[Pops]

I don't have time to talk about this now but a really good story in the times about GOM salt basin geology and oil:
http://www.nytimes.com/gwire/2010/07/28 ... 5ubPsHHXGQ

[Sixstrings]

I'm not really qualified to judge this on the science, so hopefully others chime in.

What I find interesting though is how casually the New York Times admits to peak oil like it's something everyone already knows about and accepts:

Moore, while at Anadarko Petroleum Corp., was one of the earliest geologists to probe beneath the Gulf's salt, helping discover the Mahogany oil reservoir, the region's first producing subsalt field, after burrowing through 3,825 feet of salt in the early 1990s. The productivity of these salt-based fields could prompt a re-evaluation of peak oil's arrival, he said.

It's as if it's safe to mention peak oil if it looks like it's not as imminent as previously thought.

[Pops]

I thought the same. It is funny how "peak oil" can be mentioned in the business pages, and here, in the environment section, without the benefit of explanation or even quotation marks.

[eastbay]

Even if we discover, say, 100 b/bbls of of this new oil at a 27 b/bbl per year burn rate we're talking about stretching our happy carefree oil burning lifestyles out 3 and a half additional years. So I can't get too excited about this at all.

[Sixstrings]

You'd think that on peak oil forum a post like this would get more attention. Have we lost all our hard core oil folks?

I know I post about other topics, but I've just never been able to grasp all the oil stuff as much as other issues. But I do miss the in depth back and forth between the posters who understand it.

From reading this article, I gather that somehow salt deposits have fooled us into thinking some reserves are tapped out, so if we get past the salt then there's this new cornucopia of oil just waiting to be had. That about right? Anyway, would sure be nice if anyone can bring some more expert analysis to this.

If this "cornucopia of oil just under salt" applies only to offshore drilling, then I'd say we have the usual problem of logistics, environmental issues, and EROEI involving offshore drilling. The fundamental issue of peak oil, as I understand it, is that we're running low on the easily and cheaply extractable oil.

Personally, I'll never believe in cornucopia unless we see strong growth in worldwide production for at least a few years.

[Pops]

My take, fwiw, is the GOM sediment has a "floor" of salt (evaporated seawater) from back when it first was formed and engineers had previously thought anytime they hit salt they were at the bottom of the sediment so no reason to continue drilling.

Turns out that salt "flows" under pressure so it can squeeze around and even over oil, trapping it deeper (and hotter) than previously thought. It's like looking for the remote under the couch but not under the rug because it "can't" be there.

You'd think that on peak oil forum a post like this would get more attention. Have we lost all our hard core oil folks?

Actually Six I've made up my mind no one who reads here gives a rip about po - at least about discussing anything that might affect their preconceived opinion. I'm through wasting my time looking for things to post to start a conversation, no one is interested in hearing anything new.

Look on the news page, I'll still post interesting stuff there when I find it.

[americandream]

The problem with predicting imminent doom is that imminence has a sell by date and that date has passed for many.

Those who remain are, I suspect, the hard core who will increasingly be debating the core issue, capitalism and perpetual growth. Whether it be sustainable with a Singularity or some other technology inspired alchemy or in transition as a certain school of social economy delineates.

I suspect many are realising that capitalism is not yet done and that it is a lot more resilient than previously thought, so the question of how it will be delayed is a moot point.

[Newfie]

Of course, there are complications. Deeper wells sit at higher pressures, increasing the risk of blowout. The deepest exploration well, drilled by the ill-fated Deepwater Horizon, is 35,000 feet down, several times the depth of BP's Macondo well. And further oil production will only add to the greenhouse gases humans pour into the atmosphere each year, slowly increasing global temperatures.

I tend to see the dark side in everything. Now that the runaway well is capped, and there was no catastrophe in Wall Street or Hollywood, everything will go back to normal. More deep and risky wells will be drilled. We have changed the base line of what we will accept in the way of environmental damage in order to get our fix.

