution has depended on accessing a more concentrated form of energy than the ones previously available.

The modern faith in progress assumes that this process can continue indefinitely. Such an assertion, however, flies in the face of thermodynamic reality. A brief summary of that reality may not be out of place here. Energy can neither be created nor destroyed, and left to itself, it always flows from higher concentrations to lower; this latter rule is what’s called entropy. A system that has energy flowing through it – physicists call this a dissipative system – can develop eddies in the flow that concentrate energy in various ways. Thermodynamically, living things are entropy eddies; we take energy from the flow of sunlight through the dissipative system of the earth in various ways, and use it to maintain concentrations of energy above ambient levels. The larger and more intensive the concentration of energy, on average, the less common it is – this is why mammals are less common than insects, and insects less common than bacteria.

It’s also why big deposits of oil and coal are much less common than small ones, and why oil and coal are much less common than inert substances in earth’s crust. Fossil fuels don’t just happen at random; they exist in the earth because biological processes put them there. Petroleum is the most concentrated of the fossil fuels, and the biggest crude oil deposits – Ghawar in Saudi Arabia, Cantarell in Mexico, the West Texas fields, a handful of others – represented the largest concentrations of free energy on earth at the dawn of the industrial age. They are mostly gone now, along with a great many smaller concentrations, and decades of increasingly frantic searching has failed to turn up anything on the same scale. Nor is there another, even more concentrated energy resource waiting in the wings.

If progress depends on getting access to ever more concentrated energy resources, in other words, we have reached the end of our rope. The resources now being proposed as ways to power industrial civilization are all much more diffuse than fossil fuels. (Nuclear power advocates need to remember that uranium-235, which has a great deal of energy when refined and purified, exists in very low concentrations in nature and requires a hugely expensive infrastructure to turn it into usable energy, so the whole system yields very little more energy than goes into it; fusion, if it even proves workable at all, will require an infrastructure a couple of orders of magnitude more expensive than fission, and the same is true of breeder reactors.) More generally, it takes energy to concentrate energy. Once we no longer have the nearly free energy of fossil fuels concentrated for us by half a billion years of geology, concentrating energy beyond a certain fairly modest point will rapidly become a losing game in thermodynamic terms. At that point, insofar as progress is measured by the kind of technology that can cross deep space, progress will be over.

We can apply this same logic to Fermi’s paradox and reach a conclusion that makes sense of the data. Since life creates localized concentrations of energy, each planet inhabited by life forms will develop concentrated energy resources. It’s reasonable to assume that our planet is somewhere close to the average, so we can postulate that some worlds will have more stored energy than ours, and some will have less. A certain fraction of planets will evolve intelligent, tool-using species that figure out how to use their planet’s energy reserves. Some will have more and some less, some will use their reserves quickly and some slowly, but all will reach the point we are at today – the point at which it becomes painfully clear that the biosphere of a planet can only store up a finite amount of concentrated energy, and when it’s gone, it’s gone.

Chances are that a certain number of the intelligent species in our galaxy have used these stored energy reserves to attempt short-distance spaceflight, as we have done. Some with a great deal of energy resources may be able to establish colonies on other worlds in their own systems, at least for a time. The difference between the tabletop and football-field distances needed to travel within a solar system, and the continental distances needed to cross from star to star, though, can’t be ignored. Given the fantastic energies required, the chance that any intelligent species will have access to enough highly concentrated energy resources to keep an industrial society progressing long enough to evolve starflight technology, and then actually accomplish the feat, is so close to zero that the silence of the heavens makes perfect sense.

These considerations suggest that White’s law, a widely accepted principle in human ecology, can be expanded in a useful way. White’s law holds that the level of economic development in a society is measured by the energy per capita it produces and uses. Since the energy per capita of any society is determined by its access to concentrated energy resources – and this holds true whether we are talking about wild foods, agricultural products, fossil fuels, or anything else – it’s worth postulating that the maximum level of economic development possible for a society is measured by the abundance and concentration of energy resources to which it has access.

It’s also worth postulating, along the lines suggested by Richard Duncan’s Olduvai theory, that a society’s maximum level of economic development will be reached, on average, at the peak of a bell-shaped curve with a height determined by the relative renewability of the society’s energy resources. A society wholly dependent on resources that renew themselves over the short term may trace a "bell-shaped curve" in which the difference between peak and trough is so small it approximates a straight line; a society dependent on resources renewable over a longer timescale may cycle up and down as its resource base depletes and recovers; a society dependent on nonrenewable resources can be expected to trace a ballistic curve in which the height of ascent is matched, or more than matched, by the depth of the following decline.

Finally, the suggestions made here raise the possibility that for more than a century and a half now, our own civilization has been pursuing a misguided image of what an advanced technology looks like. Since the late 19th century, when early science fiction writers such as Jules Verne began to popularize the concept, "advanced technology" and "extravagant use of energy" have been for all practical purposes synonyms, and today Star Trek fantasies tend to dominate any discussion of what a mature technological society might resemble. If access to concentrated energy sources inevitably peaks and declines in the course of a technological society’s history, though, a truly mature technology may turn out to be something very different from our current expectations.

 

Re: Peak Oil; what it is and how it will impact your life

The investors guide magazine "Outstanding Investments" had this article in 2005. Very prophetic.

The next five years may determine the United States' economic future. The world energy challenge is on, and the United States is a day late and a dollar short (actually, several dollars short). While America ambles along, other countries have their sights set on securing energy resources around the globe -- and they aren't wasting any time.

"No surprise, leading the pack is China. Asia's sleeping economic tiger is waking with a roar, gobbling up global resources at a stunning pace -- including oil. It's the rip-roaring demand from countries like China and India that is lighting a fire under oil prices right now -- and stretching the supply-demand equation perilously thin...The tidal wave of growing oil consumption will likely trigger a global economic crisis. OPEC will have the United States over a barrel.

"...For every SIX barrels of oil currently consumed, only one new barrel is discovered. And that number is getting worse -- there were only 13 major oil finds (over 500 million barrels in reserves) in 2000, six in 2001 and two in 2002. There hasn't been any major oil discovery since then!

