Energy guru T Boone Pickens was on CNBC to discuss oil prices. He sees Brent oil heading back to $90 within 12 to 18 months.
The interview with Joe Kiernan is a bit difficult to watch and prompts a bit of profanity from Pickens. Kiernan claims that peak oil is nonsense since we are producing more oil every year.
What Kiernan fails to understand is that peak oil does not happen overnight. We have hit the peak of conventional low cost oil production and demand exceeding that conventional oil production has pushed prices up to a level where higher cost oil is now possible to develop.
If we had an option, we wouldn't be spending money to produce shale oil, because it is high cost. But at the current level of demand we need shale production. That is why the drop in oil prices is not going to be permanent. The price of oil needs to be at a level that allows shale production to continue.