Then, as we find more oil, we burn it. Remember Hansen says if we burn all the oil we will do irrevocable harm. If we burn all the fossil fuel we will turn Earth into Venus. If this holds up it just makes it easier for us to do more damage.

In short: great news for me,,,,,,,,,,,,,,,,,,sucks for my grand kids.

[americandream]

No turning back this clock, dude.

Of course, there are complications. Deeper wells sit at higher pressures, increasing the risk of blowout. The deepest exploration well, drilled by the ill-fated Deepwater Horizon, is 35,000 feet down, several times the depth of BP's Macondo well. And further oil production will only add to the greenhouse gases humans pour into the atmosphere each year, slowly increasing global temperatures.

I tend to see the dark side in everything. Now that the runaway well is capped, and there was no catastrophe in Wall Street or Hollywood, everything will go back to normal. More deep and risky wells will be drilled. We have changed the base line of what we will accept in the way of environmental damage in order to get our fix.

Then, as we find more oil, we burn it. Remember Hansen says if we burn all the oil we will do irrevocable harm. If we burn all the fossil fuel we will turn Earth into Venus. If this holds up it just makes it easier for us to do more damage.

In short: great news for me,,,,,,,,,,,,,,,,,,sucks for my grand kids.

[smiley]

Actually Six I've made up my mind no one who reads here gives a rip about po - at least about discussing anything that might affect their preconceived opinion.

I have to admit that my main reason for replying is because I don't want you to yank your ethernet cable from the wall and do something terrible (like join a macrame workshop) because you feel neglected by your PO friends.

Lately there are a lot of articles that promise a large volume of oil in an unexpected place, be it the arctic, ultradeep water, belarusian swamps or you name it, and offer the possibility of finding more oil in these formations or regions. At last the cornucopians have something more tangible to offer than self-filling reservoirs and magical methane supply from the earths core.

Its an amazing turnaround from the gloom of the last 10 years. All these finds will take a long time to bring on stream, but it shows the industry is capable of finding more oil than it uses and shows we have not come to any peak," said Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam

http://www.guardian.co.uk/business/2009 ... -of-mexico

However I remain skeptical at heart. I am not a geologist, so I am hardly in a position to judge on the statements made in this article. All I can do is surf around on the net and look for convincing counter or concurring sources.
http://www.rigzone.com/news/article.asp?a_id=46706

I think this article puts it nicely. Despite all our technology even the oil company doesn’t know what they have in their hands until they stick a pipe in it and start producing oil for a couple of years. I don’t think that a discussion here is going to clarify what is going on 30.000 feet below.

My gut feeling or “preconceived opinion” is that this is salt thing going to be more than a marketing dud than anything else. But I also think that we can only judge on that in a few years time if it takes off or not.

If it does the better. Delay of the peak is for me not relevant. Barring a miracle find no amount of oil is going to shift the peak out of my (or my kid’s), lifetime, so we have to deal with it. But availability of expensive oil is going to make the transition a lot easier.

[Pops]

I have to admit that my main reason for replying is because I don't want you to yank your ethernet cable from the wall and do something terrible (like join a macrame workshop) because you feel neglected by your PO friends.

Thanks Smiley, glad to see you. I hate it when I get my overalls all in a knot!

I like the tech part (even though I don't know squat about it) and this falls in that "known unknowns" area - we know there will be more oil discovered, we just don't know where.

[sparky]

.
Pre-salt drilling has revolution ed oil exploration , the Gulf is where the techniques were tried
the South Atlantic off shore Brazil and the sister formations of Angola are being drilled now
of course the biggest salt sea is the Mediterranean basin with a near uniform salt bottom all over
the Israelis had some success , I'm not too familiar with their geology but will check it

As for business being casual about Peak Oil , yes they have accepted it for a few years now
they are realists ,
If one has to look for oil at the extremity of geology , that the proof we are at the extremity of exploration , oil companies don't do glory they look for money


the real issue is timing , forget the year , what really matter is the decade
and the down slope , utter collapse along a cliff face is not the main bet ,
more likely a slow strangulation of the western model , over a generation , if things go well

the real issue is if some bozzo in power decide to do something drastic , that would be unwise and could create more problems
since there is no real solution , better to surf this decline easily , I'm a happy doomer

[Dreamtwister]

How do you delay something that has already happened?