"And when the reality of higher prices hits with full force -- and I think it's coming very, very soon -- no one is going to find it more difficult to swallow than the spoiled, overconsuming United States.
"The crisis is truly devastating in scope and could end life as we know it in the United States."

And then this recent admission;

In a recent hotline, Outstanding Investments emphatically endorsed the "peak oil" hypothesis: "World oil production "peaked" in 2006 ... the world is now entering a phase of irreversible decline in conventional oil production ... there will be a 35% decline in available conventional oil within a mere 13 years from now. As you can imagine, the world will change profoundly."

 

Are you buckled in?

Well folks. It looks like the rest of the world is finally starting to wake up. The roller coaster of oil that we are all riding on has reached the top and is about to break over and drop down the other side. I hope you have your restraint devices fastened tight because it is not going to be a fun ride.
I expect to see $100-$150 a barrel oil early in 2008 and $4-$6 a gallon gas by summer. If I were a betting man I would wager any amount that we will be seeing fuel rationing before the end of this decade.
If you have only been hap-hazardly going about your survival preps then now is the time to get serious. Time is fast running out. MM


The Peak Oil Crisis: A Message from Houston
Written by Tom Whipple
Thursday, 25 October 2007

We gathered at a hotel near the Convention Center, some 525 of us from 18 countries and 36 states attending the Association for the Study of Peak Oil-USA’s 3rd annual conference. The PowerPoints flashed by at mind-blowing speed as speaker after distinguished speaker shared the latest thoughts and insights into the peaking of world oil production.

For those of us acquainted with the field, there was nothing startling. World oil production has either peaked already or is certain to do so within the next few years if the world’s petroleum industry manages to eek out a little more production. But the good times are clearly over.

Peak production of conventional oil came 30 months ago and although new production projects will come on stream in the next few years, they will have a hard time balancing the depletion from existing fields which various speakers placed at 4-5 percent a year and probably increasing. As a greater share of world production shifts to undersea production, which is expensive and is usually water flooded to get the oil out as quickly as possible, some believe the annual world depletion rate could increase to six percent or more.

The most ominous development for countries such as the U.S., which must import most of its oil, is the emerging concept of "peak exports" which was discussed by several speakers. Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible.

This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful.

For me, the most interesting insight of the conference had nothing to do with oil production but rather was an insight I gained into the psyche of the American people. A keen observer of the American scene pointed out that most literate Americans are aware that we have some sort of energy problem. If for no other reason than unprecedented gasoline prices and the TV ads featuring yellow corn-fueled cars, most have at least an uneasy feeling that some sort of transformation is coming.

The problem is that most have no concept as to how soon the transformation will start and how much their lives are going to change. The President, his government, the Congress, the oil companies, and indeed the media have left us with the impression that we have the transformation to an alternative fuel future well in hand. Bills mandating and increasing the supply of ethanol have been passed or are in the hopper. The President makes periodic references to hydrogen-powered cars. The oil companies allege there is no problem and the media takes it all in and remains mute.

The peak oil problem is not that most of us don’t recognize a transition is coming – if for no other reason than reducing our dependence on "foreign oil" – it is that we don’t recognize that the transition will come soon and will inflict more economic pain and social dislocation on the American people than we have experienced since the Civil War or perhaps ever.

Thus the message from Houston was "it will be soon and it will be bad, very bad," much sooner and much worse than 99 percent of the American people realize.

Earlier this week, a European Organization called Energy Watch released a paper concluding as many others have done that world oil production peaked last year and will decline steeply over the next 22 years so that by 2030 production will be in the vicinity of 40 million barrels per day which is less than half of current production. In ten years production will be down on the order of 20 million barrels per day.

What we in America have not yet begun to grasp is that numbers like this imply the near total demise of the private internal combustion powered automobile. Your local gasoline station is at the end of the distribution pipeline and is the most likely to be cut off. If gasoline available for distribution in the U.S. were to fall from 9 million barrels a day to the order of 5 million through a combination of declining production and declining exports, it is not hard to figure out what would happen when the government gets around to prioritizing uses.

Food production and distribution would come first, then public health (clean water, sewage, sanitation, medical services), then public safety including the armed forces, and finally some level of economic activity that uses petroleum products.

Thirty seconds of pondering this situation should leave you with the idea that there will be very little gasoline available for your gas station to sell to you. For sure, there will be a lot fewer gas stations around ten years from now and you are not going to like the prices.


LONDON, England (CNN) -- The world has reached the point of maximum oil output and production levels will halve by 2030 -- a situation that will eventually lead to war and disaster, a report claims.

The German-based Energy Watch Group released a report Tuesday saying the world's oil production peaked in 2006 and from now on will drop by around 3 percent a year. It says that by as early as 2030, the global availability of oil will be half of what it was at its peak.

"It's a very serious result," said Hans-Josef Fell, a German lawmaker from the environmentalist Green Party who commissioned the report. "I fear the world will come into a big economic crisis in the coming years."

The report warns that coal, uranium, and other key fossil fuels are also in declining supply. It predicts the fall in fossil fuel production will bring with it the threat of war, humanitarian disaster, and general social unrest

 

The real cost of oil

I recieve several newsletters a day and scan them for industry news. I have been seeing these kind of reports far more often now.

As my industry scrambles to keep up with the public demand for oil, and listen to the uninformed decry big oil greed and fantasy gouging claims.
The average oilman, blue collar, joe next door, middle income guys are out there, all over the world, far from home and hearth, sweating, freezing, and dying to bring black gold to you and me.

The oil industry is ranked as the 3rd most dangerous occupation. Ranked not by the number of accidents, but by the severity, fatal or crippling per 100,000 accidents.

No one who has been in this industry for any length of time doesn't know someone who lost their life on some rig in some remote location.
Please take a moment the next time you are filling your tank with gasoline to remember all the lives that have been lost to bring you the cheapest energy in the history of the world.


