Oil/Gold Prices Will Go Up This Week!

[Epsilon]

Expect a new Oil price hike this week after the uncompromisingly incendiary speech by the Iranian Islamic President few hours ago in the UN.
Speaking in New York, the Iranian President Ahmadinejad used anything BUT a conciliatory tone in his UN speech regarding Iran's Uranium enrichment program.
As a result......A dangerous Crisis is developing and the E3 representatives (Germany, France and GB) may not have other alternative But (in conjunction with USA) to ask the IAEA (International Atomic Energy Agency) to refer Iran to the UN Security Council for Sanctions......
All that -of course- means escalation of the Crisis with the consequences being...Higher Oil-Gold prices.......While we do not complain about further increases in the Gold price.....No one wants to see oil prices reaching new highs.

It's worth noting also........UCL (Union Res.) with its zinc (and other metals) Leases in Iran may be affected adversely if the Crisis escalates further......

Great Sunday to all!!!!!!

[mime]

All that -of course- means escalation of the Crisis with the consequences being...Higher Oil-Gold prices.......While we do not complain about further increases in the Gold price.....No one wants to see oil prices reaching new highs.

Great Sunday to all!!!!!!

Unless you've invested heavly in energy stocks. I'm not sure what to think of the oil price recently. It's been steadly dropping with the exeption of Katrina.

[Epsilon]

Mime.....YES...Of-course, naturally, "Those" who have invested in energy stocks (especially oil stocks) will be benefited greatly by a new price hike in the price of oil.
However, the overwhelm majority of consumers, worldwide, will be -severely- adversely affected....While with an upward movement in the price of Gold there will NOT BE many losers (if any)....
There is a discernible difference.....Don't you think so?

[Smurf1976]

There would be some justice in an oil spike for those of us who foresaw the present situation years ago and were laughed at by everyone from neighbours to governments.

In short, in the not too distant future we're going to have falling oil supply and, according to the ususal economic forecasters, rising demand along with "economic growth". But with falling production the rising demand doesn't mean rising consumption.

So I'm not expecting cheap oil or world peace. The economic growth could be a problem too. :(

[Epsilon]

"There would be some justice in an oil spike for those of us who foresaw the present situation years ago and were laughed at by everyone from neighbours to governments.".....
Smurf..."Us"? Did you actually forsee it years back? Who is "Us"?
Can you please elaborate?

[Smurf1976]

"There would be some justice in an oil spike for those of us who foresaw the present situation years ago and were laughed at by everyone from neighbours to governments.".....
Smurf..."Us"? Did you actually forsee it years back? Who is "Us"?
Can you please elaborate?
In short, yes I did foresee this situation and I did set about spreading the word but in due course got sick of being laughed (literally) at and being constantly talked down at.

So I bought oil stocks instead when they were cheap... :) Should have bought more of them though (that'll teach me to doubt myself).

According to those who claim to know better, plenty of alternatives will come onstream almost seamlessly at around $30 a barrel. Hmm... Double that now and no sign of alternatives and their promoters have gone rather quiet. There are alternatives, but not anywhere near as easily as many seem to think.

There seems to be a near universal inability to accept the reality of this situation. The world just doesn't have the productive capacity in oil fields to meet forecast demand and there's no realistic plan to change that.

I'm no great fan of George Bush but one thing I will credit him for is that he seems to very much understand this problem even if he isn't doing anywhere near enough about it. But then even the President of the United States of America can't seem to get the message through that oil is a massive problem so the lack of action isn't completely his fault. Look at all the fuss about drilling in Alaska - hardly anyone seems to realise that what they're talking about is drilling right next to... an existing major oil field!

Everyone just carries on as if there were plenty of the stuff. Global warming is a classic case. It could well be a serious problem, but it's all based on burning oil in quantities that are most unlikely to be available. Surely top scientists can understand that if oil has not been found, and is not being found, in sufficient quantities then it can't be used in those quantities.

I do acknowledge that there's a serious social side to this. But that is very much in the same category as house prices. Speculators gain from house price rises at the expense of the majority who pay more to buy their first home and more again to trade up. Likewise the situation is much the same with oil. And yet governments etc. condone massive house price inflation as if it somehow benefited those priced out of the market. So it's fair enough for those of us who have done the research to profit from oil IMO. I'll agree with regulated oil prices when we have regulated house prices. A plan to bring petrol prices down will be fair when we have a plan to bring house prices down. Both are essential after all so both should be affordable to the masses. And yet everyone complaining about oil ignores the fact that the one case of inflation even more out of control than petrol prices in recent years has been house prices.

Not that I have anything against property. But I do get very fed up with hearing how making $ speculating on property is good but if the oil industry makes a profit then that must be bad. In both cases it's coming out of the pockets of ordinary workers who pay higher prices. But with oil it's more justified in economic terms since there is an actual physical shortage that requires $ trillions (that's trillions with a T and on a scale that the world probably can't afford which is the major problem) to fix whereas houses can be built by the thousands at a cost which has not greatly increased.

[Epsilon]

Well said Smurf:))
Perfectly conceived and superbly delivered, the whole concept about the diminishing resources of petroleum.....
What about Uranium***? What are your thoughts?


***** Nuclear energy that is. One of the cheapest and cleanest sources of energy...
YET as if we did not have enough problems with that scourge of our planet, Islam and oil, they are now causing even greater a problem, with their attemts to acquire and share with MORE ISLAMIC DICTATORSHIPS as the Iranian President declared in Turkey, nuclear weapons technology.....
They (muslims) had the "Oil Power" for years. Enough. We, the rest, the civilised world, the world that does not espouse murdering human beings as part of our martyrdom initiation process, should NOT ALLOW them (Islamo-fanatic-fascists) to get another opportunity, albeit much more severely threatening for the entire human kind, against the entire planet's survival.
No! To Iran's attempt to acquire nuclear weapons of mass destructions.
No,a resounding NO, and full support to the E3 (Europe's Germany, France,the UK) and the USA, if we want the see this poor planet and our human race survive for a century or two more!!!

[DTM]

I do acknowledge that there's a serious social side to this. But that is very much in the same category as house prices. Speculators gain from house price rises at the expense of the majority who pay more to buy their first home and more again to trade up. Likewise the situation is much the same with oil. And yet governments etc. condone massive house price inflation as if it somehow benefited those priced out of the market. So it's fair enough for those of us who have done the research to profit from oil IMO. I'll agree with regulated oil prices when we have regulated house prices. A plan to bring petrol prices down will be fair when we have a plan to bring house prices down. Both are essential after all so both should be affordable to the masses. And yet everyone complaining about oil ignores the fact that the one case of inflation even more out of control than petrol prices in recent years has been house prices.

Not that I have anything against property. But I do get very fed up with hearing how making $ speculating on property is good but if the oil industry makes a profit then that must be bad. In both cases it's coming out of the pockets of ordinary workers who pay higher prices. But with oil it's more justified in economic terms since there is an actual physical shortage that requires $ trillions (that's trillions with a T and on a scale that the world probably can't afford which is the major problem) to fix whereas houses can be built by the thousands at a cost which has not greatly increased.


