A free-market energy blog
Random header image... Refresh for more!

Response to 'Peak Oil' Critics (the hydrocarbon age is still young: plan accordingly)

[Editor note: Mr. Lynch's op-ed in the New York Times last week stirred a good deal of  comment and disagreement from "peak oil" proponents. His response is here]

The publication of my op-ed on peak oil in the New York Times brought forth the usual tidal wave of criticism. The Oil Drum went so far as to put up a separate page for comments, and Joseph Romm issued a ‘challenge’ to me to wager on oil prices. (For an executed bet coming due next year, see the appendix below.)

Responding to each and every comment, or even the main ones, would be a Herculean (and Sisyphean) task, so I will (here) make some hopefully useful observations.

First, I apologize to Fatih Birol for lumping him in with the peak oil advocates. He is pessimistic about supply, as are many others, without being in the ‘peak oil’ camp, and he informs me that the widely-cited Guardian interview misrepresented his views.

Second, many comments bordered on the bizarre, to the point where a number of my friends—who are not acquainted with oil—found them so. (Just as an example, I was not director of the Center for International Studies, nor am I currently employed by M.I.T.)

Third, readers should understand that an op-ed piece is intended to express opinions, it is not a research piece, thus it was not loaded with facts and citations. The Times was kind enough to give me much more space than usual (hey, it’s August), but even so it would take an entire book to address most of these issues in detail.

The intellectual tradition behind resource expansionism (versus the fixity/depletion view) is a rich one, calling to mind such names as M. A. Adelman and Julian Simon. An overview of this theory, and its rich intellectual history, is provided by Robert L. Bradley Jr. in Resourceship: An Austrian Theory of Mineral Resources (28 pages).

Fourth, the ad hominem attacks should be taken as evidence of the poverty of the arguments (in those cases), as has been pointed out repeatedly by observers of scientific debate. (See Michael Shermer, of The Skeptical Inquirer, Why People Believe Weird Things, for instance.)

Also, why I should be considered a ‘shill’ for the industry is unclear, especially given ‘the industry’ is hardly monolithic on this subject. (I think it was Susie Essman, the comedian, talking about how the Jews supposedly caused 9/11, commented that ‘she must have missed that meeting’.) One might also ask why the industry, if it ‘knew’ that oil was becoming scarce, would want to argue the opposite point of view. Wouldn’t they call for financial assistance, rationalize higher prices as being necessary, etc.? Wouldn’t the Saudis, if they really were having the supposed problems producing oil, want the world to recognize it, and thus accept higher prices?

Fifth, many of the comments support my op-ed contention that the peak oil community is full of neophytes–hobbyists who have read something about the subject and usually accepted it uncritically. In fact, many seem much less familiar with peak oil writings than I am.

For example, the first post on the thread on the Oil Drum says right up front: “Peak Oil has never been about the amount of hydrocarbon molecules that exist, but flow rates, timing and costs.” The beginning of the current round of the debate was in the 1990s, when Colin Campbell and Jean Laherrere asserted that there were only two trillion barrels, and when half had been produced (which was imminent), production would peak.

Sixth, it is discouraging that a number seem to confuse total resources with proved reserves, which demonstrates either their ignorance of the industry jargon or poor reading skills. It also indicates the degree to which bloggers and blogging is differentiated from spouting off the top of your head and making well-reasoned arguments.

Seventh, a number of bloggers (including Romm), have noted my past forecasting record, focusing only on price forecasts, and especially the well-known fact that in the past few years, during the recent oil price bubble, I have repeatedly predicted that prices would in fact return towards the mean.  It took longer than I expected, partly because of the Nigerian unrest and damage from Katrina and Rita, but even ignoring that there are several problems with this argument:

The peak oil community tends to focus on price forecasting not supply forecasting, because prices are much more unpredictable, subject to both political and psychological factors (including ‘momentum trading’ the bubbles’ favorite).  They are also, once again, ignoring context.  The vast majority of analysts did not predict that prices would reach the $147 level, and they are largely using hindsight in their criticisms. 

They also conveniently ignore their own record(s).  One critic of mine, Chris Nelder, tops them all, criticizing me for having prematurely predicted a decline in oil prices.  But to quote him from last July 28, just before the price collapsed, “Oil now dropping to $70? ‘Keep dreaming.’”  He did predict $500 oil with a global depression.

Appendix: A 2010 Oil Wager

My colleague Rob Bradley and New York Times writer John Tierney (split with Rita Simon, the wife of the late Julian Simon) do have a wager on the future price of oil. Several years ago, they persuaded Matthew R. Simmons, author of Twilight in the Desert, to bet that the daily price of West Texas Intermediate would average more than $200 per barrel in 2010. The bet starts in just four months, so it looks like short of a hyperinflation (wait–Tierney bet in real terms; Bradley did not), Mr. Simmons will very likely owe Tierney/Simon $5,000 and treat Bradley to a nice dinner party for 100. (The loser however, gets to invite 25 guests.)

