IEA: oil demand has surpassed supply

The energy watchdog of the OECD countries, the International Energy Agency (IEA), recently started to talk about looming oil shortages. The high oil price of today will remain is the message they are spreading. We need to save more oil, invest more in increasing oil production and upscale alternatives. However, the IEA does not see a peak in worldwide oil production occurring in the coming decades. Based on the expectation that large amounts of oil will be discovered, not yet on the radar of oil companies worldwide. This new stance follows below from the translated transcript of an interview recently broadcasted on the Dutch television channel RTL-Z with Aad van Bohemen, the Director of Crisis Management at the IEA

What is the significance of the current crisis on the oil market?

“The situation on the oil market is worrisome in the sense of there being more demand than supply. This does not mean that we should panic because of an acute shortage of oil, there is sufficient oil in the world. There is production capacity that can be brought to the market by the oil producing countries. But this capacity should be brought to the market to meet supply. So the situation is on overall worrisome, but it is not yet time to panic.”

But if there is more demand then supply then stocks will decrease, how long can the west maintain this situation?

“This is indeed already happening for almost a year. A year ago OPEC decided to decrease their production. They are able to increase production again since the capacity is still there. Because of this decline, however, demand has surpassed supply and the western countries are consuming their own oil stocks to fill the gap. In the last quarter this event was reflected in higher oil prices. It can be solved by increasing production, but then the oil producing countries have to decide that they want to increase production.”

Can producing countries increase production? One of the questions that some analists have is if OPEC is still able to increase production?

“Certainly on the short term OPEC will be able to increase production, one and a half years ago they were also able to decrease their production. But we also see that the demand will continue its increase in the long term. Not only in the western countries but also in other countries amongst which China and India. To meet this increasing demand we need more then the present spare production capacity, new production capacity needs to be developed for the oil markets. A large number of fields are under development, new fields are being discovered and developed. What we are concerned about is if these fields will be brought to the market in time, if sufficient investment is taking place in new production capacity. Currently we are not sure if this is the case, whether enough new oil fields are being developed to meet demand."

Are you optimistic about the oil market?

“The IEA is not optimistic. We see a gap developing in the future between demand, if nothing is done to curtail demand, and production. So something has to happen, either more investment in production or more investment in substitution for oil or the curtailment of demand. All these three things will probably happen at the same time. Such developments don’t happen on their own, it can very well be that this is going to hurt. Meaning that we are going to enter a period wherein oil prices are quite a bit higher, possibly even higher than today's near all time high price, before we have found new solutions. If your question refers to the optimistic stance that it will all be fine, then I am not optimistic.”

Who is going to feel the largest impact of the problems on the oil market, are these the poor countries?

“It is sad to say but this will be the case, the western countries have become so rich that we are nearly not impacted at all by high oil prices. Only now the oil price is nearing 100 dollars per barrel we are seeing a demand reaction, but this is only a very modest reaction. At the same time the national budget of developing countries is more and more dominated by energy costs. And these countries want to grow and economic growth is always paired with growth in the consumption of energy. So such countries will be hit much harder then we in the west will be.”

When are we going to see in your view that factories will stop production because there no longer is any fuel available?

“Not, this is not going to happen. In this sense I am optimistic. Humanity has always been intelligent enough to find solution when new challenges come forth. Possibly we will have difficulties muddling through, but not in the sense that a crunch is going to occur in which factories will have to stop production.”

You are familiar with the phenomenon of peak oil, what is your view on this?

“The theory of Peakoil says that we have currently used about half of the oil production that is available under ground. That implies that we can no longer produce more than we are currently doing, and that oil production is going to drop sooner than later. At the IEA we do not believe this, we think that we know that we are still not nearly halfway, that there are plenty of reserves underground in areas where little to no oil exploration has taken place. Until now oil companies have only searched in areas where oil was relatively simple to find. Now we are looking for oil at increasingly greater depths in the oceans and more and more at northern locations above Russia. Oil is still being found at the moment, and we can continue to find oil for a long time to come.”

It does seem to become a race against the clock though, which will eventually on the long term be lost.

“On the long term oil will run out, it is a finite resource. So on the long term we need to shift to different energy sources. The question is whether we have sufficient time to switch to energy sources such as sustainable energy, solar energy. For the time being we should maybe also use more nuclear energy. One can call that a running match, a race against the clock. Will we have other sources of energy in time before oil runs out? What we say is that this will not happen as quickly as the peak oil theory which you are talking about predicts. The IEA thinks that we have more time. This does not mean that we do not need to worry, as I just explained, a shortage of oil is looming on the horizon.”

Not so long ago large adverts have been published by a number of large oil companies in all financial newspapers in the world. Didn’t it become clear from these that we have consumed the first half of oil reserves already and that the second half will be consumed in the next 30 years?

“These adverts were published by one oil company, other oil companies have a different take on the situation, they are more optimistic. It is of course about the entire picture. If one looks at western oil companies, their supplies are decreasing. These companies are not always allowed to areas where there still is a lot of oil, the Middle-East and Russia, to look for new reserves. So specifically for that oil company, or specifically for the Western countries we are already more or less at the plateau of maximum production. All that we need in additional supplies needs to come from either the Middle East or Russia.”

Isn’t it dangerous for the IEA to anticipate on oil discoveries that have not yet been made?

“This is an experience that has been built up as time passed from which we have learnt that when new areas are being explored more oil will be found. So far this has been proven to be the case. In the eighties we have started to search for oil in the North Sea, there we found oil at locations of one hundred to two hundred meters deep. At the time that was called non-conventional oil. Nowadays it is very normal to search for oil at such depths, even a depth of one thousand meters is considered as normal. Oil companies are now searching for oil at a depth of three thousand to four thousand meters on the bottom of the ocean, and even there large oil fields are being found. So a lot of locations have not yet been explored, and at these oil can still be found."

But, isn’t it true that in any case whether we find new oil fields at a depth of 3000 to 4000 meters or not, that a shortage will occur and that prices on overall will rise?

“Yes this will inevitably happen. Not only because of a shortage but also because it is simply to expensive to find oil at such depths. So an oil company will only do so if it is rewarded with a firm price for their oil. And then we are no longer talking about the 10 to 20 dollar oil of which we spoke about six years ago. This means talking about the 60 to 70 dollar oil that is needed to develop such risky projects.”

The oil price has already reached 90 to 100 dollars per barrel?

“On this price there is a premium that is to our opinion caused by a temporary scarcity of oil. It is not the structural oil price that is needed to bring new projects to the market.”

So the price increases of late is the work of speculators on the market?

“That’s what is being said, I think that this is correct. But only under the present conditions that makes it possible to speculate due to the artificial shortage on the market that has been caused by OPEC. By brining insufficient production to the market. “

And this artificial shortage is caused by insufficient dollars?

“Well I can not peer into the minds of OPEC and what they are envisioning by creating an artificial shortage. If we look at the latest remarks, and believe those, then we see that OPEC is also not that happy with the high oil price of today. What we are now seeing for the first time is that in the past quarter the worldwide demand for oil is falling. This is not what OPEC was expecting and also the IEA did not expect this to happen. But this is the effect of the high oil price and I cannot imagine that OPEC is happy with this situation. That the worldwide demand for oil starts to decrease. Because in the end they still have a lot of oil that they want to produce and sell. At these prices people will start to drive more sparingly, start to drive less, and look for alternatives for oil. Maybe much faster than OPEC itself would want."

