<Due Diligence: A reader's response to KhoslaThe Oil DrumDrumBeat: August 14, 2006>

100 comments on Saudi oil production revisited

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copelch on August 14, 2006 - 6:04am Permalink | Subthread | Parent | Comments top
Rethin,

A very interesting point. The irony is that Hubbert's peak is a model which reflects a world in which people may be dying for oil (the USA then) but not one in which they are not only dying for oil, but also killing for oil (the world now).

Paradoxically, overly rigourous adherence to the Hubbertian  model makes the peak oil community too optimistic, in that they tend to believe that the resource-wars mayhem won't really begin until after the peak, since otherwise their model wouldn't fit as neatly as they would like it to. But as you suggest the mayhem may have begun already.

So any hope of you smart TOD guys designing an updated depletion model that factors in resource-war driven production mitigation as well as creaming curves?

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MicroHydro on August 14, 2006 - 7:16am Permalink | Subthread | Parent | Comments top
Er,the mayhem started almost 5 years ago.  Looking backwards, most of the 20th century wars had oil as a motive or deciding factor.
WWI: Germany wanted the Baghdad-Berlin railway to deliver oil, the British didn't want them to get it.
WWII: Germany made runs at the North African and Azerbijan oil fields, Japan temporarily captured SE Asian oil.
The Cold War: ended in part with USSR peak oil plus Saudi Arabia flooding the market with cheap crude to cut off the USSR's hard currency supply.
US-Iraq War I (1990-1991): self explanatory
It never ceases to amaze me that over half of people who believe in geological peak oil deny that the constant warfare of this century is all about oil as well.
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Siggi on August 14, 2006 - 8:16am Permalink | Subthread | Parent | Comments top
Don't confuse end and means.

WWI is far more complicated; it was not about oil.
WWII was Nazi-Germany's quest for "Lebensraum", and oil was needed to fuel the war machine.
The cold war was about ideology. It was fought with oil, among other means.

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babble on August 14, 2006 - 11:08am Permalink | Subthread | Parent | Comments top
Depends who's history you believe.

http://www.amazon.com/gp/product/074532309X/

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tate423 on August 14, 2006 - 12:47pm Permalink | Subthread | Parent | Comments top
Don't forget about Leo Wanta and the destabalization of the ruble through Forex transaction trading.
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Chris Vernon on August 14, 2006 - 8:34am Permalink | Subthread | Parent | Comments top
I would suggest the post-peak profile of the Hubbert curve can't be used as a forecast. It is simply a result of geologically constrained production in an otherwise business as usual environment, the area under the curve being the remaining recoverable reserve. If we accept that post peak will be anything but business as usual then we can dismiss the post peak profile. No one can tell what impact resource wars, global depression etc will have on the abilities of the oil majors or national oil companies to bring oil to market.

If the collapse of the Soviet Union is a reasonable proxy for a post peak global collapse (this could even be optimistic since there wasn't a serious war involved) then oil production could fall away very rapidly indeed. FSU production fell by 50% in under 5 years.

See this graph from Laherrere:


Click to enlarge.

I guess this was economic collapse leading to oil production collapse, but couldn't the global case see peak oil causing economic collapse which in turn destroys oil production?

Will OPEC still be producing ~30mbpd 3 years post peak? I wouldn't bet on it!

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jkissing on August 14, 2006 - 10:38am Permalink | Subthread | Parent | Comments top
For economic collapse to lead to oil production collapse one must assume price collapses. This was not true during the seventies - three recessions, but never a yoy price decline. A depression would be a new case...
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ET on August 14, 2006 - 4:28pm Permalink | Subthread | Parent | Comments top
One can assume infrastructure collapse along with economic collapse. In that case oil production would collapse. This is basically what happened in the FSU and what has happened in Iraq.
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Gargoil on August 14, 2006 - 4:40pm Permalink | Subthread | Parent | Comments top
"For economic collapse to lead to oil production collapse one must assume price collapses."

This is not necessarily true ... prices can get high enough that people can no longer pay at the pump - which means pumps can no longer be paid to pull oil from the ground.

That's intolerably simplistic, but everyone MUST keep very clear that petroleum does not follow simple supply and demand, as I noted in a previous post. It is perfectly feasible that the US will nationalize our oil ... it is possible that global conflicts may continue to spread and escalate ... we could all be back on rationing stamps for food and fuel ...

For every direction there are numerous outcomes, and this forces us to not only work diligently to accurately predict such things as global peak of production, but even things like; (1) how the market will work on developing alternatives and non-conventional sources, (2) how politics and foreign policy will shift and change to deal with changes in supply, (3) how domestic policy will change - with our "way of life" changing as well ...

There is only one thing that can simply be stated - production of hydrocarbon fuel and raw materials, necessary to the maintenance of the western world's current way of life, will begin to decline in the approaching years.

No one is certain how few or how many , nor can we accurately determine at what price per gallon the US economy, and even that of the world, will finally tip over into true depression, so we must all work diligently to make accurate predictions, while at the same time altering friends, family, local/regional/state/federal politicians of your concerns, and preparing for what may be the most challenging times you and your loved ones have ever faced - be that in 3 years or 15.

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babble on August 15, 2006 - 6:59am Permalink | Subthread | Parent | Comments top
I agree, a depression is unlikely. Maybe a few quarters of recession, but we'll see.

Many on this board miss the distinction between real GDP and nominal GDP. Nominal GDP will likely keep growing, real GDP will likely contract if we peak and don't plateau ( or even just grow supply slowly). Interest rates are likely to go a lot higher than people expect unless we get a housing crash.

The Dow Jones looks OK if you look at a chart of the 1970's (in nominal terms), until you inflation adjust it (real terms), then it looks remarkably similar to a chart of the 1930's depression.

Going forward the its likely to be a stock-picker's market like in the 1970's - index trackers are going to suffer, in my humble opinion. And most stocks will decline in real terms I suspect, with possible exceptions around energy, infrastructure, and mining related themes. Precious metals also did well in the 1970's.

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copelch on August 14, 2006 - 11:29am Permalink | Subthread | Parent | Comments top
Chris, you write concerning the fall of the Soviet Union:

"I guess this was economic collapse leading to oil production collapse."

AFAIK most contemporary historians contend that it was the glut of oil in the 80s that was the chief 'culprit':

Oil glut => collapse in oil price => collapse in Russia's oil revenue => collapse of Russia.

Today:
oil scarcity => increase in oil price => increase in Russia's oil revenue => Putin rules OK.

Tomorrow:
Russian oil all gone up in smoke. Russia in deep doodoo...

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Wolfric on August 14, 2006 - 2:35pm Permalink | Subthread | Parent | Comments top
Hi Chris,

Regarding what caused the Soviet Union collapse was the collapse in oil production, thus a collapse of hard currency earning.

You can find a communication done by Marek Kolodziej during the ASPO IV International Workshop on oil and gas depletion in Lisbon, Portugal. The document is entitled : Former Soviet Union Oil Production and GDP Decline: Granger Causality and the Multi-Cycle Hubbert Curve

You can find all the presentation there

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