The settlement would be in early 2011, but the winner might be known to have a holiday-season party next year.

Stay tuned.

43 comments

1 Clifford J. Wirth, Ph.D. { 08.31.09 at 7:55 am }

Global crude oil production peaked in 2008.

The media, governments, world leaders, and public should focus on this issue.

Global crude oil production had been rising briskly until 2004, then plateaued for four years. Because oil producers were extracting at maximum effort to profit from high oil prices, this plateau is a clear indication of Peak Oil.

Then in July and August of 2008 while oil prices were still very high, global crude oil production fell nearly one million barrels per day, clear evidence of Peak Oil (See Rembrandt Koppelaar, Editor of “Oil Watch Monthly,” page 1). Peak Oil is now.

Credit for accurate Peak Oil predictions (within a few years) goes to the following (projected year for peak given in parentheses):

* Association for the Study of Peak Oil (2007)

* Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008)

* Tony Eriksen, Oil stock analyst and Samuel Foucher, oil analyst (2008)

* Matthew Simmons, Energy investment banker, (2007)

* T. Boone Pickens, Oil and gas investor (2007)

* U.S. Army Corps of Engineers (2005)

* Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005)

* Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)

* Chris Skrebowski, Editor of “Petroleum Review” (2010)

* Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)

* Energy Watch Group in Germany (2006)

* Fredrik Robelius, Oil analyst and author of “Giant Oil Fields” (2008 to 2018)

Oil production will now begin to decline terminally.

Within a year or two, it is likely that oil prices will skyrocket as supply falls below demand. OPEC cuts could exacerbate the gap between supply and demand and drive prices even higher.

Independent studies indicate that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

Alternatives will not even begin to fill the gap. There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

“By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.”

With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

It is time to focus on Peak Oil preparation and surviving Peak Oil.

http://survivingpeakoil.blogspot.com/2008/12/top-story-of-year-global-oil-production.html

http://www.peakoilassociates.com/POAnalysis.html

2 Steve C. { 08.31.09 at 8:30 am }

I find the whole dispute puzzling. Maybe that’s because the peak oil zealots drag a whole lot of marginal issues into the discussion.

They are telling us that some day the supply of oil will be so tight that it will cost a small fortune to produce. I don’t have much of an argument with that position. At least it’s logical. Prices signal scarcity. But beyond that point people try to bootstrap on arguments about global warming and the desirability of solar power, wind power and hydrogen cars etc.

Stated another way, the argument becomes one about what industrial policy the government needs to impose on a free society to “insure our energy future”. I’m not much for mandates of any sort, thank you very much.

One particular argument disturbs me. IF WE DON’T DO SOMETHING NOW, LIFE AS WE KNOW IT WILL CEASE. But the solutions offered range from the merely bad, an import tax on foreign oil; to the ridiculous, spending bazillions of borrowed dollars in pursuit of carbon neutral green energy production that defunds the Saudis (a laudable objective in my opinion), produces millions of high paying jobs, returns the earth to its natural pollution-free state (whatever that is) and makes all of our children above average.

My response has always been, we have been resolving the challenges of scarcity for 10,000 years. Why should it be any different now?

This is derided as “wishful thinking”. But I readily admit I’m not smart enough to “know” the solutions. I’m dependent on the other 5 billion people on earth to help solve the problem. What I do know is that as a species, we have a pretty good track record using applied science and engineering to innovate and adapt.

3 Andrew { 08.31.09 at 9:08 am }

Presumably the bets are “not withstanding unforseen price shocks” which happen fairly periodically against a backdrop of declining prices adjusted for inflation.

Or at least, that’s how gasoline prices behave. I presume, but do not know, how oil prices themselves behave.

http://www.eia.doe.gov/emeu/steo/pub/fsheets/gifs/1-gas-ann.gif

4 Paul Davis { 08.31.09 at 1:44 pm }

August 31, 2009

It is time for Messrs. Yergin, Lynch, and Learsy to take their leave from the oil energy discussion and Peak Oil in particular and admit that they are WRONG, DEAD WRONG and are doing a huge disservice to the world and mankind.

Making money by being a contrarian is okay I guess, but not in an industry (oil) that is so critical to our existence and lives. Shame on them for being so foolish for not recognizing Peak Oil for what it is – REAL.

Paul Davis

5 Justin Caron { 09.01.09 at 7:49 am }

This is a good blog to read when you are depressed: oil will last forever, climate change is just a scam, and all is well! great!
how I would like to believe you

6 Donald Hertzmark { 09.01.09 at 10:19 am }

The “Peakists” believe that a fixed amount of oil, recoverable using only “fair” methods (1920s technology) has reached its apogee. In fact, much of what we produce today did not even qualify as “potential reserves” just 20 or 30 years ago.

