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Thanks BULLarkey for the well wishes. I'm OK now...
bill1109,
And they said there was no free lunch...
Excellent find...
Hello Dr Worm,
I don't see support until 85-86. I've tried to catch retracement rallys but have been unsuccessful so far.
If you go long, good luck!
BULLarkey,
Missed the WAGin as I was on sick call the last couple of days. My WAG would have been 38.42.
Thanks for your reminder e-mail I got a few minutes ago...
TTT--1 Nov 05
50% Retracement Resistance
Trick or Treat?
The S&P 500 (C Fund) is testing resistance around 1,207.03, the level that marks a 50.0% retracement of its loss since the August high at 1,245.86, set on 8/3/2005. All the news seems to be good news this morning. History shows, however, that current news (which reflects the recent past) has only a temporary impact on stock prices, which discount future news many months ahead. Although seasonal tendencies are Bullish this week, longer-term trend damage has been done. Typical oversold rebounds have been limited. Both fundamentals and technicals appear to be eroding. The Bullish phase of the 4-year cycle has run its course. Long-term trendline breaks suggest a Bearish major trend change. Nevertheless, I'm fully invested and have sell stops tight if the market turns...
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) No buy possible on 1 Nov 05. Current portfolio allocation is nil.
C Fund (S&P 500 Index) Sell C Fund if SPY is < $118.08. Current portfolio allocation is 25%.
I Fund (EAFE Index) Sell I Fund if EFA is < $55.39. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $508.28. Current portfolio allocation is 50%.
G Fund (Money Market) Current portfolio allocation is nil.
Thanks Lisa, the link is useful...
Check this one out... http://traders-talk.com/mb2/index.php?showtopic=44046&st=0&p=176528entry176528
swing man,
Get into this competition...it will keep you on your toes...
http://www.investorshub.com/boards/read_msg.asp?message_id=8285275
jimapplesmith,
I don't have access to the data directly. Robert Colby publishes the info on a weekly basis. Guess one could enter it into Excel and develop a time series. If I come across the info on a daily basis, I'll post it.
Yes you could.
Here's my basic approach. If the ADX is above 20 and rising, I emphasize trend-following indicators and discount the momentum indicators. If the ADX is below 20 or is trending down but over 20, I emphasize momentum-based indicators.
TTT--31 Oct 05
Commentary
Wild and erratic up and down price swings over the past 3 weeks make trading difficult and unrewarding. On Friday, stock prices rose most of the day and closed near the highs. NYSE Volume at 2,404,211,000 shares fell slightly from the active 2,414,143,000 shares traded on Thursday. Volume is supposed to increase on price rallies when the price trend is strong. Falling volume as price rises suggests that the Bullish forces may not be as powerful as they need to be in order to sustain a worthwhile uptrend. Breadth turned Bullish, with 2383 advances versus 862 declines on the NYSE. But New Highs at 53 continue to lag New Lows at 153 on the NYSE. I'm fully invested and have sell stops tight if the market turns...
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) No buy possible on 31 Oct 05. Current portfolio allocation is nil.
C Fund (S&P 500 Index) Sell C Fund if SPY is < $118.06. Current portfolio allocation is 25%.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.92. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $501.51. Current portfolio allocation is 50%.
G Fund (Money Market) Current portfolio allocation is nil.
OT: The Russians Are Coming
by Joe Duarte, MD
Joe-Duarte.com & IntelligentForecasts.com
October 28, 2005
Editor’s note:
While the peak oil theory is gathering mainstream momentum (Mary: Please link to the article on Saudi Arabia submitted along with this one), liquefied natural gas remains a viable alternative for the United States as a major fuel source.
In this article, Dr. Joe Duarte details a potentially significant agreement between Russia and the United States, which, if it is eventually taken to its full potential, could rewrite a significant portion of the current script in the global energy markets.
Today’s Analysis: Russia’s Quiet Natural Gas Deal With U.S.
A quiet deal between the U.S. and Russia could change the landscape and the entire power structure in the energy markets.
Liquefied natural gas (LNG) from Russia, could be on its way to the U.S. by 2008. According to the Moscow Times, the controversial Sakhalin field could be fully operational by then, making the Murmansk port a key cog in the Russian LNG industry.
The Russian daily reported: “The legendary sea-faring route from the United States across the Atlantic to Russia's northern city of Murmansk, through which vital supplies went to the Soviet Union some 60 years ago to help the country fight in World War II, is looking to get a new breath of life. This time, however, the traffic is going to be reversed, shipping liquefied natural gas, or LNG, from Russia to energy-hungry North America.”
