RE: Oil: $182/barrel

From: Glenn Morton <>
Date: Thu May 06 2004 - 13:58:17 EDT

Al asked:

>What do those experts mean when they argue that there isn't a problem?
>Does this mean that they think supply will not exceed demand for
petroleum in the next five years? In the next ten years?
>In the next 30 years? Or never. Do they think that new energy sources
will be found to replace oil, whenever that is
>needed, at a reasonable cost with only a small blip in the world
economy? Can you help me (us) understand in what sense
>they see no problems?

>I have been trying to find (with referenced evidence) a good rebuttal
to those who claim we are heading for severe energy
>problems, and I cannot find any. Those who profess to not be concerned
about petroleum supplies leave us with nothing
> more than vague statements that they think new technologies will
produce more oil as needed or that increased prices will
>lead to quick solutions. All of those who see no problem seem to have
about as good an energy plan as somebody intending
>to fund their retirement by winning the lottery--not completely
impossible that it will work, but highly unlikely.

Just got back from the conference and thinking on it on the way home I
realized that all the anti-depletionists were speaking about reserves,
not production. The depletionists were speaking of rates of production.
The biggest hit to the depletionists was the criticism that they don't
take into account lower quality oil resources--like tar sands.

Two of the anti-depletionists claimed that Hubbert's curve is not
matched in practice. Well, no, but so what. Political and other
economic influences influence the investment decisions. Hubbert's curve
only works for all out, unfettered production--something that doesn't
apply to the oil industry.

Everyone agreed that oil is a finite resource and will eventually peak.
The anti-depletionists occasionally said that there was far more oil to
be recovered than the depletionists allow. That may be true, but rate
is important. One guy said that a plot of annual production vs.
cumulative production (something often used to estimate ultimate
recovery from a field, didn't work. He showed a production curve from a
UK field I have worked on. The curve starts high with high annual
produciton, but then the curve linearly begins to decline to zero.
Then, when my company took over the field, and we drill, and drilled and
drilled, we stopped the decline, but the production was at a very very
low level compared with the initial production. This fellow didn't
mention the effort required to keep that field alive. He also didn't
mention the fact that when a fishing boat dragged an anchor across the
pipeline through which the oil flowed, it was not deemed economically
viable to pay the cost to repair the pipeline. The entire oil platform
was removed in 2001. The oil field now produces zero.

This same depletionist also used a very YEC like tactic. He only showed
the UK production out to 2000 rather than to 2003. Out to 2000, the UK
was producing 12.5 million tonnes per month. Last Eebruary it produced
only 7.8 million tonnes. That is a 38\5 reduction in output in 3 years,
yet this anti-depletionist didn't bother to tell his audience this. I
actually went to the conference to meet this guy. He had asked me to
review prior to publication an article he got into the O&G journal. I
didn't think much of the article, and having met him now, I don't think
much of his integrity with data.

The problem I have with lower quality resources is that the rates will
never be able to rise very high. I guess I am a depletionist because I
am more concerned with production rates.

More later.
Received on Thu May 6 13:59:12 2004

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