The reclassification of Canada’s tar sands into the reserve category, along with similar moves in the US and Venezuela (assuming those two government could get their acts together) undercuts the peak oil argument almost entirely. Technology, if it is allowed to develop, has continually pushed the frontier of the oil industry.

Just a generation ago the heavy oil resources of Mexico and Venezuela were not considered to be of much value. Then, with new developments in refining, they became very cost effective contributors to US oil supplies.

A static view of resources and technology is hardly a constructive approach to intelligent debate, much less future energy policies. When President Carter declared that natural gas supplies in the US were on the way down and that this fuel was too “noble” to burn for power generation, he based his policy on just such an uninformed and static view. Now we know that natural gas is far more ubiquitous, and that talk of “Peak Gas” is nowhere in evidence among anyone with understanding of the industry. The only thing standing between the US economy and an increasingly sustainable use of oil and gas are the Luddite deniers huddling under the Peak Oil banner.

As for Dr. Wirth’s “Mad Max” future, he would be well advised to look at how technology has (i) expanded the hydrocarbon resources available to be used; and (ii) made better and more efficient use and transformation of such hydrocarbon resources.

Someday, our descendants will look back at “Hubbert’s Hysteria” and wonder how we could ignore the bounty of the earth and of our own inventiveness.

7 rbradley { 09.01.09 at 11:29 am }

Dr. Wirth:

I invite you to peruse my essay, “Resourceship” here: http://www.politicalcapitalism.org/aboutrb/Resourceship.pdf
to understand why minerals are expanding, not depleting resources, from an economic/business viewpoint.

Fixity/depletion is a physical science concept that is very misleading for public policy and business decision-making.

Also note that government, not nature, is the major brake to development and increasing supply.

8 Ken Maize { 09.01.09 at 4:03 pm }

Sheik Zaki Yamani, former Saudi oil minister, once wisely said in the 1970s that the stone age did not end because the world ran out of stones. I’ve never given much credence to the Peak Oil prognosticators, going back to King Hubbert and to the present and my good friend Bob Hirsch.
As oil runs out — if it does — then the price will rise and other resources will look better. Haven’t seen that in the 35 years I’ve covered energy as a journalist, and I don’t see it happening in what’s left of my lifetime.

9 Andrew { 09.01.09 at 4:17 pm }

LOLZ! Look at all the people who don’t bother to dispute the points made in the post, but just ridicule and appeal to the “obvious” “truth” of their absurd claims.

I feel sorry for you guys, having to deal with such people…

10 Heading Out { 09.01.09 at 5:36 pm }

Let me respond as I did to the article in The New Republic with the odd fact (The Oil Drum carries technical topics I write on Sundays). You will note that the following does carry some numbers, not hard to include, even in a short comment.

“Michael has been making these sorts of statements for years, and they have little more credibility than the ones he made four years have proved to have had. As I noted in the response I wrote on my own blog ( Bit Tooth Energy ) he finds it necessary to impute arguments to those of us that write on Peak Oil that we do not use.

As Nate responded on The Oil Drum our concerns at the moment relate more to such things as the declining rate of production in some of the major oil fields of the world and the lack of an immediate ability outside of OPEC to meet those declines with new production. Historic rates of decline for the producing oilfields of the world have changed from around 4.5% as historically assumed to the more recent figure of 5.2% and then, in the IEA’s latest review, to have further increased to 6.7% (which requires an increase in new production of around 5 million barrels of oil a day (mbd) per year to offset). This change has been brought about by the changing technologies used to extract more oil faster from these reservoirs (most particularly through the introduction and use of horizontal wells). The results are shown in the declines from fields such as Cantarell – in its time the third largest producing oilfield in the World, which has fallen from 2.2 mbd in 2004 to 700,000 bd today. It is seen in the production from Samotlor, the sixth largest oilfield in the world, which at one time produced 3.2 mbd, but which now produces 750,000 bd from wells that run 90% water.

The reviews that are carried out at places such as The Oil Drum include an analysis, using satellite data, of where countries such as Saudi Arabia are actually drilling their latest wells – which indicate that predictions of Aramco’s ability to sustain production from Northern Ghawar into the medium term future must be seriously questioned.

Michael Lynch might be able to acquire OP-Ed space by obfusticating the issues with “anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum”, those of us who actually study and write on this issue on a regular basis don’t have that luxury.”

11 Engineer-Poet { 09.01.09 at 5:37 pm }

As a contributor to The Oil Drum, I have to shake my head at the people like Michael Lynch and Donald Hertzmark, and those like Andrew who treat their handwaving as the final word against Peak Oil.

