Monday, May 5, 2008

Warren Buffett On Peak Oil

Warren Buffett and Charlie Munger On Peak Oil.

Q29: Doug Hicks, Akron Ohio. Oil will run out this century. Considering US policy is to do nothing until last second, will we face World War III? Will oil companies go to zero?

WB: Oil won’t run out - it doesn’t work this way. At some point the daily productive capacity will level off and then start declining gradually. There is the depletion aspect and the decline curves. We are producing 86m barrels per day or so, more than ever produced. We are closer, by my calculations, to almost our productive capacity, than we have ever been. I think our surplus capacity is less, and quite a bit less, than in past. Whatever that peak is, whether 5 or 10 yrs, the world will adjust, and we will think about it. Adjustments will cause demand to taper off. I don’t know how much oil is there, but there are lots of barrels of oil in place. We never recover total potential. We may have better engineering recovery in future. It is nothing like an on and off switch. You may still have enormous political considerations to get access to avail oil since it so important. There is nothing you can do over short period of time to wean world off oil.

CM: If we get another 200 yrs of growth dispersed over the world while population goes up, all oil coal and uranium will run out so you will have to use the sun. I think there will be some pain in this process. I think it is stupid to use up hydrocarbons of world so quickly. Stupid when there are few and limited alternatives. What should we have done? We should have brought all the oil over from Middle East and put it in our ground. Are we doing it now? No. Government policy is behind in rationality. If we have prosperous civilization, we must use the sun.

WB: Charlie, what is your over/under for oil production in 25 yrs?

CM: Oil in twenty five years, down.

WB: If this is true, that is big number. China is doing 10m cars this year, so down in 25ys is significant.
Also see here, here, and here.

1 comment:

Anaconda said...


Warren Buffett: "But oil is finite, there's actually some school that says it isn't, but I think it's petty finite."

The above quote is from Warren Buffett appearing on CNBC.

The transcript in the post shows Mr. Buffett is knowledgable on oil issues, but it's telling that at the end of the discussion, tosses the question to Charlie Munger, whether there will be more or less oil production in 25 years, as a betting proposition.

Charlie Munger bets on less oil production.

But to pose it as a "betting proposition," suggests there is uncertainty as to the answer.

As to the above quote, it's clear the Peak oil advocates have jumped on this quote as the links in the post attest. But the quote can be looked at, as a glass half-empty or half-full, because Mr. Buffett knows about abiotic oil theory, even if he doesn't name it as such, referring it as "...some school that says it isn't..."

If oil production is going to increase, it needs additional investment for exploration and development. One way to guarantee less production, is to starve it of the required investment.

It seems there are some quarters that are intent to that end.

For those who want to see continued economic growth in America, and indeed the world, oil production must be expanded.

Now if the idea that only limited supplies are left, gains currency (and regrettably it has), that will discourage investment in the oil industry.

Deepwater, deep-drilling has shown success. And, that substantial supplies do exist for an oil hungry world.

Indeed, investment will be rewarded with substanial profit.

The science supporting abiotic oil theory needs to be spread into the general populace. Mr. Buffett is famous for being a smart "everyman."

Now, more than ever, the hard science of abiotic oil theory must be used as a shield and more important, a sword.

Because when abiotic oil theory confronts "fossil" theory in the arena of science, it slays the 250 year Old Bull.

The court of public opinion must be conquored, next.