Matt Simmons: Peak Oil Now, Oil Perhaps to $300

32 Comments on "Matt Simmons: Peak Oil Now, Oil Perhaps to $300"

coffeeguyzz on Fri, 3rd Oct 2014 7:32 pm 



Did Nony get to post this?

Mark on Fri, 3rd Oct 2014 9:27 pm 



Apparently back from the dead?

Makati1 on Fri, 3rd Oct 2014 10:26 pm 



I like Matt. And, I too think oil could get to $300 in the not too distant future. Yes, the road to $300 would cause a lot of havoc in the world economy, but, barring a world war, there would still be many uses that make $300 oil profitable.

If diesel was 3 times today’s $4/gal (here in the Ps.) trucks would still roll. They wouldn’t be carrying anything except necessities, but they would still be profitable. That would make gasoline here about $15/gal, but again, it would only be used for necessary travel. A large percentage of current car owners would disappear, as they lose their jobs and had to give their condos back to the bank, but they would adjust back in the province with their extended family. Especially, if it takes a decade or so to get to that $300 oil.

It would decimate the US, and adjustment there would be much more difficult as it is an oil/energy waste country. Ditto for Japan, unless they fire up their 40 nuke plants, and most America wannabees. Air flights would go back to the domain of the military and wealthy. Tourism would be dead. Malls would be dead. Traffic would thin out to mid 1900 levels, or less. Etc.

If you disagree, tell me why. But, look around you and see what would change with even $200 oil. We will be on the farm in the next two years and independent of oil for the most part. Or any outside energy source other than the sun.

The house we plan to build, is the size of a 50s rancher and of durable construction. Concrete, steel and masonry with shuttered windows and stainless steel hardware. Myself and my friends here have a lifetime in construction and design and plan to use our experience to build a low maintenance, low cost home that will not need replacements in a world without them. What are you doing for your future shelter?

coffeeguyzz on Fri, 3rd Oct 2014 11:09 pm 



Nice post, Makati. I was on the drillship the Tainaron back in ’75/’76 when we discovered the first gas/oil fields off Palawan. Beautiful country, great people. Peurto Princessa was the tiniest, most pristine fishing village … an enchanted place.
I salute your foresightedness regarding independence and self reliance. These are eternally invaluable traits.
My own situation vis-à-vis the future is not so pressing due to age amongst other factors (I’m probably older than Rock and as we all know that’s older than the hills.) But I still maintain a keen sense of responsibility to posterity to leave any place/situation better than I found it. It is how I was raised.
My views most likely differ markedly from most who frequent this site. I started viewing this and other similar venues to learn why my extensive readings on these topics could be at such seeming variance to others interested in this important topic. In that quest, I have been successful.
I will leave you with this, Makati, wherein the above Simmons clip may be relevant (I also admired Mr. Simmons) … the ancient Greeks were said to have viewed time differently than we in that they looked backwards – as in seeing the wake of a boat-so as to get a better perspective on where they were going in the future.
Best wishes, Makati. Via con Dios.

LarsK on Sat, 4th Oct 2014 2:29 am 



What’s the point of showing us an almost 8 year old video? I mean in the mean time comes shale oil, tar sand and what have we. I’m not saying were not peaking at some time, of course we are, but somehow our civilization manages to postpone the problem again and again.

meld on Sat, 4th Oct 2014 2:51 am 



Oil will never get to $300, it may reach $200 one day in a very brief blip but will soon collapse once another round of catabolic collapse kicks in

Makati1 on Sat, 4th Oct 2014 5:13 am 



meld, you base that on what? A barrel of $300 oil would kill the US economy like a nuclear bomb on NYC, but it would not stop oil from being pumped and sold. There are productive uses for oil that would not find $300 as unprofitable.

A truck that uses 500 gallons of diesel to go coast to coast with a 40 ton load of, say, steel rebar, would only add maybe 20% to the cost at the retail end. Say that the total oil input (mine to retail) adds a total 100% to the current price of the same rebar. It only means that less rebar would be used, not that it would not be available. It will end waste quickly.

