The Peak Oil Theory was Created by….You Guessed it… Big Oil!

The Myth of Peak Oil is Melting Away….Literally A Story with Phenomenal Investment Appeal

The Peak Oil Theory was Created by….You Guessed it… Big Oil!

November 8th, 2006

November 8, 2006 -

Here’s something that I learned today about the peak oil theory that I didn’t know that seals my skepticism about its validity. The theory of Peak Oil was invented by Marion King Hubbert in 1956. Who did Marion King Hubbert work for? You guessed it. Shell Oil. Again, there is believed to be 375 billion barrels of oil in the Arctic North. Shale oil in the United States? 1 trillion barrels. And oil sands in Canada and Venezuela? Another possible 2 trillion barrels. To put this in perspective, Saudi Arabia has 260 billion barrels of oil reserves.

When Y2K came and passed without so much as a single glitch, though I have no idea who invented the Y2K scare, if I had to place a bet, I would put my money on some guy that worked for for some big tech company.

When I used to work for some of the largest investment firms in the wealthiest markets in the U.S., everytime the bigshot economists hired by the firm with their PhDs spoke about the state of the markets to the firms’ clients, they were always bullish about the markets. In fact they were notorious for never being bearish about the markets, because after all, if they were bearish about the markets, how in the world would this attitude convince their clients to fork over more millions to the firm? I always laughed because these guys sounded like a broken record, touting that great markets were on the horizon over and over and over again, so much so that I thought their PhDs stood for Plenty of Hot air & Doo doo. They were some of the highest paid cheerleaders I’ve ever encountered.

So next time, you hear another grandiose theory or proponent of a theory, always consider the source. Good investing…J.S.

4 Comments Add your own

1. john McDanel | November 19th, 2006 at 5:35 pm

Hi JS - I think having 1 trillion barrels of shale is like saying you have 1 trillion dollars in your IRA, but can only spend $50,000 per year. You’re rich, but not really.

Alberta Energy Research Institute projects tar sand production increasing to 3mbpd over ten years - big deal.

I did not believe in Y2K, but history is full of crises.

Matt Simmon’s data reform would answer all these questions. I also believe we will move on to new forms of energy after we finally understand the difference between peaking and “running out” and shale oil vs. light sweet conventional crude.

Good luck.
2. J.S. | November 19th, 2006 at 10:25 pm

John

I agree with your IRA analogy. Good analogy. In fact, I don’t know if you read it, but in a previous blog entry I wrote that it was ridiculous that oil futures dipped on an announcement of a massive oil discovery four miles below the ocean’s surface in the Gulf of Mexico. They dipped significantly even though the ability to harvest these reserves may be at least a decade away if at all.

However, if you read my various blog entries on this subject, I stated that I think a combination of technology advances, environmental changes, and alternative energy advancements will be adequate to solve our global problem of reliance on oil as an energy supply. So even if peak oil’s calculations are correct, an advancement in alternative energy fuel cells could make this calculation irrelevant. The peak oil theory, has to a large degree, relied on a growing demand and a finite amount of reserves without adequately accounting for all the moving parts that could possibly increase reserves or decrease demand (by decreasing demand I mean decreasing reliance on oil by developing alternative energy sources to meet the increasing global demand for energy). So in the end, I believe there are way to many moving parts to make peak oil a valuable theory.

As you also stated, John, it is likely new forms of energy will replace some of the world’s need for oil. The reasons why new forms of energy haven’t already been widely adopted is much too complex a subject to adequately address here, but when push comes to shove, it eventually will happen despite the actions or desires of Big Oil.

To use an analogy, it’s like saying a tornado will inevitably destroy a city because three of the five major weather patterns are in place that predict a tornado touchdown. But even when the tornado touches down, its path could still turn and completely miss your city. Too many moving parts to know for sure.
3. The Underground Investor &hellip | November 12th, 2007 at 3:44 am

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4. The Underground Investor &hellip | November 12th, 2007 at 3:44 am

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