The Oil Drum | DrumBeat: June 7, 2006

172 comments on DrumBeat: June 7, 2006

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Nate Hagens on June 7, 2006 - 9:23am

I have learned so much from reading this site. But I do recognize that the preponderance of oil related news comes from here or energybulletin.net. Ocassionally, articles like this throw me, and I start over from scratch. How can all the smart people at TOTAL see output increasing until 2020 when all the analysis here shows 2006-2010 peak?

Is it semantics? (e.g they are including tar sands, ethanol, etc and therefore it is a net vs gross disparity)

Is it they all use the same governmental/private research basis that is inherently flawed?

Is it political, in that they dont want to alarm people?

Or are the near term peakers missing something?

Or a little of everything?

I for one think people are conditioned to believe optimists over pessimists, and that the corporate esprit-du-corps will tend to build in best case, and therefore is unrealistic. I also believe that NO ONE knows, not Matt Simmons, not TOTAL, not westexas, not me, but that is kind of the point - operating on the precautionary principle because the uncertainty is an order of magnitude higher than the things we are certain about. Thoughts welcomed..

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Leanan on June 7, 2006 - 9:33am

I think business types are just naturally optimistic. If they weren't, they wouldn't be businessmen.

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The Interloafer on June 7, 2006 - 10:09am

I think they just don't want to alarm people. If TOTAL were to say the peak were to happen in 2006-2010, there'd be a huge level of shock out there.

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MUDLOGGER on June 7, 2006 - 10:58am

Slowly, gently, we are being softened up.

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good nuahs on June 7, 2006 - 12:44pm

I think this too. Preparation is underway to let us know that PO is approaching - soonish. We are part of that here at TOD.

Don't misunderstand me, I don't mean this to sound conspiratorial, or believe it to be a particularly well organised preparation.

Long term bad news, preconceived, is seldom dished out bluntly.

Hey, Alice, your pet dog has cancer - it will die a slow, painful death. Treatment is too expensive, and this will only put off death for a short time anyway.

versus

You know, Alice, Rover has to go away for a while. It will be really good fun for him.

That's how we deal with bad news. Partly it's for our benefit, but often it's damage limitation.

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totoneila on June 7, 2006 - 4:45pm

Hello Mudlogger,

Your Quote: "Slowly, gently, we are being softened up."

Please contrast with Zimbabwe's harsh 'reality beating' as Olduvai Gorge Theory asserts itself:

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ZIMBABWE again has been hit by a wave of nationwide power outages in winter as the struggling state-owned electricity utility increasingly fails to ensure reliable supplies.

Reports from Zambia said yesterday that that country's recent countrywide blackout was related to Zimbabwe's supply system.

Zimbabwe's capital, Harare, and other towns have for the past few nights been plunged into darkness as the Zimbabwe Electricity Supply Authority (Zesa) cuts power in the face of continued shortages and distribution problems.

Plush suburbs in Harare such as Borrowdale and Glen Lorne and areas like Hillside and Hatfield, as well as teeming townships on the outskirts of the city, have been without power the past few days.

The Combined Harare Residents' Association said that the power cuts showed government had failed to provide basic social services. Education, health, transport, and water and electricity supply are near collapse as the economy disintegrates.

Zesa said on Monday the worsening power shortages were due to "reduced electricity generation capacity, low tariffs, distribution problems and regional shortages".

Zesa owes foreign creditors a staggering $330m, making it technically insolvent. The crisis is compounded by shortages of foreign currency and spare parts.
-------------

http://www.businessday.co.za/articles/world.aspx?ID=BD4A212040

Zimbabwe is the model of how not to gracefully decline--the US should be entropically planning ahead on how to best shrink and relocalize electrical distribution to maximize uptime. Recall the posting whereby the US military controls the 'juice'.

I have said it before, but I will say it again: utilities need to be ramping prices much faster than inflation to have adequate funds to prevent blackouts. The rapid shedding of thieves, delinquent consumers, and poor cash-flow corps is essential so that those that can afford juice will pay for it vs buying gensets for themselves.

