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Monday, November 12, 2007

Bob Brinker on Oil Prices and Hubbert's Peak

This is an excerpt from David Korn’s November 10-11, 2007 weekly newsletter (Click for a FREE SAMPLE ) that comments on Bob Brinker’s Money Talk.


Caller: Senator Lieberman has proposed closing ANWR to oil development.

Bob said that is ridiculous. The original U.S. geological survey in 1980 estimated that along the ANWR coastal plane could produce 17 billion barrels of oil and 34 trillion cubic feet of natural gas. Bob said anyone who opposes the drilling is not in touch with reality. The caller said he is from Alaska and people who suggest the oil drilling will kill the wildlife are not telling the truth.

Bob said it is the same thing with nuclear energy, people who oppose it because of the alleged danger it poses are in the pockets of special interest groups and aren't facing reality. Bob noted that only 8% of ANWR would be subject to exploration, 92% would not. In addition, there are estimates that it would create tens or maybe hundreds of thousands of jobs.

Caller: This caller asked Bob to discuss the theory of "Peak Oil."

Bob said it is not a theory, it is real. Hubbert's peak was the model used to predict that the U.S. oil production would peak around 1970 and from there the rate of production would enter a terminal decline. Bob said we have already experienced peak oil here in the U.S., and it's going to happen in other parts of the world as well. Bob said he thinks peak oil is good science even if others disagree.

The caller asked Bob if he agreed with the Armageddon forecasts that are based on the eventual decline in oil production?

Bob said he didn't because we don't rely on oil near as much as we used to as well as the fact that we now have alternate sources of fuel that are being tapped. Oil only accounts for only 4.5% of GDP in the U.S., whereas years ago it was in the teens. That is why you haven't seen a significant economic impact even with oil trading in the mid-$90s. That said, world oil production is either at, near or past Hubbert's peak. Countries like China and India are growing very fast which puts a lot of demand on oil. We obviously have supply/demand oil issues; otherwise oil wouldn't be trading above $90. This is hurting people who live paycheck to paycheck. Bob said he doesn't know where oil prices are going at this point and only a fool would try to predict that at this point.

David Korn Comment: Charlie Maxwell, the oil energy expert, was on Moneytalk in September and predicted that oil should stay in a range of $50s up to $80 a barrel for another two years. Bob took up this mantra in response to a caller some weeks back saying he was going to go with Charlie's prediction. Up until recently, Charlie had been pretty on the mark as oil had only gone to the upper $70s. With oil now knocking on $100 a barrel, the prediction Charlie last made is pretty much out the window.

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