From Rigzone.com
10/26/2007

Mexican oil and gas company Pemex has confirmed the accident that occurred in the Gulf of Mexico yesterday. Due to 80-mph winds and 25-foot waves, the 200-foot MC jackup Usumacinta hit the Kab-101 platform.
The company stated that 81 workers were evacuated from the platform because of the risk of fire.

Fifty-eight people have been confirmed as rescued. Pemex's preliminary estimation is that 10 people have died because of the accident. This means 13 people are still unaccounted for. Rescue efforts continue.
The Mexican government has called in the country's navy, as well as helicopters, to help with the rescue.

The accident caused an oil and gas spill when the rig hit the valve shaft. Pemex stated that efforts are under way to control the leak and re-establish operations.

 

Uncharterd territory

Thursday, November 1st, 2007
Dear Energy and Capital Reader:
We're in uncharted territory.
Even the experts are concerned. And that downright scares the heck out of me.
You see, for the past 4 days, oil has been trading higher. Yesterday, oil trading was halted momentarily to give the market, which was starting to get hysterical, a time to take a deep breath.
It's morning, oil hit a new high of $96.24.
We've been telling you about the coming energy crisis for years. We've been labeled alarmists, pessimists and doom-and-gloomers. Today, we're simply called "correct."
However, I don't take too much satisfaction about making the correct call on oil and gas. At the end of the day, I'm a consumer just like you. And every time I fill up my car, it costs more and more.
That's why recent statements from OPEC and the heads of major oil companies have me quite concerned. Here are a few comments...

<DIR><DIR>Get used to $100 oil. - OPEC, October 31, 2007

The world's capacity to produce oil will fall well short of official forecasts. - Christophe de Margerie, CEO of Total

Oil production has reached a structural ceiling determined by geology rather than geopolitics, and that the technical floor for the oil price will rise by $12 annually for the next 4 to 5 years as new fields become increasingly costly to exploit. - Sadad al-Huseini, former head of exploration and production at Saudi Aramco

The growth in global demand since 2003 has been roughly the equivalent of the daily output from two of the world's larger suppliers: the North Sea and Mexico

Our industry simply cannot cope with these kinds of increases. - Andrew Gould, CEO of Schlumberger


</DIR></DIR>Call me suspicious, but it appears OPEC and Big Oil are preparing the world for much higher oil prices. And I agree - much higher oil prices are coming. That's why it's time to get your financial house in order.

 

Fuel Rationing Coming?

A preview of things to come here?



Wednesday, October 31st, 2007In the Thick of China's Energy Crisis
By Sam Hopkins

And you thought you had pain at the pump . . . Today, China is descending into a Hobbesian energy crisis that pits market capitalism against the Marxist umbilical state. In a couple of weeks, I may have to duck and cover.

Reuters tells of a deadly dust-up in a gasoline queue in Henan province, very near the major city of Xi'an, where I will be in just a couple of weeks as part of my Asian investment research junket.

Now, there are lots of disparities between the English-language Chinese press and free foreign news. So instead of the Reuters headline, "China fuel crisis spreads," telling of a man beaten to death at a fuel station in central China, we see in China Daily the relatively placid "Fuel rationing spreads to gas stations across China."

Though my own previous experience in the country leads me to doubt just how orderly this "queue" was in the first place, the scramble by Chinese drivers to fill their Chinese-made Buicks or even SUVs sure adds another dimension of chaos to the kind of ticket-window pile-ups I've seen.
Crowded coastal areas have already felt the pain of reduced supplies in recent weeks, as a succession of events have spread the petrol pain around the country, to citizens, businessmen, and government officials alike. Among the factors:

<DIR><DIR>$95 oil is hitting refiners hard, pushing out smaller-scale distillers who buy at spot prices.
Heavy subsidies lock retail diesel at 64 cents per liter, compared to $1 in nearby Singapore.
State refining leader Sinopec is bearing the brunt, balancing state concerns with business.

</DIR></DIR>Fuel Riots Loom

In Iran, which has become a net importer of refined fuel products even though it is the world's number-four oil exporter, this summer's decision to ration monthly fuel supplies caused widespread protests and riots.

Beijing doesn't take kindly to such behavior.
If growth is a numbers game, which for local party officials is certainly is, the tension between economic expansion and a fading popular sense of growing wealth is putting pressure on the nerves of consumers and CPC (Communist Party of China) leaders alike.

The economy expanded at an astonishing 11.5% rate in the first nine months of 2007, challenging Beijing's attempts to gradually apply the brakes to this fast-moving market juggernaut. Despite four interest rate hikes this year, stock market exuberance continues to mount.

The last rate adjustment was announced in August, yet news that Chinese investors might soon be able to invest in Hong Kong shares (which are considered foreign) spurred a radical rise not only in Hong Kong but also in Shanghai, which would apparently suffer from a major outflow of funds.

 

Threat of Rationing getting press coverage

The Peak Oil Crisis: After The Peak?

Written by Tom Whipple
Thursday, 01 November 2007

I am frequently asked "What is going to happen to us?" and the honest answer of course is we really don’t know in any detail. The world has never been to peak oil before and there are so many factors that will affect a world in oil depletion, it is difficult, or better yet nigh impossible, to paint a picture of what life will be like 10 or 20 years from now.

However, as we get closer to the times when the real troubles stemming from the decline in oil availability begin, a broad outline of what could happen is starting to emerge. Throw in some logical deductions and a fragmentary insight or two starts to emerge.

First the overall magnitude of a swift transition from oil and natural gas to other, less plentiful, forms of energy is almost certain to be a very big problem. Most commentators on life with diminishing supplies of oil conclude it will take decades to transition our lifestyles to those of a more sustainable civilization and that there are some very hard times ahead.
Many commentators now have noted that the speed at which our oil supplies diminish will have much to do with how tough the situation becomes. Slow depletion would give us a one-time opportunity to "make other arrangements" while rapid depletion screams "Gotterdammerung."

Among the recent insights into what is about to happen is the likelihood that the major oil-importing counties, especially the United States, will have to contend with "peak exports" as well as oil depletion. This means that no matter what the rate world oil production declines — 4, 5, 6 or more percent a year — the importing countries will have to contend with a rate of decline far worse due to the inability to find oil available for import.

