Bakhtiari Inverview - "Cannot Forsee Anything Below Even US$50 A Barrel"

[hatrack]

EDIT

During Transition One, mega projects should not be undertaken because they may take up to 25 years and “we do not know
exactly where we are going,” he says, citing the 2,600km European freight train line from Barcelona to Kiev. The idea is fine,
but simply too late.

“I do not think such a project will ever be finished, because the high oil prices will trigger price rises in prices for all other commodities,” Dr Bakhtiari told the Australian Senate’s rural and regional affairs and transport references committee in July this year. “You already see that steel is way above usual prices. Copper has hit between $7,000 and $8,000 and it will go much higher
than that. Nickel is $22,000. “All these commodities and all these metals will go very much higher, because it is the crude oil price which dictates the prices. Sugar is going up, orange juice is going up – everything is going up – because the price of crude oil is going up.” In other words, as a base commodity, crude oil is a fundamental price input to all other commodity prices, which can reasonably be expected to rise.

The world would never see US$30 a barrel again unless a bird flu epidemic wiped out millions of people or something hit the planet
that disrupted all calculations, Dr Bakhtiari told the committee. He cannot foresee anything below even US$50 a barrel.
“That in my opinion would be very bad news because if it goes back to, say, US$50 per barrel for some reason and for a short
period of time, people will think, ‘Ah! So US$75 was just a spike and now we are back to the good old days and we can begin
consuming again. Let’s go and buy that big SUV that we were looking at.’ You then lose two or three years at least. So US$30
in my opinion is absolutely impossible.” In the future, expect up to $300 a barrel. Political tension and the threat of terrorist
activity in Saudi Arabia, Nigeria, Iraq and Iran will only add to the fragile supply.

EDIT

BusinessWeek also reported CERA as predicting world oil and natural gas liquids capacity to increase by as much as 25% by 2015.
Dr Bakhtiari says he is stunned by such bullish forward predictions, saying there is no doubt “one of us is totally wrong. I am quite sure of my prediction… because I have added every single oilfield that I believe could come on stream…” Most of the super giant oilfields, which supply 40% of world production, are ageing, with some entering terminal decline. The last super giant to be discovered was the Kashagan oilfield in the north Caspian Sea in 1999. The three largest, Saudi Arabia’s Ghawar, Mexico’s Cantarell and Kuwait’s Greater Burgan, are declining steadily.

EDIT

http://www.sfu.ca/~asamsamb/Macquarie%20Bank%20interview/Macquarie%20Bank%20interview.pdf

[denverbill]

1. It's not a problem with the commodities, it's a problem with the dollar.

Oil or any other commodity can rise or fall on supply and demand, but for every commodity to go up at the same time is another story, and that story is the dollar. It looks like the enormous budget and trade deficits Republicans have foisted on the American people are finally taking their toll.

[Nihil]

5. No, it's a problem with the *transport* of the commodities.

There will be knock-on effects due to the dollar problems but every
commodity produced non-locally (and thus requiring transport to sell
if not to assemble from sub-components) will be hit by the increase
in fuel costs.

[GliderGuider]

2. Bakhtiari doesn't get as much notice as Simmons, Heinberg and Deffeyes

But he's one of the most credible peak oil commentators out there given his career with Iran. His concept of Transition stages makes a lot of intuitive sense as a decline-rate model.

Here's my prediction. I time T1 from the peak of C&C in mid-2005 and expect it to last until the end of this year, when the effects of Cantarell and KSA are fully revealed. I think T2 will be a four year period from 2008 through 2012 with an average 1.5% pa decline. T3 will last from 2013 to 2015 with an average decline of 3%, and T4 will be from 2016 to 2020 with an average decline rate of 6%. By 2020 the annual decline will be in the region of 8%.

By this model, in 2020 we'll be down 35% to 40% from today's production, to around 50-55 million barrels per day. That's about what Bakhtiari estimates - about 55 mbpd - so he sees these decline rates as probable too. That will be the same production we had in 1972, but with over 50% more people.

This is going to play out over the next 13 years, which is why I'm so pessimistic about the chances for nuclear or renewables to mitigate the situation to any great extent. We'd better get localizing.

[IDemo]

3. Bakhtiari made the definitive P.O. statement a while back

Something to the effect: "When Ghawar peaks, that will set off alarm bells all over the planet."

What's that incessant clanging sound I hear?

[GliderGuider]

4. I thought that was just my tinnitus acting up again

That's what Daniel Yergin told me it was, anyway...