Your function is head of crisis management, when is a crisis occuring according to the IEA?

“If there is a sudden shortage of oil, that is different from the situation that we just spoke about which can be described as a gradual mismatch between supply and demand. We call something a crisis if there is an incident or war or something somewhere that causes a significant temporary shortage of oil. In such a situation we have mechanisms, especially strategic oil stocks that can be brought to the market to meet the difference between supply and demand. Depending on the size of such a shortage the gap can be filled for a year, or maybe two years. In anyway there is quite substantial amount of oil stored in strategic oil stocks. But insufficient to fill a gap between supply and demand for years and years. That is why in the case of a gradual mismatch of supply and demand these stocks will not be used.”

As the oil price rises and the energy hunger of the large powerful countries increases, we see that these countries are increasing their aggressive stance. How do you see Europe maintaining itself in such a world?

“Energy politics are of all ages. That energy politics and geo politics have always been intertwined. A wonderful book has been written about this that described that at the end of the 19th century this was already the case, and that the 1st and 2nd world war were finally decided because of energy availability. At the moment, for Europe specifically we still have quite a substantial amount of natural gas but not so much oil anymore. The North Sea is depleted which implies that we need to import more from outside of Europe. In itself this is not bad at all, world trade exists simply due to the fact that one product moves from place A to B. In the Netherlands we also no longer grow coffee but we still drink it. So there is no real basis for concern, where we do have to invest in though is good relations with countries were there is still energy. And for Europe there is certainly a role to play in the direction of Russia, the Caspian Countries and the Middle East. To make sure that our relationships with these countries are good and being looked after."

Aad van Bohemen: “The theory of Peakoil says that we have currently used about half of the oil production that is available under ground. That implies that we can no longer produce more than we are currently doing, and that oil production is going to drop sooner than later. At the IEA we do not believe this, we think that we know that we are still not nearly halfway....." Interesting, "we think that we know that we are still not nearly halfway..."

That part got me also. I liked how he reframed the question to meet his answer. In addition to it being convoluted.

I'd like a more direct question and answers.

Do you think we will hit the highs seen in 2005 again and how many concurent months do you think that rate could be maintained?

In addition to it being convoluted.

Keep in mind, this is being translated from Dutch transcript. Unless you're intimately familiar with how Dutch people habitually structure their speech - and this is speech, not a written document - there's very little to be gained by looking at the minor details of his phrasing.

He is being polite.

"we think we know..."(say what?)
...and if he is wrong he gets to keep his job...
Ahhhh hah!
"still not nearly"
Are we 99% of the way to halfway?
It is what he doesn't say that seems most obvious.

It annoys me when they use the phrase "the theory of peak oil". It is not a theory. Provided you recognise oil is a finite resource then there MUST be a point at which you pump the most, and that past that point there is a decline. No theory there, just a statement of fact.

The only matter for debate is when that peak is and what shape it follows on the decline. Given that the shape is theoretically derivable, the only question is the precise when. The IEA needs some serious evidence if they are going to suggest their theory that there is much more oil to find. We need to get this the right way round.

Its the fact of peak oil
The theory of large amount of new discoveries to move the peak later.

Agreed. I forget who said it, but I love the quote:

Peak oil is a theory like the "round world theory".

The world is not round, not exactly. More elliptical and having a rather chaotic surface.

I'm convinced that we're in for a rough ride with lots of surprises...

Could we get past the flat earth stage and get into the ellipsoid phase now, please. Like in WGS 84.

That definition would be correct only with a symetrical "bell" curve, where mode = median = mean.

More likely, the actual curve is going to be skewed far to the right. In other words, the mode (peak) is far to the left of the median. In other words, it is quite possible for peak production to occur long before we reach the 50% mark. The reason: That 2nd 50% (and actually, quite a bit before that) is much more difficult and costly to get, and thus doesn't come on line at the same pace that the first 50% did.

The curve might be skewed to the left. Humanity might be so addicted to oil that it invests every last dollar in beating the logistic bottleneck and develops every remaining 10 barrel/day puddle simultaneously to keep the economic growth cycle going, followed by catastrophic collapse. Time will tell.

That is an alternative hypothesis, and time will tell. However, the extent of investment in new projects is not presently consistent with your hypothesis. It is more consistent with the hypothesis that as new oil becomes more costly to find and develop, the investments will become fewer and farther between, thus delaying the onset of new flows to < the flows lost to depletion.

Even without some sort of hyper development regime, it is not at all self-evident that the global, all-time production distribution is going to be symmetric around the peak. After all, in the past the world GDP and demand was significantly lower at the same time as big finds were easy. Now we are going to have to shrink demand by force, while no more large fields are available. World population and demand are not going to reverse in the future in a mirror image of the past. More likely is that there will be massive inertia trying to keep the status quo, leading to a catastrophic transition. Who knows, maybe magical new power sources will show up and save the day but until then, oil, gas and coal are going to be exploited (gas and coal will delay the crash).

Normal curves are symmetrical, but Lotka-Volterra (predator-prey) cycles are skewed to the left (crash is faster than growth). It depends on what assumptions you put into the model.

You can include a "effort function" in the D.E. that approximates how the market responds to scarcity. If the effort function is linear($X increase in price of oil always results in $Y increase in investment), there is no change to the shape of the resulting curve; it is still a normal curve, just a bit taller and shifted to the right.
To change the shape will require an "unreasonably aggressive surge in investment".

My technology effect concept is exactly a predator prey relationship. In this case the predator is advancing technology. And the prey is a poor little oil drop. Advancing technology is what transforms a symmetric relationship into a asymmetric one. Noye Moore's law effectively has this form. Eventually it reaches a real physical limit and transistor size no longer shrinks. In my opinion just about every example of refining technology to increase some variable results in a predator prey like relationship.

Thanks for real name for the curve I've been using shark fin.
Still like shark fin though :)

Its funny but his statement denying peak oil did not really fit in with the rest of the talk. My opinion is he still thinks production can increase esp considering OPEC reductions but on the same hand he seemed to be saying that we can expect demand to be greater than supply for the foreseeable future.

So the message is we have a lot of oil left but its going to be really hard to get and expensive and development will probably not keep up with demand ?

Also outside of Opec he did not actually say the rest of the world could increase production rates just that it could find more oil. No one is saying we won't and we will find oil till till its not worthwhile to extract.

We have plenty of oil left but please prepare like we don't ?

I like how he says the North Sea is in Depletion. Cant say the North Sea has peaked :)

Overall its a pretty weird interview. You can probably read any message you wish into it.

So the message is we have a lot of oil left but its going to be really hard to get and expensive and development will probably not keep up with demand ?

There's nothing contradictory or inconsistent about that.

If demand is increasing at 2% per year and supply is increasing at 1% per year, then we need to prepare for demand destruction, despite no peak.

If that 1% supply increase is from nonconventional oil that requires $70/bbl prices, we need to prepare for perpetual high prices, despite no peak.

I like how he says the North Sea is in Depletion. Cant say the North Sea has peaked

Does the particular terminology matter? Perhaps "depletion" is simply the term he's used to, or is the term most common in Dutch. Fundamentally, which word he uses to describe it is irrelevant.