What are you going to believe, Lynch and Yergin or the world’s lying production figures? That’s what it amounts to. Hertzmark commits the classic category error fallacy (or is it misdirection?) of confusing reserves with production rates. There may be huge amounts of tar sands in Canada, Venezuela and elsewhere, but production rates in Canada are not expected to exceed a few million bbl/day and the depleting supplies of natural gas used to separate bitumen from sand and upgrade it to syncrude promise to make it harder and more expensive to even maintain production. Mexico? Mexico’s heavy oil may be a resource, but it will not prevent Mexico from becoming a net oil importer in the next few years; Mexico’s biggest oil field, Cantarell, has been sucked dry so fast by our “new, improved” technology that its production has collapsed by more than 2/3, from over 2 million bbl/day to about 700 thousand.

Scenes like these, repeated all over the world for the last century and now including all of the world’s supergiant fields (with just one possible exception), show that peak oil is, if not already here, coming VERY soon. The “business as usual” scenario now calls for new supplies equivalent to SIX new Saudi Arabias by 2030. That’s just 21 years to add some trillions in production infrastructure, and that’s after finding the oil in the first place–we haven’t discovered it yet. If it’s not there, or in someplace where it’s horribly expensive and dangerous to produce, then what?

What Lynch & Co. haven’t figured out is that $147 oil is too much for the world economy. If it takes $100+ per barrel to develop new oil supplies, either demand will shrink through efficiency and shifting to alternatives, or the economy will simply contract to match what’s coming out of the ground. That looks to be what’s going on now; the credit crunch exposed the gritty reality behind the curtain, and all of Oz’s special effects can’t hide it again.

Time to pre-order your Volt. Your business needs to consider a hybrid Dodge Sprinter or electric Smith truck. Get ahead of the game, or forever play catch-up while trying to pay inflated fuel bills.

12 Will { 09.01.09 at 6:02 pm }

Mr. Lynch chose to ‘rebut’ the Oil Drum article by only addressing a couple of points in the most tangential fashion, and cherry-picking a few of the responses by the less informed commenters. If he really has the facts behind him, he needs to stop hiding behind rhetorical theater and put his cards on the table. But since he is bluffing, he dare not…

13 TAD { 09.01.09 at 6:43 pm }

All, Please ignore the comments of Clifford J. Wirthless. The guy is out to profit from a peak oil scare, thats it.

14 John { 09.01.09 at 7:41 pm }

It looks to me as though the essential argument about peak oil–that it is a limited resource and will eventually reach a point where less and less will be extractable every year–is not really in dispute.

Lynch seems to think that the date is so far off in the future that no one needs to worry about it. Even Yergin accepts a date within twenty years, a time frame that would still call for the beginnings of a transition as enormous as that from oil to non-oil sources of energy would take. So Lynch does seem to be pretty far out from most other prognosticators.

The hardest argument those that claim that peak is around now have is that we have no reliable data on what is under the Saudi (and some other) sands. There are suggestive indirect indications, but this still remains a big unknown.

The hardest argument for the peak oil optimists (those like Lynch who think that it is still a long way off) is that world discoveries peaked in the 1960′s. That’s a long time ago. If there is so much more oil out there, why haven’t our advanced technologies found them yet.

However much there is or isn’t of this amazingly potent black liquid, we should be treating it as the precious stuff that it is and not wasting it so flagrantly on moving millions of individuals around each in their own massive hunk of metal.

Is this, at least, something on which those on both sides of this debate could agree?

15 David { 09.01.09 at 8:14 pm }

What is “Peak Oil”? Basically a theory that world-wide production of crude oil will reach a maximum then fall. Does anyone really think it will increase forever and never fall?

The guy who came up with the theory based it on the concept that if you looked at an individual oil field (historically), they all ramp up, reach a peak production rate, then the production rate falls at the field is depleted. Since the worldwide production is the sum of a lot of individual fields, one would reasonably expect the aggregate production to follow a production curve that is somewhat similar to an individual field.

Obviously crude oil production will eventually peak and then fall worldwide–crude oil is a finite resource. The fake controversy is basically an attempt to muddle the thinking on the issue, as well as debate when crude oil production will actually peak.

Since the future cannot be known with certainty, all that can be done is to make careful projections using the decades of experience with oil extraction. Most projections are for a crude oil production peak that has already happened or that will happen in the next fifteen years.

Zero to fifteen years is soon enough that prudent preparation would not be unreasonable, and the real debate is about what if anything constitutes prudent preparation.

16 kiwichick { 09.01.09 at 8:14 pm }

BP Statistical Review Of World Energy 2009

“only 14 of 54 oil producing nations are still increasing oil production”
US peaked 1970 now down 35%
Libya ” 45%
Indonesia ” 41%
UK ” 47%
Australia ” 31%
Norway ” 28%
Mexico ” 17%

17 Mr Ronald Brown { 09.01.09 at 10:01 pm }

“Third, readers should understand that an op-ed piece is intended to express opinions, it is not a research piece, thus it was not loaded with facts and citations. The Times was kind enough to give me much more space than usual (hey, it’s August), but even so it would take an entire book to address most of these issues in detail”.

