Re: Gas prices are rising steadily

Leaving aside the politics for a moment, over the next few decades
we're going to see oil/gas prices gyrate weirdly. The Hubbert Peak
will still prevail but as world growth diminishes, oil consumption
will drop, prices will drop, then rebound as supplies diminish even in
the face of reduced per capita demand.

World industrial output will follow the supply curve. This is what I
said before the Peak hit. Years ago, I will quote myself, "sustained
global recession." I meant literally what I said.

The gyrations will likely occur as peak-led collapse phases see
rebounds that smack right back into the declining supply curve as
overhead.

Plenty of critics of Peal Oil are presently pointing to the drop in
price from last year's highs as some sort of vindication of their
position. What they fail to see is the end of exponential growth on
the demand side is only a bump on the downward side of the supply
curve.

Yes, quite exactly right. The issue going forward is how the backside
of the curve looks. Given the supply dropoffs on giant fields like
Cantarell or the North Slope or North Sea and the dropoff could be
quite a bit more severe than was predicted. The declines experienced
in these fields thus far are significantly greater than were
forecast. As I mentioned previously, I used to own shares in BPT, a
royalty play on the Prudhoe complex. Its depletion rate forecasts
were significantly below what actual production declines were. We're
in a world of hurt if the downslope doesn't give us the rosy, benign
falloff we're expecting.

In fact there is every reason to expect that it won't. The
marginality of the later reserves and the dropoff in post-Ghawar
fields suggests a sharper supply decline. Interposed with the
inevitable demand collapse and you have a bad recipe brewing. Much
tarsands have already been rendered uneconomical. In fact, the
largest, the Syncrude venture, has a breakeven in the mid $30/bbl
price point. The very sudden post-peak collapse-led supply glut drove
prices down so far that ALL but the most mature nonconventionals were
rendered economically infeasible and it made the COS trust cut
dividends almost to 0. Oilsands, the supposed savior of the backside
of the peak curve as the conventional fields' production falls of
cliffs like Prudhoe and Cantarell have, were, prior to the OPEC "cut,"
barely breakeven propositions.

Trav
.

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