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Robert Mabro Disagrees With Matt Simmons on Saudi Oil

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Pamela Ann Smith interviewed Robert Mabro, a world recognized expert on oil and gas and founder and current honorary president of the Oxford Institute of Energy Studies. The full interview is at RedOrbit (hat tip reader Michael) but the formatting is annoying (bizarrely, it doesn’t say who is saying what, although readers can infer most of the time). I’ve taken a section from the blog OilMastery where they did mark who said what, and did the same myself for another bit later in the interview.

From RedOrbit:

Robert Mabro: On the supply side, there Is a huge controversy about what Saudi Arabia’s reserves really are. There is talk of a peak, very soon, In oil supplies worldwide and that after that, we will have to learn to live with much less oil. It’s all irrelevant. It’s nonsense. When we talk about reserves, we are talking about oil in the ground. The concepts about reserves are metaphysical concepts. They have never been accurate, and they never will be.

Pamela Ann Smith: So, the distinction between proven and probable reserves is meaningless?

Mabro: No, it’s not meaningless. But it is one phony number compared to another phony number. I’ll give you an example. I tell my students, do the following exercise. ‘Go to the BP Statistical Review of World Energy and see what the reserves of the non-Opec countries were 20 years ago. Then, compare them with the reserves of the same countries in the latest issue. Then, they have to make a longer calculation: ‘see how much these non-Opec countries have produced in these past 20 years.’ Now, if the first estimate is correct, they, the non-Opec countries, would not have a drop of oil left. That’s the first point. The second point is, ‘Why should I care? Why should anybody on earth care whether Saudi Arabia has 260bn barrels of crude oil reserves, or 100bn?’ It doesn’t matter, not at all. Because what you can produce today, whether it’s 260bn or 100bn, the answer is the same. You cannot produce on the basis of 300bn, or 260bn in reserves. But if you produce at the same rate vis-a-vis reserves that the North Sea has, Saudi Arabia would be now be producing more than the whole world’s consumption. Of course, its oil would then run out quickly. So, it’s irrelevant unless you are thinking 40 or 50 years ahead. But I will certainly be dead by then…

Smith: And all sorts of things could happen by then?

Mabro: Yes. There is a hysteria about what the reserves are. But there is an even worse hysteria produced by a guy called Simmons. I have met him, he is a fun guy, but he is dangerous.

Smith: You mean Matthew Simmons, the author of Twilight In the Desert: The Coming Saudi Oil Shock and the World Economy? The book that is a bestseller In the States?

Mabro: He has said that the Ghawar field in Saudi Arabia, which is something like 110 miles long and 17 miles wide….

Smith: It’s huge. It’s the biggest one in Saudi Arabia, isn’t it?

Mabro: Yes, and it is well behaved, too. Simmons has said, “It cannot produce anymore. It is declining, and there is water in it.” Well, every field has water. If there isn’t water in it, the oil doesn’t come out! oil is not like a swimming pool, it is in rock, in porous rock. There is water and gas, so when you make the hole, you bring the pressure down, and the water pushes up, so all oil has water in it, and you have to take it out. He claims it’s a lot more, and makes a comparison with a field in Oman which is declining. But this is like comparing a calf with an elephant. A small thing with something big. He has written nonsense on Ghawar. Then he said Saudi Arabia has no surplus capacity. In other words, that they don’t have the capacity to produce more than they are producing today. Why? I was in Saudi Arabia, and I haven’t seen this. Whose leg is he pulling? You can’t see any evidence for this. We have lists of the fields that Saudi Arabia has shut down. This is public knowledge. ‘Surplus capacity’ means that you can produce more, but you keep it in the ground, you shut down certain fields so that you can re-open them when you need it…..

Saudi Arabia produces as little, or as much, as its customers want, subject to its own production constraints. If customers go to, let’s say, Algeria, Algeria may say no. Saudi Arabia has much more oil, much more. They will say yes. The production quota set by Opec is not relevant, except if the market is tight. What determines the level of production is demand.

There is one exception. If the oil price collapses and prices are going very, very low, then Saudi Arabia will produce less than the market wants. This happened in 1998. But the rest of the time, they produce for the market.

Smith: So, is Horsnell right? That too little supply is the main problem?