[sparky]

.
What has already happened is the peak in "classic " onshore crude oil ,
I'm not counting vegetable juice , that's bull , but there is a case for tars and the heavies

As I said before , if one's need to go hundred of miles offshore drilling over a mile or two of water , down four miles of rock and tricky stuff to get a moderately sized field by historical standard
then one can conclude that someone is a bit desperate to obtain the stuff

[Pops]

Take a look at Staniford's blog, he's keeping pretty good track of production and has a nice graph today.

What happened in '08 was something but it wasn't the peak of oil production, we're less than 1Mbbl/day from that volume and the price is half what it was then.

[Outcast_Searcher]

Take a look at Staniford's blog, he's keeping pretty good track of production and has a nice graph today.

What happened in '08 was something but it wasn't the peak of oil production, we're less than 1Mbbl/day from that volume and the price is half what it was then.

Is there a reliable historical demand chart to compare to the production / price chart? If one can get a sense of the likely GLOBAL future demand, relative to likely global production -- THAT will (IMO) tell the tale on the TREND and relative slope of future price changes. Clearly, the fate of the global economy will impact such demand to a large extent though.

Unless the global economy just stays flat to bad overall, which flies in the face of virtually all the median forecasts I see for third world economic growth, I can't see how supply can keep up with demand OVER TIME without significant crude price increases.

[smiley]

Take a look at Staniford's blog, he's keeping pretty good track of production and has a nice graph today.

What happened in '08 was something but it wasn't the peak of oil production, we're less than 1Mbbl/day from that volume and the price is half what it was then.

Not sure that argument is valid. PO refers to a peak in oil production while prices (like outcasts states) are the result of production versus demand. Arguably the demand in 2008 was a lot higher than it is now, judging by the draw on oil reserves like the SPR in 2008. It might well be that if demand increases by a few MB the prices rocket back to 2008 levels. After all oil prices are very inelastic. Also the price is affected by currency fluctuations though this contributes probably to less than 15% to the prices.

I think the real question is whether the oil production is able to follow when the demand (and thus prices) pick up.

I think this will not be the case. I would guess that a price of $40 (nymex) would be a level that both oil producers and oil producers are comfortable with. This leaves sufficient room for profits at the producers side and an acceptable price at the pump. The fact that someone would say that with higher prices more oil becomes available is IMO only partially true. Even the most difficult fields such as tar sands can be produced at $40. Any production method that would warrant even higher prices would be so excotic that it is unlikely to produce any significant volumes of oil.

The fact that we're at twice these levels can mean two things. Or the consumption is growing too rapidly which is certainly not the case. Or the production is restrictive. This restriction might be temporarely, caused by the lag between exploration and production ( the oil has been identified but it takes a while to get online). Or the restriction is permanent (we cannot find the production capacity). In that case we have reached PO.

Fact is that for the past six years oil production is stagnant at price levels above what I would consider comfortable. This is also about the time it takes from discovery to development of a field. So unless we see a sizeable increase of the oil production in the next year or so I would say it is about time to raise the alarm.

[Pops]

Is there a reliable historical demand chart to compare to the production / price chart?

You can't measure demand independent of price unless there is no cost and no restrictions on supply. Remember that the demand side of supply & demand is made up of desire plus ability to pay. You can guess at the future like the EIA does by simply extrapolating the past but it is completely bogus.

The outliers on the price plot, like $15 in '00 and $147 in '08 indicate where supply & demand are way out of balance. When the supply is too large the price goes down, when desire grows prices go up -

But also, when the ability to pay alone increases, volatility goes up and so does price, independent of any real desire for the physical product. I think that was a lot of what happened '07-'08, in addition to China's increasing consumption, real estate began to cool and too many commodity gamblers began placing bets on oil.