Basing your opinions without research or facts? Welcome to the surreal world of misopiniation (purposely incorrect to match the author’s journalistic world view). Gotta meet the deadline and to hell with the facts.

18 ccpo { 09.02.09 at 3:37 am }

Mr. Lynch,

Unsurprisingly, you are not telling the truth. The quote from the neophyte is absolutely accurate. That reserves are discussed and that the downslope tends to coincide with about 50% of reserves depleted does not in any way alter the fact that PO is an issue of flow rates.

Try draining a swimming pool with a straw. Then try draining a glass of water with a fire hose.

Then go read the Hirsch Report and see what it says about mitigation time lines.

19 Philip Rebbechi { 09.02.09 at 6:04 am }

I don’t know for sure whether oil production has peaked or not but the figures I have followed for about 30 years suggest that it has.
It’s too bad that we cannot run an economy on hubris because we have oceans of that.

20 mlynch { 09.02.09 at 7:57 am }

Wow! As with the Oil Drum and other places, there is too much here for me to address all at once, but I will make a couple of comments now.
For Wurth, your certainty shows that you are a novice. Anyone with experience in this business knows how many times the experts have been confounded.
And the list of experts you cite proves nothing. Most of them are also novices with no significant experience forecasting oil supply, Skrebowski an exception. And the peak oil community has a terrible track record; the current warnings are only the latest. There is a big difference between scientific consensus about the gravitational constant or the composition of asteroids and oil supply, which involves a huge number of uncertain economic and political variables.
Regarding the discovery trend: First, the estimates are not accurate, but rather like comparing orchards of different ages and concluding that trees are growing smaller with time. The estimates for recent discoveries are understated by an unknown amount.
But more important, discoveries were high in the 1960s because of heavy activity in the Middle East countries, which tapered off because of nationalization and the oil market glut (and the Iran/Iraq War, the sanctions against Iran and Iraq, etc.). With new activity, we are seeing new discoveries there in the multi-billion barrel range. (A decade ago, when peak oil was beginning to get noticed, a number of authors worried that we hadn’t been finding billion barrel fields for a while.)
More late.

21 Scott { 09.02.09 at 8:00 am }

Would the media be willing to have Mr. Lynch and all others on both sides of this “debate” have a public discussion about the topic and the consequences of it on TV.The only real question is when will it peak, not if, and the Saudi’s won’t let anyone outside independently verify what they have left.Should we just trust them?

22 Engineer-Poet { 09.02.09 at 9:23 am }

Yes, we might be finding new multi-billion-barrel oil fields. However, to be a “supergiant” field (capable of producing more than 1 million barrels/day for an extended period) it needs to justify ~20 years of production at that rate. The minimum size for that is around 10 billion barrels. There are what, 7 supergiant fields in the world? At least 6 out of 7 are past peak, and the 7th will be shortly. BAU requires ALL of them to be replaced. Where are those replacements?

People don’t seem to understand large numbers. A billion barrels sounds like a lot, but the world consumes a billion barrels of oil in less than 12 days. The billion-barrel announcements aren’t coming in they’d need to. We’d need about 30 a year. Where are they?

And pardon if this HTML doesn’t work correctly, because there is no preview function:

There is a big difference between scientific consensus about the gravitational constant or the composition of asteroids and oil supply, which involves a huge number of uncertain economic and political variables.

Unlike astronomers, the major oil exporters are known to be lying about their reserves. Originally, they gained export quotas under the OPEC system; today, they paint a rosy picture of future supplies to prevent a stampede toward much more efficient vehicles and alternatives. One of CERA’s biggest clients is the Kingdom of Saudi Arabia, which should tell you to be skeptical of anything from Daniel Yergin.

23 Will { 09.02.09 at 9:44 am }

Mr. Lynch, your last response above struck me as coming straight out of 1984.

“your certainty shows that you are a novice. Anyone with experience in this business knows how many times the experts have been confounded.”

You have been wrong so many times it isn’t funny, though I wouldn’t call you an expert in this field; the term “pundit” would be more suiting.

“And the list of experts you cite proves nothing. Most of them are also novices with no significant experience forecasting oil supply”

Again, just because you’ve been at this longer and have been wrong most of the time proves something?

“the peak oil community has a terrible track record; the current warnings are only the latest. ”

You sound as if you had something more than an atrocious track record. Of course, Hubbert predicted the 1970 US lower 48 oil peak with astounding accuracy. A number of other petro-geologists have made statements about an impending peak in the 2010-2017 timeframe, so your criticism of these are empty words.

“concluding that trees are growing smaller with time”

This is an absurd metphor; everyone knows that older trees don’t ‘grow smaller’, they simply begin yielding less until they quit altogether.

“The estimates for recent discoveries are understated by an unknown amount.”

Or are OVERSTATED by an unknown amount, especially the OPEC numbers that are based on political quota protection rather than engineering exploration and discovery.

