I expect I'll be recording my thoughts and conclusions from the US ASPO conference in a series of posts. I expect I'll give each of the main questions I came to the conference to learn more about separate posts. They are:
- Is Peak Oil real? I went in assuming it was real, but was looking for the latest data in terms of confirming or denying it.
- When does Peak Oil bite? When does it start significantly changing my investing and personal landscape?
- How significant is Peak Oil and what does its impact look like?
- What preparation should I make, in terms of investing and in my personal life?
- Which voices are the most credible and the most important to pay attention to in-order to track Peak-Oil and its implications going forward?
This post covers the last question. In this first post, I provide my notes for the speakers who had enough to contribute to make it to the "Must Follow" list. I'll be trying hard to follow all of these folk's work. Bold print is used to high-light the takeway actions for myself and key points which for me were new and significant. This voices are listed in a logical order rather than the order of importance.
Chris Skrebowski, Energy Institute, London - Skrewbowski is the best analyst I know of in terms of empirically looking at oil supply going forward. Follow his work. Determining the actual liquid fuels peak is much harder after 2008 as demand has changed. OECD demand has shrunk will developing demand is still growing. OPEC has extra supply but its hard to tell how much. The EIA show 2012 as the peak not counting "unidentified projects". Skrewbowski thinks late 2014 is the peak (THAT's JUST 4 YEARS AWAY!!!). Skrebowski goes with 4.7% depletion of all existing production based on 3/4s of EIA's 6.7% depletion for post-peak fields. Skrewboski is expecting no production growth for 2012 with a little growth in 2013 and 2014. EIA is predicting demand growth of 1.2 Mbpd/year with no double-dip recession. Only half of oil demand is now the OECD. The peak will be around 93.8 million bpd. Current spare capacity is around 4 mbpd with the Saudis, Kuwait and UEA having 2/3s of spare capacity. Takeway: The Saudis control the price of oil. They have been targeting successfully a price band of between $70 and $80/barrell for years and should be able to continue to control the price of oil for another 2 years. Iran, Ecuador and Venezuela oil production is in a sustained decline. Iraq is a real wild-card. Apart from political/security concerns they could produce a lot of oil and shift the peak a couple of years. Takeway: Watch Iraqi oil production closely. The real (inflation adjusted) price of oil is higher now than in 96 of the last 100 years. $100/barrel price is needed to bring on new Arctic, Deep-Water, oil-sands, etc. The U.S. economy goes into recession whenever its oil expense exceeds 4% of GDP. Takeway: Find a way to graph and watch this.
Jeffrey Brown discussed the availability of oil exports as Peak Oil kicks in. The key idea is that exports can be expected to drop off even faster than oil production as exporting countries keep more for themselves. This was backed up with a strong, empirical case based on examining several exporting countries that have already peaked. This idea is not new, but the conclusion of his pitch (if my notes are right) was that IF oil production plateaus at the current level AND IF India and China and oil exporter consumption keeps growing at the recent rates THEN in 5 years the rest of the world will have to get along with one third less oil. Brown is a significant contributor worth following.
Chris Martenson - what a great presenter! Great popularizer, but still very empirical. Fantastic at boiling it down to the key convincing information and seeing the big pictures. Takeway: Buy the DVD and show it to all of my scientifically oriented kids and nieces and nephews. Takeway: Find a way to follow this guy's works. He claims there is a relationship between the economy and energy and that energy is the key input to the economy. He claims peak coal in 2030. Integrates fiat, fractional reserve money system where money is loaned into existence with Peak Oil. The money system requires continued GDP growth which it has been getting from cheap oil-based energy (whose consumption has been growing at roughly an exponential rate). He claims that bad and unexpected things are bound to happen as oil-based energy cannot continue to grow and thus the fiat money system can no longer grow. The money system will have to change. The money system is a complex non-linear system and is inherently unpredictable. Martenson answers the question: "How did we get two bubbles in one decade: Internet and Housing" when ordinarily they come at least a generation apart" with the answer: "They are really one big credit-expansion bubble which hasn't blown up yet". Financial markets do not change gradually and some kind of fundamental change is about to happen. Takeway: I've got to get more liquid so that I can change course when the big changes hit. My illiquid little gold miners cannot continue to hold the fast majority of my portfolio value.
Dr. Robert Hirsch, Senior Energy Advisor, MISI - Seems to have the best overall view (and makes the best overall case) that Peak Oil is significant and what its implications are. Takeway: Get his latest book and read the implications (and timing) chapters. Hisch makes a strong empirical case that oil consumption correlates with world GDP 1 to 1 (1% GDP growth correlates with 1% oil consumption growth) and that with Peak Oil we might very well be looking at a 4% fall in oil (and GDP) for at least a decade (that's a more than 40% drop in world GDP!!!). Many more good points were made, but I didn't take notes. Not a radical, but still quite a gloomy outlook. I think that's the way it is.
Hope you found this useful. Leave me a comment and let me know which Peak Oil voices you think are the most important.
MontyHigh, www.worldofwallstreet.us