<A Letter from the TOD Editors Box... The Oil Drum DrumBeat: July 27, 2006>

146 comments on IEA Supply Creeping Up

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Oil CEO on July 27, 2006 - 3:36am Permalink | Subthread | Parent | Comments top
Hey, you caught the one joke I had tonight! I totally agree. I always chuckle, when I hear the line,"we'll know in a couple of months." You've used it yourself on a few occasions as I recall. Maybe not. Anyway. Difficult situation to judge. And I am sure about this. You and I have been here for almost a year now, month-in, month-out, saying damned near the same thing. So maybe we should start thinking about setting targets into the future for us to judge things by(when we get there). I'll give an example. A proposal.

We know we've hit peak when: our 13-month average drops by an average of 2% or more per month for twelve consecutive months.

I like that one, I'm already using that. Awaiting your counterproposal.

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Stuart Staniford on July 27, 2006 - 3:46am Permalink | Subthread | Parent | Comments top
2% a month? That would be around 21 1/2% a year!

I don't think it will be easy to set criteria in advance. Eg, we might have ME oil shocks coming up before too long -- I'm not sure how long the Arab countries are going to stand for our resupplying Israel with the bombs used to maim the children that keep showing up on Arab TV every night -- and how will we distinguish the shock from the underlying trend? Or a housing crash led recession next year - we'll have to look at prices in an attempt to guesstimate how much of the supply change is due to falling demand, and how much to supply constraints.

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Oil CEO on July 27, 2006 - 5:33am Permalink | Subthread | Parent | Comments top
C'mon. I meant year on year months. I'm not compounding. I'll demonstrate with chart if you want. 13-month average of course and average monthly, so if we get 2-2-2-2-2-2-2-2-2-2-1-2 : it doesn't count. I'd be glad to hash this out. I'd only consider a joint statement from the two of us as progressive in this environment.

I totally and completely take your caveats as legitimate. I'm proposing my measure in lieu of other factors, which I am confident enough to say won't be that important.

However, I am revising proposal. Point taken.

But give me some guidance. Should I go to 1.75 or to 2.25?

As a community, we are going to need to take the lead here. I propose this as our offensive strategy.

Lord Browne on Fox tonight (on Cavuto's show). Catch that? Seen BP ads lately? Did you catch subtleties in later parts of interview. HE DOESN'T CARE. And he knows the truth. He speaks the truth. He just doesn't care. It's so obvious. What am I missing? Oil CEO often asks this question, rarely getting an answer - WTF am I missing!

We need to take the offensive.

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Halfin on July 27, 2006 - 1:32pm Permalink | Subthread | Parent | Comments top
The play-money Foresight Exchange game, http://www.ideosphere.com/ , has been going on since 1994 and lets people bet on various future events. They have a number of Peak Oil related claims and we spent some time trying to hash out the definition of the peak. It's tough because there have been peaks before, the biggest being around 1980, and we were trying to come up with something that would distinguish from them. In the end we gave up and just ruled that the "new" peak would have to happen after 2004.

The definition is two consecutive years of 3% declines in production. In retrospect that may have been two strict - we could see something that historians would eventually recognize as a peak without seeing these kinds of declines until much later. Or it could be too weak - we could have a severe two-year recession/depression and have such declines, before bouncing back to higher production than ever. It's tough to come up with a clear definition. Like the fall of the roman empire, it's something that can really only be declared in hindsight.

See the claim at http://www.ideosphere.com/fx-bin/Claim?claim=pkyr20 . Trading prices predict a peak (as defined above) in 2010. (That is, 2011 production will be 3% less than 2010, and 2012 will be 3% less than 2011.)

(http://www.newsfutures.com/pdf/Does_money_matter.pdf provides evidence that play-money prediction markets can be as accurate as real-money ones.)

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Freddy Hutter on July 27, 2006 - 3:18pm Permalink | Subthread | Parent | Comments top
Your 3% threshold would have declared a Peak in 1982 based on 1980 & 1981 declines.  Again a Peak would have been declared in 1983 based on '81 & '82 declines. After that episode, the largest of the five next annual shortfalls was 1.06% in 1999.
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Darwinian on July 27, 2006 - 6:02pm Permalink | Subthread | Parent | Comments top
There have been many times in the past when the taps were shut down deliberatey, or becase of political reasons. There was Iranian revolution and the Iran-Iraq war that caused OPEC production to drop. Then there was the collapse of the Soviet Union. Then OPEC, in about 1999, cut back on production because of low oil prices.