Watch how fast it takes you to wear out your welcome. Oil Drum editors are notoriously harsh. My advice: present Christmas presents sooner rather than later.

If one is prepared, then it doesn't matter what Pitt says.

'in depletion' implies to me the naughty side of peak while 'in accretion' would imply an increase in production, the yummy side.

(Now to get serious, how about a rating on the terms 'naughty' and 'yummy':))

AND it does matter what Pitt says unless a mutual congratulatory society is what this site is all about, no?

Pitt the Elder, as we sometimes day around here " would argue with a rock".

"Does the particular terminology matter?" he opines.

Does it matter he asks? Well as I read most of his posts this is just about all he argues over..it being what some one says or the terminology..yet here he takes the opposite tack...

Debate can be carried to ridiculous extremes as in most of his replies. It can get on one's nerves quite easily,hence I skip most of what he blathers on about. This one I couldn't resist.

The man most certainly does not have a life beyond extreme TOD debate flogging.

Also I have yet to see a language he does not tend to assume expertise in.

Pitt the Elder, as we sometimes day around here " would argue with a rock".

Rocks don't make dubious claims with no evidence.

"Does the particular terminology matter?" he opines.

Does it matter he asks? Well as I read most of his posts this is just about all he argues over.

Then I suggest you haven't read my posts all that carefully. If you had, you might have noticed things like "numbers" and "evidence" in them, rather than whining about whether someone's using my favourite word or not.

Debate can be carried to ridiculous extremes as in most of his replies.

Please explain how my most common phrases - "that you believe something does not make it true", and "provide evidence" - are "ridiculous extremes".

The man most certainly does not have a life beyond extreme TOD debate flogging.

Is there a point to your gratuitous (and, you'll be happy to know, incorrect) insult?

Also I have yet to see a language he does not tend to assume expertise in.

You have yet to see one where I have.

If you'd understood what I wrote, you'd notice that I was claiming neither expertise nor ability in Dutch. What I was doing was pointing out that obsessing over particular choices of wording in a transcript translated from another language is foolish.

Were you paying attention, you'd have noticed that the two are very different.

"Does the particular terminology matter? Perhaps "depletion" is simply the term he's used to, or is the term most common in Dutch. Fundamentally, which word he uses to describe it is irrelevant."

It could be the translation. But, if he did use the equivalent of the English word depletion, then I think it would matter. A resource begins and is in depletion the second you start using it, so you can say that about every field. Terminology does not matter only if the terms mean the same thing.

I should probably go back and look at my intro economics texts, but isn't demand always represented on as a curve, such that the amount demanded is a function of the price at which it is offered?


So, a statement like "oil demand has surpassed supply" just means to me that the price is too low... or "demand exceeded supply at a too low price."

In a functioning free market the price rises to the point where supply (the available stock) equals demand (the amount that is sought and purchased).

Only if there is no stock at any price can demand be said to exceed supply. If there is a functioning market, a price is reached which is just low enough to attract buyers to all of the available supply, and just high enough to discourage purchase of the last marginal unit.

The whole discussion of "price" sees it as a problem. But it is the solution. The only market solution.

The interview notes that oil demand is highly inelastic. But as long as it is not perfectly inelastic, there is a price that solves the problem.

I gather from this interview that the IEA spokesperson thinks price is currently related to "speculators" and other factors. Aren't they otherwise known as traders, who are reflecting the collective wisdom about the current and future price point that clears the market (sells all the supply at the price that maximizes value while failing to discourage sale of the last marginal unit?)

"Demand exceeds supply?" Every time I hear that my poor little mind boggles. It's like hearing the sound of one hand clapping... it's not a clap, unless elasticity is 1.

"At current prices, demand exceeds supply." That's a statement I can understand. So let prices rise until it doesn't, and then work out your response to the resulting problems through a taxation regime, or by creating an empire to re-extract that money from the oil producing states.

Whatever.

I think everyone understands this. The "demand will exceed supply" talk is just a way of characterizing "upward price pressure."

Come to think of it that's really the fundamental difference between the Aad van Bohemen picture of the future (high prices, tight supplies) vs. the peak oil picture of the future (high prices, tight supplies). Does future price pressure stem from the demand curve shifting to the right or, as peak oil advocates argue, from the supply curve shifting to the left?

It may not really matter much which it is, except of course if both are happening simultaneously.

It seems like a very illogical expression. It would make more sense to say "demand is increasing and supply is not." Price will resolve the issue because demand and supply are always balanced (absent severe market inefficiencies.)

(I always wonder when people talk about demand destruction whether they are referring to destruction of demand for oil at higher price points because there is less you can do when the energy inputs are so much more expensive... or destruction of demand for consumer goods and everything else as oil costs filter down through the economy first, resulting ultimately in a reduction in growth and a reduction in the demand for oil itself?)

----------

Regarding demand and supply curves, I'd say both are happening. The growth in demand is a function of investment and development... the plateau and decline in production is a function of geophysics and extraction efforts... two different functions that are always in a balance that is represented by price.

"In a functioning free market the price rises to the point where supply (the available stock) equals demand (the amount that is sought and purchased)."

In the first place, the oil market is not a free market. In a free market, all producers are free to make as much as they're physically capable of, and all buyers are free to buy as much as they can afford.

However, OPEC being a cartel, production is kept below the physical maximum, and "who shall we sell to?" is a politicalor diplomatic decision.

Secondly, oil demand shows very strong price inelasticity. That is, there's a certain amount you need to live your particular lifestyle, and if the price rises you won't reduce consumption by much. If you need 20lt of petrol to get to work to earn $500, so long as that 20lt of petrol costs less than $500, you'll pay for it, because that spending enables your earning. That's a simple case that you can poke plenty of holes in and show alternates where it turns out different, but it shows the basic principle, that oil is like our daily bread - there's a certain amount we need to consume to enable earning and thus other consumption.

Interesting question what constitutes a "free market"....

In the oil market, it seems likely that producers are producing pretty near everything they can... but it wouldn't be less free if they weren't, would it?

Aren't buyers now free to buy as much as they can afford? Or are you saying that OPEC is turning down hard cash to sell below the market price to someone? (Could be, but I'd like to hear about that.)

So by your two criteria (which I don't think constitute a proper definition of a free market)... it looks like there is a free market (unless OPEC really is turning down offers of higher payments for political reasons....)

So does it make sense to speak of a market (or free market) in oil? Well isn't there a free futures market?

-----
Second, as long as demand is even slightly responsive to price (and it is), it has some elasticity, and so there is, ipso facto, a price point at which demand and supply balance. Only if demand is completely inelastic (n=0) would it make sense to say that demand could exceed supply.

Isn't the futures market a pretty accurate reflection of the price that traders think will clear the available supply at a certain date in the future?

When and where is demand ever greater than supply without an immediate price correction that reduces demand to a level exactly equal to supply? There may be momentary inefficiencies and time lags, but if the amount that is sought for purchase is significantly higher than the available supply, are you saying that sellers are still selling at a lower price for more than an hour or a day?

I would be surprise to learn that... but maybe I'm naive.

So, again, when is demand greater than supply? And for how long? (minutes? days? months?) And in those days or months, the price doesn't change to bring them into balance?

Does not price rise pretty much in real time until enough purchasers drop out of the bidding war and those remaining purchase the existing supply at a new higher price point?

