In the meantime, throughout the Southeast US during the month of September, gasoline stations went days without being resupplied.

The point is to look at the timing. I actually have a post from either August or September of last year predicting shortages should a hurricane come through because the inventory levels were so low. The hurricane did come through during the first part of September, and we started to see spot shortages. By the time of the ASPO conference, the refineries were coming back up. So my view was that inventories would likely to recover - and I stated as much when asked about it. At the same time, Simmons was predicting that things were going to get worse. It wasn't a matter of him predicting shortages. We already had the shortages when he made his talk. The issue was what the situation would be going forward into the 4th quarter and beyond. Take a look at his archived ASPO presentation and you can see what he was predicting.

This is where the peak oil theory falls down. No one will pay $25 for a gallon of gas.

An interesting premise. If oil and product prices to not increase by a factor of 10, then Peak Oil is bogus. Presumably, the referenced interview was around June, 2005, following the release of Matt's book, "Twilight in the Desert." Oil prices were then about $56, rising to $134 in June of 2008, 2.4 times the June, 2005 price, so it's true that the price increase fell short of Matt's projected 5 to 10 times range. Of course, if we look at a little longer time scale--say June, 1998 to June, 2008--we do see a 10 fold increase in oil prices.

But of course, some people would argue that Peak Oil is about volume, and in any case we have seen numerous examples of large price increases, e.g., Texas and the North Sea, failing to reverse long term post-peak conventional production declines. The initial production declines in both cases corresponded to roughly 10 fold increases in oil prices.

And of course, there is the fact that since Matt's book was published in 2005, Saudi annual crude oil production has been below their 2005 rate for three straight years, despite three straight years of year over year increases in oil prices, which BTW is the same kind of production/price response that we saw from the prior swing producer, Texas, and coincidentally, based on the HL plots, Saudi Arabia in 2005 was at approximately the same stage of depletion at which Texas peaked in 1972.

I think that Matt was basically right about prices, but not about the time frame, but like a lot of other people, I was surprised at the scale of the pullback in prices. I suspect that the continuing trend will be one of higher cyclical lows and higher cyclical highs. And I suspect that next year we will transition to mostly involuntary reductions in net oil exports, versus voluntary + involuntary reductions in net oil exports this year.

One of the things has surprised me is the number of poorer developing countries, many of them in Africa, that showed large increases in consumption from 1998 to 2008, as oil prices rose at about 20%/year (US consumption 2008 was back to the same level as 1999). In effect, many African countries outbid the US for oil supplies, which is contrary to what I had been expecting. It will be interesting to see what price consumers in developing countries will pay for small amounts of fuel, put to productive uses, versus what an American consumer--exercising his "God Given" right to use large quantities of fuel to navigate the wilds of outer suburbia in his four wheel drive--will be willing (and able) to pay to maintain a high consumption lifestyle.

Incidentally, based on some 2006 AAA numbers, if gasoline prices went from $2.40 to $25.00, it appears that the total cost per mile of driving a small sedan would go from about $0.50 per mile to about $1.25 per mile, assuming 10,000 miles per year--or from $420 per month to about $1,050 per month. If memory serves, H2 Hummer owners were paying around a dollar per mile in total costs last year--or about $1,000 per month.

http://www.pacebus.com/sub/vanpool/cost_of_driving.asp

Actually, peak oil theory does not "fall down." What does fall down is the idea that the bulk of the population will continue to pay infinite $ to obtain refined oil products. Someone, with enough cash, might be willing to pay $25/gallon (thus, destroying your hyperbole of nobody would pay $25/gallon), but would they take the risk of actually going out and driving around? Or would it be more of a "MAD MAX" world?

What peak oil theory does say is that at some point you cannot produce any additional oil no matter what the price is and that you've reached the limit even if oil prices were $1 billion/ barrel.

Of course, what did happen was that oil demand did not achieve the same level of growth as exhibited between the 2003 and 2004, when it jumped by nearly 2.8 million BPD from 79.6 to 82.4 MMBPD. And we did not reach this level of demand until late 2007 and early 2008. So, not only did supply flatten but so did demand all while prices continues to rise. Since the two are linked (demand versus price) and Simmons stated that linkage, was he really in error? Or was he a little too loose with the wording that demand "could easily" increase that rapidly.

I've published the asymptotic curves before between price and production so I won't do that again now. But it is quite clear that the rate of change in price with production increases very rapidly as we approach this limit {(d$/dP)-> a very large value}

What is also apparent is that it's a classic case of demand destruction. It did not prevent the eventual spike in prices that occurred in July of 2008. While the prices did not exceed the 5 times (lower) threshold of the week prior to August 29, 2004 ($44.34/bbl), they certainly were more than 3 times the price than when he made the comment.

Again, I take note of an accuracy problem on your part. What was wrong with you accurately quoting Simmons rather than taking the 1000% comment you made above?