The implication here is that we are going to have rapidly falling oil and gas imports no matter what happens to world oil production. Indeed there is evidence that world oil exports are already falling and that the importers are starting to live off of their stockpiles — a situation that will not last for long.

If exports do start to drop, the U.S. will quickly become highly vulnerable. It is time to start thinking that five years from now we will be importing significantly less oil and gasoline than the 12 million barrels a day we currently import. For the sake of argument let’s say that by 2012 we can only find 9 million barrels a day to import — a not unreasonable proposition. Domestic production 5 years from now looks like it will be roughly the same or down a bit so we are going to have to do with less.
From here we could explore many possible outcomes, but the private automobile is obviously where the biggest blow will fall first. I have no idea where gasoline prices will be five years from now but they will obviously be higher. We probably should be thinking dollars higher rather than cents.

Somewhere between now and the day when we only import 9 million barrels of crude and products, we are going to have to confront the issue of who gets how much.

This will rapidly become a political question that will quickly surpass every other political issue of the day by many orders of magnitude. If you think the American people are upset about Iraq, abortion, immigration, taxes and pistols, just wait until the politicians start talking about who gets how much gasoline and diesel fuel. It is going to be something to watch.

Now, as a nation, we could simply do nothing and let many-dollars-per-gallon sort out the allocation, but I suspect this is not going to work. Too many vital functions of our civilization such as food production and distribution or health and sanitation will be disrupted and a clamor will arise for government at all levels to do something. Although the intensity of the debate will be unprecedented, I suspect that the pains of disruption will soon reach a threshold where a compromise is reached and some scheme for the "allocation" of liquid fuels is established.

It will soon become apparent that bottom priority for distributing liquid fuels will be filling the tanks at your local gasoline station and marina.
This line of reasoning suggests that while the availability of petroleum products in the U.S. may be down by three million barrels per day (b/d) from 21 million to 18 million, there will be a disproportional impact on the 9+ million barrels of gasoline we consume each day.

As we currently have no idea how a liquid fuel allocation scheme would work, it is difficult to calculate or guess at what is going to happen to the gasoline available for sale to the general public. I would suspect, however, that we should be thinking of a cut on the order of 50 percent from the current rate of consumption.

If a cut in gasoline availability of this size does not occur in the next five years, just be patient, it won’t take much longer once oil depletion and export limitation sets in.

All this is by way of saying that when you throw in "peak exports," the oil depletion situation takes a rapid and sudden turn for the worse. With world oil prices now in the $90s and the prospect of higher gasoline prices this winter, we are clearly feeling the opening tremors of much worse to come.

 

The confessions begin

Saturday, November 10th, 2007Big Oil Begins Its Confession
By Brian Hicks


Dear Energy and Capital Reader:

This week has been an epiphany for the market, validation for us at Energy and Capital, and a confessional for Big Oil.

Forgive me, World, for I have sinned . . . it’s been 75 years since my last confession.

Okay, here we go.

First into the confessional this week was the International Energy Agency (IEA). As we reported in Wednesday’s Wealth Daily , the usually sanguine IEA sounded unusually negative and alarmist about the recent price spikes in oil:

According to the IEA’s World Energy Outlook for 2007:

"An abrupt escalation of oil prices after 2015 as a result of a global supply crisis cannot be ruled out."

" . . . it is very uncertain whether new oil production in the period to 2015 will be enough to compensate for the natural falloff in output from existing oil fields and keep pace with the projected increase in demand."

"The consequences of unfettered growth in world energy demand are alarming."

Whoa.

I want you to think about something. Oil prices are already approaching $100 a barrel. If the IEA is warning us about an "an abrupt escalation of oil prices," what exactly does that mean?!

Could it mean $250 a barrel . . . $300 a barrel . . . $480 a barrel?
Yes.

Right now, with oil trading for $95 a barrel, we’re paying the equivalent of 15 cents a cup. There’s 667 cups in every barrel of oil. So $95 divided by 667 = $0.15.

No matter how you spin it or slice it, oil is still insanely cheap. I know that sounds absurd, but it’s true.

So the price of oil could (will) go way up . . . to levels unimaginable.
OK, next into the confessional is Tony Hayward, CEO of British Petroleum.
Forgive me, Shareholders, for we’ve cooked the reserve numbers.

Here’s what Tony confessed yesterday:

"Every geopolitical event causes a spike in the price [in oil], but these spikes only happen because the underlying market is itself tight. For the medium term, the era of cheap energy is behind us."
For penance, I want you to read Lies, Damn Lies and Statistics: The Manipulation of Public Opinion in America. Read it three times.

Let’s move onto the next sinner.

Forgive me, Shareholders, for we told you everything was okay, when in fact we knew the world was heading into the abyss.

From the CEO of ConocoPhillips, Jim Mulva . . .

"Oil and gas production fell at all of the largest publicly traded oil companies in the third quarter, as aging oil fields, declining access and soaring costs for drilling services took their toll on output.

"I don’t think we’re going to see the supply go over 100 million barrels a day. Where is it all going to come from?" --November 8, 2007

Good question, Jim.

For your honesty, your company’s stock will sell off 23%.

Last, but not least, is George Bush.

Here’s an exchange he had with a journalist two days ago:

Question: "Mr. President, with oil approaching $100 a barrel, are you concerned that your hard words for Iran on its nuclear program are helping drive up oil prices, which can end up hurting the U.S. economy?"

Bush: "No. I believe oil prices are going up because the demand for oil outstrips the supply for oil. Oil is going up because developing countries still use a lot of oil. Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling. That’s why the price of oil is going up." --November 7, 2007

Penance?

How about a 31% approval rating?

Okay, now for some saints.

Here’s a collection of quotes from Wealth Daily and Energy & Capital over the last three years:

"The fact is that we’re at a tipping point. The world’s oil supply has been flat while demand is growing up to 3% annually.