Mabro: Some other people would say that oil, along with wheat and some metals, remains more attractive than other investments in the financial markets. And we know that the people who lead these markets are financial institutions, the banks and the hedge funds. They are the leaders. So the paradox is that, consciously or unconsciously, the determination of the oil price has gone away from the producers to the financial sector. It went away from the oil people to the non-oil people.

Smith: So is there anything that could stop the oil price from rising in the coming year?

Mabro: Yes, of course. A bubble has formed. We know one thing about bubbles, and that is that they burst. When, I don’t know. It could be tomorrow, it could be in four years’ time.

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38 comments

  1. russell1200

    I don’t know Simmons arguments well, but that struck me as a rather spurious dismissal of a rather important issue.

  2. Half Empty

    The IEA is today reported as saying that non-Opec oil could peak within two years.

    http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4368523.ece

    Those fluent in IEAspeak may take “could” and “two years” to mean “will” and “any time now.”

    If true, by 2012 the importers will be competing over a shortfall of 5 million barrels a day. Unless OPEC pull off something heroic and Matt Simmonds (who I’d believe any day over Mabron) is utterly wrong, the IEA’s forecast of “extremely high” oil prices will prove horribly correct.

    Mabron’s representation of Simmonds’ analysis of the high levels of water cut in Saudi’s older fields is ludicrous and, frankly, tells anyone with even a slight knowledge of the peak oil issue all they need to know about the value of the rest of the clip.

  3. anewc2

    When I look at this, on one occasion, the “Ann Smith” part of the interviewers name is linked to a Harry Potter Book. WTF? Is Amazon so lame that they have to fool people into clicking on links?

    I have no problem with advertising on blogs. But I really object to ads masquerading as content.

    I know that in the media business the advertiser is the customer and the reader is the product. Is that how you see us now? Mindless marks whose main function is just to click on ads? Bah. I have liked and respected this blog. But with this, you become just more MSM.

  4. Anonymous

    simmons is the worst. Everytime he speaks something less intelligent comes out.

    Last time I saw him on CNBC he was spouting the usual peak nonsense and tried to claim that:

    “There is nothing in this world of value that we well for 15 cents per cup”

    Think about that for a second. The man is a complete imbecile.

  5. Independent Accountant

    Checking in from the world’s oil capital. Simmons is the most respected man in the industry. I agree with his position on peak oil.

  6. Anonymous

    Like Matt Simmons, Robert Mabro has written a book. His book lists for $125.00, and has attracted not a single reader review at Amazon. Its sales rank there is #440,924.

    By contrast, Matt Simmons’ book lists for $16.95, and has received 93 reader reviews at Amazon, averaging 4 stars. His sales rank is #3,312 in books.

    How is it that an ordinary 368-page book by Mabro, not even leather-bound, costs 125 dollars? Does being an Oxford don justify an extra 300% mark-up, or what?

    If Mabro knows as much about petroleum economics as he evidently knows about book marketing, one would be well advised to consult some other ‘expert.’ Mabro should adopt ‘Robert125′ as his blogger handle; LOL!

  7. Anonymous

    ^

    um actually that book isn’t even by Mabro, it’s a hardcover textbook edited by him.

    Most textbooks cost that much, but since you have never attended university, I guess you wouldn’t be aware of that fact.

  8. Anonymous

    Here’s a critique of Simmons from 2005.

    “Peak Oil” is stupid and irrelevant. There is plenty of oil in the world. There just isn’t nearly enough to consume at the American rate. So prices will rise enough to destroy this implied demand.

    If demand for oil increases at 4% a year, but supply doesn’t move, then prices need to increase significantly (maybe as much as double) to destroy that demand growth.

  9. DownSouth

    I worked in the oil industry for a lifetime as a petroleum engineer. Most of what Robert Mabro says is just blathering nonsense.

    The unpleasant reality is that we lack sufficient information to know with any level of confidence what is going on in Saudi Arabia. That is so because the country´s royal family guards the information that would be needed to make any kind of intelliegent geological and engineering study of the country´s oil fields and reserves as if it were a state secret.

    How this man professes to know the unknowable is beyond me. Perhaps he talks to God, like George Bush does?