According to the Times, hurricane Katrina was a wake up call for Washington, leading to a new focus on negotiations. “The hurricane seems to have given new impetus to the energy dialogue between Washington and Moscow. It has also given Russia a chance to flex its muscles in its pursuit of a role as an energy superpower -- even if Russia is yet to produce its first LNG.”
The New Saudi Arabia
According to the Times, Russia’s goal is to become the world’s new energy hub, in essence the “New Saudi Arabia.”
Indeed, the fruits of the Kremlin’s war on Yukos, and the expansion of national natural gas giant Gazprom are starting to pay off. ["Russia wants to be the new Saudi Arabia in terms of global energy -- a global energy partner for consumer countries," said Chris Weafer, chief strategist at Alfa Bank, who has advised the Organization of Petroleum Exporting Countries. Saudi Arabia has since the 1980s reaped considerable political benefits from having an energy partnership with consumer countries. "But it seems that the model that Russia is pushing is a more expensive version of that. Instead of just being a big global energy supplier shipping lots of oil ... Russia wants to be and is able to be a supplier of several types of energy ... which gives it better political leverage," Weafer said.”
Indeed, this is a big bet on both sides, and one that has been carefully guarded by the two governments, whose public portrayal of relations has been cool at best. “The development of the huge offshore Shtokman field -- which contains 3.2 trillion cubic meters of gas and 31 million tons of gas condensate and is by far the largest LNG project in Russia -- aims to develop the natural gas deposits located under the Barents Sea. As the production is launched in 2010, most of the gas condensate will be shipped to the United States, which plans to boost its total LNG imports to 180 billion cubic meters per year by 2025.”
LNG: The Solution
After 9/11, Russia and the U.S. have haphazardly tried to build an energy partnership. But politics, and the Yukos situation, in which the Kremlin gutted what was Russia’s energy crown jewel, and jailed its founder Mikhail Khodorkovsky, provided a major set back to an already complex situation.
The solution seems to have become LNG. In essence, the solution was reached by default ["All the oil Russia produces has essentially already been sold," said Valery Nesterov, an oil and gas analyst at investment bank Troika Dialog.]
Meanwhile ["The U.S. market has a great potential for growth. We can only reach it using LNG technology. After all, you can't build a pipeline from Russia to the United States," said Sergei Kupriyanov, the spokesman for Gazprom. In addition to the competition that Russia would have to face to sell oil to the United States -- mostly from the Gulf states, Mexico and Venezuela -- shipping oil across the Atlantic is very expensive. But even more importantly, Russia simply does not produce enough oil to feed United States' energy needs.”
Aside from Russia having the world’s largest reserves of natural gas, there are other advantages. “The planned route for Shtokman gas from Murmansk to the east coast of the United States will be significantly shorter than the distance the shipments from the Middle East have to make to North America, giving it an advantage over the Gulf exporters of LNG. And the money that Washington is ready to shell out for LNG is certainly not getting smaller -- the price for 1,000 cubic meters of natural gas rose threefold in 2004 to reach $222. At the same time, European customers paid Gazprom only $136 for 1,000 cm of natural gas. But most importantly, gas is set to grow in importance -- for Russia as well as for other hydrocarbon exporters -- because its global reserves are estimated to be immeasurably larger than those of oil.”
Conclusion
Russia and the United States are once again on friendly terms, at least on one issue, energy. To be sure, this is the apparent situation today, which means that tomorrow could be different, given the usual state of affairs between the two countries.
And of course, there are the hidden agendas on both sides, and the inevitable healthy dose of self interest, especially for the White House and the Kremlin.
Nevertheless, as the Moscow Times notes: “by involving Western partners in LNG production -- as in the case of Shtokman -- or taking part in the distribution of gas abroad, as is assumed in Germany once a pipeline is built to that country under the bottom of the Baltic Sea, Russia is forging close cooperation not only with foreign governments but also the consumers themselves, thereby taking its role as a global energy provider much further.”
Indeed, ["A more extensive web is being created in which Russia has a much safer role than just energy supplier ... and LNG is going to be a part of it," Weafer said.]
The Russians are coming.
Major Trend
Relative Strength Rankings
Of Exchange Traded Funds by Robert Colby
Research studies suggest that ETFs ranked in the top quintile (highest fifth) of the list (with a rank of 80 and higher) may have a greater probability of outperforming the market in the months ahead. Conversely, ETFs ranked in the bottom quintile (lowest fifth), below 20, may have a greater probability of underperforming the market in the months ahead.