The IEA does not take into account that continuing discoveries are not only more difficult to access, but also generally smaller in size relative to growing demand for oil.

When Ghawar (sp?) was a young field and world demand was much smaller, a certain complacency with regard to peak oil can be understood.

Now that the mega-giant fields are aging and declining, new discoveries are still relatively small, and demand is sky-rocketing.

The current resource availability is a set up for terrible resource war -- already well underway -- and for various kinds of economic and social disruptions related to unjust distribution of this critical resource.

Combined with other resource and ecological issues, Peak Oil is a very big deal now -- not in some vague future.

I think that the IEA is doing a disservice to all by painting a picture of virtually endless new discoveries combined with current market dogma as solutions to this problem.

"What? Rome? Mighty World Bestriding Rome could ever Fall? You're daft man!"

Doesn't this seem like what the IEA is saying?

The IEA does not take into account that continuing discoveries are not only more difficult to access, but also generally smaller in size relative to growing demand for oil.

Do you have any evidence that they're not taking this into account, or is that simply your assumption? Because that's an obvious thing to take into account, so it would be very surprising if they did not.

I think that the IEA is doing a disservice to all by painting a picture of virtually endless new discoveries combined with current market dogma as solutions to this problem.

How is this "current market dogma"?

“The IEA is not optimistic. We see a gap developing in the future between demand, if nothing is done to curtail demand, and production. So something has to happen, either more investment in production or more investment in substitution for oil or the curtailment of demand. All these three things will probably happen at the same time. Such developments don’t happen on their own, it can very well be that this is going to hurt. Meaning that we are going to enter a period wherein oil prices are quite a bit higher then even the near all time high price of today, before we have found new solutions. If your question refers to the optimistic stance that it will all be fine, then I am not optimistic.”

"Invest in demand reduction and substitutes, or it'll hurt." How is that "current market dogma"?

Interestingly, the EIA position seems pretty close to the recent NPC Report.

Not hysteria, but real concern concerning the price/supply impalance.

For the mass consuming nations, the recommendations seem clear and balanced....work toward production, but also work toward demand reduction, and try to narrow the gap as advanced technology is developed to bring down the demand for fossil fuel.

It's amazing that we can spend so much time arguing about how many angels can dance on the head of a pin, and exactly what word was used in what sentence, when the overall all message is once again the same as has been repeated by so many sober knowledgable people:

Reduce consumption. Diversify. Work toward alternatives.

Panic and screaming and gnashing of the teeth achieve nothing.

The truth is, most folks just don't want to hear that message. Making noise is so much fun. But the grunt work continues in the shops and labs, and out in the open sea on oil rigs that would have been science fiction only a few years ago.

RC

Hi Pitt,

Well, I can see the point about "current market dogma" or "BAU" (now let me explain...) as being implied in the statement:

"In the Netherlands we also no longer grow coffee but we still drink it. So there is no real basis for concern, where we do have to invest in though is good relations with countries were there is still energy."

These two sentences seem to have a couple of premises. The analogy to coffee - the coffee *can* be obtained, just "at a price", and "from elsewhere".

The point about "good relations" is well taken, if somewhat idealistic - and not taking into account any current situation, ie., "what good relations? where?" But let's put that aside - theoretically, all countries *could have* "good relations" and perhaps adopt the Oil Depletion Protocol, etc.

So, the first assumption/premise does appear to be in line with an idea of somehow "the market" fixing the problem - as long as everyone gets along. (or something.)

My take on the objections to this are as follows:

The problem is serious - he says as much in parts of this.

The people who are in a position to actually gauge the gravity of the situation are sitting in his chair - and those nearby.

It is morally incumbent upon those who know to tell, or as Aleklett put it - they are like those who knew about the impending tsunami and did not tell others in its path.

Now, it may be the case, that the IEA - most members - do not know what a good plan is, or what to do or say. Or how to reconcile their jobs w. their knowledge, or their knowledge of economics with their knowledge of oil - many things could be going on (we can't read their minds).

Still, then - the honest thing would be to say that. I believe the objection is not (as Roger seems to say) - that "fear and panic" is not spread. But rather - it's about honesty. What is the honest and most ethical stance?

That's the issue. (As I see it - and also the way I interpret some of the TOD responses.)

“It's difficult to get a man to understand something if his salary depends on him not understanding it.”

—Upton Sinclair

-but what they can do is give warning by framing the situation in langauge that cannot be subsequantly denied. If we don't do this then that will happen... etc. E.g. We don't believe a Tsunami is coming but unless we invest in an early warning system the consequences could be severe...

I think basically what he is saying is that the end of cheap energy is over and that without massive investment (enabled by much higher prices) things will get a lot worse.

I also thought it interesting that he says we have loads of unexplored areas where oil may exist but then goes on to say we are basicaly reliant upon Russia and the ME for the increases...

It looks like the US/Uk and some parts of the ROTW are heading into slowdown and possibly recession in 2008/9. this is going to lower demand. If this should happen and prices don't fall substantially that's a sure sign that the game plan has changed IMO. If we don't see $200 oil at some point within the next 5 years I would be very surprised.

Nick.

Pitt,

I was inspired to start posting because of you. I have been reading the Oil Drum for several months and am quite impressed with your ... I don't know what to call it.

I think it is appropriate that "That's It I'm Out" responded to you. He is also one of my favorites.

Your offensive nature and knowledge of the subject are rare. That's why I like you. When I say offensive, I mean "challenging in a winning kindof way" ... not "offensive" in the classic sense.

My wife and all my daughters love you. My niece wants your email address. She swears she knows you from Harvard.

Dear GG Collins,

I Love the irony! I had to read your comment a couple of times before I got it!

To be clear, Pitt is the best writer here. He is also the smartest. He knows what he is talking about and his criticisms of others' posts are damning.

I love irony, too. I just didn't mean it in whatever I said.

Dear GG, or perhaps I should call you by your real name -Pitt!

My little ruse worked, Pitt, and you fell for it! I was convinced that GG and Pitt were one and the same person from the beginning, only I wasn't sure how to smoke Pitt out. I didn't think it would so easy!

I too think you're razor-sharp, mind like a diamond-tipped drill, Havard debating society... You have a worthy place here, you don't need to pretend to be this GG Collins, I think that kind of thing is beneath you. You more than anyone is aware of your debating abilities. You are smart, but so are a lot of other people here. Describing yourself as the smartest is tad arrogant though, but your forgiven. What I can't forgive you for is having the gall to call yourself the best writer here. That is going too far! I am the best writer here, as I proven on numerous occasions! Not only here, but worldwide! I've sold over two million books, damn it! I'm the best writer, not you, so there!

Now that I've got that off my chest, I feel better. However, Pitt/GG you are a little agressive in your damning criticisms of other people. Quibbling and nit-picking are fine in their place, but over and over again? I certainly wouldn't want to give people the impression that I was grumpy, or a sophist, with an accusatory style, and haemorrhoids, ouch! You need to lighten up, dude, and develop a sense of humour.

What Ho Writerman, I know you for the pit of iniquity you are. What deceit to call yourself a writer of caliber and to very apparently not own a spell check. Of course you do have a rather artistic use of the Gatling commas underhanded shotgun. But no! no! with or without arms Pitt I smell you out for the triple persona Pitt/GG/Writernman.