Hopefully, US & state utility regulators are examining this COUNTRYWIDE COLLAPSE and realizing that the early forcing of millions off the postPeak grid is the best way to keep the remaining grid blackout free, well financed for parts and maintenance, and well-guarded against attacks [both foreign & domestic].

Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?

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eric blair on June 7, 2006 - 5:46pm

buying gensets for themselves.

Whgat is wrong with having a PV genset you bought with your own money?

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totoneila on June 7, 2006 - 6:19pm

Hello Eric Blair,

Absolutely nothing--in fact, that is the optimal solution for nearly everyone, but what tiny % of the US will ever be able to afford this? Recall that hurricane victims buy gensets instead of PV panels to power their refrigerators, at the minimum.

PostPeak, those economically forced off the grid will resort to woodfires, kerosene space heaters, and ice chests-- expect a lot of house fires, carbon monoxide poisonings, and outbreaks of food poisonings.

Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?

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DelusionaL on June 7, 2006 - 8:57pm

What a little staement- food poioning. Nat'l Geo just lately stated that refrideration has saved so many people comapared to all other modern machines. IMO it is the biggest reason to want some "homepower" set up. Lights heat, etc. can be had much easier.

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BrianT on June 7, 2006 - 10:12am

TOTAL has zero obligation to inform the public on this issue. No one has any idea what executives at TOTAL believe re oil depletion (possibly internal memos would help). Look, the head of GM is still talking about success for the company. He is a smart man. Don't confuse intelligence and honesty (or ethics). Company reps say things for reasons, not because the company has a desperate need to inform the public of the truth.

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tate423 on June 7, 2006 - 10:22am

I know it's been pointed out, but don't confuse a shareholder(owner of the company) to the general public. Companies answer to their owners and if you aren't one, shut up.

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BrianT on June 7, 2006 - 10:26am

Whatever.

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tate423 on June 7, 2006 - 10:31am

This wasn't direct @ you. Just a general statement that people who don't own the company have no say from the companies perspective.

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BrianT on June 7, 2006 - 10:41am

Look, the guy made the comment at an oil conference covered by the press. I am literally amazed that in 2006 people still put so much blind faith in what company reps say(not just to the public, but also to their own shareholders). You are extremely confident that if TOTAL believed the we are at peak right now, they would say this(at least to their shareholders). Nothing I can say will change this. As an aside, Mark Cuban wrote on another blog site and the jist of his column was that shareholders are delusional if they think that upper management is working for their interests (the interests of the company). Upper management are working for their own interests (often these two interests coincide).I'm just saying you have to take public pronouncements with a huge grain of salt (or if you choose, ignore everything I have said-either way works.

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tate423 on June 7, 2006 - 11:20am

Im not arguing about Total. I'm only distinguishing the public from a shareholder. I don't put blind faith in anything anyone says. Many people here know to research the so called "facts" and make up their own mind. I'm in that camp.

I'm only pointing out that companies answer to their shareholders. I agree that upper management goals are not aligned with shareholder goals and therefore management doesn't tend to care about shareholders.

In the end, a company does answer to it's shareholders and if you don't believe me then there wouldn't be corporate takeovers, hostile or otherwise. Most times their is a majority shareholder who controls the votes on anything. Those that are in a position to make changes, can and do.

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rg144 on June 7, 2006 - 1:39pm

Just one observation, since the company is French, they are way more progressive about this energy debacle. They drill conservation into their kids at an early age. Their cars are small, they are into Nuke in a big way, they've got the high speed train TGV, they never had the oil to begin with, 5000 people die in a heat wave due, etc. So it's more 'preaching to the choir' to the Frech public who won't panic from it.

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DelusionaL on June 7, 2006 - 9:09pm

BrianT - There are very few people that are still alive who can talk to you about real suffering- rationing during WWII the great depression- I don't think our society is mentally prepared for what is coming and because so many don't even want to think let alone talk about it(and they have never experienced anything harsh so cannot visualize this happening). I'm sure that you have had the same response that we have all had it talking to other people about this...they just simply don't want to hear something really terrible is going to happen. They are correct in there is little if anything that they can do about it( the most common response I get). I see a slow grinding decline with minor or major problems depending on where you live. Once everyone is suffering enough then they will listen. Will it be too late...