But now every nation is producing flat out, except perhaps for Nigeria and a few barrels in Iraq. But the point is a drop in production right now would be caused almost entirely by depletion, not by political reasons.

That is the difference Freddy.

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GreyZone on July 27, 2006 - 4:32pm Permalink | Subthread | Parent | Comments top

Halfin, please take note of the following graph:





This is the month by month oil production for the lower 48 US from 1969 to 1973 (2 years pre-peak to 2 years post-peak). Note that it is very noisy. Note that it is very hard to distinguish the peak in there.

Now, here is another view for you to consider of the same 5 years. This makes it even more obvious how hard it is to spot peak on a month-by-month basis, which is why I call BS on Freddy Hutter's crowing about any single month's change. Actually seeing peak will only be possible by looking backwards. Any crowing now, either way, is just a guess.

Note that the YELLOW data set in the second graph is the peak YEAR but that the prior year actually had months above any of the peak year months.





Here's the CSV data for those five years using month-by-month production (in thousands of barrels) in case anyone wants to copy and paste just those 5 years. This data came from the EIA.

Year,Jan,Feb,Mar,Apr,May,Jun,Jul,Aug,Sep,Oct,Nov,Dec

1969,275528,249984,280705,277140,290036,288935,288145,281077,278850,285603,280380,295368

1970,293818,267960,294748,287730,295213,280770,285274,296360,295590,310403,301320,308264

1971,299305,272412,302808,293070,298995,288120,293121,291741,274050,284022,274170,282100

1972,282534,270744,293322,285390,298034,285660,294376,293973,285240,293930,282780,289385

1973,284454,263066,287430,278757,287134,276418,285731,284225,271959,285940,274829,280960

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Freddy Hutter on July 27, 2006 - 4:02am Permalink | Subthread | Parent | Comments top
Uhh, u might want to back test that first.  As i mentioned in the past, we've had nine year-over-year setbacks.  This morning i cited 1999 & 2002.  Try it on these last two extraction pullbacks and u will see the folly in calling a Peak.  False negatives and false positives all over the map...
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Stuart Staniford on July 27, 2006 - 4:09am Permalink | Subthread | Parent | Comments top
RTFM :-)
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Prodigal Son on July 27, 2006 - 5:03am Permalink | Subthread | Parent | Comments top
I checked out your website Mr. Hutter -- it's awful format! Absolutely horrible to read. Why don't you make it a bit easier on the eyes? It looks absolutely unprofessional.
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Oil CEO on July 27, 2006 - 5:42am Permalink | Subthread | Parent | Comments top
Ugg. Yes, this has been mentioned before. I'm sorry I ever started this trend. When I have progressed with Sailorman some more, I'd gladly re-invent Freddy's website. Until then, please play it on his numbers. He just needs to lose the black background. That's all it is. And he probably had a site long before you - so give him a break. Right!? - :) Let's all concentrate on the real enemy - our congressmen and senators.
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Prodigal Son on July 27, 2006 - 9:14am Permalink | Subthread | Parent | Comments top
Didn't mean to be mean -- it's just very hard to read.
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Freddy Hutter on July 27, 2006 - 3:22pm Permalink | Subthread | Parent | Comments top
It is the oldest and one of the last of our non-subscription (free) sites.
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Prodigal Son on July 28, 2006 - 1:56am Permalink | Subthread | Parent | Comments top
:-) Still hard to read.
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smekhovo on July 28, 2006 - 12:53pm Permalink | Subthread | Parent | Comments top
You mean there are idiots who pay for your crap?
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Sunspot on July 27, 2006 - 10:02am Permalink | Subthread | Parent | Comments top
Oh, so it's our congressman and senators who are using 85 million barrels of oil a day?  They sure do drive a lot!
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146 comments on IEA Supply Creeping Up

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