(Well you suggested humour as an asset, you didn't signify what level did you? I was in full flower in grade 5:)

But no! no! with or without arms Pitt I smell you out for the triple persona Pitt/GG/Writernman.

Dammit, I knew I should have used deodorant today.

You caught me - I'm actually everyone on this board.

Including you...

My little ruse worked, Pitt, and you fell for it! I was convinced that GG and Pitt were one and the same person from the beginning, only I wasn't sure how to smoke Pitt out. I didn't think it would so easy!

Don't flatter yourself.

I have no interest in having a sock puppet here to say good things about me. Whatever you may think of me as a person has no bearing - if you're being rational - on the arguments I present; accordingly, I simply don't care what you think of me. I'm never going to meet any of you, you have no idea who I am, you have no influence on my career or personal life - what you think of me as a person simply has no bearing on my life in any way.

For all that, I don't really care one way or the other that you believe I have a sock puppet here, except that you're wrong, and I strongly dislike people promulgating wrong information. At least you offered an attempt at evidence, though, which is a cut above many arguments one sees online.

However, Pitt you are a little agressive in your damning criticisms of other people. Quibbling and nit-picking are fine in their place, but over and over again?

By and large, I don't so much "nit-pick" as point out what appear to be fundamental problems, typically with either the (flawed) structure of an argument or the (lack of) evidence supporting it. If the argument is off by 10%, that's a nit-pick; if it's off by an order of magnitude, that's a problem.

I will occasionally post new ideas and information when I find some that I believe is interesting, apropos, and well-supported, such as the technology-adoption (sigmoid) model of wind power growth, the high organic farming yields study, or figures on how much it would take to build and power an electric car fleet. By and large, though, there's not all that much new information to add at any particular time. Every now and then some comes along - RR, EM, and SS are worth watching for that, along with a few others - but new flawed arguments come along all the time, so that tends to be the majority of what you see me react to.

Should I let flawed arguments or misinformation go unchallenged? Probably sometimes. It's a surprisingly good way to keep your critical analysis skills sharp, though, at least based on recent discussions with a lawyer friend of mine.

Your debunking of Stuart Staniford's ideas about the latest IEA numbers is brilliant.

For those of you who haven't read it, Stuart basically cried mercy.

Stuart did no such thing.

Let's see what Stuart DID say about Pitt:

Pitt the Elder said:
Instead of focussing your energy on the important questions - like what is the best way to get society to move towards sustainability - your time and energy is focussed on whether or not one noisy data point is statistically higher than another noisy data point.

Either way, it does not matter.

Stuart said:
Which no doubt explains why you expended your time and energy commenting on it...

The reason I chose to put some of my time on it was because a number of people prominently commented that this data point meant something new and significant was happening (and by implication, perhaps peak is later, and perhaps taking action is less urgent). I wanted to explore whether they were right, and once I had concluded that they were at least premature in drawing the conclusion, point that out.

Finally, "Instead of focussing your energy on the important questions , like what is the best way to get society to move towards sustainability"

Actually I have written about that quite a bit, and will continue to do so. Feel free to also devote your time and energy towards it instead of haranguing me :-)

This is making Stuart cry mercy? It rather looks like Stuart called out a known blow-hard for not practicing what he preaches.

As for the ass kissing that CG Collins does, if you are not Pitt in disguise, then maybe you should move in with the fellow and be his personal slave. Your slobbering over him in public is pathetic.

And in case you missed the irony, what I just did was provide what Pitt claims to love - evidence - against your assertion about Stuart. At this point your false statement is what is known colloquially as a "lie".

What you did was screw yourself. You came out of retirement to back up Stuart. Stuart's doggy is toast.

Pitt is the New Big Dog on The Block. Get used to it.

You have no Evidence, puppy.

“The IEA is not optimistic. We see a gap developing in the future between demand, if nothing is done to curtail demand, and production. So something has to happen, either more investment in production or more investment in substitution for oil or the curtailment of demand. All these three things will probably happen at the same time. Such developments don’t happen on their own, it can very well be that this is going to hurt. Meaning that we are going to enter a period wherein oil prices are quite a bit higher then even the near all time high price of today, before we have found new solutions. If your question refers to the optimistic stance that it will all be fine, then I am not optimistic.”

This is the most pessimistic view I have heard from the IEA which IMHO is about as Pollyanna as they come. Only CERA is more pathetically optimistic IMHO.

Wow, there's enough spin in that interview to power the Canadian tar-sands operation for 10 years.

What a fucking dingbat

I was thinking waffle iron...

It looks as if the second question is translated backwards or was stated backwards.

Let's look at Aad van Bohemen's job discription, he's the Director of Crisis Management at the IEA, "management" is the important word here, not "crisis".

I kind of agree with Pitt the Elder's calm, reflective and sober, analysis of van Bohemen's statements.

In the current world situation; massive financial instability, a jittery stock market, worries over energy supplies, climate change, a possible attack on Iran... There's already enough nervousness to go around. One can hardly expect van Bohemen to come straight out with statements which might actually make things worse, his job, after all, isn't to promote a crisis; or promulgate, or disseminate, or proclaim, information that could result in oil prices rocketing upwards or the stock market diving.

The general tone of his utterances, is, in my opinion, unmistakable. He is concerned that demand is going to outstrip supply, and we are in a race against time to find alternative sources of energy...

Clearly he wants to inform, in his diplomatic fashion, not start a panic, a panic that wouldn't help anyone, least of all the poor in vulnerable countries.

The news about "Peak Oil" isn't something the IEA believes one can just blurt out to an unsuspecting public. In their opinion, information about such momentous change, has to be handled and managed carefully.

Maybe its time to talk a little panicky?

Soft, calm, sober,,,we are way way past all that.
Its time to get real.

Hasn't there been enough bullshit already?

Airdale,

Your right. I was attempting to explain the rationale behind van Bohemen's statements. I was trying to interpret what he was saying, which for someone in his position is pretty "radical".

I don't actually agree with his strategy, but then I would never get anywhere near the job or platform he has attained.There is a clever social process by which people are barred or accepted into certain socio/economic circles, and individuals who by their behaviour or attitudes, show independence of thought, or a critical mindset, are automatically excluded from the "aristocracy" or "ruling-class".

Pitt seems to have gotten on your nerves. He is, very pedantic, close to applying the strictures of formal logic to non-formal utterances and conversation, which is always a bit tedeous. Whilst it's fine in courtroom situation, espcially if he was ones own lawyer, here it can sometimes make one yawn, as his rhetorical method is out of context.

Aad Van Bohemen reminds me of noone so much as Hans Blix. Courtly Scandinavian diplomats, reserved and measured, with an acute sense for which side their bread is buttered on. Too much candor and their main client will cut their legs out from underneath them, yet each does seem aware of his responsibilities to the historical record. We can't say we weren't warned, if we would only carefully parse their words. In a sense, they are the dogs that didn't bark, except he is barking. It's just that it's a muffled, tinny little yap when what we need to hear is a siren.

The general tone of his utterances, is, in my opinion, unmistakable. He is concerned that demand is going to outstrip supply, and we are in a race against time to find alternative sources of energy...

But then he goes on to say that the recent $90+ prices are not part of this picture.

You see this kind of statement a lot: "Oh, yeah, prices are higher now than they should be...even if they're lower than they will be later."

