[MD]

Back in the early '80's, OPEC got together and made a new plan: The amount of oil that each member could produce was to be in proportion to their stated reserves.

Within a few short years, all of the major OPEC producers suddenly "found" enough oil to double their reported reserves.

Unfortunately, those same stated reserves have been used by the Energy Information Administration to predict our future availability of oil.

It has recently become evident that OPEC cannot deliver on the production promises that they have been making for decades, which means the world must now turn to harder to process and produce oil reserves. (google "tar sands", "oil sands", "shale oil", "bitumen", "heavy oil")

Unfortunately it will take quite some time and quite a bit of capital investment to construct the necessary refineries that will bring new supplies of finished product (gasoline and diesel) to market.

Therefore you can expect energy prices to remain very high for the foreseeable future.

There will be no return to cheap and plentiful oil. The future will contain a mix of energy sources, all of which will be more expensive than in the past.

[KingM]

The problem with this theory is that it presupposes that the holders of all those unconventional resources didn't develop them because they looked at how many reserves OPEC claimed and figured it was enough. That's the equivalent of your deciding not to go to work today because there is more than enough labor in the country to get the job done.

I'm not saying that OPEC didn't overstate it's reserves, but that this overstatement has nothing to do with production levels in non-OPEC suppliers.

[MD]

The problem with this theory is that it presupposes that the holders of all those unconventional resources didn't develop them because they looked at how many reserves OPEC claimed and figured it was enough. That's the equivalent of your deciding not to go to work today because there is more than enough labor in the country to get the job done.
I'm not saying that OPEC didn't overstate it's reserves, but that this overstatement has nothing to do with production levels in non-OPEC suppliers.

But it does!

Since the OPEC members were unable to constrain their production, the price of oil crashed to very low levels, and remained there for a very long time.

This occurred shortly after much investment had been made in alternatives, which in effect killed much of the alternatives market and the capital which had been invested.

With all of the incredibly cheap oil that has been available for delivery from OPEC (until very recently), you can understand why little investment was made in alternatives. The lesson of the 80's was not forgotten.

[killJOY]

The headline is deceiving: it looks like you're calling peak oil the big lie.

[KingM]

But it does!
Since the OPEC members were unable to constrain their production, the price of oil crashed to very low levels, and remained there for a very long time.
This occurred shortly after much investment had been made in alternatives, which in effect killed much of the alternatives market and the capital which had been invested.
With all of the incredibly cheap oil that has been available for delivery from OPEC (until very recently), you can understand why little investment was made in alternatives. The lesson of the 80's was not forgotten.

But none of that has anything to do with stated reserves, it had to do with the price of the commodity. As everyone here is so fond of point out, it doesn't matter the size of the resource, it's the extraction rate that matters. OPEC was bringing too much product to the market to make alternatives a good investment, that's all. It didn't matter if this was temporary or permanent, it had a chilling effect on higher cost producers.

[3aidlillahi]

But none of that has anything to do with stated reserves, it had to do with the price of the commodity. As everyone here is so fond of point out, it doesn't matter the size of the resource, it's the extraction rate that matters.

But in this case, OPEC said that what you state is proportional to how much you can produce. So therefore, if you state more, you can produce more which would then push down the price and undercut other "sources" of energy. Had they not increased their stated reserves, production would have remained lower, leading to higher prices thus giving alternatives to conventional oil extraction methods a chance to breathe.

[KingM]

But in this case, OPEC said that what you state is proportional to how much you can produce. So therefore, if you state more, you can produce more which would then push down the price and undercut other "sources" of energy. Had they not increased their stated reserves, production would have remained lower, leading to higher prices thus giving alternatives to conventional oil extraction methods a chance to breathe.

No, because the OPEC producers were cheating like crazy, which is why oil dropped to $10. The price didn't rise because of any quotas or because OPEC suddenly started to obey their own rules, it rose because demand rose to and then outstripped the ability of the cheaters to cheat.

[mididoctors]

Back in the early '80's, OPEC got together and made a new plan: The amount of oil that each member could produce was to be in proportion to
........ snip ...............
Therefore you can expect energy prices to remain very high for the foreseeable future.
There will be no return to cheap and plentiful oil. The future will contain a mix of energy sources, all of which will be more expensive than in the past.

Not a bad Idea with the thread title there MD..

Boris
London

[mididoctors]

The headline is deceiving: it looks like you're calling peak oil the big lie.

I think it was a smart idea myself given the current influx..

Boris
London

[mididoctors]

But in this case, OPEC said that what you state is proportional to how much you can produce. So therefore, if you state more, you can produce more which would then push down the price and undercut other "sources" of energy. Had they not increased their stated reserves, production would have remained lower, leading to higher prices thus giving alternatives to conventional oil extraction methods a chance to breathe.

No, because the OPEC producers were cheating like crazy, which is why oil dropped to $10. The price didn't rise because of any quotas or because OPEC suddenly started to obey their own rules, it rose because demand rose to and then outstripped the ability of the cheaters to cheat.

my understanding of history is that the reserve issue came first...

It was getting invoiced by the USA for Gulf I that created the cheating on top of cheating scenario ...

The basic premise of fixed reserve numbers distorting perceptions about oil value against future production made by MD can be said to be true in a simple explanation of history.

