Peak Oil (was "petroleum geologist explains US war policy")

[Crispy]

It's interesting reading back in this thread and realising that the things that were predicted 9 years ago are steadily coming true. The inability of SA to expand production. The ridiculousness of biofuels exposed. We're past the peak of conventional oil and now we're watching the non-conventional oil going gangbusters to replace the losses due to depletion of existing fields. So far they're catching up, but will they be able to expand exponentially as the conventional oil decline starts to steepen? Economics and physics says not likely

 

[Falcon]

The announcement came after Saudi Arabia said it had boosted output to a near record level of 9.87m b/d in January and stood ready to cover any shortfall as European sanctions against Iran bite deeper. "I want to assure you that there is no shortage of supply in the market," said Saudi oil minister Ali al-Naimi. "Oil prices today are unjustifiable on a supply and demand basis. We really don’t understand why the prices are behaving the way they are."

It's odd that that the Saudi oil minister really doesn't understand why prices are behaving the way they are - his country has just authorised the construction of a fleet of 12 nuclear reactors to safeguard its water supplies, a conventional missile strike away from Iran and Israel (thereby converting them into nuclear missile strikes).

He needs to check his numbers more carefully. Saudi production capacity is roughly 15 million barrels per day. Saudi domestic consumption is roughly 5 million barrels per day. Saudi MAXIMUM export capacity is 10 million barrels per day. This recent increase isn't them adding new production to take up slack - it is them saturating their discretionary export capability.

Here is where the fun starts. It has a population of 25 million, growing at 2% per annum (i.e. it will double in 35 years). Their main water aquifer has fallen 150 meters in the last 25 years. No-one knows when it will run out, and therefore have to assume it can run out at any time, and govern their energy arrangements accordingly. Energy demand is inelastic - they need power for cooling, and for water desalination. Water desalination for 50 million people requires colossal quantities of energy. Its domestic energy demand is therefore growing at 5% per annum (a doubling time of 14 years).

Project demand forward against fixed production capacity, and Saudi ceases oil export in about 16 years. They aren't building new capacity (because, unlike us, they have access to their real oil reserve numbers, not the political ones the ruling Saud family publishes to help it cling to power), they are building nuclear reactors. And they are the last remaining "backstop" swing producer in the global petroleum system.

THAT's why prices are behaving the way they are, Mr Oil Minister, and why you are building nuclear reactors. You disingenuous little fuck.

[This is the so called "Export Land Effect" minus the decline in production capacity, for those with an interest in such matters].

 

[elbows]

They and many other in a position of power/responsibility aren't going to bluntly tell us the truth very often because being honest about it bring the implications forward. The reality is not all that counts, the perception has big implications too. Which is why I was quite fascinated as the elephant in the room occasionally shuffled into mainstream view at various brief moments over the last 7 years or so. I was waiting to see if it got up and started singing, but mostly its been a brief whimper and relatively hushed tones.

When looking back at the nearly 10 years that I've been at least vaguely aware of peak oil, there are only a couple of areas where expectations have not panned out quite as expected. I can't tell how much time they have bought from non-conventional oil just yet, but non-conventional gas certainly seems to have changed the expectations that we'd already be in the midst of a perfect storm of oil & gas production declining notably at the same time. I've not much sense of how much time this has bought either. The financial crisis has obvious changed some equations on the other side, but this was expected and represents exactly the sort of threats to the system we should expect from peak oil. Austerity and peak oil are in bed together, but the relatively obscurity of peak oil in terms of mass politics has lead to more pillow talking than pillow fighting so far.

 

[elbows]

An interesting story about Brent backwardation, and how problems at Buzzard & Elgin may prolong this trend despite the return of light Libyan crude:

http://www.bloomberg.com/news/2012-...y-brent-crude-relief-from-libya-s-return.html

Buzzard is worthy of further investigation, since older North Sea fields declined its become a big part of production. It hasn't been operating that long (only discovered this century I think) and it looks like its suffered from multiple problems in recent times.

 

[elbows]

Peak oil discussions have recently taken place in other threads, but we aren't going to let this thread die are we?