There's a relentless determination to disconnect the present from the future.

I think that the comments are frank but they often try to soften the blow. Aad van Bohemen gives the impression that lots of oil is to be found in regions that have not yet been minutely explored. I'm sure that the IEA takes into account the size of these finds but public statements could be taken by the general public to mean that we've got a long time yet, before we have to find an alternative (and the implication in his answers is that there are alternatives), though we may have to cope with lower levels of oil supply growth (yes, still growing) and with prices which are historically high (though he didn't say that they will continue to rise).

So I think peak oilers would come away thinking he'd at least acknowledged the main problem (demand outstripping production), whilst others might come away with the feeling that the pain might be bearable ("factories won't close down").

I liked the interview, it's nice to know that IEA has some forward-thinking people. You can't expect them to come forward and tell everything they know, but I think that the little that he said is true. Double the price of oil every year and you'll see that consumption decreases more than the depletion rate.
My grandfather still lives without oil (wood for heating, animals for plowing and transport etc). My father has a car, I have one more powerful than his. But among us three, it is my grandfather who lives a happier and fulfilling life!
As long as the transition is gradual and there are no wars, oil depletion is something to look forward to. What's all that talk about finding alternatives? The world has gotten along very well up until 150 years ago when this oil thing started... it is oil that was an alternative for a short while!

Yes, people 150 years ago lived with less or even no oil at all.

On a planet with about 1 billion people.

Now we are heading from a planet with 6.5 billion people for a planet with 9+ billion people. Don't you think this makes a difference - 9 times the population?

Cheers,

Davidyson

I just explained, a shortage of oil is looming on the horizon.

So, peak oil or no peak oil, there's trouble ahead, I like van Bohemen openness. And also the indication that we are already living on stocks.

What I don't like are the hints that OPEC countries are simply unwilling to fullfil our needs. Even if some OPEC countries could do so (which is doubtful) we have to face the reality that not everyone appreciates the Thatcher politics.

The Dutch thamselves have parted away from the Thatcher politics on Natural Gas production.

What I would give to be a fly on the wall in the meetings that are going on right now between the OPEC member country ambassadors and the U.S. All the threats in the world are pretty useless when you are indirectly talking to a hole in the ground that isn't producing like it used to.

Humanity has always been intelligent enough to find solution when new challenges come forth.

Well. That was reassuring.

You see, that's how you "manage" "crisis."

Tom Whipple -- a journalist -- puts this mere bureaucrat to shame (as usual):

Decision at Abu Dhabi

But if there is more supply than demand then stocks will decrease, how long can the west maintain this situation?

“This is indeed already happening for almost a year. A year ago OPEC decided to decrease their production. They are able to increase production again since the capacity is till there. Because of this decline, however, demand has surpassed supply and the western countries are consuming their own oil stocks to fill the gap. In the last quarter this event has reflected in higher oil prices. It can be solved by increasing production, but then the oil producing countries have to decide that they want to increase production.”

Perhaps I slept during my College economics class, but my understanding is that in a strict sense, demand cannot outstrip supply. By definition, demand equals supply at a specific price.

If there is more supply than current demand (excess inventory), then the price will drop, and demand will (once again) equal supply.

Further, we've often looked at charts on TOD that show a widening gap between supply and demand. Is that really how it will work?

Won't we have graduated demand destruction each year? For example at $100 dollar oil, people turn down the thermostat, or ditch their SUV.

Perhaps at $200 dollar oil, they start carpooling, or buy a smaller house if they move.

And so forth.

The question isn't whether there is going to be a gap between supply or demand, but are the side-effects of demand destruction going to be acceptable to our society. And how far down the use curve can we go before we start to see cracks in the modern industrial society.

It would be an interesting analysis to go through the major components of oil usage, and try to price in (and predict demand impact) to get a sense of how society will look in 50 years (beyond the obvious of not having cars that get 16 mpg anymore).

Mike

Mike,

What you say is true on demand unable to outstrip supply, but for some reason the common terminology developed by society is different then the right economic definitions. It would be interesting to find out how this division in nomenclature came into existence.

You are of course right. Supply plus inventory draw equals demand. The
draws on inventory are raising prices. The rising prices are (presumably )
increasing investment in new supply, although this may not be enough to offset depletion of known reserves. The rising prices are also curtailing demand (or at least stopping it growing as fast as it would otherwise). However, it is hard to spot, because demand destruction (ie. shortages) are in places we don't hear much about. Zimbabwe, Nepal, parts of west Africa, central America, the far east, parts of China. These places are facing real hardships. Some of them are falling out of the industrial age forever. We in the west are so much richer than these countries that we can absorb oil prices several times higher than they are now. It is not a question of price versus mpg of car being driven, it is a question of last man standing at the national or continental level. Africa's consumption will fall to zero before the US stops making and driving Hummers.

It's consumption that can't exceed supply. It's consumption that is reported by the IEA and the EIA, though it's termed "demand". Actual demand ("want", "desire") can be higher and will result in queues or demand destruction caused by economic slowdown as the demand simply can't be met. Of course, higher prices reduce demand but demand can surely exceed supply, and that is the situation we all dread.

Demand, taken as "actual demand", "want", or "desire", is essentially infinite, unsatisfiable. It always exceeds quantity supplied, and usually exceeds it greatly. That makes it a tautological word useless for serious discussion. That's why economists treat it, instead, as a curve that diminishes with "price". (I realize that for some readers, "price" will be a dirty word, but there it is.)

There's just no use "dreading" having "actual demand" exceed quantity supplied. It always has, and it always will.

What we might need to "dread" is having the "price" - in currency or, under Marxist governance, endless hours wasted queuing - rise high enough to seriously diminish life-opportunities. A high enough "price" might push us into a low-pay no-opportunity job instead of a better but more distant job. Or it might end our civic, artistic, and social activity, as we husband the fuel for work and the grocery store - not an ideal outcome for "bowling alone" U.S. society. Or it might end that activity because we're always exhausted, with our easy twenty-minute drive to work having become a two-hour ordeal of walking, waiting, and creeping along at a glacial pace in a bus.

Now, if the "price" stays high enough long enough, we might eventually see deeper rearrangements that mitigate the worst of those outcomes. However, changes of that sort often carry huge capital costs and would thus take many decades, especially under straitened circumstances.

Clearly current demand destruction has moderated the price; yet, OECD countries want greater supply thinking the price will fall. This might occur in the short-term until those whose demand was destroyed re-enter the market as they can now afford to demand at the current price, which will then rise rapidly as demand will once again exceed supply, which will in turn cause a new round of demand destruction. I see this vicious circle already ocurring.

I was surprised that there was no question related to the rate of decline new extraction must compensate for prior to increasing overall supply, nor was there any mention of increasing domestic consumption by OPEC members which decreases the amount of supply available for export that must also be compensated for by increased rates of extraction.

Further, in the paragraph immediately after the discussion of demand destruction, he is asked about factories being closed, etc., and answers that this isn't happening, but he just said it was in the previous paragraph, but only in non-OECD countries that I presume he's not worried about because they're not worthy, or somesuch, which is why he answered the way he did.

Also missing was any mention of the impact the falling dollar has on price and whether or not European countries would rather pay for oil (and gas) in Euros directly and thus economize on the energy purchases.