No, ‘wide-loads’ driving their SUV to McDonalds will not happen. Nor will the average American own a personal car/truck unless it is a motorbike or some other low fuel consumption transportation. Saving to buy a new bicycle will replace the debt of a new car every 3-5 years. You might even start to see the bicycle powered tykes on your highway that we see here.

Makati1 on Sat, 4th Oct 2014 5:14 am 



Ooops! Trikes, not tykes … although tykes love their first bicycle without trainers. LOL

Makati1 on Sat, 4th Oct 2014 5:19 am 



coffeegyzz, That Greek idea worked when the current didn’t mess with the wake. I’m not so sure it would work in a river rapids. I think we are entering virgin territory now, not comparable to anything in human history.

As for age, I’m 70, and I have a long wake behind me…lol. Not that I ever traveled in a straight line. I’m not lost, I’m exploring!

Best wishes for your success! ^_^

Newfie on Sat, 4th Oct 2014 7:55 am 



We are on the undulating plateau of oil production. As the price of oil rises, people and companies cut back their consumption of oil. As demand fades, the price of oil falls. Eventually it falls to a level where consumers can afford to buy more of it, demand increases and the price of oil goes back up. Up and down in an endless cycle. If it hits $300, it won’t stay there very long, It would destroy the economy, destroying demand and the price would plunger to $30 a barrel.

shortonoil on Sat, 4th Oct 2014 7:58 am 



Besides the point that $300 oil is theoretically impossible, it would put gasoline at about $10/gal. Refineries need a minimum flow rate to operate, with $10 gasoline they wouldn’t have enough demand remaining to keep their operations running. So unless someone can build an engine that burns straight crude, there is not going to be $300 oil.

To have a demand for petroleum products there needs to be an economy, to have an economy there needs to be petroleum. The largest user of the energy that now comes from petroleum is the petroleum industry itself. There is not enough energy in a unit of petroleum to pay for $300 oil. At $300 the petroleum industry itself could not even afford their own oil. To make $300 oil affordable the value of a BTU would have to more than triple. Before that happened the wheels would stop turning, the lights would go out, and the people remaining in their grass huts would no longer know how to use petroleum, even if they had it.

At $300 oil there would be no industry, no monetary system, there would be no trade. There is zero chance of this occurring.

http://www.thehillsgroup.org/

Nony on Sat, 4th Oct 2014 8:11 am 



hilarious. There you go peakers.

pat on Sat, 4th Oct 2014 8:29 am 



the $300 seems unrealistic but if seen from the past that it has gone up to 150 from 20- 30 levels in just few decades. oil is the most important commodity in the world but before $300 the world will see a begin of the shortages of the commodity before it skyrocket to more than $200. the oil is an indicator of the world economy and declining by more than 20 per cent shows theres huge demand destruction due to recessions, slow growth, no purchase power etc and not the oil glut.

Davy on Sat, 4th Oct 2014 9:26 am 



As is regularly the case Short hits the nail on the head with his hard hitting analysis. Corns like Noo can only retort with cheerleading. We have to consider the dynamics of the oil complex in its entirety. We could conceivably get $300 oil for a very short time but it would be part of a shot lived feeding frenzy. Picture Nat Geo when the piranhas dine on a small mammal. More likely considering the really dangerous position the economy and global order are in we could see unnaturally low prices. Short makes the important point that above or below a certain level the economic dysfunctions ends both the oil complex economy and the broader economy. Oil and the economy are interconnected and symbiotic. They share mutual health requirements and cannot be decoupled from one another. If one is out of synch both are out of synch. There is some time lag and some reactivity but both oil and the economy suffer from any price beyond a threshold of economic health. This envelope price appears to be roughly where it has been for many months.

marmico on Sat, 4th Oct 2014 10:38 am 



The largest user of the energy that now comes from petroleum is the petroleum industry itself.

