Oil: still peaking? In the previous entry, Sam dares question my assertion of no new oil being laid down, particularly if I'm relying on those flaky geologists. Not that I know enough geology to defend the entire field, but I'm given to understand that the oil guys really care about where oil comes from, they have essentially infinite money to work with, and they are more sophisticated than outsiders like me sometimes appreciate. Eg., the Fast Fourier Transform was well-known inside before Cooley and Tukey published it, medical imaging trails seismic by about a decade, the Top500 supercomputer list of machines, owners, and applications is usually headed by entries like "unnamed government agency / classified" and "Giant Oil Co / exploration". So if it can be known where oil comes from, they probably know.

My understanding is that a fairly specific set of conditions is required to make oil. Oil comes only from oceans, other organic carbon deposits, such as peat bogs, turn into coal. The conditions required include climatic (hot and wet), so that there's large biological productivity. Local geology and hydrology is also important. It has to be deep, but near land, and in a trapped body of water without deep circulation, so that bottom conditions are anoxic to prevent decomposition. Or something like that, and parts of this picture may be controversial, I don't know enough to know. Still, think Norwegian fjords, except with a tropical paradise at the surface, and that's the picture I have. This isn't sufficient to turn into oil, it's still got to get buried in the right kind of rock at the right depth for the right length of time and get trapped under the right kind of cap rock, but you've got to start this way to get a chance, and the picture is specific enough to exclude anywhere that currently exists. At least, that's my understanding.

As for citations, the source I can find quotes Klemme and Ulmishek (AAPG Bulletin 1991) for deposition vs. time, a webified summary of which is available here. This is mostly gibberish to me, but see Fig. 1. I also ran into this, written by the (retired) chief geoscientist at ExxonMobil Exploration, if you want to know what (at least one dude in) Big Oil thinks about Peak Oil. (Short summary: sure to happen, could cause geopolitical / environmental / economic / security disruptions, and go ahead and invest long-term as if high prices will continue.) Added: reviewing my original words in the light of above, "no oil whatsoever" is probably overblown, and needs some kind of mealymouth footnote, like "which could turn into an economically viable reserve, or not much anyway". Indeed, that's probably all Sam was saying...

Peak Oil?

It's working, anyway. I feel impelled to post more because Brer TFox is posting:

and there is in fact no oil whatsoever being deposited right now.

What's your source on that? Cause if it's the same people (i.e., mainstream geologists) who claimed that continents don't move only 45 years ago, I don't accept that as an authority.

I would accept "the amount of oil currently being deposited is unknown but probably quite small and almost certainly less than the amount of oil being extracted." But really none?

Current Accounts

TFox has a nice post two down about the US current account deficit. I was recently thinking about this in connection with Canada's removal of the foreign-content cap on RRSP's.

An RRSP is a flexible, tax-deferred savings/investment account available in Canada. You can put in up to 18% of your income (up to a cap of $15.5k), and that contribution becomes exempt from income tax. The growth in the account is tax-free, but withdrawals are taxed as income.

Until this year, there was a restriction on how RRSP funds could be invested. Up to 30% could be invested in "global" content, while the remaining 70% had to be invested in Canadian content. Typically people would choose GIC's (a kind of insured certificate of deposit) or bonds, but "Canadian" could include Canadian-managed clone funds which reproduce the behavior of foreign equity funds (plus a fee). But now that's all changed.

I figure it like this: the 70% Canadian requirement was intended to pump up investment in Canada and thereby cause Canada's economy to grow. But since many people were investing their CanCon conservatively, banks were looking for nice safe loans to park that money in. And there's only so many houses and McDonald's franchises to finance. Interest rates have been low and are staying low, and I believe this is caused in part by the large pool of RRSP money looking for low-risk borrowers.

The total amount held in RRSP's in 2003 was $340 billion CAD (source). So with the cap removed, the $240 billion CAD is now free to find a home anywhere in the global capital market. Let's suppose that all of it goes to the US, into index funds that track the S&P 500.

The investment must be balanced by a current account deficit or else by increased US consumption of Canadian goods and services. And it's the latter possibility that I think the Government is banking on. Their previous strategy of forcing direct investment in Canada through the RRSP foreign-content cap failed: banks were unwilling to lend the money to economy-growing businesses. The new strategy is to allow Canadians to buy foreign investments (which will incidentally drive the Canadian dollar lower) to make Canadian products more attractive to foreign consumers, so that Canada sees demand-driven growth -- this instead of trying to force capital-supply-driven growth.

Good for them. And, incidentally, good for me -- now I can put all of my RRSP in Berkshire.