Posted on 01/27/2006 5:23:10 PM PST by LouAvul
DAVOS, Switzerland (FORTUNE) - Be afraid. Be very afraid.
That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.
The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.
"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.
Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.
(Excerpt) Read more at money.cnn.com ...
" .. think that hydrogen itself will make a poor transport fuel due to its energy density (half the BTU's by volume as gasoline) "
Correct point, and enough to tell us that hydrogen-powered cars is a pipe dream. It's either gasoline, LPG, electricity or bio-fuels.
"The reactors that generate heat this high could also be used to provide the process heat for other types of synthetic fuel production."
Possible, so you may have hydrogen from nuclear plants feeding a coal syngas plant.
"That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel."
"In other words, Browder is engaged in the pump, prior to engaging in the dump."
Yeah, that was my initial reaction too. This is the kind of talk you hear near peaks of bubbles. Is that the real Peak Oil?
"I cannot identify what was overlooked in his assessment."
Well, I can. It's really simple.
The "Hubbert peak" is at half the production extracted, supposedly. So they estimate that half-way point using *proven* reserves.... problem is porven reserves tells us what we know is out there now. It doesnt tell us what might be out there that we havent found yet. Inevitably the final number is higher. These models of peak oil are all saying "this is what is left, we used half of it, we're done for!" So Peak Oilers keep using the wrong number as input, getting bad data as output.
as an example, in the 1980s, the USA had less than 10 years of 'proven reserves' left!!! That means you could have been saying in 1985..."hey, we are going to run out of oil in 1995!" Well, it didnt happen. Not only did it not happen, but if you check the 'proven reserves' numbers for 2005, they are about the same as for 1980s. (Off top of my head, I believe the number is around 30 billion barrels of oil.) We pumped out entire proven reserves base in the interim, and *still* have the same level of proven reserves! There is no doubt in my mind that after the next 1 trillion barrels of oil that we use, that the global proven reserves levels will include many oil resources that are not counted today as proven. That alone shifts the ultimate correct Hubbert's peak (which can only be observed either in hindsight or with full knowledge that we *wont* and *cant* find any more oil resources.).
The IEA estimates that show gradual peaking in 20-30 years more accurately estimate that process of both expanding reserves in current fields, and finding some additional new field, but the scenarios are not frightening enough for the fearmongering side of Peak Oil hype. It's very easy to project running out of something if you dont count all of what's out there.
"If Saudi Arabia can keep it going and increase production to 12 million barrels a day as CERA predicts than we just might make it to 2015, but if Ghawar starts declining before 2015 and with it Saudi Arabia (outside of CERA's predictions) then its difficult to come up sufficient additional oil production to avoid a peak."
This is simply not so. While it is true that most models rely on OPEC production increasing from around 30 mbd total to near 40 mpd by 2015, the non-OPEC production is expected to increase by an equal amount. (See the CERA testimony or their analyses, which was 50/50 OPEC and non-OPEC.) The Saudi contribution is important but only a small part of the overall increase in production capacity of 16 million barrels per day over next 10 years. In other words, if Saudi Arabia can't increase by the project 2-3 mbd, there would still be another 11-12 mbd increases on tap. Places like Nigeria, Libya, Algeria, central Asia, are on tap to increase and smaller non-OPEC plays like China, Brazil and GOM are all expected to contribute to that. This also leaves out Iraq, which, if it gets straightened out, could increase by 2-3 mbd above current production.
We have a more diverse supply of oil than is commonly supposed. Saudi's are big, but their 'market share' of oil production is only 14% or so, and if they cannot increase, others will. What *is* important about the Saudis is that they are the one country today with significant reserve capacity - they could pump more if need be, starting tomorrow.
"That is not true. The world proved reserves of petroleum has continued to increase. In addition to meeting the increasing demand, the reserves continue to grow with new discoveries and improved technologies.
In 1985 the reserves stood at 700 billion barrels, today they are at 1293 billion barrels. This is a 85% increase in reserves while also supplying the demand. There has been a 28% increase in the last decade."
Thanks for that factoid!
People are often fooled into thinking that '1293 billion barrels of proven reserves' means that is all that is out there. Actually it is a lower bound on what is out there.
reasonable estimates are for 3,000 billion barrels of oil resources that are economically recoverable at today's prices or lower. If you add shale, it goes up a few more trillion barrels.
At current production levels, 3,000 billion barrels will last ... 100 years.
Shenanigans!
There is an apples v orange discussion here - 'proven reserves' versus a calculation of total final economically recoverable resources available. Current total proven reserves, as another poster cited, is around 1200 billion barrels.
The IEA study I've been speaking of was tying to calculate the actual recoverable oil resources over time. Beyond proven reserves, it looks at how reserves and resources might be found and recovered. They speak of 5.5 trillion barrels of oil resources recoverable, 1 trillion of which has been produced ... leaving 4.5 trillion:
http://www.iea.org/textbase/nptable/Oil%20cost%20curve,%20including%20technological%20progress,%20availability%20of%20oil%20resources%20as%20a%20function%20of%20economic%20price.pdf
It shows ...
OPEC+ME = 1000 billion barrels
other conventional oil = 900 billion barrels
deepwater = 100 billion barrels
Arctic= 200 billion barrels
EOR = 300 billion barrels (above $20/barrel)
heavy oil bitumen (tar sands) = 1000 billion barrels
oil shale = 1000 billion barrels (above $30/barrel)
I've already made my points about the difference between 'proven reserves' (always conservative based only on current knowledge and technology of fields) versus
'ultimately recoverable resources'. If we want to talk about what will happen in the next 50 years, we have to talk
about the latter concept. My 3 trillion number was including the tar sands, which is starting to be included in even 'proven reserves' estimates. This is reasonable, we are producing it now.
Still, if you want to back that out, you still have about 2 trillion of conventional oil economically recoverable oil (meaning we are really 1/3 of the way through).
See their publication:
http://www.iea.org/bookshop/add.aspx?id=204
BALONIE!!
See post 15,plus we have enough coal to convert to oil in this country to last OVER 100 years! Diesel fuel made from coal burns cleaner than diesel distilled fron oil.
YUP...7 month wait for a drilling rig, so even the speculators...who may have rights to a mineral lease...and have to gamble with popping a whole in the ground have to wait for the ever more expensive driller to show up on location to find out if it is a dry hole they are about to hit!
Thank you, Laz, for, as always, being the voice of reason. :-)
George Soros aka George Scwartz: the international pimp dares to squeak. What a bone head.
Don't say that! The muzzies will get excited!
I think Steve Forbes said it'll drop to $30.
Look at current - let alone projected - of US consumption.
Then look at - even optimistic - estimates of US reserves.
Can't drill our way out of this one.
No offense, he either lied or does not understand the market. False predictions are important if one wants to make a lot of money from people who panic.
All the more reason to start building more nuke plants. Lots of them. Nuke-producted electricty can be used to power homes and battery-powered cars. To hell with the Saudis
I do not believe Mexican or Kuwait oil "peaked" or know what your definition of the term is. There is more oil than the general public realizes and new methods of getting it being developed every year.
IF past predictions were believed, we ran out of oil about twenty years ago. So, I guess nobody knows where the current oil supply is coming from.
Regardless. Drill ANWR and develop nuclear energy along with research for new energy sources. Democrats want the last one but go balistic over the first two. The heck with them.
Why "yikes"?
1. Soros. That should be enough right there.
2. Out of Switz. where Kerry and a bunch of others were, and likely met with Soros. Socialist talk, thats all.
OHMYGODDON'TLETCANADAHAVESOMUCHOIL! Wealth does not suit Canada well.
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