“With new activity, we are seeing new discoveries [in the Middle East] in the multi-billion barrel range.”

See above. And even if audited multi-billion barrel discoveries would be found, how many will it take to add up to the more than 1 trillion barrels of new discoveries needed to satisfy projected demand to 2030 (per IEA Chief Economist Birol)?

Your dismissive handwaving will confuse fewer and fewer of your acolytes, a number shrinking by each passing hour.

24 Iconoclast421 { 09.02.09 at 12:37 pm }

I know Lynch is a fraud because he uses all the same favorite tactics used by all the popular frauds. Note the backhanded reference to jews and 9/11. That’s exactly what I’m talking about. Why bring jews and 9/11 into it? Surely there are much better ways to make a point. More logically sound ways at least.

But it is the constant logical fallacies of the fraudster that reveals its true nature.

“Also, why I should be considered a ‘shill’ for the industry is unclear, especially given ‘the industry’ is hardly monolithic on this subject”

That is a mindless rebuttal, as expected. “The industry” certainly IS monolithic with regards to peak oil. The business model of the entire industry fails if peak oil hits unexpectedly. That makes it pretty damn monolithic.

“For example, the first post on the thread on the Oil Drum says right up front: ‘Peak Oil has never been about the amount of hydrocarbon molecules that exist, but flow rates, timing and costs.’”

Did it ever occur to you that this may be true to the person who wrote it. And that the peak oil ‘movement’ has grown substantially over the years precisely due to the fact that this is a much stronger, more logical argument? But no, you’d rather argue against a logically unsound hypothesis, which states that “we used up half the world’s oil, therefore we’re at the peak.” What sense in hell does that make? And you wonder why people who ascribe to that theory come to the wrong conclusions? Peak oil DOES have everything to do with flow rates, and it has little to do with how much is left in the ground vs how much was produced. It doesnt matter how much is in the ground if it cannot be brought to market at a faster rate than today. On paper, you can try to replace a Ghawar with 100 times as much shale rock. They might both contain the same amount of energy, but it is the height of folly to assume that you can bring the shale oil to market as fast as you could the light sweet crude. No, I take that back, it is the height of folly to assume that this dynamic isnt relevant to peak oil.

“I have repeatedly predicted that prices would in fact return towards the mean. It took longer than I expected, partly because of the Nigerian unrest and damage from Katrina and Rita”

Here is another huge gap in reasoning. It is pure intellectually bankrupt dishonesty to claim that hurricanes and Nigeria have any lasting impact on oil prices, up or down. Prices rose and fell in 2008 due to currency events. The dollar spiked as a safe haven currency. Oil fell primarily for that reason, with the drop in demand from job losses as a secondary factor. The 2008 hurricane season did NOTHING to effect prices. There is no reason to think that the 2005 hurricane season was any different. The market is bigger than the Gulf, and it is certainly bigger than Nigeria.

“One might also ask why the industry, if it ‘knew’ that oil was becoming scarce, would want to argue the opposite point of view.”

If you had any understanding of peak oil, then you would at least understand this. This touches on one of the most basic premises of peak oil… that it destroys the business model of the oil industry. The oil companies CANNOT report declining reserves because it would immediately increase their borrowing costs in the capital markets. For this reason they will ALWAYS lean towards overstating reserves. If they do not, they will pay higher interest rates, and ultimately will be swallowed by their competitors who have less aversion to lying about reserves. The financial crisis of 2008 was caused by systemic fraud on every level in the financial sector. The oil industry is built the same way. Multiple levels of systemic fraud will ensure collapse in a post peak environment. This WILL happen, millions of jobs will be lost, and it will be precisely due to the fact that the industry based extremely important business decisions on the works of hacks and frauds. But rest assured we will get no apology from Lynch or any of the thousand other hacks who caused this mess.

25 mlynch { 09.03.09 at 5:17 am }

Regarding my track record, it is far better than that of any peak oil advocate. Again, those attacking it here and elsewhere are similar not very familiar with my track record (or those of others). In 1980, at Energy Modeling Forum 6 at Stanford, the model I worked on was later judged the best, especially for it supply forecast. In 1985, when others were warning of sharply rising natural gas prices, a large study done by M. A. Adelman and myself concluded prices wouldn’t rise. In 1986/87, I warned that the eventual decline in OPEC surplus capacity would lead to more price volatility. In 1989, in a 100 page EIU report, I warned that, contrary to expectations, oil prices would decline in the 1990s, not increase and the error, I argued, lay in excessive pessimism about non-OPEC supply. (Campbell at the same time published an article saying world oil production had already peaked). Petroleum Economist called my views heretical, which they were, but they also proved prescient.

My article “Forecasting Oil Supply: Theory and Practice” explains some of the methods used, and my article “The New Pessimism about Petroleum Resources: Debunking the Hubbert Model (and Hubbert Modelers), Minerals and Energy, vol. 18, no.1, 2003 describes my reasoning for rejecting peak oil arguments.
More later.