Well said Smurf. It looks like oil is a scarce resource although houses don't have to be.

[Milk Man]

Gold will go up and keep going up IMO.

As for house prices; all of you who want to live in smog infested cities can keep your postage stamp sized blocks! House prices are expensive because there is too much demand in cities. Go to the country, get one of the many jobs available and buy a house on 1/4 acre for $100000. Sydney house prices are ridiculous. People that winge that they can't afford it: no-one said you have to live in Sydney!

[Epsilon]

Those who want to live in Sydney, at all costs (and I don't blame them...Sydney is the best city in the world) can always go and buy a house out in the West, or the South West (the Outer South West that is).....I think they can be still affordable out there......
OR.......The second best choice...The best alternative......Move all the way to the REAL WEST........Perth!!!!!!!!!!!!!!!
Cheers......Great and profitable week to all:))

[Hanrahan]

Smurf..."Us"? Did you actually forsee it years back? Who is "Us"?

I'm with the Smurf. I knew.

In the '70s King Hubbert told us of peak oil and before that Ralph Nader warned us that oil was a depleteing resource, possibly in "The Waste Makers" which I read. Naturally both were laughed at. :banghead:

So the story was out there, just not on TV, is all.

[Epsilon]

"So the story was out there, just not on TV, is all."
...Yeah...Of-course ....the story was 'OUT THERE"......The only problem is NO ONE took any notice. In hindsight we are all becoming experts and "prophets"....
BTW...Who is (was?) king Hubert?

PS. Ralf Nader has never been taken seriously, not even in the USA where his following is less than 3% (at best).....

[Hanrahan]

Not that I have anything against property. But I do get very fed up with hearing how making $ speculating on property is good but if the oil industry makes a profit then that must be bad.
I used to be a regular poster on Somersoft, a property forum, and this attitude is precisely their's. They want the government to "do something" about petrol prices but to do nothing which would prevent them from retiring @ 50 with millions of $s in property. In a recent post (had to change my nic) I asked why they thought Caltex investers didn't deserve their day in the sun. No replies.
:D

[Hanrahan]

"So the story was out there, just not on TV, is all."
...Yeah...Of-course ....the story was 'OUT THERE"......The only problem is NO ONE took any notice. In hindsight we are all becoming experts and "prophets"....
BTW...Who is (was?) king Hubert?

PS. Ralf Nader has never been taken serious, not even in the USA where his following is less than 3% (at best).....
If you don't know who King (name, not title) Hubbert was then you've got a lot of reading to catch up on. Naturally start by Googling his name.

The fact that you didn't believe what you were told is your problem, not mine. Smurf an I DID take notice.

BTW Peak Oil is a much more serious problem than expensive petrol for motorists. It is reasonable to regard modern agriculture as a process to convert oil to food, they use so much of it. So the end of cheap oil will also be the end of cheap food.

[Epsilon]

The fact that you didn't believe what you were told is your problem, not mine. Smurf an I DID take notice.
Glad to hear it Han......Glad to hear that you took notice and obviously (the only logical thing to do) were loaded with cheap (a dozen a dime they were then...) Energy stocks.......
Enjoy your millions now then Han...You thoroughly deserve them!!!!!

[Hanrahan]

"The fact that you didn't believe what you were told is your problem, not mine. Smurf an I DID take notice."
Glad to hear it Han......Glad to hear that you took notice and obviously (the only logical thing to do) were loaded with cheap (a dozen a dime they were then...) Energy stocks.......
Enjoy your millions now then Han...You thoroughly deserve them!!!!!
I'm not sure which oilers were both safe and cheap a year ago. HDR hasn't advanced far and is speculative. (did OK with it 18mths ago) CTX has had a nice run but is a refiner/retailer, not producer. ROC and WPL have done well enough and I should hsve had some, (but not have matched SMM and ERA). BHP is a lot more than an oiler, so no; I didn't make a fortune. As they say, It aint easy. But thanks for your wishes.

My most productive trading stock for years is a miner, BSG. :)

[Smurf1976]

To get away from the personal nonsense... :)

If you take a 5 year rolling average of oil discoveries then the worldwide peak was in the early 1960's.

This is for discoveries of genuine new fields, not simply drilling out known fields and announcing the new wells as a "discovery". Whilst it's significant to the company concerned, it's a bit like buying a new house and after 6 months taking a look under the floor and "discovering" a pile of timber and a hot water service and then claiming that you just got them. In reality they were yours from the day you bought the place - sooner or later you were going to find them. Much the same with small oil deposits near existing major fields - it's inevitable that oil companies will over the years push the limits to see how big the field really is. That doesn't make this a new discovery though.

What we need are genuine discoveries of new oil provinces. And these have been seriously trending down from massive surplus over demand 40 years ago, to balance around 1980. Since then demand has continued to rise and discovery has continued to decline.

So now we are at the point where most oil is produced from a relatively small number of oil fields that are rapidly aging. We just don't have big new fields being discovered to replace them. A few big fields nearing decline, and hundreds of thousands of small fields that can't possibly offset the decline of the elephant and giant fields.

The North Sea, Prudhoe Bay (Alaska), Siberia and Bass Strait were all discovered in the 1960's. Since then it just keeps getting smaller despite more drilling, better technology etc.

So now we're coming to that point, first predicted back in 1956 and known with reasonable certainty based on actual oilfield experince since the 1970's, where the productive capacity of the world's oil fields fails to meet demand.

Not a peaking of production yet, although that will happen in due course, but a failure to meet demand. A failure that is not easily overcome.

More to follow on what happens next... (from a scientific perspective). Should be tonight. :) :)

[Epsilon]

In the mean time.....OPEC is meeting this week (Vienna?) to seriously consider increasing its daily output of oil in a last ditch attemt (see: desperate) to bring down to more logical, more acceptable levels, the price of petroleum.....
Let's see......Interesting days ahead of us......

[mime]

Those who want to live in Sydney, at all costs (and I don't blame them...Sydney is the best city in the world) can always go and buy a house out in the West, or the South West (the Outer South West that is).....I think they can be still affordable out there......


West?? Ewww.

Na kidding. I was told by one of my teachers awhile ago that petrol will cost around $2 a litre in the not to distant future because of China and India's growth. After I herd that I sold out of all my other stocks and bought into energy.

Reading this post makes me this of that book "Rich dad, Poor Dad" when his friend told him about the price of oil was going to rise and he bought lots of energy stocks and profited.

It's a different mind set. Rather then bitch about the cost of oil why not profit from it?

[Epsilon]

You are excused Mime.....You are excused my friend;))
Now...re: Your suggestion.....
"It's a different mind set. Rather then bitch about the cost of oil why not profit from it?"
Well, it would be nice if the price of oil by going upwardly, to uncharted territories, would benefit most people.....Would it not?
In other words.....Ideally ....It would be perfect if the majority of the world's 6,3 billion people were benefiting from the stratospheric levels of the price of oil, by investing in Energy stocks......
Instead, it would appear their "bitching" resonates from Tierra Del Fuego to...Ulan Bator and from Mount Erebus in Nea Zealand to...Greenland......
One is to really wonder why......

