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Monday, October 24, 2005

Hubbert did in the Soviet Union?

A commenter at TOD provided a link to lecture notes by Ayres on Economic Growth (and Cheap Oil)
It seems that the CIA took Hubbert’s methodology seriously and applied it to the USSR (Anonymous 1977). This report predicted that Soviet oil production would peak in the early 1980's. In fact there were two peaks, the first in 1983, at 12.5 million barrels per day and the second in 1988 at 12.6 barrels per day. Since then production has declined steadily. It seems likely that the Reagan administration, which took office in 1981, bearing in mind the economic havoc produced when US production peaked in 1981, followed by the Arab oil embargo and the "oil crisis" of 1973-74 and the deep recession that followed, decided to use the "oil weapon" to destabilize the USSR. Reagan embarked on a major military buildup, putting the Soviet Union under pressure to keep up. Meanwhile, declining prices after 1981 forced the USSR to pump more oil to supply its clients in Eastern Europe and to sell in world markets for hard currency. Then in 1985 Regan persuaded Saudi Arabia to flood the world markets with cheap oil. Again, the USSR had to increase output to earn hard currency. This led to the second peak in 1988. Two years later the USSR imploded (Heinberg 2004) pp 40-41.
I have a feeling that the implosion caused a reverse shock which has since stabilized. I would try to fit this curve with the oil shock model if I could, but I have yet to find a good set of discovery data.

Which brings us to asking an exceedingly pretentious question: Can we generate a better model than the logistic curve, donate it to the CIA, and thus help them out in putting an end to oil-funded terrorism?

Nah! Let's use it to make a killing in the oil future's market instead!


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