Interpretation:
99 to 80, Buy
79 to 60, Hold
59 to 40, Market Perform
39 to 20, Avoid
19 to 0, Sell
Please note that this screen is not investment advice. Your use of this site means that you have read, understood, and accepted my Disclaimer.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Rank Name, Symbol
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
99 Brazil Index, EWZ
99 Latin Am 40, ILF
98 Mexico Index, EWW
98 Oil Services H, OIH
97 Biotech H, BBH
96 Emerging 50 BLDRS, ADRE
96 South Korea Index, EWY
95 Japan Index, EWJ
95 TOPIX 150, ITF
94 Energy SPDR, XLE
93 Energy VIPERs, VDE
93 Natural Resource, IGE
92 Telebras H, TBH
92 Emerging Markets, EEM
91 South Africa Index, EZA
90 Austria Index, EWO
90 Canada Index, EWC
89 Energy DJ, IYE
89 Gold Shares S.T., GLD
88 Energy Global, IXC
87 Broadband H, BDH
87 Asia 50 BLDRS, ADRA
86 Utilities H, UTH
86 Switzerland Index, EWL
85 Australia Index, EWA
84 Mid Growth Index M iS, JKH
84 Spain Index, EWP
83 EAFE Index, EFA
83 Global Financials, IXG
82 Powershares Dynamic, PWC
81 Transportation Av DJ, IYT
81 Powershares Dynamic OTC, PWO
80 REIT Wilshire, RWR
80 Pacific ex-Japan, EPP
79 Cohen & Steers Realty, ICF
78 Software, IGV
78 Utilities SPDR, XLU
77 Mid-Cap VIPERs, VO
77 B2B Internet H, BHH
76 Extended Mkt VIPERs, VXF
75 Utilities DJ, IDU
75 Value MidCap Russell, IWS
74 Germany Index, EWG
74 Financial SPDR, XLF
73 S&P Europe 350 Index, IEV
72 Belgium Index, EWK
72 Growth BARRA MidCap 400, IJK
71 Utilities VIPERs, VPU
71 S&P MD 400 iS, IJH
70 Russell Mid Cap, IWR
69 Financials VIPERs, VFH
69 Financial DJ US, IYF
68 Sweden Index, EWD
68 REIT VIPERs, VNQ
67 Developed 100 BLDRS, ADRD
66 MidCap SPDRs, MDY
66 S&P MidCap 400/B Value, IJJ
65 EMU Europe Index, EZU
65 Growth Russell Midcap, IWP
64 Growth BARRA Small Cap 600, IJT
63 Hong Kong Index, EWH
63 Real Estate US DJ, IYR
62 S&P SmallCap 600, IJR
62 STOXX 50 DJ, FEU
61 Technology MS sT, MTK
60 Small Cap VIPERs, VB
60 Financial Services DJ, IYG
59 Small Cap Growth VIPERs, VBK
59 NYSE Composite iS, NYC
58 Networking, IGN
57 Small Cap Value VIPERS, VBR
57 Small Growth Index M iS, JKK
56 Growth Small Cap DJ, DSG
56 S&P SmallCap 600/B Value, IJS
55 France Index, EWQ
54 Mid Value Index M iS, JKI
54 Rydex S&P Equal Weight, RSP
53 Telecom Services VIPERs, VOX
53 Europe 100 BLDRS, ADRU
52 Netherlands Index, EWN
51 Biotechnology, IBB
51 United Kingdom Index, EWU
50 Growth VIPERs, VUG
50 EAFE Growth MSCI, EFG
49 S&P 500/BARRA Value, IVE
49 NASDAQ 100, QQQQ
48 Global 100, IOO
47 Regional Bank H, RKH
47 Large Value Index M iS, JKF
46 Industrials VIPERs, VIS
46 Internet H, HHH
45 Euro STOXX 50, FEZ
44 EAFE Value MSCI, EFV
44 Vanguard Total VIPERs, VTI
43 Total Market DJ, IYY
43 Value VIPERs, VTV
42 Small Core Index M iS, JKJ
41 Value 3000 Russell, IWW
41 Russell 3000 (Cap W), IWV
40 Value 1000 Russell, IWD
40 Fortune 500, TMW
39 Growth 3000 Russell, IWZ
38 Healthcare Global, IXJ
38 Mid Core Index M iS, JKG
37 Malaysia Index, EWM
37 Growth 1000 Russell, IWF
36 Consumer Staples VIPERs, VDC
35 Large Cap VIPERs, VV
35 Russell 1000 Big Cap, IWB
34 Large Core M iS, JKD
34 Russell 2000 Value (Small), IWN
33 Info Tech VIPERs, VGT
32 Fidelity Commonwealth, ONEQ
32 Technology DJ US, IYW
31 S&P 1500 iS, ISI
31 Russell 2000 Small Cap, IWM
30 Singapore Index, EWS
29 Growth 2000 Russell, IWO
29 Value Large Cap DJ, ELV
28 Small Value Index M iS, JKL
28 Value Small Cap DJ, DSV
27 Technology GS, IGM
26 S&P 500 SPDRs, SPY
26 Industrial DJ US, IYJ
25 S&P 500 iS, IVV
25 Consumer Staples, XLP
