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Why Peak Oil Is a Crock

The good news about the oil supply? Peak oil is a crock. There’s plenty of oil. It’s just harder to get to it now than it was 20 years ago.

The oil is deep underground or below miles of sea or mixed with sand or in places where the underground pressure to bring it up has fizzled out.

The question isn’t whether the technology exists to get hundreds of billions of barrels out of the ground. The technology is there. But in many cases, deploying it is an expensive proposition.

How to light a fire under the oil companies? The answer doesn’t lie in government subsidies and grants. That’s the last thing the oil sector needs. Let the marketplace motivate them.

Oil companies talk about raising production all the time. Talk is cheap, and so are the oil companies when it comes to investing in their E&P (exploration and production) operations.

But let supply run low and prices run high. With fat profit margins to fall back on, new technologies will be unleashed.

In short, oil companies need to find more oil — and they will. If they don’t, they won’t be able to leverage rising oil prices. And besides, a future without oil ain’t in the cards…

Basic Energy Fact #1: Oil is the lifeblood of modern society — has been for quite a while. In fact, the rise of oil and the modern economy has gone hand-in-hand. One would not exist without the other.

Basic Energy Fact #2: Energy consumption will rise 35 percent by 2030, according to a number of energy research firms and oil companies. And which energy resource will be number one in 2030? The same one that is number one now: oil.

Basic Energy Fact #3: Renewables like wind, power, hydro, and thermal will increase their piece of the pie. But don’t expect miracles. I love solar and wind. But I don’t expect energy production from them to contribute more than 10 percent of the total energy pie by 2030. Right now, they have a 5 percent slice.

What’s happening right now is part of the boom-and-bust cycles endemic to the energy sector. In down times, underinvestment prevails, nicely setting up the boom part of the cycle.

Underinvestment will give way to rising prices, leading companies to invest more in E&P. Eventually, supply will catch up to demand and prices will fall. A bust is turning into a boom right in front of our eyes.

The big integrated oil companies will benefit nicely. Take your pick. ExxonMobil, British Petroleum, Chevron, and Conoco-Philips all make nice long-term picks.

But there’s another reason why I’m convinced that peak oil is a crock. There’s already a proven technology out there that takes petered-out fields whose oil output has been reduced to just a trickle and jacks up production again. The company that owns this technology is buying up abandoned oil fields for next to nothing.

IDE’s Dr. Rusty McDougal (who edits the Resource Windfall Speculator) loves this company. He thinks that among the many impressive new oil-field technologies we’ll be seeing in the next five years, this is the one most likely to revolutionize the industry. The company that owns it stands to do very well for itself too, as Rusty explains in a free report he has just written.

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“I have admired you.”

“Dear Michael,

“I have been a subscriber to ETR for many years, almost since its inception. I have also purchased your book Ready, Fire, Aim. I like what you are saying, especially in your article in the Feb. 6 issue of the Michael Masterson Journal about the power of trust.

“I am now 73 years old and have had a general contracting business for 27 years in South Florida. During this time, I have witnessed many such instances as you describe with your friend Roy and also your friend with the bistros.

“Some people just can’t bring themselves to hiring and surrounding themselves with talents that are greater than their own, that are complementary to them. They have difficulties delegating important tasks, thinking that nobody knows as much or can do a particular task as well as they can. That is shortsighted in the extreme, and a detriment to their business as a whole.

“I have admired you from a distance, your accomplishments with ETR and its many different businesses you created. Anyhow, thanks for the great article, and I am looking forward to the next chapter. I have, of course, already subscribed to the Liberty Street League newsletter.”

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Forget the Middle East…

All the oil we need is right here! One small California company has figured out a way to make “dead” depleted oil wells productive again — and could potentially extract 14.2 billion barrels from the ground that others thought were simply impossible to get.

Multiply each barrel by the current price of oil at $71/barrel, and you can see why this company’s shares could easily soar.


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COMMENTS

  1. 02/15/2010

    Hey Boss – You misread the memo about Peak Oil.

    It’s not about running out – it IS about exactly what you explain here – Demand outstripping supply and the consequences of that (Worldwide economic meltdown – super powers going to war over it, etc.). The article you wrote here – does a good job of explaining the “why” of Peak oil it just missed the consequences of it. Who will give up their share – Will it be China, the USA, India?

    The CEO

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