"Will we see a barrel of oil cost $100?
"That’s a possibility. As I said before, the next year is going to test the theory of peak oil."
--Keith Kohl, August 7, 2007

" . . . heck you can kiss $45 a barrel goodbye . . . maybe even $50! In fact, we’re probably facing a price spike between $80 to $100 a barrel within the next 24 months."
--Brian Hicks, January 18, 2006

"Our resident energy expert, Mike Schaefer, believes that oil prices will continue their rise . . . heading to at least $80 near term . . . then to $105 a barrel in the next three years."
--Brian Hicks, February 7, 2006

" . . . I think these estimates are a bit on the conservative side, and we should see $80 oil this year, no problem."
--Chris Nelder, January 18, 2007

"Today, we’re calling for the price of oil to reach over $100 within the next twelve months."
--Brian Hicks, October 15, 2007

"As I’ve said before, if there is an open confrontation between the U.S. and Iran, we’ll be lucky if oil prices ever drop below $100 per barrel again."
--Keith Kohl, February 26, 2007

"When oil spirals up to and beyond $100 per barrel as a result of declining production, a domino effect begins. Oil is energy. Energy prices skyrocket. Everything else follows."
--Phantom Trader, February 24, 2005

"IEA predictions point to a 53 percent surge in global energy needs over the next 25 years and oil prices running in excess of $100 a barrel by 2030.
"I suspect we’ll see it much sooner that!
"The fact is that oil prices are going to skyrocket. I’m talking way over $100 a barrel."
--Keith Kohl, February 26, 2007

"I think we’ll see oil over $100 per barrel before 2009."
--Keith Kohl, July 10, 2007

"The price of oil could get as high as $185 a barrel with oil hitting $80 a barrel within the next two years."
--Brian Hicks, March 3, 2005

" . . . within the next three to five years, Saudi oil production is going to collapse by as much as 30% to 40%.
"Clearly, this would push oil well over $100."
--Mike Schaefer, January 16, 2007

"The long-term fundamentals, on the other hand, are still in place for a continuing energy bull market that will eventually push oil prices to well over $100 a barrel."
--Luke Burgess, October 10, 2006

As usual, keep reading Energy and Capital. We’ll give it to you straight . . . the good, the bad, and the ugly.

Profit, don’t panic,
Brian Hicks

 

Re: Peak Oil; what it is and how it will impact your life

By 2015 the price of oil may well be so high that the average person will be unable to afford it. if it is even available for sale to the public. By then it may well be reserved for critical infrastructure only. Will our grandchildren ever fly in an airplane, not likely.
This reminds me of the saying they had in Saudi Arabia when I worked there;

"My Grandfather rode a camel, I drive a Mercedes, my Grandson will ride a camel."

 

Re: Peak Oil; what it is and how it will impact your life

Just a few thoughts about recent news.
The president just signed the first energy bill in decades that mandates fuel efficiency standards.
We will be forced to build and drive much more fuel efficient vehicles and it also phases out incandescent light bulbs in 5 years. Not a lot of press about it. Hmmm. Wondering why? Maybe just me.

The President, and congress know of peak oil. They know that we are running out of cheap fuel. They have for the last couple of years been slowely getting the public at large used to the idea. Now they are implementing phase 2. Starting to pass laws to regulate how we use fuel and energy. We will see more of these "energy saving" measure in the future. I see the complete banning of older "gas hog" vehicles soon. Mandatory thermostat settings. Maybe even a limit on electricity usage. With fines for exceeding it first then later mandatory replacment of thermostats to regulated ones.

As the scope of the oil shortages gets worse and the knowledge of it becomes more accepted, more types of these energy saving laws will be passed with ever increasing penalties for violations. Eventually we will have forced rationing of everything from the gasoline we are allowed to buy, to how much electricity we can use in our homes.

The news of Irans building of nuclear reactors should be sending chills down everyones spines. Not for the reasons that our current administration would like you to believe tho. I heard a commentator the other day say that Irans claims that they are building and re-opening these reactors for peaceful puposes, to produce energy for thier country, was bogus because an oil rich nation had no need for nuclear power.

That just illustrates how a lot of people, and even a supposedly knowledgable newscaster have no idea how oil works. Iran is a major oil producer. But, they are also a major oil exporter, as are all oil producing countries. These opec counties, in general, have very little resources outside of oil. Oil sales amounts for a huge portion of their national income. And they have over the last several decades built their infrastructure around energy and oil generated income, just like the rest of the world.

So if they were to take all of the oil that they produce and use it solely for their own energy needs, they would be able to supply and possibly meet, thier current energy demands. But if they know that oil supplies are dwindling and they cannot meet demand then they must look to other sources. If they sold none of their oil it would cripple their economies. Their would be lights on, but the people would be out of jobs and starving and in revolt. They must sell a good portion of their oil supplies in order to maintain civil order and their way of life.

No oil producing country could afford to keep all of their oil. It would result in an economic meltdown.
So the fact that the worlds 3rd largest oil exporter is defying world pressure and risking war over the use of an alternate energy source is an ominous sign.

 

Re: Peak Oil; what it is and how it will impact your life

Sorry for the end of the year gloom. But I believe, like the quote says, " I would rather know the worse and prepare". The last couple of years have been a real rollercoaster ride in the oil industry. And this next year promises to be more of the same. The worst is yet to come it seems.
It is bittersweet for me. I lived through the $10 a barrel days (where were these all powerful, price controlling, oil barons then?) when I lost everything I had. Lived in my car, and when I was lucky in a tent. Now with the price of oil at $90+ a barrel and the search for it in a frenzy, I am making more money than I ever dreamed I could. But there is the paradox. When my business is doing good the rest of the economy is suffering. Nobody likes high energy prices, not even those of us in the business.
I post this here on the last day of the year to warn my friends here that the worst is yet to come. I have stated before and I do so again, buy the most fuel efficient vehicles you can find. Look into any type of alternative energy you can afford. You don't have to spend thousands on a complete solar conversion for your home. You can buy a cheap solar panel that will keep one or two batteries charged up. Install a few 12 volt lights in your home. Buy and install a wood burning stove. Start doing what you can while you can.