    I haven´t read that much of Simmons, but to his credit I believe what he has called for is for Saudia Arabia to make the information available so that an independent engineering assesment of the country´s oil reserves can be made. Simmons, in other words, is asking to be proved wrong. This buffoon Mabro, on the other hand, proposes no test of truth. It is pseudo-science of the worst sort.

  10. PureGuesswork

    Comment sentiment check: Overwheling majority bearish Mabro, bullish Simmons. Contrarians take note

  11. mxq

    Lots of ad hominems in this thread.

    Everyone should keep in mind, Mabro doesn’t claim to know how much oil is in the ground.
    (“40 or50 years” is about as specific as he gets)

    I think his “impossible to know” implication is a pretty admirable (contrary?) answer these days.

    Why?

    As Mabro says: “The concepts about reserves are metaphysical concepts. They have never been accurate, and they never will be.”

    Yet, investors – like Simmons – are coining money claiming that they know the answer to this utterly unknowable problem.

    Compound that with the notion that this is an area that has been starved of attention for at least 20 years (give or take). The pyschological effects of that are now being seen. Robert Shiller had a great piece regarding this phenomenon.

  12. Anonymous

    So, it’s irrelevant unless you are thinking 40 or 50 years ahead. But I will certainly be dead by then…

    This is a damming quote. Anyone who is professionally connected with the Earth Sciences most certainly does think on much longer times scales than a single human lifetime, not just now and then, but as part of a deeply ingrained mental framework. I find it very difficult to take anything he says about the geology of oil reservoirs seriously after reading this.

  13. DownSouth

    When one hears someone like Mabro talk engineering or geology one needs to consider the source.

    There is no doubt that he has absolutely no concept of how reservoir studies are conducted. And because he doesn´t understand, he assumes the engineers and geologists who conduct those studies also don´t know. Therefore, no one knows! It thus follows in his little pea-sized brain that reserve determinations must be ´metaphysical.´ I suppose that´s why oil and gas producing companies and banks that lend to the industry pay these guys their six-figure salaries–to sit around and meditate, hoping to receive some message from above about reserve estimates?

    Mabro is like the guy who flips the switch and the electric light comes on. He doesn´t understand how that works, and of course with his bloated ego and inflated sense of self, he can´t concede that someone else might indeed understand. He thus concludes it must be magic.

    The guy tries to pass himself off as an expert on something he knows absolutely nothing about. He blathers nonsense, and the ignorant and unknowing are his victims.

  14. Anonymous

    The bubble part seems correct but it appears to be a protect your ass-ets play more than anything being the US$ is the reserve currency which is not being taken for granted any longer.

    I could write and orate volumes and come to the same standard conclusion everyone does, ‘we don’t know and neither do they.’

    [ya think? it's possible that the oil pools are being replenished abiotically]

  15. Ed Miller

    After reading his comments, I am shocked that this person is considered to be an oil expert. His comments show a void of knowledge that is remarkable. Proven reserves have grown because both price and technology have changed the definition of what is reserves. Duh!

    Perhaps the proper question is who has proclaimed him an expert and what is their agenda.

  16. Anonymous

    If any of you had bothered to check, rather than going into flame mode because you didn’t like his views, Mabro is a professor of economics at Oxford and has written five books, two of them on oil, and edited another four books, two on oil, two on gas:

    http://www.allbookstores.com/author/Robert_Mabro.html

    Oh, and there is this:

    The first OPEC Institutional Award for outstanding lifetime achievements in the field of energy economics was today awarded to Professor Robert Emile Mabro, former Director of the Oxford Institute for Energy Studies, and now its President. Professor Mabro’s interest in oil economics began in 1969 as a Senior Research Officer in the Economics of the Middle East at Oxford University London, three years after obtaining a Masters degree in Economics from the University of London.

    His interest in oil development economics started to emerge back in 1972, when he co-founded the Oxford Energy Policy Club, and later established the Oxford Energy Seminar, which is held every September.

    In 1982, Professor Mabro set up the highly respected Institute for Oxford Energy Studies and was its first Director, until his retirement in 2003.

    Professor Mabro is a recipient of several awards, including that from the International Association of Energy Economics in1990, for outstanding contribution to Energy Economics and its Literature.