Your point is an additional insight.. worthy as it is I think that the historical point of priority for those wishing to see the big lie for the first time is the rigging of reserve numbers

Boris
London

[Twilight]

Thanks MD! It is always good to see attention drawn to this.

OPEC members' reserve numbers are no different to cooked books at any other company. Except Kuwait, which was kind enough to backtrack once media and their politicians started asking awkward questions.

Kuwait itself contains an estimated 101.5 billion barrels of proven oil reserves, roughly 8 percent of the world total...
Source

PIW learns from sources that Kuwait's actual oil reserves, which are officially stated at around 99 billion barrels, or close to 10 percent of the global total, are a good deal lower, according to internal Kuwaiti records...
Source

Kuwait's Oil Minister Sheikh Ali al-Jarrah al-Sabah confirmed on Saturday that Kuwait's proven oil reserves are 48 billion barrels -- a figure conflicting with the previous official estimates of nearly 100 billion barrels.
Source

This was covered by the BBC back in 2005.

The larger the reserves a country said it had the more it could pump. The more it could pump the more money it could make. As a result in 1985 Kuwait revised its reserve estimates by 50% overnight. It was soon followed by United Arab Emirates, Iran, and Iraq. In 1988 Saudi Arabia became the last to join the revised reserve estimates party...
...what troubles some analysts is that twenty years later, these reserve estimates are unchanged... Kuwait for example still claim exactly the same reserve level as they had in 1985 despite pumping millions of barrels every day since then.

Kuwait was the first to revise up, now it is the first to revise down.

A lot of that oil never existed. How much, we do not know (except in the case of Kuwait), because at this moment in time we are driving our civilisation with a fuel gauge frozen since 1988.

But we can see that persistently asking "unhelpful" questions works.

As far as I can see, the EIA has not updated its publicly held assumptions to reflect these new facts. I have updated mine. Such is the world of energy, crucial parts of the puzzle go out on foreign news feeds, not gracing the pages of the statistical arms of your government.

Anyone else remember this?

Giant oil group Royal Dutch Shell has said it is trimming its figures for proven oil and gas reserves by 20%.
Stunned investors promptly began a sell-off that knocked more than 7% off the Anglo-Dutch firm's share price in both London and Amsterdam.

Yet NOCs' figures are seldom disputed.

Discount your expectations of future performance accordingly.

[TheDude]

But none of that has anything to do with stated reserves, it had to do with the price of the commodity. As everyone here is so fond of point out, it doesn't matter the size of the resource, it's the extraction rate that matters.

But in this case, OPEC said that what you state is proportional to how much you can produce. So therefore, if you state more, you can produce more which would then push down the price and undercut other "sources" of energy. Had they not increased their stated reserves, production would have remained lower, leading to higher prices thus giving alternatives to conventional oil extraction methods a chance to breathe.

Never looked at it that way, interesting. I've always figured they wanted to obfuscate the issue of the date of the world's peaking, so as to guarantee we'd purchase their product as long as possible - at which they've succeeded.

They revised the reserves in the wake of the price of oil crashing; the Saudis were only producing a few million barrels per day, giving their fields a rest, thus extending their life. But as a result revenues went down too, fomenting domestic unrest - Osama and company. Weird interplay there.

Even if they hadn't discovered all those paper barrels they'd eventually have had to deal with non-OPEC production declining. There's the whole petrodollar and bankrupt the USSR theories, too.

Complex subject. Wondered about the thread title too; figured it would be more bushwa about Deep Hot Biospheres.

[mididoctors]

good new article at TOD that touches on this subject

Boris
London

[CamelJockey]

bullshit

[TonyPrep]

But none of that has anything to do with stated reserves, it had to do with the price of the commodity. As everyone here is so fond of point out, it doesn't matter the size of the resource, it's the extraction rate that matters.

But in this case, OPEC said that what you state is proportional to how much you can produce. So therefore, if you state more, you can produce more which would then push down the price and undercut other "sources" of energy. Had they not increased their stated reserves, production would have remained lower, leading to higher prices thus giving alternatives to conventional oil extraction methods a chance to breathe.

Yes, but if there had been no OPEC cartel, individual producers wouldn't have been constrained, anyway. So, whilst the point may be sound, it does not mean that members of OPEC should be criticised for acting like companies outside of OPEC.

[allenwrench]

The problem with this theory is that it presupposes that the holders of all those unconventional resources didn't develop them because they looked at how many reserves OPEC claimed and figured it was enough. That's the equivalent of your deciding not to go to work today because there is more than enough labor in the country to get the job done.
I'm not saying that OPEC didn't overstate it's reserves, but that this overstatement has nothing to do with production levels in non-OPEC suppliers.

But it does!

Since the OPEC members were unable to constrain their production, the price of oil crashed to very low levels, and remained there for a very long time.

This occurred shortly after much investment had been made in alternatives, which in effect killed much of the alternatives market and the capital which had been invested.

With all of the incredibly cheap oil that has been available for delivery from OPEC (until very recently), you can understand why little investment was made in alternatives. The lesson of the 80's was not forgotten.

It depends on which country you are talking about. Brazil and Iceland are 2 countries in the forefront of renewables.

http://www.wired.com/science/planeteart ... 5/05/67523

http://en.wikipedia.org/wiki/Renewable_ ... in_Iceland

The US is different. We wont budge until the pain forces us to. The other countries did not need much pain to change.