The No. 1 energy fund’s wild (but energizing) ride

…WSJ: So you think the peak could be hit in as few as three years? How would we know we’re at the peak, and what do you mean by “fall off the cliff”?

Mr. Rice: The timing depends on when several of the world’s largest oil fields begin to roll over. Unfortunately, information on most of these fields is guarded as a “state secret” and is difficult to obtain and analyze. Suffice to say that the average age of the Mideast fields in question (is) over 50 years old, and when they start to decline, the decline will be over 10 percent a year. That would be “peak oil,” as the world probably couldn’t add enough new production to offset declines of that magnitude from the giant fields.

However, I suspect that the price effect on oil would be somewhat muted by new coal-to-liquids production and additional liquid natural gas. As long as peak oil occurs post 2012, the world (would have) a chance to develop these alternative supply sources. If some of these fields start to decline prior to 2012, and the world hasn’t developed the coal-to-liquids or LNG infrastructure, oil prices will rise substantially.

Wall St. Journal