Hubbert Speak

Ten "Future" Signs of an Oil Bubble

2008-09-07T23:55:00.000-07:00

PUBLISHED IN "INDUSTRIAL ECONOMIST" - SEP 2008

Mainstream media is abound with the idea that "the Commodities/Oil Bubble has burst". But what has happened over the last few weeks is nothing more than a normal correction in an otherwise structural bull market for commodities in general and Crude Oil in particular. I have pointed out a few indicative "future" signs -- events when they happen in the future -- would indicate that the bull market is nearing it's end. But my guess is we are atleast 5-10 years away from such a scenario.

Energy Policy: Band Aids for Bullet Wounds

2008-04-11T21:26:00.000-07:00

Published in Business Line on Apr 12, 2008

Shows that our current Energy Policy is terribly flawed. Also it should be obvious to anybody tracking the issue that awareness of fundamental Energy concepts is completely lacking amongst our bureacrats. & these people go on to define how we can achieve "Energy Security".

If these trends continue, we are headed for a disaster on the Energy front. I hope sooner rather than later, the Government allows the Free markets to operate in this sector. The best service that the Planning Commission can do to India is to NOT create another "Integrated Energy Policy" document.

CHEAP at $100/barrel

2008-01-03T13:38:00.000-08:00

Published in Business Line on Jan 04, 2008

With Oil hitting the $100 mark on Jan 02 as well as Jan 03, this is a good time to summarize what we have been writing in this column and explain why this $100 is just one small step in what is going to be long ride upwards. For the decade of 2010-2020, we expect Oil prices to average well above the $200/barrel mark (i.e. in 2007 dollar terms... in terms of "Ben" dollars, who knows where this is going to be) and we have explained the rationale in this article.

Peak Oil: Facts Converge with Theory

2007-09-13T15:37:00.000-07:00

Published in Business Line on Sep 14, 2007

Summarizing the four different methodologies that could be used to predict the timing of Peak Oil and concluding that 2006 is most likely to be the year of Peak Oil. This also implies that prices are set to increase dramatically in the years ahead from the current historically high levels of $80/barrel.

The Harsh Realities of Peak Oil

2007-08-01T18:51:00.000-07:00

Published in LiveMint on Aug 02, 2007

An introduction to Peak Oil and a summary of the publications so far. The picture is not included in the online version of the paper and so have added the same here. Readers need to remember that my predictions of $200 by 2010 was made in 2005 when Crude prices were $50.

Reserve Additions, Over a Barrel

2007-07-20T18:42:00.000-07:00

Published in Business Line on July 21, 2007

It is well accepted that 1985 was the last year in which we discovered more barrels than what we consumed. For each of the subsequent 20 years this trend of discovery being lower than consumption has continued. That should imply that our Net remianing reserves should be going down over the period since we are consumming from previously discovered reserves.

However, the BP Annual Statistical Review shows the opposite trend in which Reserves have been going up over the last two decade period. That is explained by the analysts through a phenomenon known as "Reserve Additions" i.e. our ability to extract more from existing oilfields than what was originally estimated. These analysts further extrapolate and state that this trend of Reserve Additions would continue into the future as well and so the fact that we are discovering less and less new oilfields every year is not a major cause of concern.

This paper explains why such thinking is misplaced and that this "Reserve Additions" is mainly the result of a one-time historical event... and that the pendulum of this event has swung the other way today which would cause Reserve Subtractions in the future.

Has Saudi Oil Production Peaked

2007-05-25T20:02:00.000-07:00

Published in BL on May 26, 2007

Explains why Saudi Arabia has probably peaked and would never be able to expand production beyond the current 9-10 mbpd on a sustainable basis.

Also given the current gasoline inventories and predictions for a very active hurricane season, we could well witness $90-$100/barrel this summer.