24 Dividend DJ Select, DVY
23 Telecommunications Global, IXP
23 Growth Large Cap, ELG
22 Semiconductor iS GS, IGW
22 Basic Materials DJ US, IYM
21 NYSE 100 iS, NY
20 Technology SPDR, XLK
20 Large Growth Index M iS, JKE
19 Industrial SPDR, XLI
19 Growth S&P 500/BARRA, IVW
18 Health Care VIPERs, VHT
17 Global Titans, DGT
17 Technology Global, IXN
16 Materials VIPERs, VAW
16 DIAMONDS (DJIA), DIA
15 Internet Architecture H, IAH
14 Healthcare DJ, IYH
14 Italy Index, EWI
13 Consumer Non-Cyclical, IYK
13 SPDR O-Strip, OOO
12 Bond, 1-3 Year Treasury, SHY
11 Telecom DJ US, IYZ
11 China 25 iS, FXI
10 Internet Infrastructure H, IIH
10 Bond, TIPS, TIP
9 Materials SPDR, XLB
8 Bond Aggregate, AGG
8 S&P 100, OEF
7 Health Care, XLV
7 Bond, 20+ Years Treasury, TLT
6 Bond, 10 Year Treasury, IEF
5 Bond, Corp, LQD
5 Retail H, RTH
4 Consumer Cyclical DJ, IYC
4 Telecom H, TTH
3 Semiconductor H, SMH
2 Microcap Russell, IWC
2 Consumer D. VIPERs, VCR
1 Consumer D., XLY
1 Taiwan Index, EWT
0 Pharmaceutical H, PPH
.
LisaAu,
Just found your board. Looks informative. Your header info is great...
way to rock...
W@G1 QQQQ 10/31/05 for a 11/02/05 close~
37.72 frenchee
thanks--wish I could wag TLT better!
Stockcharts Template
Here's a link to the template I use for analyzing the daily chart of QQQQ.
http://stockcharts.com/h-sc/ui?symbol=QQQQ&period=DAILY&years=0&months=6&days=0&...
cannot go broke takin a profit!
TTT--28 Oct 05
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) No buy possible on 28 Oct 05. Current portfolio allocation is nil.
C Fund (S&P 500 Index) Sell C Fund if SPY is < $118.04. Current portfolio allocation is 25%.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.90. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $503.87. Current portfolio allocation is 50%.
G Fund (Money Market) Current portfolio allocation is nil.
Dr Worm,
Thanks for the news...
TTT--27 Oct 05
Commentary
Sold F Fund today and bought C Fund as F Fund lost relative strength among the TSP choices. S Fund has the highest relative strength among stock choices and will get a 50% portfolio allocation if the action limits are in play for 27 Oct 05.
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) No buy possible on 27 Oct 05. Current portfolio allocation is nil.
C Fund (S&P 500 Index) Sell C Fund if SPY is < $118.04. Current portfolio allocation is 25%.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.89. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $503.74. Alternatively, buy a 50% allocation if $EMW or DWCP is between $503.74--$513.96. Current portfolio allocation is 25%.
G Fund (Money Market) Current portfolio allocation is 25%.
swing man,
Think most of the risk of PFE is already discounted. Looks to me a rebound to 21-day SMA is in the cards because of the exteem price correction outside the lower Bollinger Band...regression to the mean...
W@G2 QQQQ 10/26/05 for a 10/28/05 close~
38.29 frenchee
TTT--26 Oct 05
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) Sell F Fund if TLT is < $90.81. Current portfolio allocation is 25%.
C Fund (S&P 500 Index) Allocate 25% to C Fund if SPY is > $120.08. Current portfolio allocation is nil.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.87. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $517.09. Current portfolio allocation is 25%.
G Fund (Money Market) Current allocation is 25%.
swing man,
The indicators on the daily chart suggest one more up day as most momentum-based indicators are nearing a presignal sell area.
