Carpe Diem

Quotation of the day on ‘peak lunacy’

“We can recall a time when we were in undergraduate school and the nihilist, global-cooling, left-of-center environmentalist “Malthusians” were telling us that the world would be out of crude oil by 1984. This was of course sheer lunacy, but many fell for the thesis… the same people who argue for peak-oil production. We find Peak Oil comical for if we’ve learned anything in the past forty years it is that more and more and yet more crude oil and nat-gas are discovered every day using new technologies at each step.

“To this end, we note that ExxonMobil reported that after having used a considerable sum of crude and other “liquids” last year it added another 1.8 billion barrels of “proven” reserves to its balance sheet. Simply put, XOM found 115% of the crude and other liquids that it used last year. This is impressive and it is all the more so in that this is the 19th consecutive year in which XOM found more “energy” than it used. More than half of those new proven reserves were found in the Woodford and Bakken shale regions of North Dakota. Thus, to the eco-radicals and to the Peak Oil enthusiasts we say: Sit down and shut up; you’ve been wrong long enough.”

~Dennis Gartman writing in today’s “The Gartman Letter”

26 thoughts on “Quotation of the day on ‘peak lunacy’

  1. i think we need to take a step back here.

    the malthusians are fools and misunderstand progress. i think we can agree there.

    peak energy is also ludicrous and is not going to happen.

    peak oil, however is quite possible.

    note that even the IEA is not really disputing it.

    http://www.worldenergyoutlook.org/media/weowebsite/2012/PresentationtoPress.pdf

    this is from the 2012 world energy outlook.

    page 4 shows us production.

    if you add conventional and unconventional oil, it predicts a rise in production through 2020 and then a return to decline. this rise will never exceed the 1970 high.

    sure, they could be wrong, but they could be overestimating it too. are they also “peak nitwits” for their claims? they seem to be an organization you quote a great deal, so it would seem you do not think so. so why ignore this part of their thesis? they ARE predicting that the 70′s were peak oil for the US.

    they are NOT predicting that this means peak energy or even fossil fuel energy.

    but when the guys you quote for data all the time are predicting peak oil, it seems inconsistent to rail against it so heavily.

    i’m not claiming to know. i really do not ahve a strong view i’d want to defend on peak oil.

    the recent rise is breaking hubbert curve of predicted decline which is looking too pessimistic, but it also looks unlikely to exceed the 70′s, at least the iea etc say it will not as backed up by guys like carnigie and exxon.

    this is a more nuanced issue that i think you are acknowledging and i think toning down the pejorative rhetoric some will allow that to emerge.

    • “they ARE predicting that the 70′s were peak oil for the US. the eia is also predicting a near term US peak in about 2020″ — morganovich

      Is the “peak oil” thesis limited to U.S. discovery and production?

      As for toning down the rhetoric, fine. But you would do well to remember that the “peak oil” argument is often put forward by those seeking massive subsidies for uneconomic alternative energy projects, and to justify the imposition of higher energy taxes. Those things seem far more aggressive to me than Gartman’s choice of words.

      I don’t think that anyone is arguing that oil isn’t a finite resource, only that we will have made a market based transition to something else before we run out of economically exploitable reserves. As the Saudi oil minister once observed, “When the Stone Age ended there were still an awful lot on stones lying around”.

      • no, it’s not, but i am not aware of any terribly credible world projections that look a different, are you? if we start including condensates etc, the picture may change which is why i think peak hydrocarbon energy is highly unlikely to be true. maybe this is just semantics, but it seems that we are predominantly avoiding global peak oil by making the definition of oil more inclusive.

        (i’m also far from expert in this space, so maybe they do exist, but i have not seen them or i am missing somehting)

        but, even if one accepts that “oil” has peaked, it’s nothing to worry about so long as hydrocarbons and other energy sources keep going up. it may wind up being about as relevant as peak whale oil production.

        further, who cares what some people might be using an argument for?

        if people support bad and uneconomic projects, let’s criticize them for that and focus the discussion/debate in the right place as opposed to squabbling over facts about oil.

        even assuming peak oil is true, it still does not justify bad investment nor does it mean anyhting about peak fossil energy given the trajectory of gas etc.

        but let’s keep sight of the fact that just because someone makes bad arguments about alt energy that does not make every fact they use false.

        it’s also very possible to accept peak oil production without being convinced by wind or solar.

        i’m not sure quite what to believe on “peak oil”. it seems to depend a great deal on definitions etc. but even were i to come to accept it wholeheartedly, it would still not make me believe in subsidies.

    • Of course, since all new indicators are finding oil to be abiotic (non-biological) rather than a fossil-based blows up all peak oil theories as does the depths in the earth at which oil is now extracted – far below any sediment from fossils.

