| 'Peak-oil' doomsayers catch Wall St's attention |
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 'Peak-oil' doomsayers catch Wall St.'s attention
FRIDAY, SEPTEMBER 1, 2006
On a sweltering midsummer Tuesday in the fields outside Pisa, Willem Kadijk scribbled notes as a ragtag troupe of doomsayers predicted the end of the Oil Age. With his shaved head, jeans and sandals, Kadijk, 48, blended into a crowd gathered under a white tent to hear of the coming calamity. The death of cheap, abundant crude oil, the forecasters warned, might unleash war and plunge the world into a second Great Depression. That is not the prophecy of some apocalyptic cult. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil. Proponents of this controversial idea say that global oil production is now at or near its zenith. Once the flow crests and starts to decline - and some geologists say that it already has - oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 - and keep rising. To the "peaksters," today's energy crunch is nothing next to the pain that is to come. "Peak oil is a reality," said Kadijk, a senior equity salesman at Kepler Equities, a brokerage in Amsterdam. He plans to start a fund to capitalize on what he sees as a looming crisis for the world's fossil-fuel-based economy and the ultimate bull market in oil. As energy prices soar and violence convulses the Middle East, the peak-oil movement - an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists - is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat Web sites, much the way warnings of global warming did a decade ago. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street. The U.S. secretary of energy, Samuel Bodman, the former head of Cabot, an oil and chemicals company based in Boston, has asked the National Petroleum Council, which advises him, to investigate whether oil supplies can keep pace with demand. The U.S. Government Accountability Office, the nonpartisan congressional watchdog, is due to release a study on peak oil this November. Representative Roscoe Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to sound the alarm. "The world has never faced a problem like this," Bartlett said. Everyone agrees that the world will run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The debate centers on when a global peak will occur and what will happen afterward. Colin Campbell, a British geologist who popularized the peak-oil theory in his 1997 book "The Coming Oil Crisis," said that world production of conventional oil, the kind that comes from gushing wells, is reaching its apex. Society is not prepared for the consequences, Campbell said. It is too late to develop alternative sources of power - like solar cells, nuclear reactors and windmills - to fill the oil gap before energy prices soar, said Campbell, who has a doctorate in geology from the University of Oxford and more than 40 years of experience in the oil industry. "We have come to the end of the first half of the Oil Age," Campbell said. Nonsense, said Russ Roberts, a spokesman for Exxon Mobil, among the world's largest oil companies. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing the peak-oil theory in U.S. newspapers. The oil company said that the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad stated. "The world is nowhere near running out of oil," Roberts said. Exxon Mobil geologists predict that oil production will keep rising through 2030, he said. Predictions of an imminent oil famine are as old as the industry itself. When production at the first U.S. wells, located in western Pennsylvania, began to decline in the late 19th century, some people predicted that the country would soon run out of oil. Then crude was discovered in east Texas, whose oil fields yielded so much black gold that the Texas Railroad Commission capped production to support prices. In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said that it would occur in 2001. Today, he says that total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010. Campbell says the exact day or year is not important. What matters is that peak oil is coming, and soon. Almost a century and a half after the first U.S. wells were drilled in Titusville, Pennsylvania, production has begun to decline in more than a dozen countries, including the United States, according to the BP Statistical Review of World Energy. Production at the giant Cantarell oil field in Mexico is likely to decline 8 percent this year, according to the Mexican state oil monopoly PetrÛleos Mexicanos. Investors have started to listen to the peaksters. T. Boone Pickens, the hedge fund manager, says that he is a peak-oil believer. So is Peter Thiel, who co- founded PayPal and now runs Clarium Capital Management, a $2.1 billion hedge fund firm. Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time. http://www.iht.com/articles/2006/08/31/bloomberg/bxoil.php
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