Dear 20-somethings that rule this board. If you don't know about Hubbert's Peak you are never going to understand what's happening to oil prices. M.K. Hubbert predicted that the continental U.S. would hit peak production (key note here: peak is not 'out of oil' but the point where the oil will never come out of the ground faster than it did previously.) in 1970..he made this prediction in 1956. And he nailed it! He was scorned at the time but his legacy is that we all better wake up in a hurry as to what is really happening. Even the discovery of the Alaska's Prudhoe Bay barely dented the U.S. production decline curve. Here's a link laying out the basics:
http://en.wikipedia.org/wiki/Peak_oil
Matt Simmons wrote a book in 2005 called Twilight in the Desert explaining how Saudi Arabia was due to hit peak production soon. Originally he thought it would be between 2008-2010. Guess what, much of the world now agrees the Saudi's hit Peak in May of 2005. Their field by field statistics are not openly published, the U.S. fields are by law, but Aramco has published enough engineering studies to piece together the true picture. The U.K.'s vaunted North Sea? It Hit Peak in 1999. Mexico's vast Cantarell field? It Hit Peak in 2005 and is now in a nasty decline. The NYTimes just reported that Mexico is now reporting their third straight year of missed production goals and is scaling back production goals for 2008. Don't take my word for it, none other than T. Boone Pickens is on CNBC explaining, to deaf ears it always seems, that world production hasn't exceeded 85 million barrels for two years and world demand this year is 87.5 million barrels/day. The gap is made up by reserve supplies being drawn down and other fuels like Liguid Natural Gas (LNG), coal and others. But that surplus is now completely tapped out. It just won't stretch anymore.
This is not an alarmist post. Check my facts. We are willful ignoring the truth because it seems so implausible. It's just too hard to imagine having grown up with experts telling us the easy oil would last forever. Currency dips and spikes, market manipulation, and greedy oil companies are lazy excuses for the real truth. At $100/barrel oil is still only 16 cents a cup. It's cheaper than bottled water! I'm a true leftist soul but i've come to a grudging realization that the oil companies are damn good at what they do and they are producing flat out. Now, the OPEC countries, Russia and others are realizing this Peak Oil reality and most likely talking about not depleting their precious oil supplies to keep the world from bitching about prices. It's now going to be truly 'black gold' as far as power goes on a world stage. Currently we import 73% of our oil needs on a daily basis and ship out billions of dollars of our nations' wealth to pay for it. And yet we STILL haven't got religion about other energy sources. Oil sands? They EROI (energy return on investment) flat out stinks and is an environmental and political nightmare. Alternatives show a little promise but not a ton. They are 10-15 years away from being anything significant. And you can't put solar panels on a 747, locomotive that would count for anything significat for power.
Folks, 2009-2012 are going to be brutal. Think where prices are at today's close and factor in that the general public has yet to grasp the situation. When it does, look out. Panic and hoarding will not be far behind. Yes, I believe this country can adapt...over time. But the next few years are going to be tough. Hunker down, buy a Prius and invest in commodities for the long term. It's going to get rough. And go to Matt Simmons website for terrific and free powerpoint ready presentations on this.
Here's the link: