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222 comments on DrumBeat: October 14, 2006

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DelusionaL on October 14, 2006 - 9:04am Permalink | Subthread | Parent | Comments top
Oil CEO-  Just an observation on the first chart.  When the production wave crests(is it an average? I can't read the fine print but looks like EIA revised) the price tumbles disproportionately. If we are PO I would think that this historical trend would break eventually
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Oil CEO on October 14, 2006 - 9:15am Permalink | Subthread | Parent | Comments top
Thanks for pointing that out. I've gotta change that. When I say EIA revised I mean the latest EIA numbers. But I've been doing this long enough to know that if you placed the new ones over the old ones - You can't tell the difference(on this chart, at least). That's why I'm so skeptical about any talk about revisions. It all evens out in the end.

The smooth lines are always averages. Click on the image itself if you want a bigger one.

In this case I used a 13-month centered moving average. Which was a new idea to me at the time. I prefer trailing moving averages(I refer to them as SMA or simply moving average in some of my charts). Somehow Stuart convinced me. I use a hybrid now, undectectable to the human eye.

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Oil CEO on October 14, 2006 - 9:31am Permalink | Subthread | Parent | Comments top
The consistent problem with the first one, as with all graphs of its sort is that the relationship between the two scales is always a construct. It only exists in my head. This was how I decided to do it at the time. What makes reproducing it so difficult is that it replicates itself. Perhaps when I update it I'll always have to produce a new one and an unrevised(except for the data) version.

OilProd95_Aug06

That's my last pure production. I can say that the updated version with two more months' data looks virtually the same.

The plateau continues. I'll say this only at this point. I've got another 18 months before I'll decide whether anything has been dropping. Or rising. Six months ago I would have told you the same thing. Maybe in another 6 months I'll make a decision.

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oilaholic on October 14, 2006 - 4:30pm Permalink | Subthread | Parent | Comments top
Is that plateau for oil production or oil CONSUMPTION?  Clearly it is both, assuming no major increase in storage inventory.  But it matters which is the constraining factor.   If it's supply constrained that suggests a possible peak.   But it could be that the rapid price increase has virtually eliminated the global growth in demand.   I've been seeing references to poor countries being priced out of the oil market, for example.   That could apply also to the poor people in many not-poor countries.   If that is true, possibly the current price declines may reflect a (possibly temporary) peak in global oil demand occuring just as non-OPEC supplies are increasing, thus causing OPEC to decide that a supply cut on their part is now needed to avoid further price declines.   Sometimes what is said in public is actually what is happening.
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Oil CEO on October 14, 2006 - 4:45pm Permalink | Subthread | Parent | Comments top
Now listen. You're messing with me, who told you you could come in here and asking serious questions? Throw me an email at my address. This is gonna get ugly soon and I want to know where I can send a check. Don't worry about me I'm taken care of.
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DelusionaL on October 14, 2006 - 8:22pm Permalink | Subthread | Parent | Comments top
While you are messing with us today my son showed this to me.

This is LOL funny-- you gotta see it

http://www.endofworld.net/

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mbnewtrain on October 14, 2006 - 9:10pm Permalink | Subthread | Parent | Comments top
Bush seemed so happy standing among the nukes, knowing he has more than anybody else.  And do the Chinese leaders really take baths in wood tubs (part of their energy saving strategy)?
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Oil CEO on October 17, 2006 - 5:18pm Permalink | Subthread | Parent | Comments top
That was great. I love those. I'm laughing so hard I'm crying. Or maybe it's the other way around.
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Oil CEO on October 14, 2006 - 4:56pm Permalink | Subthread | Parent | Comments top
We don't know. Nobody knows. Nobody. That's the key which these other ___ won't give you. Nobody knows. Not even the Saudis. That's why so many assholes make money on the deal. You're getting played. Nobody knows. And they will never leave character.

There are no answers to these questions.

The references you see are theories put forth by certain luminaries in the oil world.

Remember back when certain people told others they could

turn lead to gold

or that the earth was round

or that witches don't float

Which one of those three is right and how the fuck would you know?

See what I mean?

Back then turning lead to gold was where the focus was. I'm pretty sure it's the same today.

I'm pretty sure nobody has a really clear motive to prove that witches either sink or swim to save your life.

Why's that. Witches and You don't count. It's all about the...

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expat on October 15, 2006 - 1:34am Permalink | Subthread | Parent | Comments top
Well, let's see -

  1. Lead into gold - a few billion well spent tax dollars shows that turning lead into gold is not a money making venture, and that it is surprisingly more esoteric than any alchemist ever imagined. And if it hadn't been for that alchemy fantasy, I doubt anyone would ever have bothered doing it.

  2. Earth is round - you just take a well in Alexandria and one in Cyrene, wait for noon, do some geometry. Of course, you do actually have to be mathematically literate.

  3. Everyone knows by the time you find a witch, it is time to have a bit of righteous public entertainment ending in the just punishment of the evildoers. Historically, this has been a very reliable form of entertainment among people - though it only had a minor run in North America (sort of like how Americans just don't get soccer).

What is interesting is just how often people who could do 1. or 2. were considered wizards/witches.

