Friday, March 25, 2005
Peak Oil Production: J P Morgan hosts a debate
The author of this article is biased towards peak oil, but it sounds like the debate was too. That J P Morgan would hold this event is a sign by itself. The suggestion is that we are a peak production and that the peak will last several year. These years will be characterized by high price volatility. Gees, I saw a gas station raise its prices 8 cents over two and a half hours last night.
Jax
I sometimes think peak oil has already hit Manhattan as subways become increasingly unpredictable (although surveillance cameras are state-of-the-art) and escalator shut-downs present stair master survival challenges, a kind of perverse underground amusement. Unfortunately, surfacing on Fifth Avenue does not end the scenario, for where once there was excellence and exquisite fashion, now there are bargain stores catering to New Yorkers who are poor, and yes even starving.
So I was particularly fascinated by the opportunity to listen-in to the telephone conference call that JP Morgan held for its clients on April 7 and 8, "Peak Oil: Fact or Fiction", which I was given exclusive permission to monitor . Maybe there would be answers as to whether or not Manhattan is a harbinger of what's to come for the rest of the nation, and whether it's fleeting opulence (not counting all the questionably-financed real estate extravaganzas rising up) is energy-related.
The main speakers faced-off on separate days. First Dr. Colin Campbell, Founder of the Association for the Study of Peak Oil, succinctly gave his position saying that peak oil is "such a geological matter". Campbell says we're now at the halfway mark and that "by 2010 volatility comes to an end and then terminal decline" sets in.
The pronouncement is chilling. What's more, Campbell says that "over the next few years everybody will become aware of this, and in some ways the perception of this growing situation is as serious as the event itself". Campbell's a retired geologist with decades of experience in the oil industry in both exploration and executive positions. He compares peak oil to old age saying that a man knows when it has set-in.
Campbell was followed the next day by Michael Lynch, a computer oil and gas modeler for the past 25 years, President/Director of Global Petroleum, Strategic Energy and Economic Research. Lynch came out slugging, informing conference callers that Campbell refuses to appear with him since 1997, saying "you'll understand why very shortly". He seems to view Campbell as old school and too tired to be optimistic about the future. Perhaps a bit like Cheney and Rumsfeld having their last hurrahs before retiring into the bed & breakfast business on the Eastern Shore of Maryland.
Lynch believes the Hubbert model that Campbell's theory relies on discoveries and production follow a bell curve is not only "incorrectly modeled", but is "much closer to being junk science". He says further, that while Campbell and his colleague, Jean Laharrere, have now "stopped saying that" . . . they've "never admitted they were wrong".
Lynch takes the position that URR Ultimately Recoverable Resources is not a static amount and therefore cannot follow such creaming curves. "It grows over time," he says, "as a result of economic changes, development in an area, but also because of technology, and in some cases, better scientific knowledge."
Campbell says today's oil supply is finite and that it all came into being during two periods of global warming 90 million and 150 million years ago when "excessive" algal blooms formed on the seas and lakes, became heavier and heavier, and sank to the bottom of the rifts where they were "preserved" and pressure-cooked. The resulting oil and gas then began leaching its way back up to the surface through the sandstone (in the pore spaces between the grains of sand) and rock.
Campbell is adamant about the peak oil issue not being an economic or political one, but simply a case where we've now so depleted our "endowment" that peak oil will occur by 2010, and that soon after there will be a rapid fall-off in oil resources, which will profoundly affect world civilization.
So the conference began with a bit of posturing and name calling with Campbell announcing "no common ground" with the "flat Earth economists" (Lynch et al.), who he says believe there's an infinite supply of oil. (No one believes this, including Saudi Aramco).
Lynch called Campbell, Laharrere (and investment banker Matt Simmons) Malthusian pessimists, and obliquely referred to Simmons's upcoming book on peak oil as "content free".
Fortunately, JP Morgan's clients pressed speakers for details, which made the conference truly worth listening to. Campbell advised that peak discovery of oil was in 1964 and that it's been falling for 30 years. He also said that by 1981 the world was using more than it produced 1 barrel is now found for every 6 consumed and that there's little spare capacity anywhere in the world.
As further proof of peak oil, Campbell adds that the major oil companies are getting out of the business shedding staff, divesting marketing sectors, outsourcing jobs, cutting back on exploration and drilling fewer wells the seven sisters are now four. He notes the majors are also buying back company shares (i.e., BP), and argues that "the value of their past is more important than their future". He quotes the late Robert Anderson of Arco: "This is a sunset industry and the sun is fairly low in the sky."
