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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Archie Meeties who wrote (114583)	12/4/2008 7:12:54 PM
From: gregor_us	22 Recommendations Read Replies (4) \| Respond to of 206343

Hi Archimedes, Could you provide the following definitions so that we can continue the discussion? 1. Definition of peak oil. 2. Definition of a bubble or investment bubble. I'll answer first, and give you both my definitions, and positions. 1. Peak oil refers to the geologically defined limit of total aggregate daily production of a particular oil field, region, state, country or the world. Peak oil does not refer to reserves. It refers to flows. Generally, if you are "in" peak, then no amount of extra technology or human ingenuity will be able to increase peak flows as the oil age itself is concurrent with modernity, and science--so technology is already being brought to bear on the situation. In other words, peak is peak and you are either in it or not. It's a very simple definition, and is not complex. My position: we are in global peak oil right now. The evidence is 6 years of flat production of non-OPEC supply, and 3.5 years of flat global production. We will never see global oil production exceed those levels again. 2. Defining investment bubbles is hard. Usually, when a particular asset class is in a bubble, others are not. Also, investment bubbles are often defined as a speculative price advance when supply is either increasing or can be increased. Shares of tech stocks which were easily reproducable during a time when their value skyrocketed is a good example. I don't have a hard definition of a speculative bubble. My position: oil was not in an investment or speculative bubble this decade, even though it was a recipient of speculative capital flows. Oil's amplitude of violent highs and lows, which has always characterized oil and certainly obtained this decade, is typical of commodities. Historically, it's harder to distinguish the normal behavior of commodities and spec bubbles. If oil was in a bubble for the past 7 years, then every other asset class was also in a bubble. I can't distinguish in that case between Oakland CA residential real estate, dead shark sculptures by Damien Hirst, platinum, UK football clubs, and oil--this decade. One can assert that oil was in a bubble this decade, but you'll never be able to prove it. The academic work showing that it was not in a bubble has already been done, and is more voluminous and superior to any analytical work showing the opposite. Again, if oil was in a bubble, then everything was--which means it's not notable or even interesting to assert that oil was in a bubble. (I suppose one could assert tonight that oil is still in a bubble). I look forward to your thoughts. Mark me down though: we will never see any sustained daily production of oil from either OPEC or non-OPEC (together, globally) that tops what we have already seen. We have peaked, and are in peak--using the accepted definition. Gregor