[hardmoney]

Well I have to say that I am also with Smurf and Hanrahan, I've known about peak oil for about three years.What is happening now to oil prices is no surprise to me at all, and yes I am fully invested in energy stocks.Folks, your current way of life is all but over and major changes are afoot.

Dont belive me ?, well like Smurf I have also given up on trying to show others the truth of the matter.The average punter just does'nt want to know.If its not on 60 minutes or the front page of the paper, then it just aint true.

[Epsilon]

".Folks, your current way of life is all but over and major changes are afoot."
Can you give us a brief description as to how tomorrow's way of life is going to be?
Back to ...Stone Age, without petroleum?

[hardmoney]

Epsilon - how bad will it get, well I have no idea.It all depends on the rate of depletion and just exactly when it occurs.You must realise that 'peak oil' is not a theory, it is cold hard scientific fact.The only point in dispute is when it will occur.Worst case estimates range from now through to the USGS prediction of about 30 years from now.Even a small depletion rate of one or two percent a year will cause a hefty drag on the global economy.And remember that these rates are compounding.Two percent a year, every year, for ever.If the global depletion rate is higher,say around ten percent such as the North Sea production suffered this year, then we are simply screwed, completely screwed.The economic drag would be horrific.

Like Matthew Simmons, investment banker and former energy adviser to President George W. Bush, says, The problem is that the world has no Plan B.When asked what is the soloution he replied "I don’t think there is one… The solution is to pray. Pray for mild weather and a mild winter. Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it’s a certainty."

[Epsilon]

H/M Thanks for that interestingly edifying brief analysis mate;)))
However.....Although I agree in most aspects with you, I am not as pessimistic as you.....
A). There are alternative sources of energy (Nuclear, solar, wind, waves, and of-cource Hydrogen)...
B) Scientists are franticly working on new methods, sources, i.e Hydrogen Fuel Cell is one of them.....
I happen to have more faith in us...Humans and our scientific, inventive, capabilities.....
Anyway, whichever way one analyses it...The depletion of the existing oil reserves is a very frightening scenario.....
Cheers!!!!

[Hanrahan]

Epsilon, I could suggest going to peakoil.com but like others I am not after converts. Go there at your own risk, but your optimism may be shattered for alltime.

How bad COULD it be? Worst case estimates are of a 90% die-off. Can't happen? Read about Christmas Island.

Was it here or another thread I said that modern agriculture is simply a process of converting oil to food. End of cheap oil, end of cheap food.

[Milk Man]

Ethanol can be substituted for petroleum and is completely sustainable. It emit half the nasties of petrol (still CO2 I think) and is easily manufactured. In Brazil they already use an 85% ethanol blend. Basically all that needs doing is to use something other than oil to make it burn so you can see it and its a great source of fuel. How those energy stocks look now?

[hardmoney]

Well its nice to have faith, however faith wont save us, only action will, and there is precious little of it that I can see.Alternative energy, well there simply insn't one single alternative to oil.Oil is basically free energy,you stick a straw in the ground and it comes gushing out under pressure.Sure they also use water injection to help the pressure flow along, but the energy return is much greater than the energy input to pump it out.Being a liquid, its nice and easy to transport and to store away for a rainy day and it fuels everything from plains,trains and automobiles through to your winter heater.

The alternatives, well hydrogen is a non starter, its an enery carrier not an enery source.Ther is nowhere in the world that you can stick a pipe in the ground and have the hydrogen come flowing out.There is no mine you can dig the hydrogen up out of.You have tyo make it from something.Something like natural gas or water.That takes a lot of energy to do.More energy than you get back from the finished product.Hydrogen is the lightest element and so its a real bugger the store without leakage from its container long term.


You tell me, do you think that we are going to build the thousands of nuclear power plants needed to provide the electricity to make enough hydrogen to fuel all of our transport ? and do it all within the next say 10 to 15 years ?
Where are all of the vehicles going to come from ?, where is all of the infrastructure to make,transport, and store the hydrogen going to come from, Who is going to pay for it , how are they going to pay for it,where are they going to build all of this ?.Remember all of this has to happen before the peak in oil production, not ten years after.Were is the discussion about how all of this is going to be achieved ?

Simmons is right, the world has no 'Plan B'

[Epsilon]

Han, thanks for the URL mate:)) I have bookmarked it and will go back for serious reading later....Thanks again;))
Loakglen, from what I have read, the maximum safe ethanol/oil blend is no more than 30% ethanol. Above that level the engines appear to be adversely affected.....
As for Brazil....Whoa...Those cars must be the....happiest cars in the world, after consuming so much "intoxicating' ethanol!

[Epsilon]

HardMoney......As it stands, now the technological advancements are obviously NOT AN ANSWER to the Energy depletion problems our planet is faced with.....
What i was saying, they (scientific centres all over the world) are franticly working and that (because of that) I have faith that they will come with something that may solve the energy problem....
The question is WHEN? How soon????
Hopefully before the last drop of oil!!!!!!

[GreatPig]

So the end of cheap oil will also be the end of cheap food.
Cheap food is not so much the issue as enough food.



Mount Erebus in Nea Zealand
Mt Erebus is not in NZ. It's in Antarctica.



Ethanol can be substituted for petroleum
Not for all uses of petroleum. Fuel for vehicles is only one relatively minor use. So many other important parts of modern civilisation require products derived from petroleum.

GP

[Epsilon]

Great Pig...what a ...Misnomer!!!!!
Far more appropriate a nom de plume would have been....."Great OWL".....
Anyway, I mixed Mount Erebus with the Air NEW Zealand disaster IN MOUNT EREBUS......
Although.....Climatologically there is not much difference between the South of N.Z and Antarctica.......
They are both as bleak and dark...as the Son (Erebus) of Chaos and Night that region between Earth and Hades, in ancient (classical) Greek mythology....
Thanks for spotting it.......OWL;)))))

[Hanrahan]

Ethanol can be substituted for petroleum and is completely sustainable. It emit half the nasties of petrol (still CO2 I think) and is easily manufactured. In Brazil they already use an 85% ethanol blend. Basically all that needs doing is to use something other than oil to make it burn so you can see it and its a great source of fuel. How those energy stocks look now?
Most of what is said re alternatives is a triumph of wishful thinking over science.

Do some research and find out how many mill barrells/day of petrol/diesel we burn in Oz. Then find out how many acres of cane or sorgum we would need to plant to replace this. Then calculate how much diesel we would burn to produce that cane. Then add the acreage needed to produce that ethinol to your first figure. Do you see the problem?

This may help your calcs:http://www.msnbc.msn.com/id/8607389/

[mime]

I think peak oil like global warming is exaggerated. I think we have enough oil reserves for at least 20 years. By then we will probably have a new type of energy sources and will be far less relient on oil.

[Yippyio]

The benefit of high oil prices for the majority of people will be need to find an alternate energy source i.e. Hydrogen, Nuclear, Electric, Hydro, Wind and a combination.