However, Campbell does spare the more "nimble" independent oil companies, who he says will press on producing what's left, subcontracting to state companies however they can, through initiative, enterprise and bribes. And that oil in the ground will become increasingly valuable. (More)
Jax
I sometimes think peak oil has already hit Manhattan as subways become increasingly unpredictable (although surveillance cameras are state-of-the-art) and escalator shut-downs present stair master survival challenges, a kind of perverse underground amusement. Unfortunately, surfacing on Fifth Avenue does not end the scenario, for where once there was excellence and exquisite fashion, now there are bargain stores catering to New Yorkers who are poor, and yes even starving.
So I was particularly fascinated by the opportunity to listen-in to the telephone conference call that JP Morgan held for its clients on April 7 and 8, "Peak Oil: Fact or Fiction", which I was given exclusive permission to monitor . Maybe there would be answers as to whether or not Manhattan is a harbinger of what's to come for the rest of the nation, and whether it's fleeting opulence (not counting all the questionably-financed real estate extravaganzas rising up) is energy-related.
The main speakers faced-off on separate days. First Dr. Colin Campbell, Founder of the Association for the Study of Peak Oil, succinctly gave his position saying that peak oil is "such a geological matter". Campbell says we're now at the halfway mark and that "by 2010 volatility comes to an end and then terminal decline" sets in.
The pronouncement is chilling. What's more, Campbell says that "over the next few years everybody will become aware of this, and in some ways the perception of this growing situation is as serious as the event itself". Campbell's a retired geologist with decades of experience in the oil industry in both exploration and executive positions. He compares peak oil to old age saying that a man knows when it has set-in.
Campbell was followed the next day by Michael Lynch, a computer oil and gas modeler for the past 25 years, President/Director of Global Petroleum, Strategic Energy and Economic Research. Lynch came out slugging, informing conference callers that Campbell refuses to appear with him since 1997, saying "you'll understand why very shortly". He seems to view Campbell as old school and too tired to be optimistic about the future. Perhaps a bit like Cheney and Rumsfeld having their last hurrahs before retiring into the bed & breakfast business on the Eastern Shore of Maryland.
Lynch believes the Hubbert model that Campbell's theory relies on discoveries and production follow a bell curve is not only "incorrectly modeled", but is "much closer to being junk science". He says further, that while Campbell and his colleague, Jean Laharrere, have now "stopped saying that" . . . they've "never admitted they were wrong".
Lynch takes the position that URR Ultimately Recoverable Resources is not a static amount and therefore cannot follow such creaming curves. "It grows over time," he says, "as a result of economic changes, development in an area, but also because of technology, and in some cases, better scientific knowledge."
Campbell says today's oil supply is finite and that it all came into being during two periods of global warming 90 million and 150 million years ago when "excessive" algal blooms formed on the seas and lakes, became heavier and heavier, and sank to the bottom of the rifts where they were "preserved" and pressure-cooked. The resulting oil and gas then began leaching its way back up to the surface through the sandstone (in the pore spaces between the grains of sand) and rock.
Campbell is adamant about the peak oil issue not being an economic or political one, but simply a case where we've now so depleted our "endowment" that peak oil will occur by 2010, and that soon after there will be a rapid fall-off in oil resources, which will profoundly affect world civilization.
So the conference began with a bit of posturing and name calling with Campbell announcing "no common ground" with the "flat Earth economists" (Lynch et al.), who he says believe there's an infinite supply of oil. (No one believes this, including Saudi Aramco).
Lynch called Campbell, Laharrere (and investment banker Matt Simmons) Malthusian pessimists, and obliquely referred to Simmons's upcoming book on peak oil as "content free".
Fortunately, JP Morgan's clients pressed speakers for details, which made the conference truly worth listening to. Campbell advised that peak discovery of oil was in 1964 and that it's been falling for 30 years. He also said that by 1981 the world was using more than it produced 1 barrel is now found for every 6 consumed and that there's little spare capacity anywhere in the world.
As further proof of peak oil, Campbell adds that the major oil companies are getting out of the business shedding staff, divesting marketing sectors, outsourcing jobs, cutting back on exploration and drilling fewer wells the seven sisters are now four. He notes the majors are also buying back company shares (i.e., BP), and argues that "the value of their past is more important than their future". He quotes the late Robert Anderson of Arco: "This is a sunset industry and the sun is fairly low in the sky."
However, Campbell does spare the more "nimble" independent oil companies, who he says will press on producing what's left, subcontracting to state companies however they can, through initiative, enterprise and bribes. And that oil in the ground will become increasingly valuable. (More)