I was surprised that there was no question related to the rate of decline new extraction must compensate for prior to increasing overall supply, nor was there any mention of increasing domestic consumption by OPEC members which decreases the amount of supply available for export that must also be compensated for by increased rates of extraction.

What's to ask? Those are basically just observations that help explain some of the tightness of supply, so there's not much direct way to "ask" about them without being in the position of making a statement framed as a question. That kind of leading faux-question isn't typically the best way to interview an expert.

Fundamentally, both of those are simply aspects of the question "will we have enough oil in the near future?" If the IEA guy thought either of those were crucial enough that they had to be talked about, he would have brought them up himself. That he didn't suggests asking "what do you think about ?" probably wouldn't have elicited a terribly interesting response.

in the paragraph immediately after the discussion of demand destruction, he is asked about factories being closed, etc., and answers that this isn't happening, but he just said it was in the previous paragraph, but only in non-OECD countries

He didn't actually say that. What he said was that developing countries were seeking to grow, and that growth comes with higher energy consumption, so the implication was that their growth would be reduced by high oil prices. At no point does he say they'll have closing factories.

Also missing was any mention of the impact the falling dollar has on price and whether or not European countries would rather pay for oil (and gas) in Euros directly and thus economize on the energy purchases.

Why would he mention that? Supply is tight, prices are high, and there's work to be done to address the situation. The relative levels of the US$ and Euro don't change that fundamental problem at all.

You seem to wish he would talk about things that you think are important; perhaps he simply sees different things as important than you do, and wished to spend his limited time talking about those.

Right... demand is always a function of price... the demand at one price level is different from the demand at another price level. If demand is not entirely inelastic, there is a price at which demand drops to zero, and there is, in theory a price at which demand goes to infinity.

In both cases, and all in between, we are really talking about the amount consumed at a given price.

The rhetorical force of "demand exceeding supply" comes from images of famine and shortage, in which essential goods are not available at any price to anyone. It rarely gets that bad. The real problem is "typically" that valuable (useful) goods, sometimes even goods essential for life itself, become scarce relative to the need and therefore very expensive.

Given a second reality.... global climate change.... anything less than "deeper rearrangements" of our lifestyles and energy consumption are unlikely to ensure human survival on the planet. We'd better hope we have some of those soon, whether in response to the facts of oil extraction or due to wise policy decisions.

Won't we have graduated demand destruction each year? For example at $100 dollar oil, people turn down the thermostat, or ditch their SUV.

Or we keep up the thermostat, keep the SUV and instead shop Wallmart, drink U-brew, and bloat with Big mac's. I think oil is cheap and we would have much destruction of other demands before we give up oil here, even at 200 dollars a barrel.

I would think there is more possibility of the destruction of demand for oil to come from economic recession than from oil prices. Gotta stop buying those salad shooters that Kunstler speaks of before cutting back on oil. BTW what the hell is a salad shooter anyway?

Whoa Ho, now that is funny!! Gotta love that human race.

Thanks Dude :)

I make the same point above. I agree with you. And what does it mean when supposed experts adopt this seemingly incoherent economic language.

He should be saying that the growing demand for oil coupled with plateaued or declining production is likely to be reconciled in higher prices.... or something like that.

The position of Dr. Fatih Birol, the Chief Economist of the IEA, seems slightly more direct, and concerned (French vs. Dutch translation so reading nuances is probably useless).

A bug placed near the coffee pot @ IEA HQ would be "interesting". How much co-ordination of public statements is going on, what it being said in confidence to the member nations ?

Best Hopes for Clarity (Heh, right)

Alan

I found the last question and its answer siginificant that it was put at all.

So the situation is on overall worrisome, but it is not yet time to panic.”

I do not expect in my lifetime to ever see a high public official say "It is now time to panic."

“Certainly on the short term OPEC will be able to increase production, one and a half years ago they were also able to decrease their production

Utterly specious piece of logic, dependent upon the assumption that the output of mature fields never decreases. Doesn't stand up to even cursory examination.

Regards Chris

Aad my man. This strikes me as a weak, half hearted attempt to knock down a straw man. If you begin by insisting that Peak Oil theory requires that half of all the oil is gone you need only, as he does, hold out the hope that there is more oil squirrled away in horribly inaccessible places than we have used.

In reality, the only issue is the RATE of production. His dodge if you examine it closely is to claim that what was once unconventional becomes conventional over time. Well, with that attitude you can include shale and not be lying. So technically you can say that we are nowhere near using half of all the oil. See how that works?

But it is fundamentally deception. He knows that it is deception. Intended as has been noted above to "calm the waters" Their mission has always been to provide a rationale for business as usual with at the most a gentle nudge in the direction of diversification and conservation. Given human nature and the ability to self deceive, that is a prescription for disaster.

This is a bankrupt institution that has failed in its basic obligation.

Hi SW,

Good reminder about rate.

re: "But it is fundamentally deception. He knows that it is deception."

Or, it could be self-deception.

A minor nit:

A Theory is a hypothesis or conjecture that has been repeatedly tested by various experiments and tests. When does a hypothesis rise to the level of theory? I cannot say. The Theory of Evolution for example has such a mountain of cross corrobated evidence from so many different fields of study that it is accepted as fact.

Thus saying the Theory of Peak Oil is close to saying it's factual with at least a good sized hill of evidence behind it. To me the only debate here is "Was 2005 the peak?" or are we looking for the "Peak in 2010?" or later.

Kevin Gardiner

I didn't know that they used to grow coffee in the Netherlands. I know they are great gardeners but that's amazing. Not exactly a lot of 'high mountain grown' type locations. Maybe they did, but the Dutch also 'owned' Java. Indonesia used to export oil too.

I know it's probably wishful thinking but the IEA at heart does not want to panic the public with dire news about production shortfalls but it also does not really want to encourage functioning alternative solutions to life with less oil,(i.e. Cuba).

This is just a passing fancy in a midnight dream but if functioning alternative solutions to life with less oil were actually implemented too quickly (big laugh here) then the IEA crowd would have trouble 'moving the product', both in the short term and long term, at the ideal rate (velocity) to maintain maximum revenues.

Quite a delicate PR balancing act, but hey, that's why they get payed the Big Bucks.

The IEA's real mission seems to be to hyper-micro-manage the balance between demand and supply by using just barely enough honesty and encouragement about production levels and the slightest nod of begrudging 'permission' to alternatives and conservation (oh God not too much or they might discover a way to live without us, i.e. Cuba), to maintain optimal profits.

The IEA doesn't give a fig about third world economies going down the toilet, their raison d'tere is to massage the industrial sheeple not to panic or to stop using their product too quickly because they are actually getting serious about working alternatives to oil.

Cuba's example might not be viewed as an ideal success story but it's one of the few were a country was functioning with Oil one day, and then poof, trying to function without it.

The IEA doesn't want the western and asian economies to hit a wall but neither does it want to see working systems appear to quickly that would not use oil.

When Russia left Cuba high and dry,they got off their duff and found some oil and gas as well.Unfortunatly it is very heavy oil(10-18API).Recoverable reserves are about 2-5%.They are planning to pilot with off-shore steam flood.If succesful,recovery may be 20%, which would make them self-sufficent.They may beat Chevron(Neutral zone) in having one of the world's first off-shore steam flood.

