Sunday, October 01, 2006

A "Peak" into Our Future

Let's face it. Dire prognostications seldom play out the way the pessimists predict.


I theorize that as events unfold behaviours change and people adjust to the "new current" reality in ways that are nearly impossible to predict before the events unfold.

Recently, a perception that the world is entering (or soon will) enter a "peak" in its ability to produce crude oil -- especially the light sweet stuff that is easy to turn into gasoline -- has left the paneled basements of doomsayers and has started to get notice in more traditional media outlets. Regardless, I still find some not familiar with the concept, but in a nutshell it is this:

All oilfields follow a bell shaped curve in regards to production before they run out of oil. Even though we continue to deplete them, and we spend many billions on new sources, we are not finding enough new ones to replace what we are using. Several of the major oilfields are in decline and the only options that might possibly be left are very expensive due to location, geopolitics, weather, depth of sea, etc. The global oil resources, taken in aggregate are at or near the downside of the bell-curve slope. As the world continues to grow demand, price hikes will be the only thing that can constrain demand.

Enough of the primer. Are we going to "run out"? Is there a shortage?

As I like to say: there is a shortage of $20/barrel oil. there is no shortage of $80/barrel oil.

The sources of oil are very expensive to extract, and the bigger sources are all seemingly in difficult/expensive to extract form.

Here is a recording of an interview that offers more on this story, and how the recent "big find" in the gulf and falling prices effect the fundamentals behind the "peak oil" theory. The interviewer has already drunk the peak oil "kool aid", unfortunately, but Matthew Simmons, author of "Twilight in the Dessert" does a great job of breaking things down. He makes an especially interesting prediction that perhaps the "globalization" of the production of physical things in remote parts of the world is flawed because it assumes that: 1.) cheap labor will continue to be cheap, and 2.) transportation energy will continue to be a non-factor in regards to costs of getting stuff to market.

I know the recording is 40 minutes, but it's a lot easier than reading a big technical book on viscosity levels, and soil permeabilities, depletion rates, etc.

Enjoy!....and I promise a return to more stuff about Montevideo on Monday:

ciao for now,

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