I believe there's a better risk/reward ratio in small caps, energy, and uts now. My favorites are CCJ, PBW, XEC, APA, and VXF.
Good luck on your decision!
TTT--25 Oct 05
Commentary
Moved into S Fund today as mid & small caps are starting to move out. Will move 50% into S Fund if F Fund sells on Tuesday and buy criteria for S Fund is met.
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) Sell F Fund if TLT is < $90.79. Current portfolio allocation is 25%.
C Fund (S&P 500 Index) Allocate 25% to C Fund if SPY is > $119.80. Current portfolio allocation is nil.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.86. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Sell S Fund if $EMW or DWCP is < $510.62. Alternatively, allocate 50% to S Fund if $EMW or DWCP is between $510.62 and $517.46, and F Fund is sold. Current portfolio allocation is 25%.
G Fund (Money Market) Current allocation is 25%.
swing man,
Could run to 39 as that's about a 2/3 retracement from the recent swing high to low...
It's more than symbolic. It is one of the reasons why...
Week 8: PIT
OT Bull,
My Raptor picture under my signature element is hugh. It's a product referenced from a link on the USAF's Website. Is there an easy way for me to downsize it?
TIA
Bull,
I've never read a Hussman article with such a bearish overtone. Seeing he's often more right than wrong, the yellow flag is up in my portfolio...
Thanks for providing the info...
QT, (OT)
The image is taken from the USAF Website by a reference link in my signature profile. How do I resize it?
Hello AnderL,
Check out this graph about the housing bellwether bubble index... http://www.investech.com/others/chart.cfm?id=565
QT,
The trend in volume topped out as price did. Volume trend has been down as price has corrected from the price top. In other words, price action of the correction wasn't confirmed by the volume trend. I'm thinking the current market trend is about to turn bullish as long positions were being liquidated and downtrend will end as sellers sell their positions. This view is supported by the CMF already being in a buy mode and ROC about to go positive. Nevertheless, if price drops below 14.88, I'm out of the long.
GL!
You are welcome QuickTrade
OT: The Inevitable Peaking of World Oil Production
Robert L. Hirsch
October 22nd, 2005
Reprinted with permission from The Atlantic Council
http://321energy.com/editorials/hirsch/hirsch102205.html
The era of plentiful, low-cost petroleum is approaching an end.
Without massive mitigation the problem will be pervasive and long lasting.
Oil peaking represents a liquid fuels problem, not an “energy crisis”.
Governments will have to take the initiative on a timely basis.
In every crisis, there are always opportunities for those that act decisively.
The era of plentiful, low-cost petroleum is approaching an end. The good news is that commercially viable mitigation options are ready for implementation. The bad news is that unless mitigation is orchestrated on a timely basis, the economic damage to the world economy will be dire and long-lasting.
Oil is the lifeblood of modern civilization. It fuels most transportation worldwide and is a feedstock for pharmaceuticals, agriculture, plastics and a myriad of other products used in everyday life. The earth has been generous in yielding copious quantities of oil to fuel world economic growth for over a century, but that period of plenty is changing.
In the following, we describe the nature of the problem, options for mitigation, and required timing. The exact date of peaking is not known; some think it will be soon, others think a decade or more. However, the date is almost irrelevant as mitigation will take much longer than a decade to become effective, because of the enormous scale of world oil consumption.
Background
Oil was formed by geological processes millions of years ago and is typically found in underground reservoirs of dramatically different sizes, at varying depths, and with widely varying characteristics. The largest oil fields1 are called “super giants,” many of which were discovered in the Middle East. Because of their size and other characteristics, super giant oil fields are generally the easiest to find, the most economic to develop, and the longest-lived. The world’s last super giant oil fields were discovered in the 1960s. Since then, smaller fields of varying sizes have been found in what are called “oil prone” locations worldwide — oil is not found everywhere.
The concept of the peaking of world oil production follows from the fact that the output of an individual oil field rises after discovery, reaches a peak, and then declines. Oil fields have lifetimes typically measured in decades, and peak production often occurs roughly a decade or so after discovery under normal circumstances. It is important to recognize that oil production peaking is not “running out.” Peaking is the maximum oil production rate, which typically occurs after roughly half of the recoverable oil in an oil field has been produced. What is likely to happen on a world scale will be similar to what happens with individual oil fields, because world production is by definition the sum total of production from all of the world’s oil fields.
Oil is usually found thousands of feet below the surface. Most oil fields do not have an obvious surface signature, so oil is very difficult to find. Advanced technology has greatly improved the discovery process and reduced exploration failures. Nevertheless, world oil discoveries have been steadily declining for decades, as shown below.
