The Oil Drum

62 comments on Hofmeister v. Simmons

Comments can no longer be added to this story.

Termoil on March 21, 2008 - 9:10pm

John Hoffmeister seems to be at odds with Jeroen Van Der Veer's idea of Scramble or Blueprints. John seems to be pushing BAU but maybe that is just the nmessage for the American market. At the same time he says "sure we gonna peak someday" but then gives the impresion that it's not anytime soon. As for that idiot journalist at the end who couldnt string the words together to make his point, get rid of him.

Comments can no longer be added to this story.

xeroid on March 22, 2008 - 6:21am

John seems to be pushing BAU

He has no option as he is trying to grow his company and maximise profit, and, like you and I he doesn't know for sure when we will peak - at least he admits production will peak!

As usual he says peaking won't be caused by lack of oil in the ground - we know this, it isn't what causes the world peak - just the normal old smoke and mirrors!

The peak is caused by inadequate investment in production to ensure that the price of oil constantly falls in real terms - so that we can all afford to demand more (~2% more each year for BAU.) The reason the investment isn't made is because the costs are rising as the oil gets ever more difficult to find and to make a profit the price the product must sell at must keep going up in real terms - this is very risky for an oil company since they don't know the shape of the future demand curve.

We (and Hoffmeister) know for sure that at some stage demand will fall away - for more than three years now the price has been such that demand for 'all liquids' has been flat.

Demand for exported crude (the market that Hoffmeister mostly deals in) is actually falling at current prices - if they only rely on imported crude (and not alternate liquids) somebody somewhere doesn't have BAU growth.

The steeply rising crude prices (in real terms) indicates the oil companies, in total, can't or won't pump any more at the moment.

If a world recession causes the demand to fall below what the oil companies are willing/able to produce at maximum, then the price of oil will fall - this is very risky for oil companies when a deep water oil well can cost >$200 million just to drill the hole - if the price falls so far that the oil company doesn't make a profit it's bye bye oil company.

These are dangerous times for oil companies as each new well gets ever more expensive at the same time as the overall business climate deteriorates - in order to maximise profits in the long term it might be better to hoard the oil and not drill too many new holes at the moment, which would imply a very steep decline rate in a few years.

Comments can no longer be added to this story.

joewp on March 22, 2008 - 9:53pm

My mother always told me to watch what they do, not what they say. While Hoffmeister trumpets there's no peak in sight and unconventional oil will save us, he maintains a rolling mill and farmland in Lancaster Pennsylvania, a fact that was removed from his Shell bio, but still referenced here http://www.eenews.net/tv/transcript/483

The President of Shell America is a doomer.