It is going to be a very interesting year to come. Let's prepare for the worst and pray for the best. MM


Oil steady near $96, eyes biggest gain this decade

LONDON (Reuters) - Oil steadied near $96 a barrel on Monday, heading for its biggest annual gain this decade as dwindling fuel stocks and growing concern over political turmoil offset the impact of a softening U.S. economy.

U.S. crude edged 30 cents lower to $95.70 a barrel by 8:15 a.m. EST, while London Brent crude gained 31 cents to
$94.19.

With prices starting the year at around $61, oil is now up almost 58 percent. It hit an all-time high of $99.29 on November 21 as a falling dollar and thinning inventories stoked investor interest.
Oil's rally is entering its seventh year, more than quadrupling its market value of below $20 at the start of 2002.

If prices hold, they will register their best performance for a front-month contract since 1999, when oil prices more than doubled from a $10 low.
Oil is set to average around $72.30 this year, up about 9 percent from 2006.

In January, as futures prices tumbled, analysts had expected prices to fall to an average $63.23 a barrel this year, according to a Reuters poll.
The latest poll showed a consensus forecast for a rise in prices to $77.62 a barrel next year.

Political tensions have lately come back to the fore, with instability in nuclear-armed Pakistan depressing the dollar and lifting oil, and Iran's foreign minister saying the OPEC member aimed to start its first atomic power plant next year.

But prices fell 62 cents on Friday, ending a four-day rally, after data showing a 9 percent decline in sales of new U.S. homes last month heightened fears the economy would slump into recession.
"Energy markets will continue to be buffeted by two countervailing forces for the balance of this week, but we would give the edge to the bulls, who should maintain relative control for at least a little while longer," said Edward Meir of MF Global.

While oil prices have been buoyed by a slide in U.S. crude stocks to below seasonal norms, some analysts are already looking beyond the peak demand winter season.

"We do see this squeeze starting to ease in the new year, as the peak of the heating season will pass in 3-4 weeks, more U.S. refineries come back into service in 2008, and the focus shifts back to gasoline inventories," said First Energy Capital analyst Martin King.

 

It is just amazing to me to watch how fast people can become acclimated to anything. The populus (for generalities sake) was decrying $2 a gallon gasoline and had this great foreboding for the world when oil was at $50 a barrell. Now only a year+ from then and we have been hovering at +/- $3 a gallon gasoline and $95+ a barrel oil for a fairly long period (in the short attention span of the populus) which is actually a very brief time, yet they, meaning the average populi, better known as sheep, have become so accustomed to it that the alarm is fading. Instead of worrying about the future shocks caused by escalating energy prices, they have begun to think that all is well and that these high prices are only temporary and due to some scheme of the oil companies or of politicians. Nothing to see here folks go on back to sleep.
Just amazing. The lengths people, meaning sheeple, will go to convince themselves that alls well.

I quit posting in this thread for awhile, believing that I had pretty well covered the topic and explained the current situation well enough that most people understood it. And I got tired of posting doom and gloom stuff all the time. There hasn't been any bright spots to report on in the oil situation, and I see none forthcoming either.

But I think it past time to post a brief refresher. The following article is of very recent publishing and spells out the current oil situation very succinctly.

One side note that I would add. I recently watched the movie "There Will Be Blood". I didn't want to see it, I had gleaned from the promo's that it would be the stereotypical "greedy", oilman myth. I did enjoy seeing the early drilling operations and equipment. But the movie had a very disappointing ending, I can't believe this is what Hollywierd is promoting as "Oscar Winning" movie making. But the interesting thing is that it is loosly based on a work by Upton Sinclair, "Oil" published in the 1920's. It is apparent from that book that the greedy, immoral, selfish, oilman mythos was pervasive even back then. In fact it goes back a hundred years to Ida Tarbell and the "Tea Pot Dome" scandal. The long shadow of John D. Rockefeller is still embeded in the collective psyche of the populus today.

This is from an investing firms newsletter.

Dear Reader,
The financial news service Bloomberg recently reported on a crisis in Big Oil that'll forever change the way you get and use energy.
According to Bloomberg, in as short as 16 years, companies like Exxon and ConocoPhillips may no longer exist.
Here's a short excerpt from the report:



<DIR>"There's a steady liquidation of the world oil industry... Exxon is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024."



</DIR>In fact, the Big 5 (Exxon, Chevron, BP, ConocoPhillips and Royal Dutch Shell) are spending more on stock buybacks than they are on finding new oil.
This begs the question: With oil trading near $100 a barrel and demand soaring, why aren't these companies investing every penny they have exploring for more oil?
The answer will shock you.
We've been following this emerging crisis for 5 years... and here's what we've uncovered. Not only did we learn that Big Oil is preparing for the last days of its existence, but we also discovered that this situation represents one of the greatest investment opportunities of the 21st Century.
How much so?
The International Energy Agency (IEA), an independent energy watch dog out of France, reported that the world will have to spend $20 trillion to meet surging energy demand.
Read that again: The world needs $20 trillion to meet energy demand.
Twenty trillion dollars is nearly the equivalent of 2-years' worth of US GDP... and is roughly 10x the size of China's stock market.
That's a huge amount of capital.

Over a Barrel
You see, when the IEA said that $20 trillion needs to be spent to meet surging energy demand, what they really meant was $20 trillion needs to be spent to avert an all-out global crisis and war.
On November 7th, the IEA released its World Energy Outlook for 2007. Its contents sent shockwaves throughout the industry and sent the price of oil up $2 in a single day.
Here's what the IEA said:



<DIR>"An abrupt escalation of oil prices after 2015 as a result of a global supply crisis cannot be ruled out.

. . . it is very uncertain whether new oil production in the period to 2015 will be enough to compensate for the natural falloff in output from existing oil fields and keep pace with the projected increase in demand.

The consequences of unfettered growth in world energy demand are alarming."