26 Engineer-Poet { 09.03.09 at 9:53 am }

Somehow, “More later” never includes anything like a demonstration that the expanding reserves translate to increased flow rates from old oil fields.  Neither does it include a discussion of Deffeyes, or the plateau in oil production from 2005-2008 while prices quadrupled—and the sustained high prices today despite a recession deeper than the Asian Flu of 1999.

Funny, that.

27 rbradley { 09.04.09 at 9:09 am }

Hey critics:

Let’s drop the personal attacks and just stick to the intellectual arguments. Try to keep your emotions out of it.

The BP discovery in the Gulf of Mexico the other day–a 2 billion barrel field?–should inject a little humility in the debate about ‘running out of oil.’ Yes, it will take years and a lot of new technology, but that is what the mineral extraction industry has always been about.

28 mlynch { 09.04.09 at 9:17 am }

Gee, Engineer-Poet (and others), there’s been 260 comments just on the on Oil Drum page, plus several other pages (including this one) and emails directly to me from Matt Simmons, so I apologize that I didn’t get right everybody’s specific interest.

If you think older fields aren’t being affected by investment levels, take a look at Forties and Samotlor. Both are seeing rising production, and it’s only just beginning. Fields that like, even if they only plateau, will see their ‘estimated decline rate’ come down and down.

The plateau in oil production is easily explained: OPEC cut production to maintain prices, Nigeria had production interdicted, Venezuelan production was affected by poor management. And don’t forget there is a lag time between prices recovering (which was only 2003), investment increasing, and production coming on line.
More later.

29 Philip Verleger { 09.04.09 at 12:45 pm }

This argument will never end because those with the facts such as Mike Lynch will never convince those who believe in the peak oil theory reject any and all evidence that contradicts their religion. Mr. Lynch is to be complimented for his perseverance.

My only concern is that prices might rise in 2010 to levels predicted by Simmons. Such an increase would occur not because we are running out of oil, but rather because we lack sufficient refining capacity to remove sulfur. As the IEA explained in its Medium Term Outlook issued on June 30, the 2007 rise in prices occurred because the world lacked sufficient desulfurization capacity. There were surplus cargos of sour crude seeking buyers in June 2007, even when prices hit $147. Prices could shoot back up in 2010, especially if the situation in Nigeria deteriorates.

As regards peak oil, the adherents should be reminded (a) there are no facts about the future, and (b) man’s technological ingenuity will prevent prices from ever rising to sustained levels that are significantly above $60 to $80/bbl.

30 Drumbeat: September 1, 2009 | Bear Market Investments { 09.04.09 at 1:26 pm }

[...] Michael Lynch – Response to ‘Peak Oil’ Critics (the hydrocarbon age is still young: plan a… The publication of my op-ed on peak oil in the New York Times brought forth the usual tidal wave of criticism. The Oil Drum went so far as to put up a separate page for comments, and Joseph Romm issued a ‘challenge’ to me to wager on oil prices. (For an executed bet coming due next year, see the appendix below.) [...]

31 Will { 09.04.09 at 4:05 pm }

rbradley said;

“The BP discovery in the Gulf of Mexico the other day–a 2 billion barrel field?–should inject a little humility in the debate about ‘running out of oil.’”

Since the world goes through roughly 30 billion barrels per year, we would need to find fields like that every 3 weeks. I don’t recall such finds occurring with such frequency…

mlynch said;

“If you think older fields aren’t being affected by investment levels, take a look at Forties and Samotlor. Both are seeing rising production, and it’s only just beginning.”

So out of all the world’s oil fields, you decide to cherry pick two and expect us to simply nod? Sorry, just because higher depletion techniques are used to give a quick lift to a couple of fields, we won’t throw the recent IEA analysis of an overall 6.7% decline rate out the window. What on Earth do you take us for, college freshmen?

Your explanation of the plateau is simplistic and omits many other factors, such as increasing production costs and declining fields.
“More later”.

32 Engineer-Poet { 09.04.09 at 4:27 pm }

If you think older fields aren’t being affected by investment levels, take a look at Forties and Samotlor. Both are seeing rising production, and it’s only just beginning.

You are being disingenuous here.  Since the Forties field was sold to Apache, it is true that its production has risen from ~40kbbl/d to ~70kbbl/d.  But that’s a far cry from the 500,000 bbl/d it was producing in 1979 (let’s see if the image works):

The estimated reserves when the field was sold were ~150 million barrels, compared to ~2.5 billion barrels already produced.  Even if that figure is doubled, it’s a far cry from what the field already produced, and there is no way to get production anywhere close to what it was pumping at peak.

The plateau in oil production is easily explained: OPEC cut production to maintain prices

You’re being disingenuous again.  Production plateaued while prices were doubling year-on-year.  OPEC only cut production after the collapse a year ago.