    He was awarded the Queen Elizabeth II Commander of the British Empire (CBE) and several other awards.

    which came from here:

    http://www.oxfordenergy.org/opec_mabro.shtml

    The Oxford Energy Institute is well regarded. You can’t dismiss Mabro out of hand.

  17. Juan

    Yes MXQ, anything contrary to the religion of peak oil is most often met with ad hominems though I have to say that Mabro’s initial response could have been more clear.

    I might have said something along the lines of: the total resource base is unknown and the portion of this total which falls under the categories of reserves is not simply physical but includes technologies of production and recovery as well as real demand conditions of larger economy. Total resources and reserves are distinct; one is fully unknown, the other variable; neither is static.

    Mabro was likely bothered by what can be taken as a trivial question which has been ballooned far out of proportion.

    Well suggest those who take Simmons as guru numero uno read the attached critiques of his ‘Twilight…’.

    Another Day in the Desert:
    A Response to the Book, “Twilight in the Desert”

    http://www.ceri.ca/Publications/documents/GoE_Oct05.pdf
    (which does address the water cut issue from perspective of a petroleum engineer rather than investment banker)

    and

    CROP CIRCLES IN THE DESERT:
    THE STRANGE CONTROVERSY
    OVER SAUDI OIL PRODUCTION

    http://www.gasresources.net/LynchM%2006%20(Crop%20Circles).pdf
    (yes, written by the ‘evil’ Michael Lynch)

    As Leonardo Maugeri noted in Science Magazine:

    To “cry wolf” over the availability of oil has the sole effect of perpetuating a misguided obsession with oil security and control that is already rooted in Western public opinion–an obsession that historically has invariably led to bad political decisions.

  18. Anonymous

    Simmons BS is the greatest gift Wall Street ever recieved. Someone blew up Shorty.

    SemGroup had sold short NYMEX crude oil futures to protect its 500,000-barrels-per-day oil trading business against a fall in crude prices. But as crude surged from less than $96 a barrel at the start of the year to a record above $147 in mid-July, demands for cash to cover its losses on the futures market began to overwhelm the fast-growing company.

    Moody’s Investors Service downgraded SemGroup debt for the second time in a week on Monday, citing concern over SemGroup’s ability to raise funds in the current credit crunch.

    The rating agency also questioned the size of SemGroup’s energy-hedging program and suggested SemGroup may have shorted more oil than necessary to hedge its normal trading business.

    “It would appear that SemGroup’s cash margin requirements exceed what Moody’s would have expected given the scale and other characteristics of SemGroup’s hedged trading activity in the past,” Moody’s analyst Andrew Oram said in a release.

    http://www.reuters.com/article/bondsNews/idUSN2144018120080721

  19. Anonymous

    Don’t we all wish Mabro was right. All we have to go on is historical production data, and Simmons is correct this does not look good. Cantarell is down over 40% in the past 2 years alone (granted, the Mexican government is not the most efficient).

  20. Anonymous

    This is not a economic problem to be corrected by “economists”–
    This is geology, and it could care less what “models” are presented—
    Simmons runs one of the largest energy funds in the world, and it is doing quite well–
    Capitalism is bumping against reality, and finally finding out it can’t expand indefinitely in a finite world–
    Pay attention, or suffer the consequences.

  21. Anonymous

    Mabro claims that we can’t really know when we’re going to run out of oil but that isn’t true. M. King Hubbert accurately predicted when oil production would peak in the USA and also many other countries. Check out this picture of his predictions for production in Norway vs what was actually produced: http://upload.wikimedia.org/wikipedia/commons/2/27/Norway_Hubbert.svg

    And by the way in 1956 he predicted global production would peak around the year 2000 but in 1976 said that could get pushed back by 10 years due to the emergence of OPEC.

    More reading: http://www.energywatchgroup.org/fileadmin/global/pdf/EWG_Oilreport_10-2007.pdf
    More reading: http://en.wikipedia.org/wiki/Peak_Oil

  22. ChuckT

    Get off Matt Simmons back. He is not the only one with an opinion on Peak Oil. Here is a list of scientist, geologist and oilmen and their estimates of when Peak Oil arrives.