The main reason we have this current problem is that whilst governments are making a furtune from massive fuel excise taxes they are not incentivised to encourage alternate fuel sources. Think of the loss in tax revenue if the government said hypothetically "ok there will be no more sales of combustion energy engines which rely 100% on petrol, everybody now has to switch to new hybrid electric cars" (Toyota Eunos, Honda)

We need governments to think long term about sustainable energy which is clean and cheap, it can happen now but the loss of revenue makes it a big call.

[Milk Man]

Loakglen, from what I have read, the maximum safe ethanol/oil blend is no more than 30% ethanol. Above that level the engines appear to be adversely affected.....
As for Brazil....Whoa...Those cars must be the....happiest cars in the world, after consuming so much "intoxicating' ethanol!

I'm sure its 85% blend and haven't heard any reports that it damages engines. No doubt there are mods though; this is what I'm looking for. In the states there are drag cars that run on 100% ethanol and methanol is a very common race fuel (only one less carbon I think) but is derived from petroleum. Slightly more horsepower from methanol.

The best thing I like about ethanol is the available inrease in horsepower. Just let me loose in an alcohol powered monster on the street and i'll be happy. :D

[Milk Man]

Most of what is said re alternatives is a triumph of wishful thinking over science.

Do some research and find out how many mill barrells/day of petrol/diesel we burn in Oz. Then find out how many acres of cane or sorgum we would need to plant to replace this. Then calculate how much diesel we would burn to produce that cane. Then add the acreage needed to produce that ethinol to your first figure. Do you see the problem?

This may help your calcs:http://www.msnbc.msn.com/id/8607389/

Thanks for the info Han.

Ethanol can be used as a complete replacement for diesel IMO. I don't know what the numbers would look like though. New engines would be needed for tractors and trucks but given the amount of compression you can apply to ethanol the torque output should be sufficient to power a truck easily. That said, with new engines designed for ethanol the lifespan of a massive low revving high-torque engine shouldn't be much different.

[Hanrahan]

Please excuse my English. I got 26/50 in the exam.Hate to get personal but you probably failed in logic too.

Seriously, If you do not believe what we say, when we are quoting highly intelligent people, experienced in the industry, then quote opposing evidence and sources. I could flood this thread with "black" data but you wouldn't read it. If you are interested you will search on "King Hubberd", "Peak Oil" and "matt Simmons". If you are not leave the debate to the adults.

[Epsilon]

Han...Please don't be so austerely harsh on Mime...He has not perpetrated a crime that deserves such a severe criticism......
It is (after all) his inalienable democratic right to express himself in whichever way he choses fit to do so, as long as he does not insult anybody......

[Hanrahan]

Han...Please don't be so austerely harsh on Mime...He has not perpetrated a crime that deserves such a severe criticism......
It is (after all) his inalienable democratic right to express himself in whichever way he choses fit to do so, as long as he does not insult anybody......
You're right of course. Mime has the right to post as he wishes. But I reserve the right to ask for sources.

Mime: Please don't take this personally, after all I don't know you personally, but I spend a couple of hours a day reading macro economics. I am not an authority though and cannot write an authorative rebuttal on everything without chasing old reports as I did on the calorific value of ethinol production as I did earlier in this thread. I spent 15mins finding that report and wonder why I should have to do so when Google is so convenient. So peace

[Epsilon]

Han...Thanks mate;))))
Have a pleasant evening......

**** I have not read any books on Macro-Economics since I was at uni....Some 20 years ago......Interesting stuff...although, in today's world with so many unpredictable geo-political developments, almost on a daily basis is hard to implement a macro-economic analysis.....
For example, I just finished reading a report by the ....esteemed economic analysts at ABARE re: Next year's gold price....
They are besing their prediction entirely upon supply and demand factors (new gold production coming on line, de-hedging etc) and totally ignore the geopolitical economic uncertainties....
In my (humble) opinion their analysis and prediction is TOTALLY WRONG.....
.......And, of-course, those guys are getting paid super-handsomely in order to give us their "expert" opinion......

[Smurf1976]

Thanks for the info Han.

Ethanol can be used as a complete replacement for diesel IMO. I don't know what the numbers would look like though. New engines would be needed for tractors and trucks but given the amount of compression you can apply to ethanol the torque output should be sufficient to power a truck easily. That said, with new engines designed for ethanol the lifespan of a massive low revving high-torque engine shouldn't be much different.
The problem is one of scale.

If you look at a human body then the food you eat (according to a doctor I asked a while ago) is about 10 (megajoules) each day give or take a bit depending on size, gender, occupation etc.

Now, if people ran on petrol then we would each need about 100 litres per year to supply this energy. So, all the food we eat in a year supplies enough energy to fill the tank of a six cylinder car one and a half times each YEAR. Enough to drive a Falcon about 700km or about one fortnight's typical use.

So, we double the food production and use that to run our cars for 2 weeks a year. Of course, converting that food to ethanol would lose some of this energy and then there's all the (oil) energy that goes into growing and transporting the food. And natural gas to produce the nitrogen fertilizers etc.

And then we need fuel for buses, trucks, aeroplanes...

It makes good sense to make ethanol from agricultural and forestry wastes. Very good sense indeed. But we're just not going to be able to make anywhere near enough to use it as a mass replacement for petrol.

[Hanrahan]

**** I have not read any books on Macro-Economics since I was at uni....
In which case we probably have a differing definition of macro-economics. I use the term loosly to describe current affairs and how it would affect world markets (not c/a and what Brittney named her new baby). I then look for companies in the hopeful sectors. This has served me well for a few years and I have had some wins on gold, silver, oil and uranium. For everything there is a season, you've just gotta read to know the season. The calendar doesn't work.

And I share your opinion of ABARE and most private thinktanks as well. That's odd because I have great respect for some individual thinkers. Who do you trust? Problems, problems.

[Smurf1976]

Back to the scientific aspects of oil... :)

There's no need to worry about the end of the world when we use the last drop. The world will NOT run out of oil within the lifetime of any of us or our children. What we are facing is not enough oil to carry on busines as usual. A devastating blow indeed, but not a situation of no oil at all.

Why?

Oil fields don't stop flowing like petrol stops flowing from a car's tank when it's empty. They slowly lose output more like a torch battery going flat. For example, Bass Strait production peaked in 1985 and is now down over 60% from that peak. But it is still flowing, just not as quickly, and it will still be flowing in another decade but it will be slower than it is now.

Why?

Two reasons. When an oil field is first developed each well will flow at full rate because it's new. But there aren't many wells producing yet. So production rises as more wells and infrastrucure is brought online.

But then the older wells start to produce less oil. Production is still rising due to the new wells, but it takes more and more new production to offset the declines from the older wells. A point comes where the diminishing number of new wells coming online (because the discovery and development job is nearing completion) can no longer offset the declines and production starts to fall. And it keeps falling despite a few new wells coming onstream and the occasional new discovery (like the new projects in Bass Strait or the Cooper Basin). The occasional step forward followed by another two steps back.