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Nate Hagens on June 7, 2006 - 10:44am

After thinking about it, the premise of strong form market efficiency, (which includes all private information) would suggest it unlikely that TOTALs and other oil executives hold an opinion that dramatically differs than their public (shareholder) statements. Privately held opinions and info (of a pending peak) would make it through the ranks of these big oil companies and the 'whisper' numbers would find their way to the futures and equity markets - youd also see all the senior execs at these companies buying farms, etc.

No - a more likely explanation is that these 'corporate' oil people are telling truth for the most part as they see it. (telling lies on such a grand scale is difficult - someone always leaks). They are seeing slight increases in production and megaproject list. What they are missing is the marriage of their view and the Hubbert view (voiced here of late by westexas and others) that SA is 58% depleted and the world is peaking. The answer that bridges these two viewpoints is a very steep world decline rate and a maximum production peak far to the right of the midpoint of the distribution.

If we are borrowing from the second half of the distribution curve, without knowing it, then the market will extrapolate our continued increase in production as evidence of no near term peak. The problem with this of course, is once the production peak occurs, we'll be well past the 50% Qt level, and have to fight much higher decline rates in addition to the net energy, net export, geopolitical stuff.
I continue to think everything is copasetic until its not with nary a few months in between. Essentially, this implies that few people in the marketplace really use or believe Hubbert on a world scale.

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BrianT on June 7, 2006 - 10:48am

Maybe. Or maybe that permanent "fear premium" of $15-20 that is supposedly built into the oil price is total (pun intended) BS.

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David JM on June 7, 2006 - 11:19am

Thelastsasquach, I generally agree with your post here but have always been impressed by the extent that "The Big Lie" can be successful despite the presence of leaks and obvious justification of doubt (see Hitler and GWB). IMO, the critical factor in spectacular mendacity is when people possess a potent motivation to believe the deception. In this case, people are ready, willing and able to be lulled into an SUV forever "sleepwalk" Kunstler style. Whether the TOTAL people are sincere and believing their own reports or trying to "soften" people up for the bad news or something else I really don't know.

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BrianT on June 7, 2006 - 11:53am

Good observation about motivation. Everyone blames the fraudster but the sucker is often a willing participant in his own demise.

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smekhovo on June 7, 2006 - 12:02pm

You think Kenny Boy Lay used to tell the truth for the most part about Enron as he saw it?

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oilmanbob on June 7, 2006 - 5:13pm

I've seen totally evil people at close range a number of times. They are narcisistic-they cannot see other people or the world as anything but extensions of themselves and they try to corrupt others because if the other people are corrupt, then the evil person's behavior is totally justified.
Kenny Boy is quite intelligent-he has a doctorate in Economics and has been in the upper management of three Gas Companies-but I believe he is responsible for seducing Skillings and Fastow and the partners at Arthur Anderson into the self-destructive paths that lead to their downfall. This wasn't Kenny Boy's first rodeo. He was the archetect of Transco's venture into coal bed methane that sunk the company(it became Williams Brothers), he talked the Republicans into decontrol of Natural Gas (look how much money we can make on futures). He had his first wife commited in order to cheat her of her community interest in Enron so he could marry Linda, he stole fro his employers by having his mistress on the Florida Gas payroll(that's Linda)and has generally behaved like an evil person while telling everyone how honest, how christian and how conservative he was. That's why we follow our King George II and just call him Kenny Boy.

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smekhovo on June 7, 2006 - 10:34pm

Very illuminating - the media of course fell for the story painting first Fastow, then Skilling as the mastermind - good to hear, that, as logic always suggested, it was the other way around.

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totoneila on June 7, 2006 - 5:14pm

Hello Smekhovo,

Thought-provoking reply, LOL! We need politicians and businessmen with a more honest backbone like former Pres. Harry Truman:

QUOTE: "I never give them hell. I just tell the truth and they think it's hell."

Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?

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BrentCrude on June 7, 2006 - 11:24am

I share the confusion

If TOTAL believed in a near-term peak they probably wouldn't say it - not good for the shareholders and way too controversial.

But equally why use a specific date 2020 unless you have at least some research to back it up. They actually seem to believe that production can grow until 2020. Why lie about something so important when you can just say nothing - after all the statement is meant to be a warning.