    E. Westervalt………Now
    S. Bakhtiari………… Now
    M. Simmons……….Now
    T. Boone Pickens …2005
    K. Deffeyes.………… 2005
    R. Herrera……….. ..Close
    H. Groppe…………Soon
    F. Robelius. …..208-2018
    S. Wrobel……………2010
    R. Bently…Around 2010
    C. Campbell……….2010
    C. Skrebowshi.. +/- 2010
    L. Meling………….2011
    R. Koppelear….. +/-2012

    These are serious people.

    People who talk about all the oil left in the ground don’t understand the bare facts of oil:

    Oil is:

    …a non-renewable produced in only two geological periods.

    …only found if seven very specific conditions are present.

    …found in a few unique places – most long since explored.

    …not created equal.

    …the highest energy density of any portable energy storage medium.

    …found, brought to the surface, refined, and moved before it is used.

    In 2007 the world found 8 billion barrels and used 31.5 billion.

    At current rates of depletion of known fields (4.5%) the world needs a new Saudi Arabia every 4 years. It ain’t gonna happen.

    This guy, Mabro, sounds like the UK equivalent of Dan Yergin and Michael Lynch, both have been wrong on every prediction since I started watching this in 2004.

    Also, if you think these guys aren’t “talking their book” (their “book” is carrying the water for Big Oil), you are living in delusion land.

    I have lived in Texas all my life and know from first hand experience that oil fields dry up and flows slow down. Maybe some of you deniers should come to Texas and go to some oil museums in once hot pumping areas.

    I just don’t get the agenda of deniers. Even if peak is 20 years out we should be preparing now.

    And by the way, I’ve watched and read Matt Simmons over the years and my only complaint is he is short on potential solutions to peak oil.

    He is a sincere man trying to tell a truth and has more plausibility and data than I have seen from any economist. I wonder how many of his critics have even read “Twilight”.

  23. Anonymous

    “Sincere” is a rather weak basis for defending someone’s analysis. Torquemada was sincere too.

    I find it amazing that people turn Mabro into a “peak oil denier” because he said some things that are pretty sensible, and hardly qualify as peak oil denial.

    He said:

    1. It is well nigh impossible to measure reserves accurately

    2. Saudis have taken fields out of production and could singlehandedly product more that the world’s production, now, but “its oil would run out quickly.” (We also have that little problem of refineries.)

    3. Simmons’ using % of water in extracted oil to reach conclusions about how close a field is to depletion is dubious.

    4. Prices of oil are no longer determined by producers but instead are set increasingly in financial markets. He thinks they are well out of line with supply and demand. That is not inconsistent with peak oil. Since oil can’t easily be stored, current prices should not strongly reflect expected future scarcity. Soros said basically said that a fundamental increase in price has been exaggerated by bulls.

    Mabro appears to be close to OPEC. He could be talking their book, but high prices happen to be in their interest. He also just might happen to have better access than most to what is really afoot there.

    There is a much simpler reason to get off oil: climate change. Peak oil is harder to prove and oil usage has been known to fall pretty dramatically in serious downturns. If you guys want to fight, pick one that gets you to the same place and is easier to win.

  24. Anonymous

    Economists have a bias: their training makes it hard for them to imagine that higher prices will not lead to increased supply. But in the case of oil, for a variety of reasons, increased prices can lead to a REDUCTION in supply.

  25. Jonathan Bernstein

    I read Simmons’s book several times through and it makes an awful lot of sense to me. I highly recommend it.

    Anyone who airily dismisses the state of the Ghawar oil field as an important issue, as Mabro seems to do, comes rather close to disqualifying himself as a serious student of oil. Ghawar by itself accounts for nearly half of Saudi production, and is by far the most prolific oil field ever found. As Ghawar goes, so does Saudi Arabia, and as Saudi production goes, so goes the world. It is almost that simple.