Boy, that was some pullback. High 80's is looking like the floor.

Matt

I find talk of demand exceeding supply irritating. First, on its own, it is meaningless. I mean, the demand for French castles is higher than supply - I can’t buy one at the price I want, or a fair price, or an old price, or any price, or whatever. Poor me. Demand used to be fulfilled; it isn’t any longer...

The expression obfuscates, it is pseudo scientific, blandly hypocritical, as it short circuits any discussion of ‘need’ or ‘fairness’ or ‘ethics’ or even deep discussion about ‘the market’ which would have to be undertaken if the economic jargon was tossed.

Note that in the area of food - where demand or ‘need’ has long outstripped supply, as about 1/3 of the world population is starving, chronically undernourished and ill, or malnourished (skipping definitions, ok make it 20% or whatever one likes) the expression is not used. Because people would immediately react and say that talk of ‘demand’ was illegitimate.

That interview was just mainstream crochet - knotting together buzz words and being diplomatic and inserting some elements the public know about or have been indoctrinated about, denying others, etc. It is politics. Not pragmatics, not science, not any kind of analysis. Soporific discourse for the sheeples (and those who want the sheeples to behave.)

Hi Noizette,

Excellent points.

re: "Note that in the area of food - where demand or ‘need’ has long outstripped supply, as about 1/3 of the world population is starving, chronically undernourished and ill, or malnourished (skipping definitions, ok make it 20% or whatever one likes) the expression is not used. Because people would immediately react and say that talk of ‘demand’ was illegitimate."

Also, WRT food - we do not see arguments about "the market" automatically being able to correct the "problem". Nor do we see arguments about how "at a higher price, so much more" food will become available ("economically recoverable".) (Of course, WRT food, we also need to talk about politics and policies that have shaped the current picture.)

re: "Soporific discourse"

Could also call it "intimidating discourse" - to those for whom the "buzz words" are signals that "we know more than you do".

Peak oil is demand exceeding supply. End of story.

In 2050, there still will be wells pumping, but don't expect them to pump a lot.

I don't think many wells will be pumping by 2050, as there won't be any way to get spare parts to them. Peak Oil means that the U.S. lacks the energy necessary to provide for transportation, food production, industry, manufacturing, residential heating, and the production of energy. Oil shortages and natural gas shortages will generate multiple crises for the nation: (1) Shortages in gasoline, diesel, and jet fuel will limit travel to work for oil rig/platform workers and technicians, coal miners, highway maintenance personnel, and maintenance workers for electric power generation stations and power lines. (2) Without truck and air transport, spare parts for virtually everything in the economy won’t be delivered, including parts needed for highway maintenance and energy production equipment. Simmons notes that 50,000 unique parts are necessary to create a working oil field. Many more parts are necessary for ultra deep water drilling – a variety of high tech ships, remotely operated underwater vehicles, seismic survey equipment, helicopters, and platforms (see The New York Times and click on Multimedia Graphic). Thousands of corporations around the globe manufacture these parts, and many of these corporations will fail in the Peak Oil crisis. (3) States governments will lack funds for maintaining the Interstate Highway System, including snow plowing, bridge repair, surface repair, cleaning of culverts (necessary to avoid road washouts), and clearing of rock slides. A failure in one section of the Interstate will cut off transportation for that highway and everything it carries: food, emergency supplies, medicine, medical equipment, and spare parts necessary for energy production. (4) The power grid for all of North American will fail due to a lack of: spare parts and maintenance for power lines and electric power generators, as well as from shortages in the supply of coal, natural gas, or oil used in generating electric power. Power failures could also result from the residential use of electric stoves and space heaters when there are shortages of oil and natural gas for home heating. This would overload the power grid, causing its failure. The nation depends on electricity for: industry; manufacturing; auto, truck, rail, and air transportation (electric motors pump diesel fuel, gasoline, and jet fuel); oil and natural gas heating systems; lighting; elevators; computers; broadcasting stations; radios; TVs; automated building systems; electric doors; telephone and cell phone services; water distribution; water purification; waste water treatment systems; government offices; hospitals; airports; and police and fire services, etc. Phillip Schewe, author of “The Grid: A Journey Through the Heart of Our Electrified World,” writes that the nation’s power infrastructure is “the most complex machine ever made.” In “Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You,” author Jason Makansi emphasizes that “very few people on this planet truly appreciate how difficult it is to control the flow of electricity.” A 2007 report of the North American Electric Reliability Corporation (NERC) concluded that peak power demand in the U.S. would increase 18% over the next decade and that new power supply sources would not meet that demand. NERC also noted concerns with natural gas disruptions and supplies, insufficient capacity for peak power demand during hot summers (due to air conditioning), incapacity in the transmission infrastructure, and a 40% loss of engineers and supervisors in 2009 due to retirements. According to Railton Frith and Paul H. Gilbert, power failures currently have the potential of paralyzing the nation for weeks or months. In an era of multiple crises and resource constraints, power failures will last longer and then become permanent. When power failures occurred in winter, millions of people in the U.S. and Canada will die of exposure. There are not enough shelters for entire populations, and shelters will lack heat, adequate food and water, and sanitation. (4) Water distribution, water purification, and waste water treatment systems will fail. (5) Untreated sewage will contaminate the drinking water for millions of residents who consume river water downstream. (6) Transportation and communications failures will cripple federal, state and local governments -- leaving and residents without emergency services, emergency shelters, police and fire protection, water supplies, and sanitation etc. (7) Mechanized farming will cease, and harvested crops won’t be transported more than a few miles. (8) Food won’t be transported from the Midwest, California, Florida, and Mexico to the U.S. population. (9) Fertilizer, pesticides, and herbicides won’t be produced. (10) Due to limited farm acreage, most cities and towns will be unable to support their populations with sufficient food from local farming (lack of carrying capacity). (10) Homes across the U.S. will lack heating. Even if homes are retrofitted with wood stoves, local biomass will be insufficient to provide for home heating, and it will not be possible to cut, split, and move wood in sufficient quantities.

In the coming years, the U.S. faces multiple energy crises. Each crisis will generate delays in handling other crises, thus making it more and more difficult to address multiplying problems. The worse things get, the worse they will get. A grid lock of crises will paralyze the nation.

http://www.peakoilassociates.com/PeakOilAnalysisOctober6-2007.pdf

Sorry, but read my and other posts above to understand why demand never exceeds supply in a functioning market when price is factored in.

So the situation is on overall worrisome, but it is not yet time to panic.”

Well, so long as it's not time to panic yet, everything's OK> :D

And don't forget that subprime is contained !!

I panicked last year, but now have a beautiful sustainable place to "retire" to in Mexico. It should be interesting to make the transition to an agricultural way of life. I will form an association for information, cooperation, integration, and self-defense. The Mexican government will collapse soon. This looks better than I thought originally. New Hampshire is kinda cold. I been out painting in cold weather and looking to move soon.

Not only does he think we will find more oil that is economically viable, he believes that we can build the infrastructure, with finite resources and little time to make up the gap with solar and other energy sources. We would have had to start that decades ago to make it viable. Ethanol is only going to cause a food shortage, I am sure that his Crisis management team will leave that to some other agency to deal with. Anybody want a nuclear power plant built in their back yard? How long do they take to get on line again? Fill in the gap any time soon, I don't think so.