In additon to the differing number of wells in production, the wells themselves lose flow rate over time as pressures reduce. To some extent technology has helped, but overall in a field you still slowly lose production capacity just like the torch bulb slowly fades out.

The exception to this is when fields are massively flooded with water to maintain pressure (and therefore production). Saudi Arabia is best known for doing this on a very large scale despite it being publicly documented by Saudi Aramco over 2 decades ago that these high production rates risked permanent field damage. (So don't be surprised to see a surprise "reason" why Saudi Arabia cuts oil exports sometime in the next few years - it'll probably be presented as a political matter rather than a geological one). With horizontal maximum contact wells and a steadily rising water level (since the oil floats on water) the production carries on with little above ground evidence as to the situation.

It's just like how a hot water cylinder works - hot water floats on cold (really, it does, cold goes in the bottom and pushes hot out the top. The hot is floating on top of the cold with only a small "mixing layer"). So you stand in the shower blissfully unaware that over the course of a minute or so you are about to run out of hot water.

It's the same with water flooded oil fields. It all carries on flat out until the wells start flowing water and it's game over. Now, if there are a few thousand wells drilled into a reservoir (as there are in some of the Saudi fields) then they wont all die at once. But from a big picture perspective they will die pretty darn quick...

But it's not just individual fields that are a problem. It's happened to whole countries where production rises, peakes and then relentlessly falls. Even the USA with literally half a MILLION producing wells and the best technology couldn't beat it. The oil price spikes of the 1970's led to more drilling and LESS production. Nature just doesn't respond to what happens with prices!

The real concern now is about a global peak. Worldwide light oil production seems to have peaked with declines in recent years. Non-OPEC production was wobbly BEFORE Katrina. Even OPEC was flat out and production actually went down a bit due to trouble in Iraq and Nigeria. Sure, there's more heavy oil but increasingly that's not enough to offset the declines of light and medium grades and refineries generally can't process it anyway.

But why can't we just pump harder? It's not that simple unfortunately. Overproduce an oil field and PERMANENT DAMAGE occurs and the end result is a lot of oil that can never be recovered. There is some evidence that the Saudi's are on the edge of doing this at present.

Go to McDonalds or similar and get yourself a "thick shake". Now, try and drink it through the straw as quickly as you could drink Coke. Can't be done because it's just far too thick - it takes most people a few minutes to suck this up the straw whereas they could drink the Coke pretty fast.

Oil is much the same. There's a limit to how fast it comes out and the heavy, thick oil that we are relying on more (now that worldwide production of light oil is falling) is even harder to get out quickly. It's like comparing cream through a straw to trying to suck peanut butter through a straw... A lot of effort for relatively little and most refineries can't process heavy oil anyway.

So what's it all mean?

Practically every oil field in the world was producing flat out BEFORE Katrina. And that was barely adequate. Now with some US production wiped out (some of the major platforms have been wrecked) the worldwide oil production has fallen.

Whilst there is still oil to be developed and more to be found, the scale is a problem. There just isn't enough new capacity coming onstream to offset the declines elsewhere as fields deplete (known as natural decline) and also to meet rising demand. Crunch time has come and the world just doesn't have a backup plan.

Build nuclear, solar, whatever. But what do we do about the next decade (at least) while it's being built? Demand is soaring and production is struggling to stay flat and will in due course start to fall. The inescapable conclusion is that there's a shortfall in supplies which means problems for the economy since it's not merely a question of price but rather it's a question of actually cutting demand.

Long term, yes, there are things that can be done. Cars with scaled-up mobile phone batteries would do away with the need for petrol provided that we have electricity (which can be produced from coal, renewables, nuclear etc). So there is hope. But they're just not going to be on the roads on a mass scale this week or even next year. The problem is one of timing between when oil becomes scarce and alternatives become practical. That's my focus here - that gap which realistically is likely to be a couple of decades or so.

And on top of all this there's issues with Iran etc. OPEC production has actually fallen a bit lately...

But what about gas? Ultimately it goes the same way. Discovery peaked in the 1970's and about half the reserves are in Russia and Iran so it's geographically concentrated just like oil which means geopolitical strife... And the UK and US are already running out of gas (production falling, demand rising just like with oil).

Realistically, gas offers the best near term replacement for oil. But unfortunatly everyone seems to think it's best used in power stations (which could easily use coal, nuclear etc) which could well leave us all rather short (to say the least) on transport fuel.

This is a highly complex topic not easily explained. Hopefully I've shed a bit of light on it here although I'm very aware that I've barely scratched the surface.

In short, don't panic. There will be SOME oil for a long time yet. But not much more than we have now and in due course much less. There are still tar sands, natural bitumen etc. But they don't come on the scale of the cheap, easily flowing light and medium grade oil that is becomming increasingly scarce.

With China and others wanting an increasing share of a shrinking pie it's unlikely to be cheap (or easy) to obtain oil. So plan accordingly. :2twocents

[GreatPig]

For some really scary theories about what could happen, and some strong arguments with lots of references, read Matt Savinar's book "The Oil Age is Over".

It's available here (http://www.lifeaftertheoilcrash.net) and used to be downloadable for free, but I notice it now costs US$11.95.

There's no pussy-footing around in that book. It opens like this:


Dear Reader,

Civilization as we know it is coming to an end soon.
Then a bit later:


In short, the end of cheap oil means the end of everything you have grown accustomed to, all aspects of industrial civilization, and quite possibly humanity itself. This is known as the post-oil “die-off.”

4. What did you mean by “die-off”?

Exactly what it sounds like. It is estimated the world’s population will contract to less than 500 million within the next 50-100 years as a result of oil depletion (current world population: 6.4 billion).

5. Are you serious? That’s 90 percent of our current population. How could that many people perish? Where does that estimate come from?

That estimate comes from biologists who have studied what happens to every species when it overshoots its resource base. When given access to an abundance of food (energy) all species follow the same pattern: a rapid population increase (“overshoot”) followed by an even more rapid population decrease characterized by violence, war, and cannibalism.
So that "bright" future ahead might just be the flash of nuclear explosions.

Cheers,
GP

[wayneL]

From: http://urbansurvival.com/week.htm

================================================== ========
Urgent Update: Oil Industry Bracing Again

We won't reveal our sources on this, but we have just received an email from a source within the Gulf of Mexico Oil Industry that you need to be aware of:

Planning evac for the eastern Gulf tomorrow……just thought I’d give you a heads-up. That means production shut-ins start tomorrow evening if the storm stays heading westward, and even more evac next day if it strengthens. This means gas will be running back up once again this week. Your readers ought to gas up while it’s cheap if they see the storm getting stronger and heading into the Gulf of Mexico.

If it goes where they show on the predictive model, it will be tearing through the edge of the OCS (outer continental shelf), which is where all the deepwater stuff is, and the northern side (strongest) will impact the fixed platforms across the entire Gulf. If it makes landfall in Texas, it will be going through the part of the Gulf where natural gas production is more prevalent than oil. This may impact the winter fuel costs, especially if we lose any of these platforms.