      When will the real scientists of the world challenge the defunct fossil fuel theory postulated in the 19th century?

      http://rense.com/general58/biot.htm

  2. also:

    http://www.eia.gov/forecasts/aeo/er/executive_summary.cfm

    the eia is also predicting a near term US peak in about 2020 and a return to decline without ever reaching the highs from the 70′s.

    they are also predicting a big rise in gas production over that period.

    of course, projections are just projections and could be too low or too high, but i am wondering just where you are getting such confidence that oil production will hit new highs?

  3. It is an issue of philosophy – Malthusians could not bear to see more people figuring out ways to survive through exploration and innovation – they see the world as “static” – “Here is what we have and when we finish that, we are all dead” – No one disputes that the earth itself is finite – perhaps even the universe is finite … Malthusians cannot accept the reality that as we use, consume more “resources” (i.e. things that are useful because some human figured out how to use it) those same “resources” become LESS scarce – because we figure out how to discover more, how to be more efficient as prices rise and all that (Julian Simon).

    Sure, we will “run out of oil” sometime in the future – as we know that the Sun will also burn itself out in the future … and sure the Sun will last several millions of years longer … the fact remains that humans do not wait for the ax to fall – we innovate, grow – discover – … we will not wait for the last drop of oil before we work on alternatives – unless of course GOVERNMENT comes in and prevents us from doing so

    This issue of “peak oil” (and so “peak oil idiocy”) is not and was never about “peak oil” – but about Malthusians interested in strangling development … (Why? again, it is about philosophy … )

    • krishnan-

      even if we assume peak oil has/will occur, i agree that the resounding response must be “so what”? we went through peak horse, peak whale oil, etc etc. on this i think we agree.

      we also get better at using resources. MPG from gasoline goes up. crops like dwarf wheat cause yields per acre to explode.

      the malthusians have been wrong at every turn.

      but to equate peak oil with malthusiansim is going to far.

      to say “the amount of oil produced in the us/world/whatever is/has/will peak and go into decline” is just a guess about/assessment of facts.

      it does not imply an cause for alarm.

      i cannot claim to have a well founded opinion on oil production peaking and i think there is a real semantic element to the debate (over just what we are going to call oil) but, for the sake of discussion, let us say it has already happened.

      so what? condensates are up, we have tar sands, nat gas, and all manner of other things. i’ve seen numerous projections that traditional crude oil will drop and be far less of global consumption and yet hydrocarbon energy production will keep rising.

      i think it’s unfair and invalid to equate a claim that traditional oil production will/has peaked with the malthusians.

      it’s quite easy to believe that oil will peak, that new sources of hydrocarbon energy will emerge, and that the malthusians are wrong all at the same time.

      just because the people using a given set of facts are using them badly and drawing bad conclusions does not make the facts themselves wrong.

      • to put it very simply in terms of formal logic:

        malthusians believe in peak oil.

        person A believes in peak oil.

        therefore person A is a malthusian.

        is a completely invalid conclusion.

        there is no proof that the set of peak oil believers is contained entirely within the set of malthusians.

        we need to be careful ascribing to people more than they actually said.

        • morganovich: “there is no proof that the set of peak oil believers is contained entirely within the set of malthusians.”

          Perhaps not, but the loudest and most reported peak oil believers are also seem to believe in government solutions to resource scarcity. And many, if not most, of those proponents of government solutions use malthusian arguments to further their cause.

          It’s the same with global warming. All of the scientists who believe that the planet is warming do not support the socialist “solutions”. But that doesn’t stop the socialists from counting all such scientists as supporters of their cause.

  4. Malthusian as a pejorative is a useless charge as Malthus was only correct when civilization ran only on human, solar, plant and animal power. A Malthusian POV is simply one along a continuum of assumptions about the future availability of energy. Personally I enjoy having “Malthusians” about the place (I personally know some:)) to sharpen counter arguments and check facts and assumptions. If we place Malthusians in a group that doesn’t deserve consideration we run the risk of being blinded by our own biases. Besides, with who would we argue?

    • I don’t enjoy having them around at all, Steven. Those malthusians are never going to accept that free markets are the solution to scarcity, and so they are always going to support restrictions on freedom. As a result, they are a danger to the welfare of all of us.

      This isn’t a parlor game. It’s a war of philosophies, and a war which has real consequences.

    • The problem with Malthus is that, when he was writing his comments, the Industrial Revolution had started thus obsoleting his views. In the 600 years before 1800, he was absolutely correct, but wrong afterwards. Except for the Irish potato famine, which was mostly cause by British politics, there were no more famines in the Western world.

  5. It never ceases to surprise me how easy it is for some charlatan and snake-oil hoaxter to recycle bullshit and how enthusiastically the old bullshit is consumed and devoured by the next generation.

  6. “peak energy is also ludicrous and is not going to happen.

    peak oil, however is quite possible”

    Morgan, you are confusing your readers….

    • Hans, what is confusing regarding that statement? You cannot read with understanding? Or is my question to you also confusing?

