I don't expect the oil prices to be determined by reserves but by actual production and demand.

However this should have an impact on the stock market valuation of energy and energy dependent companies. For example if a revision of estimated reserves signals that "oil has a limited future" this may prompt more government policies toward conservation and accelerated post oil transition. This is turn will impact the outlook of several corporations.

One possibility is that the IEA makes a step in the right direction, without going too far. The may increase the decline rates used in calculations, but still keep the difficult-to-believe reserves for the Middle Eastern countries, for example. This would make estimates come down a little, but not too much.

We won't know for sure until November 12. My guess is that it is only a partial step.

I ve been waiting for a post to make this historical observation. The oil business started with a product that came out of the ground in abundance, to the point where it flowed into ditches and water supplies. In some cases, this was intentional as neighbouring licenses vied to maximize primary production, before it was called primary or even really understood at all.

This has two implications for the business. The first is that Big Oil has always been fixated on sales and marketing. This means exploration and development have suffered a genuine historical deficit. Think of both XOM and KSA. This also explains some of their behaviour toward reserve replacement and, in the case of KSA, reserve estimates.

The old paradigm of surplus capacity was entirely genuine. The pressure to place unwanted suplies was, at source, geological. Has it changed? Not really. Not until a genuine peak pushes capacity lower than demand for a period of time sufficient to reduce stocks until stocks are gone. In the absence of buffer stocks, we are going to see big fluctuations at the margin.

This also explains the IEA's unusual approach to demand and supply: That oil demand creates supply. It's an odd reversal of the normal economic balancing act, where supply and demand have separate and distinct causes. Lest we of TOD forget, this school of thought is still very much in ascendance in KSA, USA and a surporising number of other places that should know better (the UK...).

Most consumers believe there is effectively unlimited supply, constrained only by capital and regulatory constraints. I believe early surplus will cause later shortage and that this observation is as true for the short run as it is for the long term. It is founded on historical fact.

The alternative - conservation and prudent management of oil and gas as the king of all energy resources - is unthinkable because it requires short term sacrifice of all kinds: Risky wildcat wells, inceased energy costs, reduced levels of growth. A sensible policy would do things like risking a few caribou to have some extra capacity to keep prices from gyrating so much and slip a few pennies into product prices in taxes to provide a floor when they drop preciptously. You'll never get elected! No wonder con-rucopians rule.