It all depends on how strong it gets, and with Houston temps scheduled for the upper nineties this week, it could get a lot stronger than they predict. Remember, their predictive model has a big basis in history, but with the climate changing, the model could easily be wrong in a body as shallow as the Gulf of Mexico. Shallow water tends to be warmer, right?

[mime]

Hate to get personal but you probably failed in logic too.

Seriously, If you do not believe what we say, when we are quoting highly intelligent people, experienced in the industry, then quote opposing evidence and sources. I could flood this thread with "black" data but you wouldn't read it. If you are interested you will search on "King Hubberd", "Peak Oil" and "matt Simmons". If you are not leave the debate to the adults.

<edited>. I said it was my opinion and you publicly flame me. I have read the peak oil stuff and I don't agree with the writer on the site that the world is doomed no matter what. I read around half of smurfs post and agree with him that we will not be able to produce enough oil for world demand. It will cause an economic slowdown but not the end of the world, we will be able to use alternate fuel sources or make our machines more efficient.

Don’t be a sheep and believe everything you read. From memory the site was selling their research and other crap they came up with. They want to make money off panic and hysteria.

Just read their opinions but don’t necessarily believe them.

[Hanrahan]

Don’t be a sheep and believe everything you read. From memory the site was selling their research and other crap they came up with. They want to make money off panic and hysteria.

Just read their opinions but don’t necessarily believe them.
OK, Now we're even LOL And I apologise for the "flame". I did not intend it so and have already given reasons for the post.

But you miss my point. A simple "I think" with no supporting evidence is not so impressive. If there is evidence you believe worthy of consideration then post it for all to see.

I downloaded and read Matt Savinar's book "The Oil Age is Over" mentioned above and it scared me. I accept the general facts given but not necessarily his conclusions but that doesn't matter because it is out of my control. There is logic in concerning oneself with that which can be effected, so even that very human emotion of denial is both understandable and desirable.( for sanity reasons; we are nothing without our minds)

[Kauri]

[QUOTE=wayneL]From: http://urbansurvival.com/week.htm

================================================== ========
Urgent Update: Oil Industry Bracing Again

We won't reveal our sources on this, but we have just received an email from a source within the Gulf of Mexico Oil Industry that you need to be aware of:


Updated images at.. http://www.ssd.noaa.gov/PS/TROP/DATA/RT/GMEX/IR4/20.jpg :(

[Epsilon]

The storm is still way out......It has not even YET "transformed" into a hurricane let alone going directly towards Texas.....Hopefully it wan't happen.
Rita is still an ..unpedictable "maniacly" behaving hydro-lass.....
We will not know until atleast Wednsday.......

[mime]

Wow oil spiked $4.3 a barrel. What does the future hold?

[markrmau]

Oil COULD be about to have a nasty head and shoulders formation. Just have to wait until we see what rita does.

Note, nymex crude is opening early - 7am sunday US time I think.

[wayneL]

A bit of light relief....not that far off topic :) :

Recently during one of his many trips, President Bush encountered a man with
long hair, wearing a white robe, and sandals, holding a staff.

President Bush went up to the man and said," Aren't you Moses?" The man
never answered but just kept staring straight ahead.

Again the President said, "Moses!" in a loud voice.

The man just kept staring ahead, never answering the President.

Bush pulled a Secret Service agent aside and pointing to the robed man asked
him, "Doesn't that man look like Moses to you?"

The Secret Service agent agreed.

"Well," said the President,"Every time I say his name he just keeps staring
straight ahead and refuses to speak. Watch!" Again the President yelled,"
Moses!"and again the man stared ahead and didn't answer.

The Secret Service agent went up to the man in the white robe and whispered,
"You look just like Moses. Are you Moses?"

The man leaned over and whispered back ... "Yes, I am Moses.

However, the last time I talked to a bush I spent 40 years wandering in the desert, and ended up leading my people to the only place in the whole middle east where there is no oil."

[wayneL]

Oil COULD be about to have a nasty head and shoulders formation. Just have to wait until we see what rita does.



I was thinking possible H & S coming since the low on the 12th.

However Unleaded Gas is a different story, as it's refinery capacity that is potentially more impacted by Rita.

Natural gas is an even bigger story, they are apparently closing down gas wells(?) in anticipation of damage. of tranportation facilities

Oct UG & NG :

[wayneL]

A good site to track the storm....down to a strong cat 3 as of the moment.

http://wwwa.accuweather.com/maps-satellite.asp?partner=accuweather&myadc=0&traveler=1&zipcode=&site=SE&fday=1&type=ei&large=1

[Epsilon]

Wayne.....
How about latinizing your signature:
" I think, therefore I am".......To something like.....DUM SPIRO SPERO (While I breathe I hope)...OR , better still,.......DUM VIVIMUS VIVAMUS ((While we live let us live.....In free translation: Let us enjoy life!). The latter one was the motto of the Epicureans (of-course......)......
Cheers!!!!! Glorious day in Perth today!!!!!

[AnUbIs]

In some way I’m glad petrol is coming to an end, now maybe we’ll develop different fuels so we don’t have to keep filling the pockets of the people who hate us!!! Maybe we can sell our fuel to them for top dollar!

[Smurf1976]

I was thinking possible H & S coming since the low on the 12th.

However Unleaded Gas is a different story, as it's refinery capacity that is potentially more impacted by Rita.

Natural gas is an even bigger story, they are apparently closing down gas wells(?) in anticipation of damage. of tranportation facilities

Totally agreed. Even though crude oil production has been cut due to these storms, refinery throughput has been cut even more so there is now a surplus of crude even if there is a shortage of refined products. The world just can't process the entire crude production with the refinery problems.

Natural gas is a HUGE problem. The US is post-peak gas producer to start with. Demand is up and Canada also can't supply any more than it already does. Indeed they to have the problem of resource depletion.

Any physical shortage of natural gas will tend to affect the diesel, jet fuel / kerosene, LPG and fuel oil markets also since these are the most readily usable substitutes, particularly for power generation. Petrol becomes affected indirectly as refineries shift to maximise mid distillate production.

I do, however, get the impression from a growing number of anecdotal reports that demand, an quite possibly the global economy, has already gone over a tipping point during the past few weeks. Demand for refined products seems to be slipping quite seriously in some instances and they all seem to come back to reduced consumer spending / tight finances rather than the use of alternatives.

[wayneL]

Wayne.....
How about latinizing your signature:
" I think, therefore I am".......To something like.....DUM SPIRO SPERO (While I breathe I hope)...OR , better still,.......DUM VIVIMUS VIVAMUS ((While we live let us live.....In free translation: Let us enjoy life!). The latter one was the motto of the Epicureans (of-course......)......
Cheers!!!!! Glorious day in Perth today!!!!!

Indeed a perfect day :)

It is true that Quidquid latine dictum sit, altum viditur (Whatever is said in Latin sounds profound).

My signature in latin is actually Cogito ergo sum. Another variation is Cogito ergo doleo (I think, therefore I am depressed. haha)

I've always thought that the use of obscure latin phrases without the translation rather pretentious, may as well use the english.