</DIR>That's why Big Oil finds itself in a race against time to secure every last barrel it owns. By buying up all of their shares, not only will they control the billions of barrels they currently own once the supply crunch hits (assuming it hasn't already)... but they'll also profit handsomely as the price of oil continues to skyrocket from insatiable demand.
Let's be clear about this - the world has never experienced an event this severe. What is unfolding in front of our very eyes is a crisis of epic proportions.
Earlier in 2007, the world's top oil investment banker and former energy advisor to Bush and Cheney -Matthew Simmons- told a stunned Bloomberg audience that oil could reach $300 a barrel, and...



<DIR><DIR>Our first strategy is to buy one of the most undervalued oil companies in the market today. The company is in Calgary... and when you buy its stock, you can own as much as 34 barrels of oil for just $57.

With oil trading over $90, every 100 shares you buy gives you access to $336,600 of oil resource.

So far, investors who own this stock have earned over 250% this past year alone!




</DIR></DIR>Third, we reveal our favorite oil stock under $10 a share... a stock we think has the potential to hit $26 in the next 3 years. It's a Texas oil and gas company that's doing something unique - it's reviving old oil fields...and squeezing out what's been left behind. For instance, did you know that for every barrel of oil that was pumped out of the ground in America, 2 barrels were left behind? More on this opportunity in a moment.

But don't take my word for it. Look at what Big Oil is doing.
Companies like Exxon and Chevron see the iceberg in the distance. They know the "End of Oil" is coming. And they are "getting their houses" in order to prepare for the coming economic shockwaves that dwindling oil supply will cause.

And so are we.
To fully understand what the future holds for energy... and why oil is headed to $300 a barrel, you first have to understand why Big Oil is disappearing before our very eyes.

Fire Sale
The Liquidation of Big Oil... by Big Oil
With a market value of $460 billion, Exxon Mobil is the second largest publicly traded oil company in the world.
In 2006, they posted a net profit of $39 billion: A record for the company.
Sitting on a massive amount of cash, Exxon could've distributed that $39 billion to its shareholders in a massive, pig-choking dividend. Every single share you owned would've received an additional $7.22 cash payment.
It could've also taken that $39 billion and developed alternative energy sources like solar, biodesiel or ethanol, which are all the rage these days.
Better yet, Exxon could've used those billions to explore for much-needed oil.
The company did none of those things. Instead, Exxon used $30 billion of that money to buy back roughly 350 million shares of its own stock.
Why?
Hold that thought.

ConocoPhillips is the 3rd largest oil company in the world. On January 24, 2007, the company announced its 2006 year-end financials. Like Exxon, it was a record year for Conoco. They posted a total net profit of $15.5 billion for the year.
Two weeks later, the company's management revealed a plan to buy back $15 billion worth of its stock!
Flush with more cash then they originally thought, Conoco announced this past July it would raise its buyback to $25 billion.
Chevron is doing the same. They announced in September they'll buy back $15 billion worth of its own stock as well.
Oil buybacks aren't exclusive to just American oil companies.
BP (British Petroleum) has repurchased 643 million shares so far this year. In 2006, the company bought back a whopping 1.3 billion of its own stock. The most ever.
To give you an idea of how aggressive BP has been "retiring" its stock, take a look at how much the company has purchased this decade:
But regardless of this considerable boost in production over the past 40 years, you can bet the farm that the world will not be able to keep up this kind of increase for much longer.

You see, the thing is...you have to find oil way before you can produce it.
But new discoveries of major oil fields peaked over 40 years ago and has followed a steady decline ever since. In fact, the last major oil field discovery - Cantarell in Mexico - occurred 30 years ago.
"Technology is great, but it can't find what's not there. In the last five years, we consumed 27 billion barrels of oil a year, but the oil industry discovered only three billion barrels a year. So only one barrel was replaced for every nine we used."
- L.B. Magoon, U.S. Geological Survey
Since then we've been unable to find any new field that is able to produce more than 1 million barrels per day. And logic dictates that without new major discoveries, we're simply unable to significantly ramp up production.
That means the "peak" in global oil production is soon to follow if it hasn't already. So, peak oil is really a result of peak discovery. The model looks something like this:

Most oil insiders believe that OPEC doesn't have the reserves they say they do. And in January '06, Petroleum Intelligence Weekly shocked the industry when it announced that they've seen documents that prove that Kuwait has less than half the reserves they claim they have.

Sounding Alarm
OPEC and Big Oil are Screaming,
But Nobody is Listening

"There is not much we can do. OPEC has done all it can do. This is out of the control of OPEC." - Qatar Oil Minister Abdullah al-Attiyah
Gone are the days when Exxon could talk down the price of oil. Gone are the days when a US President could call the Saudi's and ask them to pump more in order to lower the price.
This is a new era... a new oil market. And those "in-the-know" are sounding the alarm.
A widely-followed industry report on international oil supplies recently released suggested that oil prices could move permanently over $100 a barrel very soon.

This gloomy assessment came from the International Energy Agency (IEA). Let me say it again, the IEA is well-respected within the industry... and isn't known for alarmist warnings.
However, in a recent interview, the IEA did a complete turnaround. The IEA argued that governments need to make urgent, bold decisions on energy policy, or risk massive energy-supply crises within two decades - crises and shortages that could spark serious global conflicts.
"I am sorry to say this, but we are headed toward really bad days," IEA chief economist Fatih Birol was reported saying.
Read that again. And again.
That's exactly what my team and I have been saying for the past 5 years.

We Were Right:​

"The fact is that we're at a tipping point. The world's oil supply has been flat while demand is growing up to 3% annually.

"Will we see a barrel of oil cost $100?