Pareto's Principle of Oil Fields

2007-02-05T21:36:00.000-08:00

Published in Business Line dated Feb 05, 2007

Deals with the size distribution of Oil fields and shows that a very small number i.e. 120 (3%) of the oil fields in production today contributes a disproportinately large share of the output (47%). Even within this 120, a mere 14 fields (also known as the elephant oil fields) contribute nearly 20% of the world's output with an average daily production of nearly 1mbpd.

How this relates to Peak Oil is that all these large fields were discovered 3-4 decades back. The elephant oilfields have an average age of 55 years with the last discovery being made in the 1970's. The essential conclusion is that when these large fields go into decline we will not be able to replace them with new fields and so the Peak of the giant fields would also mean the Peak for world-wide Oil production.

The Reserves Ultimatum

2006-11-30T18:20:00.000-08:00

Published on Dec 01, 2006 in BL

Estimates of Ultimate Recoverable Reserves (URR) of Conventional crude range between 2.0 to 4.0 trillion barrels (tb). This variation in the estimate of URR is the main reason for differences between the camp of Hubbertians and Cornucopians on the timing of Peak Oil.

This paper looks at both sides of the arguments and concludes that the URR is very likely to be around 2tb. It also points out the multiple flaws in the arguments of USGS that leads people to conclude URR at 3.0 or higher.

The Wrong Lessons of the 1970s

2006-10-27T19:18:00.000-07:00

Published on Oct 28, 2006 in the BL

Many comparisons are drawn on what is happening in the Oil front today to what happened during the 1970's and 1990's. Though the outcomes, i.e. oil price increase, are similar, the causes couldn't be more different.

While the previous crises were of a political nature, today it is primarily geological. With record high nominal prices, every producer (possibly with the exception of Saudi Arabia) is pumping at full-tilt. So what worked as a solution during the 1970's will not work today. However, we seem to be blissfully unaware and assume that over time, the issue would somehow resolve itself. The "endgame", as we have repeatedly stressed throughout this series, is going to be very different.

Crude Oil: Super Spike Ahead?

2006-09-25T20:23:00.000-07:00

Published on Sep 26, 2006 in the BL

Outlining the estimated production profile in this article. In some sense, you could look at the earlier articles as explanations of the shape and numbers associated with the production profile explained here.

There are also some external variables -- i.e state of the Oil industry infrastructure that could alter the numbers given here. These issues have been introduced here so that readers can understand why short-term fixes are not easy to find and so to why more negative surprises such as the Prudhoe Bay disaster are likely to occur.

Of Tar Sands and Sand Castles

2006-08-15T20:25:00.000-07:00

Published on Aug 16, 2006 in the BL

One of the arguments against Peak Oil is that reserves of Non-conventional sources such as Tar Sands and Oil Shale are huge as compared to Conventional Crude and that these would help offset the decline in Conventional Crude production. This paper shows as to why production from these Non-Conventional sources is very small today inspite of the massive investments made to date and as to why it would be very difficult to increase the production from these sources. The conclusions are that the reserves of conventional crude alone would ultimately define the shape of the production profile for a long time to come.

One example would probably summarize how difficult it is to increase Production at Tar Sands of Canada. Shell wanted to increase their production at Canada by 100,000bpd. Their initial estimate of the costs was $4 billion (July 2005) which was later upgraded to $7.3 billion and around Aug 2006, they increased the estimate to $12 billion. & all this is for an incremental production of just 100,000 bpd.

The Stage Set for an Oil Bull Run

2006-08-09T01:10:00.000-07:00

Published on July 12, 2006 in the BusinessLine

Analysing production plans, demand requirements and depletion scenarios to conclude that we will easily be running a deficit before the end of the decade.

Predicting the Oil Peak

2006-08-09T01:09:00.000-07:00

Published on June 20, 2006 in the BusinessLine

Using multiple methods to predict Peak Oil to conclude that we are aleady past Peak production or utmost a couple of years away from the Peak.

Peaked Over Crude Oil

2006-08-09T01:06:00.000-07:00

Published on November 04, 2005 in the BusinessLine

A primer on Peak Oil and some common misconceptions about the Oil Industry.