The point about lag is well-taken, but a lot of projects in the pipeline have been cancelled despite the recovery of oil prices to the seventies.  There is obviously doubt that demand will hold up long enough to recover investments, which indicates that the margins are not very big; it must cost a large part of $70/bbl to get that oil out.  If it takes much larger inputs of material, labor and energy to get a barrel of oil, it suggests that the net energy produced by the oil industry (in excess of its own consumption) has already peaked.

33 Andrew { 09.04.09 at 6:07 pm }

“Since the world goes through roughly 30 billion barrels per year, we would need to find fields like that every 3 weeks. I don’t recall such finds occurring with such frequency…”

Will, aside from your snide remark where you apparently take yourself to be smarter than a college freshman (Hm, wonder where that came from?) Iran just “found” an even larger field “days earlier”. Frequent enough for you?

34 mlynch { 09.05.09 at 7:13 am }

The charge of cherry-picking is certainly a valid one, since peak oil advocates display similar behavior. The point I’m trying to make is that patterns of investment vary over time, especially with price. (And by the way, the recoverable reserves in Forties have probably tripled.) But the point I’m trying to make is that if you estimate ‘rates of decline’ for a field that has declined for 20 years, and then it goes flat or up for 6-8 years, then the decline rate will be much lower.
Unfortunately, the decline rate question is very difficult because of the lack of transparency. We don’t have investment field by field except in a few cases, and everyone, including the IEA has struggled with this issue.
Regarding the irrelevance of a single 2 billion barrel field, remember that in the 1990s, non-OPEC production rose sharply and there were few 2 billion barrel fields.
More late.

35 mlynch { 09.05.09 at 7:44 am }

I’m herewith coining a new term, Nitwitters. This is for people who make brief, uninformed and useless comments, such as ‘you’re a fraud!’. Historically, we only hear this sort of thing when someone prominent like Pres. Ahmadinejad of Iran says something stupid like denying the Holocaust, but now, the general public can expose large numbers of their comments.

Granted, refferreed journals do not always serve the role of allowing debate to go forward (given the time lag), but since many seem to judge a validity of an argument by the numbers who repeat it (oops, I mean, scientific consensus), it is not completely irrelevant. I disagree with McLuhan’s comment that ‘the medium is the message’ but there’s no doubt it influences the message.
Mike

36 mlynch { 09.06.09 at 8:28 am }

Ouch. Apparently Nitwitter is not original. Someone sent me a site that sells t-shirts with it. Maybe we should start handing them out. :)

37 Tribute to Tiber: “Oil is Found in the Minds of Men” — MasterResource { 09.09.09 at 1:01 am }

[...] the (Canadian) National Post, can be read in conjunction with MasterResource posts on "peak oil" here and here. A brief bio of Mr. Foster appears at the end of this [...]

38 Will { 09.09.09 at 3:13 pm }

Having to resort to calling people names, Mr Lynch? It seems a nerve has been struck here. If making uniformed and useless comments is the criteria, I’m afraid you’ve made so many wrong predictions as to earn the award you wish to assign to others.

Andrew, if you take Iranian unaudited data at face value, see Michael for a t-shirt…

39 FT.com | FT Energy Source | The Source: India’s emissions; Solar from space; Eni { 09.10.09 at 1:50 pm }

[...] Lynch responds to critics of his anti-peak oil oped in the NY Times [...]

40 mlynch { 09.15.09 at 7:07 am }

Gee, Will, forgive me for making a comment that isn’t substantive but only critical. Oops, that was you, too!
Again, if you think my record disqualifies me from commenting, you obviously don’t know my record or those of peak oil advocates. Which was one of my original points in the op-ed.
Mike

41 Peak Oil Update - GetRealList { 09.21.09 at 1:31 pm }

[...] Lynch fired back quickly, saying that my article “tops them all” and alleged that I had predicted $500 oil with [...]

42 contraryfarmer { 09.24.09 at 9:12 pm }

Philip Verleger, did you really say this?!?!

As regards peak oil, the adherents should be reminded (a) there are no facts about the future, and (b) man’s technological ingenuity will prevent prices from ever rising to sustained levels that are significantly above $60 to $80/bbl.

You do realize that statement (b) is a, you know, prediction about the future.

LOLZ

43 Drumbeat: September 1, 2009 : Hawaii Clean Power { 10.18.09 at 6:24 am }

[...] Michael Lynch – Response to ‘Peak Oil’ Critics (the hydrocarbon age is still young: plan a… The publication of my op-ed on peak oil in the New York Times brought forth the usual tidal wave of criticism. The Oil Drum went so far as to put up a separate page for comments, and Joseph Romm issued a ‘challenge’ to me to wager on oil prices. (For an executed bet coming due next year, see the appendix below.) Responding to each and every comment, or even the main ones, would be a Herculean (and Sisyphean) task, so I will (here) make some hopefully useful observations. [...]

Leave a Comment