Re: Matthew Simmons on Oil

From: Rich Blinne <rich.blinne@gmail.com>
Date: Tue Aug 23 2005 - 15:06:50 EDT

On 8/23/05, janice matchett <janmatch@earthlink.net> wrote:
>
> At 02:14 PM 8/21/2005, Glenn Morton wrote:
>
> I read his 400 book on the airplane on the way back to Beijing about a
> week ago. I am more depressed than ever. I learned a few things about the
> fields that the Saudis claim are going to replace the oil Ghawar doesn't
> produce. They are fields which have already produced and were abandoned.
> Also the southern part of Ghawar has a 13 millidarcy reservoir. Usually we
> call such reservoir a dry hole.
>
> I am currently reading The Long Emergency. It is really depressing so I am
> going to stop reading it.
>
> *Al Koop <koopa@gvsu.edu>* wrote:
> http://www.financialsense.com/transcriptions/Simmons.html
>
>
> ### Half the stock market (reflecting the world) is made up of negative,
> fear/pessimism-driven *Bears* and the other half is made up of positive,
> courage/optimism-driven *Bulls.
>
> *

Glenn is a working petroleum geologist. I'll stack him up against Rush
Limbaugh any day of the week. I noticed that the people quoted were
economists and not scientists or engineers. What drives markets is many
times psychology and thus optimism and pessimism can be self-fulfilling.
Thus, you have economists focusing on this. Oil production is dependent on
things beyond psychology, however.

Yes, it is true that extraction technology has improved. However, what the
NYT Magazine article pointed out (and would come as no surprise to Glenn) is
that if you extract the oil too quickly and in the wrong way you can destroy
the oil field forever. Furthermore, by focusing on the reserves you don't
pay attention to production rate. I'll close with a quote from Glenn (ASA
list: 10/16/2004) when he took on Greenspan's rosy prediction concerning oil
(note again an economist and not a physical scientist):

>
> >Though Mr. Greenspan conceded that there have been relatively few new
> >oil fields discovered in recent years, he said the world's net proven
> >reserves have risen by 100 billion barrels over the last decade even
> >though more than 250 billion barrels have been extracted.
>
> Big friggin deal. Mr. Greenspan you don't understand what is important and
> what isn't. Production rate is what is important, not reserves. All oils are
> not equal. What has been added to the reserves is highly viscous, heavy
> crudes which have the consistency of molasses (or worse) and thus can't be
> produced very rapidly. Remember my banking analogy. If I put a billion
> dollars in your bank account but tell you you can only extract it at the
> rate of $10 per day, you are not rich, I would submit.
>
Received on Tue Aug 23 15:07:31 2005

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