PS, oil producers must reinvest some of their oil to produce more oil. As long as they are producing multiple barrels for every barrel invested, the production process will remain profitable for them. This is called EROEI by some authors (energy returned over energy invested) and perhaps energy producers are not using their output product to produce more energy, but they must be able to extract more energy than they invest in any form for the production to be profitable. As I recall, in the early days of US production (until 1950) this ratio was as high as 100:1, but lately it has dropped to as low as 5:1 for offshore deepwater drilling. I will look for a hard source on that but I can’t back up those numbers yet. Simply put, oil companies will profit as long as they sell a lot more than they use. How many seeds are in a single apple, and how many apples will grow on the tree that those seeds produce? Certianly more than one.
I have read both of Stephen Leeb’s books, and Simmons’ Twilight in the Desert. Not sure which book you mean by ‘Peak Oil’ as that describes a lot that deal with the subject :). But I have read most of them. Twilight is an excellent book, but is technical and not for a beginner in the subject. The book I recommended, A Thousand Barrels a Second, strikes an excellent balance between the “we’re all gonna die now” crowd and the “we should do nothing because everything is OK and there is tons of oil” crowd. It explains the real problems and challenges we face going forward, and does so in layman’s terms.
I wholeheartedly agree that the US government should not subsidize offshore drilling and exploration. Corporate welfare is absolutely not a free-market policy. The subsidies were put in place to encourage domestic exploration and production in the face of inexpensive foreign oil, and US oil companies certainly don’t need the help anymore, if they ever did.
I currently own Chevron and Exxon-Mobil, and while I believe oil may hit $200, that could still be several years away. I certainly think there is little downside risk.