Citation please. At first glance, it seems to be a gross exaggeration. Petroleum consumption is ~36 quads of which the refining sector, arguably the most intensive energy user, is ~2 quads. Where are the other 16+ quads in the upstream, midstream and downstream sectors?

bobinget on Sat, 4th Oct 2014 1:11 pm 



“It takes 60 Iraqi wells to produce one million Bp/d”
“It takes 2,500 shale wells to produce one million Bp/d”

http://www.resilience.org/stories/2014-10-02/in-search-of-oil-realism

Iraq, Iran, Venezuela, and Russia in the ‘new’ OPEC cartel will within just a few years will control oil and USD oil pricing.

The West is Currently at War to prevent that from becoming the case. One problem: without explaining WHY the West is fighting in the Mideast, (the REAL reasons) this war is doomed to failure Long Term.

Northwest Resident on Sat, 4th Oct 2014 8:42 pm 



At $300 per barrel, we would be looking at a three hundred percent increase over today’s price (give or take a few bucks).

Food prices would triple, medicines/pharmaceuticals would probably do the same, all that plastic junk you buy would triple in price — basically, a three hundred percent increase in the price of oil will result in a correspondingly high jump in the price of everything else. Because why? Because almost everything you eat, touch, wear, sit on and use is the direct result of oil-intensive production and transport.

We can’t logically think of a world where the price of oil goes up that high and everything else stays the same. In fact, ANY increase in the price of oil reflects directly in the price of just about everything else.

And that goes for the entire world, not just the USA.

Who knows — maybe oil will shoot up to $300 per barrel for a day or two, but nobody is going to buy it at that price. Why bother? At a sustained price of $300 per barrel the entire global economy will shut down pronto, and no amount of propaganda or blissful ignorance will hide that fact.

Ain’t gonna happen.

John on Sat, 4th Oct 2014 9:35 pm 



Northwest Resident,

I respectfully disagree, and believe that oil will sell for $300 per barrel, because it’s worth it. I also tend to believe that the world economy will gradually decline as energy production tails off, though there will be difficult consequences such as social unrest. So as much as I respect and follow shortonoil, I disagree with the concept that the economy will not function on $120+ oil. I just think world governments will intervene and get the oil. People will consume less, and life will be much harder.

John on Sat, 4th Oct 2014 9:36 pm 



Oh, and by the way, I live in your neck of the woods.

Northwest Resident on Sat, 4th Oct 2014 10:26 pm 



John — Disagreeing with me is cool, respectfully disagreeing with me is a welcome change from some of the flack I catch here.

If you consider that $100 per barrel is already more than the economy can bare, then it is a real stretch to think that we’ll ever get to $300 per barrel with a still-functioning economy. The only way that BAU still holds together with $100 per barrel is with massive infusions of debt to compensate for the too-expensive oil. $100 per barrel is already driving the economy to the brink of collapse. Long before we hit $300 per barrel, we’d have to hit $150, $175, $200 — but somewhere in there the global economy would just disintegrate. Rising food and other commodity prices would put 99% of the world’s population in dire straights, more so than we already see. Starving masses not only couldn’t afford to live in a world with too high oil prices, they would resort to desperate measures, long before hitting $300 per barrel. We’re on the brink of that now.

Hey, check out Our Finite World. Gail has some articles that explain exactly why there is a break-off limit to how much the world can afford for oil — and that limit is far below $300. Her most recent article does a very good job in explaining the dynamics of why we’ll never see $300 per barrel oil.

ht tp://ourfiniteworld.com/2014/09/21/low-oil-prices-sign-of-a-debt-bubble-collapse-leading-to-the-end-of-oil-supply/

Also, I’m not a gradual decline believer. TPTB are keeping BAU going only via massive debt infusions, stock market (and oil price) manipulation, and all kinds of gimmicks, none of which stand a chance in heck of lasting long term, all of which drive us further up that steep precipice that we’ll eventually fall off of. When things start unraveling, it will be fast and furious. If there is going to be any kind of long slow decline, we are living it now, slowly but surely approaching that point where it just collapses from the weight.