Oil Reserves
Oil reserves are in some ways like inventory in a business, but the analogy can be deceiving. “Reserves” is an estimate of the amount of oil in an oil field that can be extracted at an assumed cost. Thus, a higher oil price outlook often means that more oil can be produced. However, geological realities place an upper limit on price-dependent reserves growth.
Reserves estimates are revised periodically as an oil field is developed and new information provides a basis for refinement. Reserves estimation is a matter of gauging how much extractable oil resides in deep, obscure, complex rock formations, using inherently limited information. Reserves estimation is a bit like a blindfolded person trying to judge what the whole elephant looks like from touching it in just a few places. It is a far cry from counting cars in a parking lot, where all the cars are in full view.
Specialists who estimate reserves use an array of technical methodologies and a great deal of judgment. Thus, different estimators might calculate different reserves from the same data. Sometimes self-interest influences reserves estimates, e.g., an oil field owner may provide a high estimate in order to attract outside investment, influence customers, or further a political agenda.
Reserves and production should not be confused. Reserves estimates are but one factor used in estimating future oil production from a given oil field. Other factors include production history, local geology, available technology, oil prices, etc. An oil field can have large estimated reserves, but if a well-managed field has past maximum production, the remaining reserves can only be produced at a diminishing rate. Sometimes decline can be slowed, but a return to peak production is impossible. This fundamental is not often appreciated by those unfamiliar with oil production.
Production Peaking
World oil demand is forecast to grow 50 percent by 2025.2 To meet that demand, ever-larger volumes of oil will have to be produced. Since oil production from individual oil fields grows to a peak and then declines, new fields must be continually discovered and brought into production to compensate for the depletion of older fields and to meet increasing world demand. If large quantities of new oil are not discovered and brought into production somewhere in the world, then world oil production will no longer satisfy demand. Peaking means that the rate of world oil production cannot increase; it does not mean that production will suddenly stop, because there will still be large reserves remaining.
The peaking of world oil production has been a matter of speculation from the beginning of the modern oil era in the mid 1800s. Initially, little was known about petroleum geology, so predictions of peaking were no more than rank speculation. Over time, geological understanding improved dramatically and guessing gave way to more informed projections, although the knowledge base involves numerous uncertainties, even today.
As indicated in Table I (see page 9), some forecasters believe that world oil production peaking might occur very soon. Others argue that we may have more than a decade of plentiful oil, which is the position of Daniel Yergin of Cambridge Energy Research Associates, as recently expressed in an op-ed piece in the Washington Post.3
Until recently, OPEC assured the world that oil supply would continue to be plentiful, but that position is changing. Some in OPEC are now warning that oil supply will not be adequate to satisfy world demand in 10-15 years.4 Such declarations are in line with the widely discussed questions about Saudi Arabian oil reserves raised by Matthew Simmons in his recent book.5 Even Dr. Sadad al-Husseini, a retired senior Saudi Aramco oil exploration executive, is on record as saying that the world is heading for an oil shortage; in his words “a whole new Saudi Arabia [will have to be found and developed] every couple of years’’ to satisfy current demand forecasts.6 So the messages from the world’s “breadbasket of oil” are moving from confident assurances to warnings of approaching shortage.
Types of Oil
Oil is classified as “Conventional” and “Unconventional.” Conventional oil is typically the highest quality, lightest oil, which flows from underground reservoirs with comparative ease, and it is the least expensive to produce. Unconventional oils are heavy, often tar-like and are not readily recovered because production often requires a great deal of capital investment and supplemental energy. For that reason, most current world oil production is conventional oil.7
The Oil Price-Reserves Nexus
In the past, higher prices led to increased estimates of conventional oil reserves worldwide. However, this price-reserves relationship has its limits, because oil is found in discrete packages (reservoirs) as opposed to the varying concentrations characteristic of many minerals. Thus, at some price, world reserves of recoverable conventional oil will reach a maximum because of geological fundamentals. Beyond that point, insignificant additional conventional oil will be recoverable at any realistic price. This is a geological fact that is often not understood by economists, many of whom are accustomed to dealing with hard minerals, whose geology is fundamentally different.