However I'm not averse to the well known phrases in common usage, such as ad hoc, ipso facto, ad infinitum, quid pro quo, cui bono etc

But, Denuone latine loquebar? Me ineptum. Interdum modo elabitur. (Was I speaking Latin again? Silly me. Sometimes it just sort of slips out.)

:D

Cheers

PS. Dum vivimus vivamus I like that one. The epicureans (largely misunderstood by todays society) had a good thing going. The movement should be resurrected IMO.

[Epsilon]

Glad to hear you like the Epicurean philosophers(y) thinking and way of life....
Do you speak any Greek by the way?
Have you ever had coffee at Kostas in James street, Northbridge?
Another brilliant day in Perth today......We are going to Frementle for lunch!
Cheers;))

[brerwallabi]

Gold stocks might offer some gains in the morning if current movements overseas of the Dow being even further down and gold being currently up by $2.60US.
Off to bed yawn so hopeully I can have a good day trading tomorrow.(very carefully though)

[markrmau]

GM thing could be interesting. I understand they are being interviewed over accounting practices. If anything is uncovered, it could cause turmoil in the bond market as I understand there is 100's billions$ of GM debt (currently classed as junk anyway though) on the market.

Should be good for gold.

[TjamesX]

Just came across this thread and thought it would be worth continuing the discussion (on the Oil side of things)

I have gone Long AWE and ARQ today, I think the oil price will rebound.... long term. Unfortunatly I got out of HDR too early today for a 6% loss after being spooked by WPL 10% sale (the price has held up well considering) - one of those unfortunate things of investing - buy in, a few days later someone wants to sell 10% of the company.... :(

I have recently moved into the energy industry (commercial analyst by title). Two things I have realised in that short time;

1) we live in a very lucky country as far as energy goes (I'm talking Coal & Gas here)
2) people don't realise how lucky we are and how much we rely on it.
3) I believe petrol prices will rise because transition technologoies are not developed enough and will take time to materialise.

Oil is the most condensed form of energy (hang on, I just thought of Uranium hmmmm), OK Oil is the most condensed for of energy available that can be easily converted :D. A transition from this form of energy to coal, gas or uranium for transport (ie electric or gas powered transport) will cost more money than high oil prices and they haven't worked out electric/gas powered plane transport as yet! Then we move onto oil refined products. Do we have a transisiton technology for plastics yet???

In the end we have to come to grips with the fact its a limited resource. There can and will be alternatives, but any transition will cost money - money that the consumer will have to pay. The only way to get cheaper energy is if someone seriously cracks the renewable game.... but its proving to be quite hard. You don't want to know how much more expensive wind and solar power are compared to fossil fuels.

And the price of making solar cells in the US has bottomed and is rising (due to commosity price rises).........

[michael_selway]

atm theres alot of oil and OPEC can increase production quite a bit

so Oil shouldnt rise between 3-5 yrs at least (most likely fall), however every now and then spikes occur liek hurricanes etc

[doctorj]

atm theres alot of oil and OPEC can increase production quite a bit

so Oil shouldnt rise between 3-5 yrs at least
That's a big, big call.

Like it or not oil is finite and each day we use more of it, not less. All doesn't actually have to run out, the supply just has to slip beneath demand and prices will rise.

I don't think we're going to see US$100+ oil in the next 3 years, but if anything, the average price paid for Oil is going to increase not decrease in the long term.

[Smurf1976]

atm theres alot of oil and OPEC can increase production quite a bit

so Oil shouldnt rise between 3-5 yrs at least (most likely fall), however every now and then spikes occur liek hurricanes etc
I strongly disagree with you there.

I run my own world oil production model, admittedly not updated this year but still reasonably accurate, and to the best of my understanding there is no significant unused capacity to produce any grade of oil which sufficient numbers of existing refineries can process anywhere in the world including Saudi Arabia.

Except for the Saudis this is backed up by recent US Government stats which show OPEC except Saudi Arabia to be at 100% capacity. It's well accepted that nobody outside of OPEC is sitting on surplus capacity and indeed most of the major non-OPEC producers are post peak anyway.

As for Saudi, they have been consistently unable to produce above the capacity used in my model despite overwhelming incentive in the form of price and all manner of promises to stabilise the market and so on. Once again they ran up production until they hit what I believe to be their maximum (9.6 mmbpd versus historically claimed capacity 10.0 - 10.5 mmbpd which has recently been raised to 10.5 - 11.0 whilst actual production has fallen from 9.6 to 9.5). The last time they were producing significantly above present levels was 25 years ago and even then they only sustained the lower limit of the capacity range they have claimed for decades.

Much of the additional oil relesed to the market in recent years by Saudi is sour, heavy crude for which the world lacks sufficient refineries to process and accordingly it sells at a significant discount. This strongly suggests that they don't have surplus capacity to produce light or medium grades and it is generally accepted by both sides of the debate that nobody outside of Saudi has surplus.

This is not to say that oil is a one way bet. It is not. But I disagree with the notion that there is significant unused production capacity. :2twocents

[doctorj]

I run my own world oil production model

Surely this is worth a topic on its own. I'm sure many would benefit from discussions about how to go about building these models and what kind of inputs you use.

[Milk Man]

Don't the Saudi's pump water into their oil fields to make the oil come out faster too? This would mean that supply in these fields wil not slowly dry up but come to an abrupt halt when water comes out the rigs (because oil floats on water). Is this correct? I dont know about the ramifications are for damage but if you pump too much out of a bore then the bedrock wears away around the casing, and if too much wear occurs then the water will escape out the top of the bedrock and the bore is FUBAR. Im pretty sure thats how it works, bottom line: pump to much then bore is FUBAR.

Saudi's = FUBAR :D

[Smurf1976]

Don't the Saudi's pump water into their oil fields to make the oil come out faster too? This would mean that supply in these fields wil not slowly dry up but come to an abrupt halt when water comes out the rigs (because oil floats on water). Is this correct? I dont know about the ramifications are for damage but if you pump too much out of a bore then the bedrock wears away around the casing, and if too much wear occurs then the water will escape out the top of the bedrock and the bore is FUBAR. Im pretty sure thats how it works, bottom line: pump to much then bore is FUBAR.

Saudi's = FUBAR :D
This is a very complex topic but in short, yes the Saudis do pump very large volumes of sea water into their oil fields, particularly at the Ghawar field (the world's largest).

In simple terms an oil field without enhanced recovery techniques in use will experience a gradual decline in output over a long period of time. A bit like how a torch battery runs down only it's over a much longer time period. In parts of the USA there are "idle" oil field pumps all over the place. Actually they're not "idle" at all but are simply switched off until the oil fills the bore up again and then the pumps are switched on to pump it out and then switched off again. The reason being that the fields are so heavily depleted that the oil just doesn't flow at all rapidly these days.

The reasons are geologically quite complex (and I'm not a geologist) but suffice to say that it's wrong to think of an oil well as being like a straw into a glass of water. Think of it more in terms of a straw stuck in a sponge soaked with thick honey and you'll understand what the problem is with getting it out quickly.