Here I took Staniford's chart, cut out the middle of '07 to middle of '09 (commodity run-up and recession) and it looks pretty "fluid" if you'll pardon the expression.




So, what I'm getting at is we may be at peak but I don't think we're past peak.

[smiley]

I'm not sure whether you're allowed to do that. By removing this part of the graph I get the impression that you label it as an abberation, the result of gambling.

The way I understand these contracts they involve physical oil. In other words, if the contract expires and you are the holder, you better clear out some space in your backyard, because you'll receive a 1000 foot tanker on your doorstep.

http://www.cmegroup.com/trading/energy/ ... =undefined

You can of cause influence the futures. If you buy or sell 2015 options you are talking about virtual oil. But as the expiration date comes nearer, you have to start thinking about the physical stuff as well. As you approach the expiration date the price should close in on economic reality.

I think that this makes price manipulation of the spot price virtually impossible, except when you are prepared to physically take oil off the market and put it in storage. Think of how Hunt cornered the silver market. That can be done, but as I recall most of the national and private storage facilities were close to empty in 2008.

II think what you are seeing here is really the inflexibility of the oil market. We're all bidding over a fixed amount of oil. If that amount is sufficent then the deals are quickly made. If that amount is insufficient then it depends on the determination and the depths of the pockets of individual bidders at which price the contracts will be settled. They just keep bidding until some bidders fall out.

It might well be that we will see such price spikes every time that demand and supply come into conflict with each other.

[Pops]

By removing this part of the graph I get the impression that you label it as an abberation, the result of gambling

.

Yea, that's exactly what I'm saying - not that it wasn't partly the result of super-fast demand increases outstripping supply and not that I'm not convinced we are on the plateau or dang near but yea, it had lots to do with gambling.

After all, the whole idea behind futures market is so people who actually use the stuff (refiners, processors, ets) can lock in a price and define their budgets, etcetera. If the price is going up and you actually need the stuff to continue business would you wait and buy everything on the spot market in 6 months or would you try to lock what looks to be a bargain today? One of the reasons Southwest Air was so profitable when other carriers were hurting was exactly that - they had bought contracts before the price went nuts.
...

WASHINGTON — Thursday, January 14, 2010
In a move aimed at limiting financial speculators' ability to drive up oil prices, the Commodity Futures Trading Commission on Thursday proposed restrictions on the number of energy contracts that any single investor can hold and new limits on the trading activities of Wall Street banks.

The commission staff proposal comes amid growing research that suggests that the record high oil and gasoline prices in 2008 were due in part to excessive financial speculation. Much of that speculation came from Wall Street powerhouses such as Goldman Sachs and Morgan Stanley.

"Today's meeting is an important step," commission Chairman Gary Gensler said.

Before 2001, there were limits on how much control any one investor could have in the energy markets, a term called position limits. The limits disappeared amid an era of deregulation, and by 2004 oil prices were climbing sharply as the global economy grew.
http://www.mcclatchydc.com/2010/01/14/82393/trading-commission-proposes-curbing.html#ixzz0wy4qdcgW

Those boys were gambling with borrowed money and thought they had the markets figured out, when the true value of RE paper derivatives of derivatives started to show, people wanted their loans paid back and the whole thing came down.

At the time I thought "This Is It!" the big overnight armageddon event I'd always pooh-poohed, not only because oil was skyrocketing but also so was almost every other commodity - except the one where most average people had most of their equity, real estate. What I didn't understand for some time was how completely the market had been set loose to "regulate" itself and exactly how much leverage had been manufactured from thin air.

All that leverage needed someplace to go to keep the party alive so "every" commodity boomed - that was probably the givaway that it wasn't just oil - after all, it would take some amount of time for the high cost of oil to percolate through the economy and raise milk prices for example.

So if you ignore that little bit of noise in '07-'09, we still have about the same amount of capacity we did at that peak albeit at about 600% the price of 2000. To me that says we are at a plateau at the worst and not on the downhill side of the peak.