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Image | Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
 by Chris Martenson

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
 by Chris Martenson

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Image | Not Cheap, Not Easy: Getting the Last Oil Out
Not Cheap, Not Easy: Getting the Last Oil Out
 by Chris Martenson

Last September (2009), a spectacular oil find was trumpeted all over the news.  It was deep and it was audacious, but the technological prowess on display gave some people the ammunition they needed to continue to deny the reality of Peak Oil.  At the time, I received more than a few emails from individuals who used this find as proof that Peak Oil, even if it was real, was still far in the future.  Faith in technology was given a huge boost by this nature of this find.

I countered with my usual mantra of TIME, SCALE, & COST, arguing that there’s a gigantic gap between a brilliant technical demonstration and full-scale production.  I was quite skeptical of this particular find, because it was 35,000 feet under the surface, a full mile deeper than Mount Everest is tall.  I’ve used this specific example in every talk I’ve given since.

To jog your memory, here’s the original news article:

Not Cheap, Not Easy: Getting the Last Oil Out
 by Chris Martenson

Last September (2009), a spectacular oil find was trumpeted all over the news.  It was deep and it was audacious, but the technological prowess on display gave some people the ammunition they needed to continue to deny the reality of Peak Oil.  At the time, I received more than a few emails from individuals who used this find as proof that Peak Oil, even if it was real, was still far in the future.  Faith in technology was given a huge boost by this nature of this find.

I countered with my usual mantra of TIME, SCALE, & COST, arguing that there’s a gigantic gap between a brilliant technical demonstration and full-scale production.  I was quite skeptical of this particular find, because it was 35,000 feet under the surface, a full mile deeper than Mount Everest is tall.  I’ve used this specific example in every talk I’ve given since.

To jog your memory, here’s the original news article:

Image | China Follow-Up, Energy, and the Future
China Follow-Up, Energy, and the Future
 by Chris Martenson

In the most recent Martenson Report, I laid the foundation for understanding that China may be on an aggressive policy of resource acquisition tuned to the reality of depletion.

Here are a couple of very interesting ideas and news items that have come out.  The first is that the US government is now publicly concerned that China may be trying to “lock up” oil reserves.  I find this somewhat humorous because this message is conveyed without the slightest trace of irony.  This, of course, has been the US’s own policy for a very long time.

China Follow-Up, Energy, and the Future
 by Chris Martenson

In the most recent Martenson Report, I laid the foundation for understanding that China may be on an aggressive policy of resource acquisition tuned to the reality of depletion.

Here are a couple of very interesting ideas and news items that have come out.  The first is that the US government is now publicly concerned that China may be trying to “lock up” oil reserves.  I find this somewhat humorous because this message is conveyed without the slightest trace of irony.  This, of course, has been the US’s own policy for a very long time.

Image | “It’s Really Bad” – Oil Supplies Intentionally Overstated
“It’s Really Bad” – Oil Supplies Intentionally Overstated
 by Chris Martenson

The Guardian published an explosive article today.  If true, it means that governments have been intentionally overstating the amount of oil that we have and could pump out of the ground. The implications are enormous.

This confirms the evidence that I saw at ASPO that had been painstakingly developed by independent researchers.  So we might want to incorporate this news into our personal and financial frameworks.

First, a snippet:
“It’s Really Bad” – Oil Supplies Intentionally Overstated
 by Chris Martenson

The Guardian published an explosive article today.  If true, it means that governments have been intentionally overstating the amount of oil that we have and could pump out of the ground. The implications are enormous.

This confirms the evidence that I saw at ASPO that had been painstakingly developed by independent researchers.  So we might want to incorporate this news into our personal and financial frameworks.

First, a snippet:
Image | The Energy-Less Recovery
The Energy-Less Recovery
 by Chris Martenson

There is such a tight correlation between energy use (specifically petroleum demand) and economic growth that it is almost unthinkable to suggest that one could actually have a recovery in the economy absent a recovery in petroleum demand.

But that’s what we are being asked to believe, if we put the results of two separate government reports together that both happened to come out today.  The first says that the US economy shrank by only 0.18% percent in the second quarter, or at an annualized rate of 0.7%.  The second says that oil demand in July retreated to a level last seen 13 years ago.

These do not make sense in the least, and one of them has it dead wrong.  You know where I am going with this already, don’t you?

Here’s the first:
The Energy-Less Recovery
 by Chris Martenson

There is such a tight correlation between energy use (specifically petroleum demand) and economic growth that it is almost unthinkable to suggest that one could actually have a recovery in the economy absent a recovery in petroleum demand.

But that’s what we are being asked to believe, if we put the results of two separate government reports together that both happened to come out today.  The first says that the US economy shrank by only 0.18% percent in the second quarter, or at an annualized rate of 0.7%.  The second says that oil demand in July retreated to a level last seen 13 years ago.

These do not make sense in the least, and one of them has it dead wrong.  You know where I am going with this already, don’t you?