And the thicker (heavier) the oil, the bigger the problem with production rates such that some heavy oil fields are still pumping over a century after they started. They never did flow quickly, they still don't and probably never will. They will ultimately produce a lot of oil, but over a long period of time and that is what the issue with oil is. It's not about "running out" of oil but rather a question of the rate at which it can be produced.

This situation creates the misleading impression, especially to tourists, that the USA has numerous oil wells simply sitting idle when in fact the reverse is true. They're running flat out but that doesn't result in a lot oil being produced these days.

To maintain production rates as the field ages (depletes) a number of techniques are used with water flooding being the most well known and amongst the simplest and oldest. Pumping steam, natural gas, carbon dioxide etc. in is also used as are detergents in some situations. And of course there's also the drilling of production wells into small surrounding fields (usually falsely announced as a recent discovery) etc.

With water flooding what basically happens is that huge volumes of water are injected to both maintain reservoir pressures (which drop naturally as the oil is extracted) and also to "sweep" oil across the field towards production wells.

Another, far more modern, technique is horizontal drilling. In very simplified terms think of a well drilled in a curved manner so it runs horizontally through the oil with several "legs" coming off it reaching to the sides. This can produce a lot more oil on a daily basis than a conventional vertical well. Such wells sit above the water below and below the natural gas above the oil. It's literally a case of extracting an ever thinning layer of oil from between water and gas. Production stays very high until suddenly all you have is gas (which is either used, flared or reinjected) and water with a bit of oil.

According to Saudi Aramco (the Saudi national oil company) both water flooding and horizontal drilling are extensively used by them. Two very significant points arise from this:

1. The fact that they are injecting such huge water volumes and spending a fortune on horizontal drilling very strongly suggests that they would otherwise be unable to meet production targets. This in turn implies that the Ghawar field in particular has passed its natural peak production and is only being propped up by the use of such technologies. If this is correct then it would also strongly suggest that Ghawar is more than 50% depleted. It is known publicly that the reason for starting the water injection in the first place was alarm at the rapidly falling reservoir pressure levels in the 1960's. Ghawar was only discovered in 1948 and commenced production in 1951.

2. The use of horizontal maximum contact drilling combined with water injection has the potential to lead to a rapid fall in production once water reaches the producing wells. Rather than declining slowly, they would simply die, one at a time, almost literally overnight.

Now, there are a lot of wells drilled into Ghawar but if they start just dropping off one at a time then that leads to a production decline which in due course becomes a major problem. This situation is exactly what happened at the Yibal field in Oman. Production was at 250,000 barrels per day a few years (1997) after the introduction of maximum contact horizontal wells and Shell convinced the government there that a 30% production increase over the next 10 years was the thing to do. Just months later the collapse began and now, depending on which reports you read, production is between 40,000 and 80,000 barrels per day. A rather spectactular collapse in production which was totally unexpected judging by Shell's actions. Oh, and it flows about 900,000 barrels of water per day in addition to that little bit of oil that comes up with it.

It is not my intention to be overly pessimistic about oil and suggest the end of the world etc. But it is anything but easy to maintain production going forward with meaningful increases being highly unlikely in my opinion. The new development that would be needed to facilitate sustained production increases just doesn't seem to be happening and there aren't the known undeveloped reserves for that development to occur. The underlying reason for this is that exploration has been increasingly unsuccessful over the past four decades with a sharply falling discovery trend. What was considered too small for a major oil company to bother with in the 1970's is now announced as a major discovery. A major discovery which over the next decade will produce enough oil to run the world for 5 days. That last sentence says it all in my opinion. :2twocents

[Dan_]

Smurf,

A big thanks for the detailed and informative posts you provide for us readers here as ASF.

I find your detailed explanations most valuable and educational

[Milk Man]

Excellent explaination Smurf. You should do geology- sounds like you really have a good base in it already.

:bier:

[michael_selway]

I strongly disagree with you there.

I run my own world oil production model, admittedly not updated this year but still reasonably accurate, and to the best of my understanding there is no significant unused capacity to produce any grade of oil which sufficient numbers of existing refineries can process anywhere in the world including Saudi Arabia.

Except for the Saudis this is backed up by recent US Government stats which show OPEC except Saudi Arabia to be at 100% capacity. It's well accepted that nobody outside of OPEC is sitting on surplus capacity and indeed most of the major non-OPEC producers are post peak anyway.

As for Saudi, they have been consistently unable to produce above the capacity used in my model despite overwhelming incentive in the form of price and all manner of promises to stabilise the market and so on. Once again they ran up production until they hit what I believe to be their maximum (9.6 mmbpd versus historically claimed capacity 10.0 - 10.5 mmbpd which has recently been raised to 10.5 - 11.0 whilst actual production has fallen from 9.6 to 9.5). The last time they were producing significantly above present levels was 25 years ago and even then they only sustained the lower limit of the capacity range they have claimed for decades.

Much of the additional oil relesed to the market in recent years by Saudi is sour, heavy crude for which the world lacks sufficient refineries to process and accordingly it sells at a significant discount. This strongly suggests that they don't have surplus capacity to produce light or medium grades and it is generally accepted by both sides of the debate that nobody outside of Saudi has surplus.

This is not to say that oil is a one way bet. It is not. But I disagree with the notion that there is significant unused production capacity. :2twocents

Hi thx for the info!

http://www.smh.com.au/news/business/higher-oil-output-to-push-down-petrol-price/2005/11/18/1132016987201.html

Btw do you agree or disagree with this article then?

[Smurf1976]

Hi thx for the info!

http://www.smh.com.au/news/business/higher-oil-output-to-push-down-petrol-price/2005/11/18/1132016987201.html

Btw do you agree or disagree with this article then?
The short answer is that numerous countries, more than half of all significant oil producing countries in fact, have experienced a rise, peak and then fall in production volumes. This is fact, not theory as the article asserts.

The response to high prices on North Sea production has been for an acceleration of the rate of decline. Likewise US production slumped through the oil price spikes of the 1970's and has trended down ever since. It is still trending down today and despite the huge rise in prices since 1998 production is lower now than it was then.

It is possible that the article is correct in a sense. Some production growth is likely in the near future and the markets could use that as a basis for sending the price down. Likewise changes in the geopolitical situation, weather, the economy and so on will also influence the price so $35 is certainly possible. If the economy ended up in a depression we could end up with $5 oil pretty easily.

As for the longer term, economists didn't see the North Sea oil peak coming whereas many thinking people did. Likewise the UK gas crisis happening right now, the USA gas crisis, the NZ gas situation, the famous peaking of US oil production in 1970, production collapse at Yibal oil field and the fact that oil prices ever went over $40 a barrel. Economists were consistently wrong and those sounding the alarm bells, whilst not particularly good with timing, have in due course been proven correct.

Those same people disagree with the notion of abundant oil and, unlike the economists, have a track record and relevant training (geology) as a basis for their claims. In the absence of proof that this time really is different, I will side with those with the track record. That said, given the seriousness of the issue I do hope to be proven wrong.