    BTW theoildrum.com corroborated Simmons with an exhaustive analysis of Ghawar in the Spring of 2007 which showed, as well as outside analysts can, that the field is in decline. Mabro also misstates and oversimplifies Simmons’s argument regarding the water cut (or percentage of water produced) at Ghawar. Simmons’s argument rests, not only on the increasing water cut, which perforce shows declining productivity in the field. He also summarizes dozens of technical papers published by Saudi Aramco personnel. The papers show that the Saudis are working through complex and difficult geological issues in order to keep lifting oil. The papers also show that the Saudis are bringing long fallow oilfields onstream as Mabro discusses — but that these fields are not nearly as prolific, or as easy to produce, as the ones that powered Saudi Arabia’s glory days. As one would expect, the Saudis pumped the easiest and best oil first.

    Of course you can always find someone who disagrees with Simmons. The question is, does that someone really know what he or she is talking about?

  26. Anonymous

    When I speak of Simmons “sincerity” it is in the vein of not doing this just to make money, which is a criticism I often see on blogs. No my real admiration for him is the data and work he has done not just on Saudi, but on the state of the industry (rusting and out of resources) and the global supply generally.

    Mabro says, “But there is an even worse hysteria produced by a guy called Simmons. I have met him, he is a fun guy, but he is dangerous.”

    Who is more dangerous, someone who presents a compelling case that Peak Oil is near and we should wake up or someone who minimizes and obfuscates.

    Again I ask what is their agenda. I just don’t get it.

    As far a global warming, Peak Oil will be a problem long before anyone does anything about climate change.

    Of course, the solution will probably include burning a lot more coal, so we will get the worst of all worlds – Peak Oil and climate change.

    Although there is a chance Peak Oil will slow transportation (95% of the world’s transportation is powered by oil) down so much that using the last bits of precious oil to build more coal plants just won’t be practical.

    Also, if Mabro know anything about the Saudi’s, he should know that they have said recently that they would not produce more than 12 million barrels a day for the forseeable future.

    So called it what you want – geological peaking, political peaking or rusting infrastrcture peaking – Peak Oil is here now

  27. macndub

    There is a reason why talk of peak oil is dangerous, chuckt. It’s because supply is not peaking. Production will continue to expand as progressively more marginal fields (such as oil sands carbonates, 100 billion barrels and not included in current oil sands reserves) are brought on stream.

    We are approaching an ecological crisis because of our dependence on fossil fuels. At some point, oil prices will drop. More supply will be found. Everyone will take a deep breath and start driving SUVs again. This will happen based on the experience that it always has. And oil is a volatile commodity. It will drop and increase in price.

    After Hubbert’s peak in 1970-ish, we brought Prudhoe Bay online in the late 70s, not enough to replace, but enough to flatten the decline. This laid on top of the 70s demand destruction to help collapse oil prices. Similarly, natgas production is now higher than it was in 1975 according to the EIA, because higher prices are making marginal plays economic.

    Counting on the supply side to wean ourselves from fossil fuels is risky, to say the least.

    I look forward to a petroleum-free economy, but by the time this happens, oil should be virtually free because it will have no value.

  28. Anonymous

    Compare the Cantarell field, 3rd in size in the world at http://www.offshore-technology.com/projects/cantarell/

    It was discovered in 1976, was fully online by 1981, nitrogen injection started in 1990 and in 2006 following 16 years of nitrogen injection has peaked.

    Now, Ghawar was discovered in 1948, some of it was online in 1951, water injection started in 1965. See here: http://www.searchanddiscovery.net/documents/2004/afifi01/index.htm

    By and large, Ghawar is 3 to 5 times larger than Cantarell, but is also twice as old, and injection started 40+ years ago, 17 years after the field was discovered. Cantarell nitrogen injection started 14 years after it was discovered. So Cantarell has been online for 31 years (since discovery counts as first wellhead).

    It is certainly NOT unreasonable to assume, even given the size differences, that after 43 years of injection and 60 years after discovery (assuming first wellhead), that Ghawar’s production is declining.

    It isn’t a crime against humanity, it should not be a state secret (in fact we could learn from it), and it isn’t the end of the world.

    Simmons is probably right. There aren’t any oil fields that DON’T decline after 60 years. Anybody who thinks otherwise is smoking some good stuff.

  29. Juan

    ChuckT,

    Pretty sure that no one claimed simmons was/is the only prominent ‘peaker’ and am sure that some of those listed have, on different occasions, moved their date for peak forward — if everything is so solidly known and captured by types of geologic determinism, one might think that would not have been the case.