My back of the envelope calc - 85mbd at 2% growth per year to 2020 gives 110mbd - an extra 25mbd. Also the smart people at TOTAL must be aware that major fields are in decline - so they must have convinced themselves that there is an extra 30mbd+ to come on stream - 3 Saudi Arabias.

Saudi is promising an extra 3mbd and Canada oil sands an extra 3mbd - allowing for other developments lets call it 2 Saudis they expect to be discovered in the very near term.

How on earth can this happen - what on earth can they see that we can't ?

I think I am a natural pessimist and perhaps susceptible to PO theory. Most of my friends and colleagues think I am bit nuts. If this stuff was true they reason, we would have heard more about it - sometimes I wonder if they are right.

Can the smart people at TOTAL be so incredibly wrong ?

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smekhovo on June 7, 2006 - 12:09pm

Put me down in the camp that believes Desmarest, like Ali al-Naimi, doesn't actually care whether or not what he says is true. He decides to say what he thinks will make his company look best, and tells a flunky to churn out a macro scenario that can fit that context.

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BrianT on June 7, 2006 - 12:37pm

Call it Camp Reality.

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BrentCrude on June 7, 2006 - 1:11pm

But these people have children, nephews, nieces, grandchildren - maybe even a moral conscience. This isn't about trying to fool a few shareholders, its about the future of civilization.

And even if you believe the execs only care about the share price - what about the thousands of oil engineers around the globe who live and breathe this stuff every day - why aren't more of them jumping up and down waving red flags.

I know some of the TOD'ers work for the oil companies - are your colleagues aware of peak oil, is it discussed at lunch or at the water-cooler - does it keep them awake at night ? Why aren't they all buying farms ?

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Amy on June 7, 2006 - 2:47pm

Three of my siblings are petroleum engineers. When I brought up the PO topic with one of them a couple of years ago, he just laughed and said "there's plenty of oil." Another said to not worry, since "prices always come down in the spring." Neither really had a clue, and I didn't even try with the other one. By now, though, the whole family is pretty sure I'm a nut case.

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AlanfromBigEasy on June 7, 2006 - 2:57pm

Show them a copy of this Sunday's Dallas Morning News editorial page and ask for comments :-)

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plunsfo on June 7, 2006 - 3:35pm

what was in the editorial? Can you provide a link?

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Amy on June 7, 2006 - 4:23pm

I checked the website for the Dallas Morning News, but couldn't find last Sunday's paper. The most recent articles I found in the archives are from May. It is (very) possible that I just don't know how to use the DMN site, but it is also possible that issues are archived by month, making the recent past unavailable until July.

Is there a particular search term or phrase that might help me find the editorial? Maybe someone else saved it someplace online.

Thanks!

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Biologyfool on June 7, 2006 - 4:27pm

I believe when he said this Sunday he was talking about 6/11/06. I think Allan helped Westexas write an editorial due out this weekend.

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Amy on June 7, 2006 - 6:08pm

You're right! I can't believe that I totally forgot. But, I've written myself a reminder to go to the library on Sunday to look for the Dallas Morning News.

Thanks!

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zceb90 on June 7, 2006 - 3:14pm

My experience with oil majors has been that they primarily worry about their own reserves. Their remit is to make good returns for shareholders, ensuring that the world has enough oil is far beyond remit of any individual corporation. I worked for oil majors for 3 decades and we never really discussed the world situation. It's not that they were trying to hide anything, we just had too much to worry about looking after our own patch to spend time on global picture.

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Prodigal Son on June 7, 2006 - 4:59pm

But these people have children, nephews, nieces, grandchildren - maybe even a moral conscience.

So did the folks on Easter Island.

This isn't about trying to fool a few shareholders, its about the future of civilization.

Studies show that people are very concerned about relative gains and relative distribution of resources, not absolute gains. What's important is being the big fish, not necessarily the size of the pond.

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Twilight on June 7, 2006 - 12:32pm

Putting an exact date on it makes it sound more authoritative. Make the date far enough ahead that people won't worry about it.

So what is heard is that the experts say everything is OK for a long time. And yes, since that is what people want to hear, they will choose to beleive it over other information.

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