I do think that there is a level beyond money - for example, staying warm in the winter isn't really about money, it is about survival. It is just that many people in North America can't imagine what it is like to live without any fuel in the wintertime, regardless of how much money they have. Check out the mass migrations of Germans from East to West in the winter of 1944-45 to escape the Russians to get a feel for what I mean - even if you were rich/powerful enough to have a vehicle, and fuel, it just meant the strafing fighters found you worth their time. For most Europeans who were alive before 1940 or so, such a concern with heat and survival is not theoretical, along with the awareness of how unimportant money is compared to staying alive.

I think part of the general confusion here is the difference between money as a source/representation of human motivation/activity, and the fact that reality is not the same as human motivation/activity. Just like turning lead into gold, it is conceivable that the Texas oil fields could go back to producing what they did in the early 1970s. It is just up until now, no one has figured out a way to replace what has been burnt. This can be thought of as finite (really huge to beyond human comprehension) and conceivable not being equal to infinite (never ending). After all, a few billion atoms of gold from lead sounds huge - until you do the math.

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totoneila on October 15, 2006 - 3:53am Permalink | Subthread | Parent | Comments top
Hello Expat,

Well said, Well said.  Sadly, come crunch time, I must agree with your statement that the ignorant will probably do in the witches/wizards that offer the best chance for them to be lead out of the darkness.  Such is life-- that is why Socrates gladly drank the hemlock.  Can we possibly be better philosophers when our time has come?

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

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expat on October 15, 2006 - 11:01am Permalink | Subthread | Parent | Comments top
Not that I like to make predictions but - 'Environmentalists talked about climate change - they are a curse upon us all in these hard times' is so much easier to accept than how we all create huge amounts of CO2 by flipping on the light switch before taking a hot shower to go to work and then shopping at a store, unwrapping and cooking the purchased food grown in various parts of the planet, and then putting the remainder in the trash and/or fridge. (and for the 3 or 4 of you who aren't living like this - just mumble 'Lord Jevon' to yourself as you sleep the sleep of the just).
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Oil CEO on October 14, 2006 - 5:22pm Permalink | Subthread | Parent | Comments top
Okay. Fine. It's production. They are the numbers that absolutely everybody uses. We can argue about them. But that probably wouldn't do us any good. There's probably fifty people who would be qualified to discuss the numbers with me. Prof. Goose wouldn't be in that crew. I doubt Stuart could make the cut. Even Simmons. There's no reason not to trust Simmons. He just isn't honest. He never comes clean about anything. I doubt Yergin would make the cut. But he's probably got at least four people who could. Esser is strong.

Lynch is strong. Pickens is peak oils' worst enemy. He just doesn't understand. Everybody forgot about Economides. And he outflanked everybody.

The great thing about oil smacking low is that it is knocking over false prophets like ... like ... like Hewlett Packard CEO's.

To think I lamented this storm a month ago. We may need another job. Kid, we're lucky we're still alive. Okay. Okay? That's all you've got to say? Okay. Okay.

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Halfin on October 14, 2006 - 8:11pm Permalink | Subthread | Parent | Comments top
Is that plateau for oil production or oil CONSUMPTION?

Yes, that is the big question. Generally speaking, if prices are high we would say it is supply limited. If prices are low then that points to a failure of demand. Despite the recent fallback, prices even today can still be considered high. If we truly had an oil glut then producers would be competing with each other to cut prices, and we'd see historically low prices of $10-20 per barrel. Since we're not, that points to supply limitations.

Having said that, we should keep in mind that market participants look to the future as well as the present in making their decisions. Producers may choose to produce below the maximum if they believe that we will have shortages in the future and their oil will be worth even more then. A production cutback in the face of high prices is therefore not necessarily evidence that we are at peak now, but it suggests that producers see a peak as a realistic possibility within their planning horizon, and that is affecting their decisions today.

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oilaholic on October 15, 2006 - 11:00am Permalink | Subthread | Parent | Comments top
Thanks for taking my question seriously.  Another clue to whether it's supply or demand constrained may be the willingness of OPEC to attempt to reduce supply temporarily.   If they thought the peak was really demand driven, they would know that cutting down supply temporarily in order to lift prices back into the $70 range would be futile because it would continue to reduce demand and therefore make any price increase they could achieve only temporary, requiring more cutbacks later to maintain the higher price and therefore ceding more of the oil market to non-OPEC countries.  So their willingness to attempt a cutback to restore higher prices suggests that they think there has been either a TEMPORARY demand peak or a TEMPORARY supply spurt that can be corrected by their temporary cutback.  Since demand destruction would not be likely to be a temporary phonemenon (unless it is weather-related), this suggests they don't see supply continuing to increase steadily among the non-OPEC producers, since that phenomenon would make their current proposed cutback feckless.  Bottom line: it seems like OPEC believes that supplies are likely to be fairly well constrained going forward.
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jkissing on October 15, 2006 - 1:41am Permalink | Subthread | Parent | Comments top
This site, posted at the bottom of the thread, has a graph and curve that agrees with your's.

http://mainelyenergy.com/

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