Here’s the first:
Image | Saving Oil in a Hurry
Saving Oil in a Hurry
 by Chris Martenson

What would happen if there was some sort of an oil emergency that required countries to rapidly cut down on their fuel use?  Clearly there would have to be some sort of a triage plan to allocate what oil was available.

There are a number of possible scenarios that could lead to a cessation of oil imports and/or distribution, ranging from hurricanes to wars in the mid-east.

This is worth thinking about, because the impact to your lifestyle could be large, depending on your circumstances.

Luckily, we have a pretty good ‘lens’ into the mindset of the official planners, because in 2005 the IEA completed a study where they assessed the types of policy responses that would save the most oil and at what cost (to implement; not to lower the impact on the economy or your lifestyle, obviously).
Saving Oil in a Hurry
 by Chris Martenson

What would happen if there was some sort of an oil emergency that required countries to rapidly cut down on their fuel use?  Clearly there would have to be some sort of a triage plan to allocate what oil was available.

There are a number of possible scenarios that could lead to a cessation of oil imports and/or distribution, ranging from hurricanes to wars in the mid-east.

This is worth thinking about, because the impact to your lifestyle could be large, depending on your circumstances.

Luckily, we have a pretty good ‘lens’ into the mindset of the official planners, because in 2005 the IEA completed a study where they assessed the types of policy responses that would save the most oil and at what cost (to implement; not to lower the impact on the economy or your lifestyle, obviously).
Image | Natural Gas Prices in Free-Fall
Natural Gas Prices in Free-Fall
 by Chris Martenson

As you know from the oil reports I put out a while back, I am concerned that our broken paper markets are having real-world impacts that might prove to be regrettable.  One of those areas is in the realm of NG pricing and production.

I am convinced that we are in the midst of a price/supply/demand whipsaw that will leave us poorly prepared for a resurgence in energy demand that is sure to come.

Gas Reserves Hit New High, Forcing Prices Downhill

Natural Gas Prices in Free-Fall
 by Chris Martenson

As you know from the oil reports I put out a while back, I am concerned that our broken paper markets are having real-world impacts that might prove to be regrettable.  One of those areas is in the realm of NG pricing and production.

I am convinced that we are in the midst of a price/supply/demand whipsaw that will leave us poorly prepared for a resurgence in energy demand that is sure to come.

Gas Reserves Hit New High, Forcing Prices Downhill

Image | Chart of the Day – US Oil Imports
Chart of the Day – US Oil Imports
 by Chris Martenson

This is your chart of the day.  If anything can explain exactly the sort of difficulties our economy is facing, this is it.

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All economic growth requires energy.  This decline in energy use is the first such decline in the entire history of our energy records.  Sure, there have been a couple of minor dips (back in the 1970’s), but nothing quite like this.

Chart of the Day – US Oil Imports
 by Chris Martenson

This is your chart of the day.  If anything can explain exactly the sort of difficulties our economy is facing, this is it.

/></p> <p>(<a href=Source)

All economic growth requires energy.  This decline in energy use is the first such decline in the entire history of our energy records.  Sure, there have been a couple of minor dips (back in the 1970’s), but nothing quite like this.

Image | Resource Wars
Resource Wars
 by Chris Martenson

This is a must-read article.  It shows that the big money, and what I consider to be the long-term smart money, is moving aggressively towards locking up the last remaining critical resources on the planet. This article centers on crop land, but it could just as easily center on critical mineral resources. Or oil.

Wish you weren’t here: The devastating effects of the new colonialists

Resource Wars
 by Chris Martenson

This is a must-read article.  It shows that the big money, and what I consider to be the long-term smart money, is moving aggressively towards locking up the last remaining critical resources on the planet. This article centers on crop land, but it could just as easily center on critical mineral resources. Or oil.

Wish you weren’t here: The devastating effects of the new colonialists

Image | Oil, More and Less
Oil, More and Less
 by Chris Martenson

Another post of interest from the In Session archives:

Oil is a tale of more and less.

Here’s the more:

Saudi Arabia has started production from its giant Khurais oilfield, the largest ever single addition to global oil supplies, Saudi Aramco’s top executive said in remarks broadcast on Wednesday. 

Oil, More and Less
 by Chris Martenson

Another post of interest from the In Session archives:

Oil is a tale of more and less.

Here’s the more:

Saudi Arabia has started production from its giant Khurais oilfield, the largest ever single addition to global oil supplies, Saudi Aramco’s top executive said in remarks broadcast on Wednesday. 

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I keep adding more reports - this week I pulled the SPR up to the top, because the price of oil is really beginning to matter again: Durable Goods (DGORDER): -15.7B (-5.51% m/m); retreat from last-month's all time high. ISM Services: 54.4 actual, 52.7 prior; expansionary. Strategic Petroleum Reserve (WCSSTUS1): +798k (+0.23% w/w), with oil at $87/bbl. Fed...
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