I guess I first started sending out these missives about two years ago, in late 2005. Some of you no doubt thought that I had fallen off my rocker. Well, that is probably true, but another reality is that the oil situation continues to unfold about as expected. Unfortunately.

Waxing a bit nostalgic, I have been studying oil and gas supply since the price plunge of the mid-1980's, when we started having "supply side" speakers at the API-Houston Chapter.

...Interestingly, I remember my father (38 years at Shell Oil) mentioning King Hubbert one time. As a teenager, though, I didn't pay much attention. Hubbert worked in the same facility as my dad, in the 1950's. My brother (16 years older than I am) swears he remembers Hubbert coming over for dinner once or twice, probably before I was born. Dad was chairman of the API-Houston Chapter at that time, and I have his bound monograph of the papers given in 1956, including the original Hubbert article. He obviously was interested in it, as he took the time to update the curve - in pencil - sometime in the 1970's.

t has been a busy couple of years, and the last few months have been exceptionally busy for me. I've been doing my level best to try to stem the tide of Peak Oil by trying to find more of the stuff! (Well, gas anyway.)

... A few weeks ago, Oct 17 - 19, I attended the Association for the Study of Peak Oil's (ASPO's) USA convention, held at the Hilton of the Americas in downtown Houston.

... My observations and comments:

• The peak in oil production might have occurred in late 2005, and most in this group believe it will certainly happen prior to 2011 - 2012. If it hasn't occurred, my bet would be 2008, as I have believed since 2001 or so.

• It sure looks like Saudi has produced about half of its recoverable oil, meaning it is at or near peak, in turn meaning the world is at or near peak.
• Cantarell (second largest field in the world, in Mexico) peaked in 2004 as I previously communicated to you, and is down from 2 MMBO/D (late 2005) to 1.6 MMBO/D today. It is on a trajectory near to the "worst case" scenario, as described by Pemex in early 2005, and later confirmed by the WSJ.
• Oil Export Withholding (Hirsch) seems quite likely, and was a new one to me. Means things will happen even faster.
• Jeffrey Brown's "Export Land Model" is similar, but is a “physics” rather than an economic/geopolitical phenomenon. Namely, when consumption in exporting nations is increasing in a low, but compounding fashion (as it is), and production begins decreasing in a compounding fashion, then those nations soon have NONE to export - much sooner than if they hadn't been growing their consumption. To wit: Indonesia, UK - both exporters until very recently.
• GDP will drop about like the oil rate will decline - and continuously, year over year. (Hirsch)
• Rationing of gas and diesel are in our near (0 - 3 years) future.
• Inflation is far understated, and will rear its head soon. And at a time when the economy is deteriorating.
• There could be a series of "head fakes", ie prices drop for a time, due to new Rockies Express pipeline, LNG, Independence Hub online - or due to a rapid run-up in price causing demand destruction (for a short while) (Petrie)
• There is no simplistic "smoking gun, no reason" for Peak Oil, hence the public and the media can't "get it". So, the politicians won’t get it. (Whipple)
• Not yet a critical mass to move people and politicians.(Whipple)
• Behavior is not likely to change until there is a pronounced shortage at the pumps, hoarding.(Whipple)
• Politicians, in general have a "Don't have enough? Well, just get more." attitude.
• Although not related to Peak Oil, many minerals are now in short supply, controlled by foreign govts, either in our country or theirs. (Matthews)
• Still no battery or electricity storage solution for plug-in hybrids or pure electric vehicles.

Meanwhile:

• a huge real estate bust (and all that it entails) is in the early stages, due to a massive overextension of credit

• many of our financial institutions are being shaken to the core (Merrill, Citi, Countrywide, WaMu)
• oil ironically broke $90 the Thursday evening of the conference, now it is nearing $100.
• gold has been spiking, the dollar has been plummetting
• $250/bbl strike price calls are now available in 2010, $200 calls evidently have active trading in 12/08.
• the IEA just issued a really gloomy forecast, two weeks ago.

On the brighter side, though, is that old adage about the Chinese word for "chaos" being the same as for "opportunity".