    Jonathan Bernstein,

    Yes, I followed the TOD’s 2007 analysis + all comments, also read the referenced SPE papers, and found the arguments interesting but necessarily speculative.

    anon 11:57 PM,

    Agreed, not unreasonable to assume but just such assumption should lead into attempts to disprove rather than validate.

  30. ChuckT

    Sorry, but “it always has” is not a strategy. Kind of like people in the 18th century saying the horse and buggy will always be the best mode of transportation because “it always has”. Also throwing out flip numbers like 100 billion salt carbonates or 800 billion oil shale without qualification of costs and time is disingenuous at best. One thing that always gets me riled about people who have never been on the ground making things happen is glib assurances. Oil must be found, brought to the surface, refined, and moved before it is used. Even relatively easy to find and produce oil requires a complex and expensive supply chain. Brazil is a good example. Sugar cane ethanol requires a totally different supply chain than petroleum products – the two cannot be mixed. We have the same thing here with corn ethanol. Ask the railroads that are making a fortune hauling corn ethanol that should be moving through a pipeline. This petroleum based supply chain system we now have is the evolution of 100 years of trial and error and it will not be replaced easily.

    Do you have any concept on the cost and challenge of drilling six miles under the ocean? Remember Chevron’s Jack 2 that was touted right before the election in 2004 as the savior. Have you heard anything about it lately? No because when the hype started they failed to tell you it was six miles deep in the Gulf of Mexico, in an active hurricane zone, 250 miles offshore and they really didn’t even know how much was there (somewhere between 3 and 15 billion barrels – not much when the world uses 31.5 billion a year).

    Somehow I think you have the impression I am a big fan of SUV’s or not doing something about climate change. Nothing could be further from the truth. However,
    as I said before, Peak Oil will be a visual and severe problem that politicians won’t be able to ignore like they have climate change.

    I’ll close with this prediction either this winter or next there will be a shortage of heating oil/diesel fuel that will finally wake the American people up. Diesel does the work. You can park the car and cancel the trip to the mall or casino, but diesel brings the food and takes away the garbage. Our inventories are low and worldwide demand is strong. Diesel is the Achilles heal and when Granny is freezing because we don’t have enough, maybe someone will get serious.

  31. mxq

    “I’ll close with this prediction either this winter or next there will be a shortage of heating oil/diesel fuel that will finally wake the American people up…When Granny is freezing because we don’t have enough, maybe someone will get serious. “

    (can’t peak oilers make a statement without sounding like a bad halftime peptalk?)

    Futures prices are at their highest level in recorded history…shouldn’t these shortages you speak of already have occured (months ago)? Where are the lines?

    It seems that the only lines are the ones created by price caps — which destroy the economic incentives for downstream participants in price capping economies (ultimately, to the detriment of consumers).

    Either way, that means a lack of true demand signals.

    Back to Mabro re: supply. As stated above and as he implies, supply data has never been accurate. Too many variables and assumptions and unknowables.

    Here’s my prediction: Junk in = junk out.

  32. Anonymous

    May I point out that Mr Simmons is an Oil & Oil Services investment banker. To those less familiar with the industry, that means that his bonus (translation: potentially massive extra compensation) depends non-linearly on the level of, and the prices paid in, oil industry M&A. Obviously he employs himself in furthering his business interests, i.e. talking up the oil industry. I apologise if this sounds rude, but it bespeaks a certain level of naivety to discuss the proceeds from sales of the book – I would account for potential losses on this front as 'other business expenses', or maybe sales or marketing.

  33. Juan

    One thing that always gets me riled about people who have never been on the ground making things happen is glib assurances. Oil must be found, brought to the surface, refined, and moved before it is used. Even relatively easy to find and produce oil requires a complex and expensive supply chain.

    If in ref to my comment then, at risk of being labeled, will mention that relatives have been in the business since turn of last century, from Rising Sun Petroleum Co (+/- 1902) to the Tulsa Refinery to independent driller/operator to my first job as a roustabout then sometime landman back in the early 1960s Illinois Basin to knowing what a fire flood was long before thermal recovery techniques began to be covered… which thankfully does not make me an expert but only someone who has a clue.

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