Oil companies and governments have conducted extensive exploration worldwide, but their results have been disappointing for decades. On this basis, there is little reason to expect that future oil discoveries will dramatically increase. The situation is illustrated in Figure 1, which shows the difference between annual world oil reserves additions and annual consumption.8 The image is one of a world moving from a long period in which reserves additions were much greater than consumption, to an era in which annual additions are falling increasingly short of annual consumption. A related fact is that oil production is in decline in 33 of the world’s 48 largest oil-producing countries.9
Impacts of Improved Technology and Higher Prices
Exploration for and production of petroleum has been an increasingly more technological enterprise, benefiting from more sophisticated engineering capabilities, advanced geological understanding, improved instrumentation, greatly expanded computing power, more durable materials, etc. Today’s technology allows oil fields to be more readily discovered and better understood sooner than heretofore.
Some economists expect improved technologies and higher oil prices will provide ever-increasing oil production for the foreseeable future. To gain some insight into the effects of higher oil prices and improved technology on oil production, consider the history of the U.S. Lower 48 states. This region was one of the world’s richest, most geologically varied, and most productive up until 1970, when production peaked and started into decline. Figure 2 shows Lower 48 historical oil production with oil prices and technology trends superimposed. In constant dollars, oil prices increased by roughly a factor of three in 1973- 74 and another factor of two in 1979- 80. In addition to these huge oil price increases, the 1980s and 1990s were a golden age of oil field technology development, including practical 3-D seismic, economic horizontal drilling, dramatically improved geological understanding, etc. Nevertheless, as Figure 2 shows, Lower 48 oil production still trended downward, showing no pronounced response to either price or technology. In light of this experience, there is no reason to expect that the worldwide situation will be different: Higher prices and improved technology are unlikely to yield dramatically higher conventional oil production.
Peaking of World Oil Production
Various individuals and groups have used available information and geological tools to develop forecasts for when world oil production might peak. A sampling is shown in Table 1, where it is clear that many believe that peaking is likely within a decade.
Mitigation
A recent analysis for the U.S. Department of Energy addressed the question of what might be done to mitigate the peaking of world oil production.10 Various technologies that are commercial or near commercial were considered:
Fuel efficient transportation,
Heavy oil/oil sands,
Coal liquefaction,
Enhanced oil recovery,
Gas-to-liquids.
It became abundantly clear early in this study that effective mitigation will be dependent on the implementation of mega-projects and megachanges at the maximum possible rate. This finding dictated the focus on currently commercial technologies that are ready for implementation. New technology options requiring further research and development will undoubtedly prove very important in the longer-term future, but they are not ready now, so their inclusion would be strictly speculative.
A scenario analysis was performed, based on crash program implementation worldwide – the fastest humanly possible. Three starting dates were considered:
When peaking occurs;
Ten years before peaking occurs; and
Twenty years before peaking.
The timing of oil peaking was left open because of the considerable differences of opinion among experts. Consideration of a number of implementation scenarios provided some fundamental insights, as follows:
Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.
Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.
Initiating a mitigation crash program 20 years before peaking offers the possibility of avoiding a world liquid fuels shortfall for the forecast period.
The reason why such long lead times are required is that the worldwide scale of oil consumption is enormous – a fact often lost in a world where oil abundance has been taken for granted for so long. If mitigation is too little, too late, world supply/demand balance will have to be achieved through massive demand destruction (shortages), which would translate to extreme economic hardship. On the other hand, with timely mitigation, economic damage can be minimized.
Warning Signs
In an effort to gain some insight into the possible character of world oil production peaking, a number of regions and countries that have already past oil peaking were recently analyzed.11 Areas that had significant peak oil production and that were not encumbered by major political upheaval or cartel action were Texas, North America, the United Kingdom, and Norway. Three other countries that are also past peak production, but whose maximum production was smaller, were Argentina, Colombia, and Egypt.
Examination of these actual histories showed that in all cases it was not obvious that production was about to peak a year ahead of the event, i.e., production trends prior to peaking did not provide longrange warning. In most cases the peaks were sharp, not gently varying or flat topped, as some forecasters hope. Finally, in some cases post-peak production declines were quite rapid, as in the U.K. for example (Figure 3)
It is by no means obvious how world oil peaking will occur, but if it follows the patterns displayed by these regions and countries, the world will have less than a year’s warning.
It’s Not Your Mother’s Energy Crisis
Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has often been used. Motor vehicles, aircraft, trains, and ships simply have no ready alternative to liquid fuels, certainly not for the existing capital stock, which have very long lifetimes. Non-hydrocarbonbased energy sources, such as renewables and nuclear power, produce electricity, not liquid fuels, so their widespread use in transportation is at best many decades in the future. Accordingly, mitigation of declining world conventional oil production must be narrowly focused in the near-term.
