Wednesday, January 28, 2009

Analysis of Simmons January 14, 2009 Brief

You'd better sit down.

Things are really bad. Worse than anybody ever imagined.

Allow me to strongly suggest you visit Matthew Simmons' January 14, 2009 briefing on Peak Oil.

My summary analysis is as follows:

1) The 2008 oil price "spike" was not really a spike but just the culmination of a multi-year rise in oil prices due to fundamental changes in the oil industry.

2) 2008 high price was NOT due to speculators!

3) Recent new oil discoveries were unfortunately small and deep. (inadequate to compensate for crashing production from existing fields).

4) IEA's November 2008 WEO (World Energy Outlook) "yanked the covers" off the naked truth of some very ugly facts about the world's 800 largest oilfields and revealed (confirmed) the fact that most of them are in irreversible decline.

5) Cheap oil/energy is OVER!

6) "Hard data" now confirm that Global Oil Production PEAKED IN 2005!

7) Oil prices are way too low!

8) Oil should be at least $150.00 per barrel with a permanent pricing "floor"

9) The world is facing the reality of the "twin cancers" of the oil biz, people and rust.

The "People" problem is due to the upcoming retirement of the bulk of the oil biz

The "Rust" problem is due to the fact that the world's oil infrastructure is built out of steel and is way too old and must be replaced immediately

10) Even at just an 80% replacement rate the rust problem is bigger and more complex than World War 2!

11) Obama does not know what is going on.

12) The world cannot adjust given the current "blueprint" of oil dependency

There obviously is a lot to discuss here.

If it turns out to be true that Global Oil Production has already peaked in 2005......we don't have enough time to fix the problems.

I want to make it clear that I am not attacking President Obama just for the sake of attacking somebody. I have always had great respect for the commander in chief.

But on a daily basis I talk to people who seem to think that Obama's concept of "change" is the magic potion that will wipe away the current inconvenience and bring back the heady days of cheap energy. It won't.

And, most importantly, many experts are warning us that Obama does not have a PLAN!

Look, don't be pissed at me as if I am calling your favorite football team names. We mean that Obama does not have a plan that is SCALED UP big enough to deal with the huge energy gap!

Obama's recent speech, as analyzed professionally here on The Oil Drum might sound good to a layperson. It sounds good to "double" the alternative energy in three years. But that is nowhere near enough to avoid massive problems. It is too little, too late.

Please don't confuse realism with pessimism. I'm not particularly pessimistic. But the reality of the Peak of Oil production is very, very real.

It is very important for as many people as possible to instantly develop an AWARENESS of the SCALE of the problem.

That is the most important concept. The scale.

This is very difficult for most people. Thinking about really big numbers doesn't mean that much to people on a day to day basis. A million here, a billion there. What does it matter to somebody working for an hourly wage at Wal-Mart?

I think the thing that scares me the most is that Obama doesn't even use the term Peak Oil in every paragraph. I'm talking about "mindshare." Not enough mindshare.

Forget about the "terrorists" and everything else. Peak Oil is the enemy within. We are killing ourselves.

How much of the new Obama "Stimulus Package" is dedicated to the estimate 100 TRILLION dollars we need for oil infrastructure replacement?

Doesn't anybody understand that all the stuff we built back around World War 2 has now rusted away? It's so simple.

Just take a walk near any refinery or pipeline or oil field or port and you can see for yourself that everything is in really bad shape.

Making just a "down payment" on fixing the economic crisis is not going to solve the CAUSE of the economic crisis, Peak Oil.

I don't even have the courage to try to discuss the last point. "The world can't adjust" is too negative, too extreme. Even for an old hang glider pilot like me :-(

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