Brazil is fascinating enough in itself, but more fascinating to me is the whole South American offshore region and by extension the world oil production balance.

As Luis de Sousa says, "Tupi is possibly just the first of a series of fields that may compose an entirely new oil region enclosed in the Santos Basin. Hence new discoveries of significant volume in this area are likely."

The question is, what are we talking about when we say "significant volume" and big a series of new fields? Just the other day there was a link here on TOD to the possibility of sizable finds offshore Uruguay, finds offshore Argintina are now to be considered fully possible, and even the Falkland Islands has been mentioned.

Given world consumption today, it takes absolutely huge oil finds and development of said finds to have any real effect on oil markets. Could these finds make moot the idea of peak oil? Almost certainly not. But they could alter timing by some time, and create an interesting new balance of power in the oil producing group of nations.

The news just the other day that a Russian official had stated that Russia was for all practical purposes peaked would be a huge factor in rebalancing the power relationship. If Russia is indeed on the decline, while areas such as South America and West Africa are on the increase, it portends a major geopolitical shift in the world of oil production and petro power politics. Vladimir Putin had been getting pretty cocky about all the ways he hopes to use the petro weapon. Now, he and his successors may have to re-evaluate their options.

Of course, the wildcard is still Saudi Arabia. They have been very coy this time around, unlike the 1970's. They NEVER use the word, but they have been operating a defacto partial embargo for the last several years. But it is a cloaked embargo, and one that may not be intentional, if you accept the theory that KSA simply cannot raise production appreciably. Either way, the Saudi's do not have to "withhold " production to hold oil production flat, all they have to do is delay turning up investment. Either would have the same effect.

The question is, at what point will the confluence of events in the world have a real effect on the markets and break us out of the current paradigm, either to the upside on price or to the downside?

American and European oil consumption is beginning to flatten due to recession and a greater concern on the part of the auto buyer about fuel economy. Canada, West Africa, Brazil, and even the U.S. have the possibility of raising oil production, the U.S. very little, Canada some, Brazil and West Africa considerably more. But Mexico, the North Sea, and Russia seem to be at the top of possible production, at least for some time in the future, perhaps forever.

Saudi Arabia? Who can even guess. They may be at the top of possible production, or they may still have a considerable amount of oil up their sleeves to meter out as suits their needs. Do the Saudi's see the possibility of the non OPEC producers and new oil finds in South America and Africa combined with flat or declining American and European consumption being great enough to glut the market?

Or do the Saudi's feel that the developing nations, China and India, will more than swallow up any new production, and with declining production in Mexico, Russia and the North Sea it will make the possibility of glut improbable if not completely impossible? If so, how will OPEC react? Can they afford to "shoot the moon" on price, and not worry about competition or consuption restraint (conservation)? Or at some point, will they step in and stabilize oil markets? Even if they want to, can they?

So for my own benefit, in an attempt to clarify the unclarifiable, I draw a few conclusions:

(a) Once more I state my assessment that predicting peak oil down to the year or even to the decade is a statistical impossibility. The lack of information is too great and the variables too many. This does not mean peak oil is not a danger. Quite the contrary: It is all the more dangerous because of it's unpredictability, making it very difficult if not impossible to plan for.

(b) The implications of decisions made now, both on the production and consumption side, will take years, possiblly decades to play out. Huge sums of capital and long periods of time are required to change anything in the oil business, in fact in the energy business in general.

(c) Plans laid now based on current "facts" are an extreme risk. Planning for possible glut and price decline in the energy markets may seem foolish, but likewise planning for shortages, ever higher prices, and catastrophic collapse may turn out to be wasteful of years and money and look just as foolish a few years down the road. Once more we are reminded of the concept of "hedging". And we are not talking about the way that word has been abused recently (such as "hedge fund") but real hedging, i.e., being prepared to weather any eventuality as best as possible, "case hardening" economies, cultures and systems to sustain change in any direction.

(d) Other issues may well drawf concerns about oil depletion, and force action that will be completley unconnected to the depletion issue, but will have a major effect upon it. Carbon release is assured if we find large major new oil fields. Is there a point wherein we may begin to place a penelty on oil and coal use, not because they are in short supply, but because they are heavy carbon fuels?

(e)Lastly, and most controversially, I am more and more convinced each day that there will certainly be more than enough oil to transition to a new "renewable age". I am convinced that renewables and advanced efficiency technology is and has been smeared and slandered based on little or no use of real evidence. There is a large contigent who have a vested interest in seeing the renewables marginalized, and will use the tool of prospective peak oil as a tool to do it. The main reason we will not transition to a new renewable low carbon technology is not because there is not enough oil to do it. It is because we want to keep burning the oil that remains.

(e)Advice on how to cope: Think about, study, and teach your children about COMPLEXITY. If you yearn for the simple, primitive life, sadly, you were born into the wrong age.

RC