      Simplified:
      1) Peak energy is not going to happen.
      2) Peak oil did or will happen at some time.

  7. I believe the real issue will come down to the question of how much does it cost to get the oil. Eventually, there may be plenty of oil left but not economically feasible to extract.

    We need to harness all the hot air in DC somehow.

    • observeronthehill: “Eventually, there may be plenty of oil left but not economically feasible to extract.”

      That “eventually” you write about may only be temporary.

      It was once not economically to extract oil below 5,000 feet. But technology advanced.

      It was once not economically feasible to extract oil from deep ocean deposits. But technology advanced.

      It was once not economically feasible to extract oil from shale. But technology advanced.

      No one today can predict with any accuracy when the advance of petroleum extraction technology will stop. So no one should everf claim to know when petroleum will no longer be an economically feasible source of energy.

      The risk to our economic progress is not resource acarcity. It is, as it always has been, government interference in free markets.

      • Sure technology advanced. What is more relevant is price. Oil that is cheap to produce was produced and consumed years ago. The oil companies knew about the oil in the Bakken and the deep water Gulf of Mexico decades ago. But those areas were not worth fooling with when oil was $25. There is a lot of $100 oil in the world. Not so much $25 oil.

        • Mark Clark: “There is a lot of $100 oil in the world. Not so much $25 oil.”

          If you are referring to 1970′s dollars, there’s quite a lot of $25 oil. The real, inflation-adjusted price of oil today is not much different than it was 25 to 35 years ago.

          • Oil was was in the teens to low 20s all through the mid -90s to the early 2000s. I remember buying diesel fuel for my farm around 1998 for $0.42 a gallon. Now it is close to $4.20. Don’t try to tell me we have had a ten fold increase in CPI since 1998. The reason oil went to over $100 in 2008 was people gave up looking for oil in the preceding decade because of low prices. No one is going to spud a well in North Dakota for less than $75 per barrel. There is lots of oil still available. It is just going to take trillions of dollars to bring it to market.

          • Mark Clark: “Oil was was in the teens to low 20s all through the mid -90s to the early 2000s. ”

            And much of that 1990s oil came from deposits which was considered “not economically feasible” just two and three decades earlier. As I noted above, petroleum extraction technology advanced and lowered the cost of prodduction.

            Also, the price of oil does not always reflect the fully burdened cost of that oil. A lot of oil being sold today for $95 a barrel cost much less than that to produce. Likewise, some of the oil sold in the 1990s cost more than $20 to produce (Once the capital to drill a well has been spent, the marginal cost to produce the next barrel of oil from that well is much lower.)

          • Once a well’s production begins to decline it eventually will be more expensive to produce each additional barrel. Saudi Arabia’s Ghawar oil field has been producing 5 million barrels a day for decades. But their cost of production is much higher now. Many years ago they simply drilled a hole in the ground and a well flowed over 10,000 barrels a day. Now to maintain Ghawar’s production they have to pipe seawater over 100 kilometers, treat it, inject it under high pressure and then separate the oil and water after it comes back out of the ground. Even that great expense is not enough to maintain production so now Aramco is going to have to start injecting carbon dioxide to recover the oil and an enormous expense. Todays technology allows us to access more oil but it doesn’t make the cost of bringing that oil out of the ground less than in the past. In 1930 Dad Joiner brought in the Daisy Bradford well with primitive equipment and an oil flow of tens of thousands of barrels a day. Today’s drillers using the most advanced and expensive equipment and using millions of gallons of water and hundreds of truckloads of sand for fracking are happy to get a well that might produce close to one thousand barrels a day.

  8. Peak ignorance?

    Peak oil has nothing to do with the amount of oil in the ground or in published reserves or resources. It relates to the achievable rate of production. This goes to show that people with professorships and investment newsletters don’t know diddly-squat. Obviously King Abdullah knows more about his oil than Dennis Gartman because he wants to leave as much in the ground as possible for his heirs and successors.

  9. If you’re looking at just the amount of ‘reserves’ in the ground, you’re missing the big picture. It’s not about total oil available, or total energy available. It’s about Energy Returned on Energy Invested (EROEI). If it’s gonna take a barrel of oil to get that additional barrel out of the ground, it does you no good to know that oil (or energy) is there. If it takes more than a barrel of oil to get the equivalent amount of energy out of the ground, that energy probably won’t ever come out of the ground. And the price of oil (or energy) won’t play into it at all either.

    The tar sand and shale plays are mostly right around that balance point- it takes a barrel to get a barrel. That’s why there’s a proposal to build a nuclear power plant in Alberta to power the tar sands development. There’s no actual net gain of energy there- its just an arbitrage play that destroys the ground in the process. Some of the shale gas plays are actually net energy negative, but profits are being driven by real-estate speculators (i.e. Chesapeake Energy) and the losses are sustained by well operators (the small guy). That’s another artificial bubble that can only be sustained for so long.

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