You could be right of course. I just don’t see how.

John on Sat, 4th Oct 2014 11:01 pm 



It’s pretty obvious business as usual has changed since 2008, as you describe. Thanks for the link. I’ll read the article tomorrow or the next day, as I’m enjoying the creature comforts of a good baseball game on TV this evening.

Northwest Resident on Sat, 4th Oct 2014 11:20 pm 



John — Keep in mind this one central point. Which is, as energy costs rise, wages do not rise to keep pace. In fact, just the opposite. Rising energy costs result in wage suppression as businesses struggle to produce products that remain cost effective. As energy costs rise and wages remain stagnant, or employees are laid off so that the business can try to still make a profit, the ability to purchase products greatly decreases. At some point, there isn’t enough product being purchases and businesses go under — or they load up on debt which is what we’re seeing right now. That can’t go on forever.

Enjoy the game.

Makati1 on Sun, 5th Oct 2014 12:13 am 



John, you are on the right track. $200 oil is quite marketable just not for useless junk and throwaway lifestyles. True, the non-manufacturing countries will become 3rd world, but there are many uses for oil that would still be very profitable, even at $300.

The oil you put in your car already costs you $500/bbl. Some petrochemicals are worth thousands of dollars per barrel. Airlines will still fly, but the average person will not take a hop across country to visit grandma on Christmas. They will travel less and pay more. My flight to the US RT costs about $1,700. If it cost $3,400. I would go, but less often. I could still get a flight there. Even at $5,000 many will still go. After all, the $8,000 seats in first class are most often full even today. There will be major downgrading in many businesses and most will just disappear.

Many above have a narrow vision based on their US life that is not reality. Yes, many things will end. And the pain will be most felt in the places like the US that thinks waste is their right and will never end. It is ending. The next 10 years are going to change our world so much we will not recognize it. Gert prepared. We are.

Makati1 on Sun, 5th Oct 2014 12:15 am 



“True, the non-manufacturing countries will become 3rd world…”

Should read:

“True, the countries that do not manufacture necessities will become 3rd world…”

GregT on Sun, 5th Oct 2014 1:19 am 



“My flight to the US RT costs about $1,700. If it cost $3,400. I would go, but less often. I could still get a flight there. Even at $5,000 many will still go. After all, the $8,000 seats in first class are most often full even today. There will be major downgrading in many businesses and most will just disappear.”

And when the economy finally comes crashing down, dollars ( and all other fiat currencies ) will become worth-less. How do you propose that people will pay for those flights? How do you propose that the airlines will still be in business? My prediction? The airlines will be among the first businesses to disappear. They already have a long history of insolvency, restructuring, takeovers, and government subsidies, even when the going has been good.

Westexasfanclub on Sun, 5th Oct 2014 4:07 am 



I think one day a barrel could cost the EQUIVALENT of economic sacrifice to 300 dollar. Just that we wont pay for it in Dollar nor in Euro, Yen our Pound. These currencies will have vanished long before we hit the 300 dollar mark because these fiat currencies are bound to economic growth. There might be a return to the gold standard or the implementation of the bitcoin or something similar and ironically thtis currency even might be called DOLLAR but it will be a totally differet kind of currency. A stable, not expandable post collapse currency. And even if big industry and service structures are gone by then – if the IS can make money with backyard refineries today, the world can do so tomorrow.

