You’ve heard of peak oil theory and have a vague idea of what it is, and you know much of the world economy runs on oil, but how specific is your knowledge? If you invest in individual oil stocks/trusts as I do, you’ll want to know as much as you can about the oil industry. Since I’ve been reading Jeff Rubin’s Why Your World Is About To Get A Whole Lot Smaller (2009) (read my review of Jeff Rubin here), I’ve been clarifying a few of the vague notions I had before. And if there’s anything one can say about Rubin, it’s that he gets his message across loud and clear.
For those not familiar with Jeff Rubin, he used to be the top economist at CIBC World Markets. He’s since left that position to go out on his own – which he can do, now that he’s one of the most consulted experts on world energy. He predicted the huge run-up in oil prices back in 2000, and is a major proponent of Hubbert and Campbell’s peak oil theory (the words “proponent” and “theory” are arguably inappropriate here, since “peak oil” is hardly in the same speculative box as quantons or dark matter – it’s much easier to verify/falsify). The following facts come straight from Rubin’s research:
- Discovery of new oil fields (in whole world) peaked in 1966.
- U.S. oil production peaked at 10 million barrels/day in 1971.
- There are 42 gallons of oil in a standard barrel.
- U.S. burns about 25% of world’s oil but produces less than 10% of it.
- World oil production has hardly grown at all since 2005.
- In August 2008, oil prices still hit their record highs despite Americans having driven 15 billion miles fewer than in August 2007.
- Oil companies can barely get half the oil out of a well before geophysics and economics make what’s left not worth going after.
- U.S. oil consumption has increased from 15 million barrels/day in 1970 to 20 million barrels/day in 2009.
- Oil consumption in Australia and New Zealand is up 63% and 74% since 1980.
- The Gulf of Mexico is the only place in the U.S. where oil production has grown in the last 15-20 yrs.
- Underwater fields deplete twice as rapidly as conventional fields on land.
- Deepwater oil discovery peaked in 1996.
“The oil that is coming on line to replace the declining wells is dirty and hard to find. It is unreliable and expensive. Like the change you desperately look for in the pockets of pants you haven’t worn for a while, a lot of the oil we refine and burn these days is stuff we wouldn’t even bother with if we still had access to yesterday’s oil fields.”
Rubin’s general point, as I mentioned in the review, is not one we haven’t heard before. We’re running out of oil; yes, we are. It’s not going to happen overnight, but by the end of another 10 years we’re going to see some painful pricing and tough choices in regard to our food and travel choices. What Rubin does is bring all the facts together to create a shocking picture that allows you to see ahead 20 to 40 to 60 years from now.
It makes me reconsider the warnings of the somewhat extremist trends analyst, Gerald Celente. He studies all of this. His tracking programs follow all of this data and merge it with other global trends such as declining water supplies (for example, in countries like Saudi Arabia, “fresh water in underground aquifers is already down 50 percent from the levels of the mid-1990s.”). What I’d like to be able to do is create my own, less statistical picture on the basis of all of this and use it to make my own plans and better decisions going ahead.
For example, after reading this book, I’m not sure what I should think about in terms of buying a car going forward. Rubin notes that even if we all had electric cars, at the current usage and number of miles driven in America, we don’t even have enough electricity to power all the cars. And it’s clear that gas prices are going to get much worse. Is the best we can do to hope that our governments invest in better, more efficient public transit? Let’s hope that’s what the Obama administration moves towards, rather than building more and better roads – because it sounds like there are going to be less and less people driving those roads.
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{ 14 comments… read them below or add one }
It’s fascinating to me that our current transportation methods in the U.S. developed as a result of our desire to be “independent” from public transit and move about on our schedule. However, we actually have a different form of dependence: Our dependence on a resource that is dwindling. The bottom line is that we are dependent on something that, by definition, has to become more expensive. Oil is a limited resource, and can only become scarcer and more expensive in the long run. Developing alternative/renewable energy resources and putting in reliable and convenient mass public transit may be more expensive at first, but in the long run it will cost much less.
That’s a good way to put it – and interesting that no one ever saw that oversight back in the days when the carmakers lobbied to get rid of many forms of public transit. I guess near-term profits always cloud long-term vision? Hopefully that changes at least with respect to environmental factors going ahead. It sounds like Obama realizes this, but we’ll have to see what actually transpires.
Time for solar powered cars! :)
Yeah, right – if we can split an atom and burn a city within seconds, we should be able to use photons from the sun and run a car all day:)
Interesting post! I start a small portfolio of stocks a couple of months ago. I only have one “oil” company stock in my portfolio because I am investing for a long term basis. I hope one day modern cars will work with solar or electricity and oil will worth barely nothing because i won’t worth anything… Hope it will happen soon because of the pollution and stuff.
It’s ad that we continue to use more and more oil every day. Hopefully with more funding to companies like Tesla and Aperta, we can become less dependent on oil and more on renewable sources. In order to make the EV a truly green option, we need to keep increasing our renewable energy supply to also reduce our dependency on sources like coal and nuclear.
This is the stuff I wrote about before I started ERE. I found that we were mostly preaching to the choir (this was back in 2003). However, oil resources are a serious serious issue and their depletion will change the world. No, there will not be “substitutes” in the sense that people can just switch to alternative energy soures and everything will be the same. The “way of life” will have to change. I started ERE mainly because I wanted to promote ways that would make the transition easier on people while avoiding the cassandra problem. Early retirement was just the carrot that I thought most people, at least the oil consuming people, could relate to—or relative better to than creaming curves, etc.
hello
i just wanted to know where you get your infomation from???
and how much of it is true?
hellooo,
i was just wunderin were u get ya info from, cod ya give us a ring, me young bearn wants 2 no! thanx n all that like
cyas yas’ round
bibi
xxxx
@boberys – check out the link to the book review in the post – I did a series of posts based on what I read in Jeff Rubin’s book on peak oil.
hello @MoneyEnergy thankyou very much for your reply!! it will be taken on board! what is your name? and will you go on a date with me????
ly lots xxx
Logic alone tells you that if the worlds surface was ball of cheese and a plague species growing in population starts eating the cheese, eventually the cheese will run out. Cheese will be harder to eat the deeper you have tunnel for it.Eventually it won’t be worthwhile tunnelling for it, and you’ll have to eat something else. At that point since your populations growth depends on cheese as its primary source of energy, your population must die off. Eventually American must return to the stone age along with the rest of the planet. Remember, there is no substitute for kerosene (I’ve made loads of calculations on jatropha, it doesn’t add up). That means no planes. No planes means no transport of goods to market. No transport of goods means subsistence farming and mass starvation on a planetary level. Medicines, food supply and water supplies would all be hit. Worst of all, no oil, no combine harvesters, no fertilizers. Every species must one day die out. Every species will go up and down in population. But they must go extinct eventually.
Look everybody oil is going know where. There is enough oil for all of us forever and ever. Didn’t you know that the U.S. and Saudi Arabia are friends.
@Stoneage Man – how about scientific innovation? Aren’t you familiar with alternative energies research?