"That's a possibility. As I said before, the next year is going to test the theory of peak oil."
--Keith Kohl, August 7, 2007

" . . . heck you can kiss $45 a barrel goodbye. . . maybe even $50! In fact, we're probably facing a price spike between $80 to $100 a barrel within the next 24 months."
--Brian Hicks, January 18, 2006

"Our resident energy expert believes that oil prices will continue their rise . . . heading to at least $80 near term . . . then to $105 a barrel in the next three years."
--Brian Hicks, February 7, 2006

" . . . I think these estimates are a bit on the conservative side, and we should see $80 oil this year, no problem."
--Chris Nelder, January 18, 2007

"Today, we're calling for the price of oil to reach over $100 within the next twelve months."
--Brian Hicks, October 15, 2007

"As I've said before, if there is an open confrontation between the U.S. and Iran, we'll be lucky if oil prices ever drop below $100 per barrel again."
--Keith Kohl, February 26, 2007

"When oil spirals up to and beyond $100 per barrel as a result of declining production, a domino effect begins. Oil is energy. Energy prices skyrocket. Everything else follows."
--Phantom Trader, February 24, 2005

"IEA predictions point to a 53 percent surge in global energy needs over the next 25 years and oil prices running in excess of $100 a barrel by 2030.
"I suspect we'll see it much sooner that!
"The fact is that oil prices are going to skyrocket. I'm talking way over $100 a barrel."
--Keith Kohl, February 26, 2007

"I think we'll see oil over $100 per barrel before 2009."
--Keith Kohl, July 10, 2007

"The price of oil could get as high as $185 a barrel with oil hitting $80 a barrel within the next two years."
--Brian Hicks, March 3, 2005

" . . . within the next three to five years, Saudi oil production is going to collapse by as much as 30% to 40%.
"Clearly, this would push oil well over $100."
--Brian Hicks, January 16, 2007

"The long-term fundamentals, on the other hand, are still in place for a continuing energy bull market that will eventually push oil prices to well over $100 a barrel."
--Luke Burgess, October 10, 2006

Need more evidence?
How about the CEO of a major oil company.
On November 7, 2007, Christophe de Margerie, CEO of the French oil giant Total, told the Financial Times that even the target of 100 million barrels a day is an optimistic one for an industry that currently produces 85 million - far short of the 118 million barrels a day the IEA projects will be needed by 2030 to fuel the global economy.
This blunt and stark talk started a confessional line that same week from the world's oil leaders.
First into the confessional was the International Energy Agency. The usually sanguine IEA sounded unusually negative and nervous about a potential price spike in oil:
According to the IEA's World Energy Outlook for 2007:



<DIR>"An abrupt escalation of oil prices after 2015 as a result of a global supply crisis cannot be ruled out."

" . . . it is very uncertain whether new oil production in the period to 2015 will be enough to compensate for the natural falloff in output from existing oil fields and keep pace with the projected increase in demand."

"The consequences of unfettered growth in world energy demand are alarming."



</DIR>Whoa.
I want you to think about something. Oil prices are already near $100 a barrel. If the IEA is warning us about an "an abrupt escalation of oil prices," what exactly does that mean?!
Could it mean $150 a barrel . . . $300 a barrel . . . $480 a barrel?
Yes.
Think about it, with oil trading for around $90 a barrel, we're paying the equivalent of 13 cents a cup.
There's 667 cups in every barrel of oil. So $90 divided by 667 = $0.13.
No matter how you spin it or slice it, oil is still insanely cheap. I know that sounds absurd, but it's true.
So with oil selling for $0.13 a cup, the price of oil could go way up . . . to levels unimaginable.

And the IEA knows and understands this.
They know that economic development will raise global energy demands by about 50% in a generation, from today's 85 million barrels a day to about 118 million barrels a day in 2030.
Nearly half that increase in demand will come from just two countries - China and India, which are electrifying hundreds of cities and putting millions of new cars on their roads, most driven by people who once walked, or rode bicycles and buses.
Do the math. In the next 23 years, global oil consumption will increase by 33 million barrels PER DAY!
Thirty-three million barrels is the equivalent of about 4 Saudi Arabias!
And that doesn't even take into account the declines we're witnessing in current oil fields. Throw in the decline rates, which is hovering around 2% per year (or nearly 1.8 million barrels per day), and the situation grows even more dire.

OK, back to the confessional. Next was Tony Hayward, CEO of British Petroleum, BP plc.
Here's what Tony confessed on November 8:
"Every geopolitical event causes a spike in the price [of oil], but these spikes only happen because the underlying market is itself tight. For the medium term, the era of cheap energy is behind us."

Let's move on.
Next into the confessional was the CEO of ConocoPhillips, Jim Mulva...
"Oil and gas production fell at all of the largest publicly traded oil companies in the third quarter, as aging oil fields, declining access and soaring costs for drilling services took their toll on output.
"I don't think we're going to see the supply go over 100 million barrels a day. Where is it all going to come from?" -November 8, 2007

Good question, Jim. Where is it all going to come from?
Last, but not least, was George Bush.
Here's an exchange he had with a journalist at the Rose Garden on November 7, 2007:
Question: "Mr. President, with oil approaching $100 a barrel, are you concerned that your hard words for Iran on its nuclear program are helping drive up oil prices, which can end up hurting the U.S. economy?"
Bush: "No. I believe oil prices are going up because the demand for oil outstrips the supply for oil. Oil is going up because developing countries still use a lot of oil. Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling. That's why the price of oil is going up." -November 7, 2007

In that brief exchange, George Bush confirmed that the world is running out of oil.
And this realization couldn't come at a worse time...

Mirage in the Desert
Why the World Must Find 4 More
Saudi Arabias

According to the International Energy Agency, we'll need about 1.5 million barrels a day of new production capacity to meet new demand, and about 4 million barrels a day of new production capacity to offset declines.
So in total, the world needs between 5-and-a-half million and 6 million barrels a day of new production capacity.
That's nearly two-thirds of the total current oil production of Saudi Arabia, the world's top oil producer, which currently produces 8.6 million barrels per day.
The year after that, we'd need the same amount of new capacity again.
Like Jim Mulva (the CEO of ConocoPhillips) said: "Where's it all going to come from?"

In fact, according to the EIA's IEO 2006 reference case, world oil demand will skyrocket from 80 mbpd in 2003 (85 mbpd in 2007) to 118 mbpd in 2030—and the reality could easily be higher than the reference case.

That means we would need at least 33 mbpd of new capacity—almost a 40 percent increase from current production levels—to meet the projected increase in demand. That's like adding four new Saudi Arabias.
There isn't another one Saudi Arabia, let alone another four.

That's the crisis the world is facing.