Numbersman on Sun, 5th Oct 2014 7:03 am 



looking at the “wake of the boat” I fully expect $300 oil. It is in the BAU forward path. It can come from several dynamics. first, general inflation. Just because we haven’t seen much inflation lately, doesn’t mean it is gone. cycles happen. Secondly, BAU can afford higher and higher energy prices as efficiencies get higher and higher (think automation, mpg, conservation, etc). We are like silly putty: adjust slowly and we stretch and adapt; change too fast and we break. Here is a link showing leis toroidal price changes ex inflation. See energy going up and food going down. http://www.economist.com/blogs/freeexchange/2013/06/commodity-prices

Makati1 on Sun, 5th Oct 2014 7:12 am 



GregT, there will still be trade and currencies. They will just be different ones with new values as Westtexasfan club says. The USD may not disappear, it may just be worth about 30% of today’s purchasing power.

Before that happens, there may be currencies backed by gold. Gold will just have a new value, perhaps 3-5 times today’s suppressed value. Did you know that China has enough foreign reserves to buy ALL of the world’s gold with a trillion or so left over? They are in the process right now. I expect the Yuan to be gold backed before 2020.

Davy on Sun, 5th Oct 2014 8:02 am 



China, is a hollow dragon with trillions in foreign exchange that it is trapped with and a hollow smoke and mirror economy that can’t use it. China is an export economy that can never allow its currency to appreciate and there is no time to transition to a consumer economy where it could use the reserves. China has a Ponzi shadow banking system that fleeces whoever enters it with “payday loans”. China has a fake GDP because of all the unrealized bad debt that has been absorbed by the government to prevent social chaos. China has mal-investment off the scale with ghost cities, highways to nowhere, excessive heavy industry overcapacity, huge infrastructure created with no way to maintain it, and multiple mega cities set to crumble like a sand castles against the tide. There is little good that can be said by a hollow giant. It is nothing more than a hot air balloon ready to deflate in midair. China will bring the world down with it. Cancer acts that way metastasizing and spreading contagions to other (in BAU’s case) unhealthy regions. So any ideologue preaching China’s ascendance is a propagandist of the worst kind.

Northwest Resident on Sun, 5th Oct 2014 9:41 am 



Guys, the time is rapidly approaching when it takes more energy to extract a barrel of oil than that extracted barrel of oil contains. That moment will not arrive simultaneously for every oil well around the world, but it will arrive. When that happens, it doesn’t matter if we’re talking $300 worth of dollars, gold, sea shells or barter — a barrel of oil that gives off less energy than it takes to extract it will not be extracted. That would be like me giving you two dollars in return for one. Ain’t gonna happen!

Northwest Resident on Sun, 5th Oct 2014 10:08 am 



Another inconvenient fact for those who think that $300 oil (or non-fiat equivalent) is likely:

The ONLY way that oil gets extracted and delivered to market today is with a little assistance from global credit/finance and energy intensive shipping — exactly the things that will disappear from the face of the earth as oil passes the limit of how much the global economy can pay for it.

Hey, there may end up being a “few” barrels of oil laying around in a warehouse somewhere after TSHTF, and sure, somebody will sell those for whatever he can get for them — maybe gold, maybe food, maybe bullets (but not dollars which as GregT points out will be worthless at that time). Or maybe there will be a few stripper wells out there still pumping a barrel or two per day for a while (as long as the electrical grid is still working), and those will sell for $300 or non-fiat equivalent.

But thinking there will ever be a sustained $300 per barrel price (at today’s $300 “value”) doesn’t take into account some basic facts.

Kenz300 on Sun, 5th Oct 2014 12:32 pm 



Diversify…..diversify….diversify………..

It is time to reduce our reliance on fossil fuels and move to safer, cleaner and cheaper energy sources.

Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future.

Some cities and states encourage bikes………. they provide safe walking and biking lanes and trails. Cities also should encourage businesses and apartments to provide safe places to lock or store a bicycle. Encourage your elected officials to do more. Speak up.. become an advocate for bicycle use in your city.

Top 10 Cycling-Friendly Cities – YouTube
https://www.youtube.com/watch?v=ycKXeKfu4lo
———————
Bike Friendly Cities, The Journey to School – YouTube
https://www.youtube.com/watch?v=4-XenU6UEp8