Risk Management
It is possible that peaking may not occur for a decade or more, but it is also possible that peaking may be occurring right now. We will not know for certain until after the fact. The world is thus faced with a daunting risk management problem. On the one hand, if peaking is decades away, massive mitigation initiated soon would be premature. On the other hand, if peaking is imminent, failure to quickly initiate mitigation will impose large nearterm economic and social costs on the world.
The two risks are asymmetric:
Mitigation initiated prematurely would result in a relatively modest misallocation of resources.
Failure to initiate timely mitigation with an appropriate lead-time is certain to result in very severe economic consequences.
The world has never confronted a problem like this. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge for decisionmakers is indeed vexing. Mustering support for an invisible disaster is much more difficult than for one that is obvious to all.
Concluding Remarks
Over the past century, world economic development has been fundamentally shaped by the availability of abundant, low-cost oil. Previous energy transitions (wood to coal, coal to oil, etc.) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
The world has never faced a problem like this. Without massive mitigation at least a decade before the fact, the problem will be pervasive and long lasting.
Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has been used. Accordingly, mitigation of declining world oil production must be narrowly focused, at least in the near-term.
A number of technologies are currently available for immediate implementation once there is the requisite determination to act. Governments worldwide will have to take the initiative on a timely basis, and it may already be too late to avoid considerable discomfort or worse. Countries that dawdle will suffer from lost opportunities, because in every crisis, there are always opportunities for those that act decisively.
Acknowledgements
The author deeply appreciates the encouragement and continuing support for the author’s work on peak oil by the management the U.S. Department of Energy’s National Energy Technology Laboratory. Roger Bezdek and Robert Wendling of Management Information Services, Inc. were major contributors to the analyses described herein.
About The Author
Robert L. Hirsch is a Senior Energy Program Advisor for SAIC. Previous employment included executive positions at the U.S. Atomic Energy Commission, the U.S. Energy Research and Development Administration, Exxon, ARCO, EPRI, and Advance Power Technologies, Inc. Dr. Hirsch is past chairman of the Board on Energy and Environmental Systems at the National Academies. He has a Ph.D. in engineering and physics from the University of Illinois.
Reprinted from The Atlantic Council
Oil fields are often composed of a number of individual oil reservoirs.
U.S. Department of Energy, Energy Information Administration, International Energy Outlook – 2004, February 2004.
Yergin, D. Technology and Higher Prices Drive a Supply Buildup. Washington Post. July 31, 2005.
Moors, K.F. How Reliable are Saudi Production and Reserve Estimates? Dow Jones Middle East Business Strategies. July 15, 2005.
Simmons, M.R. Twilight in the Desert – The Coming Saudi Oil Shock and the World Economy. Wiley. 2005.
Haas, P. The Breaking Point. New York Times Magazine. August 21, 2005.
U.S. Department of Energy, Energy Information Administration, International Energy Outlook – 2004, February 2004.
Aleklett, K. & Campbell, C.J. The Peak and Decline of World Oil and Gas Production. Uppsala University, Sweden. ASPO web site. 2003.
O’Reilly, D.J., Chairman and CEO, Chevron Corporation. Washington Post. July 25, 2005.
Hirsch, R.L., Bezdek, R. and Wendling, R. Peaking of World Oil Production: Impacts, Mitigation, and Risk Management. DOE NETL. February 2005.
Hirsch, R.L. The Shape of World Oil Peaking: Learning From Experience. To be published.
DrWorm/wallabe
Good news for a long TLT position...
http://www.marketwatch.com/news/story.asp?guid={528288A0-D9F5-4963-BC5B-E06C5E64DD1B}&siteid=mkt...
***CCJ*** Buy Alert
TTT--24 Oct 05
Moved into F Fund yesterday as U. S. Government Long-Term Bonds are starting to appreciate in price. No buy possible on C Fund, yet, but a buy is possible on S Fund as it's gaining relative strength visa-a-via I & C Funds.
Current Action Limits & Allocation Percentages:
F Fund (Long-term Treasury Bond Index) Sell F Fund if TLT is < $90.76 and move funds to G Fund. Current portfolio allocation is 25%.
C Fund (S&P 500 Index) Current portfolio allocation is nil. No buy possible on 24 Oct 05.
I Fund (EAFE Index) Sell I Fund if EFA is < $54.84 and move funds to G Fund. Current portfolio allocation is 25%.
S Fund (Wilshire 4500 Index) Allocate 25% to S Fund if $EMW or DWCP is > $513.18. Current portfolio allocation is nil.
G Fund (Money Market) Current allocation is 50%.