For some years now the IEA has been more in tune with peak oil possibilities than they used to be, and I've sometimes been quite impressed by how far Fatih Birol has been prepared to go. Most recently this article caught my eye:

http://www.hurriyetdailynews.com/ir...omist.aspx?pageID=238&nID=18587&NewsCatID=344

The main reasons behind rising prices are high demand and low production in non-Organization of Petroleum- Exporting Countries (OPEC) member states, Birol told the Anatolia news agency. “One reason is that oil demand is increasing quickly. Demand will increase by 1 million barrels this year.” The second factor is disappointing levels of oil production in non-OPEC countries, which made the market highly sensitive to supply and demand balances.

Tensions between Iran and the international community over its nuclear program, as well as problems in Sudan and Nigeria, have stretched the sensitive balance even more, Birol said. “Iran is not the major factor, but it has been the last straw. The major factor is the developments in supply and demand, or the fundamental market.”

Crude oil prices broke the $100 level for the first time this year in January due to tensions over Iran’s nuclear program, and have exceeded $120 per barrel since February 23, when Iran halted oil exports to France and England. “If Europe does not see a serious recession because of [the economic crisis in] Spain and Greece, I do not believe prices will fall below current levels,” Birol said.

May I also recommend the video interview with him on this Australian news channels special oil crunch feature:

http://www.abc.net.au/catalyst/oilcrunch/

I have not yet had time to look at the other videos on the site.

 

[Dr Jon]

Peak oil discussions have recently taken place in other threads, but we aren't going to let this thread die are we?

No, I hope not.
This thread is a good record of the Peak Oil story (which I think has some resonance with the Kübler-Ross model ?)

 

[Falcon]

Over the past few days, there has been worrying news about a rapid loss of global oil reserve margins. Jim Krane, an energy and electrical power researcher at Cambridge University, has pointed out that Saudi Arabia could face a dangerous loss of its oil reserve margins. Another researcher, from the Japanese Energy Institute in Tokyo, has warned that oil reserves could last for far less than expected. He predicts that international oil reserves will run out in 2030. Earlier estimates, by major companies, said that oil reserves could last until 2040. These two sources are highly credible as they are international scientific bodies that specialise in oil and energy.
-- "Doubts rise over crude oil reserves", GulfNews, 19 April, 2012 (ref)

These are the chickens coming home to roost after the OPEC "Quota Wars" in the 1980's. OPEC members introduced a quota system in 1981 for allocating production rights between members. Members were only allowed to produce in proportion to their claimed fraction of total OPEC reserves. This created a strong incentive to distort reserves figures - the more you claimed you had, the bigger proportion of OPECs aggregate revenue you got. Since OPEC reserves are not audited (in fact, a state secret) they ripped the arse out of the system competing with each other over revenue share, adding 300 billion virtual barrels - 25% of currently assumed world reserves - over the next 10 years without drilling a well. It's the pink stuff below, what we call "paper barrels" in the industry. You'll remember Kuwait giving up the pretence a few years ago and writing them off as non-existent.

That matters. In this graph (which I get slated for repeating, but which is effectively the X-Ray for what is going in on energy and for which I therefore make no apology), the green ASSUMES that 300 billion barrels is real. It isn't there, and the red projections are therefore highly optimistic.

This is, of course, why the Saudis are building nuclear reactors.

 

[SpineyNorman]

What's Iran's oil reserves like? Just wondering if their nuclear program is related to this in any way.

 

[Crispy]

Iran pulled the same trick. I imagine their nuclear programme has similar aims (although the completely opposite relationship with the USA complicates matters)

 

[SpineyNorman]

Anyone else shitting themselves over this?

 

[Crispy]

Anyone else shitting themselves over this?

Ever since I learned about it, yes.

 

[SpineyNorman]

Maybe we could burn the shit, use it as a replacement for oil. Like what nomads do with camel shit.

 

[Crispy]

Unfortunately, we passed peak shit in 2008

 

[Falcon]

What's Iran's oil reserves like? Just wondering if their nuclear program is related to this in any way.

Iran is mostly about gas. But the real story in all of these countries isn't the size of their domestic resource, it's the size of their domestic demand, and the instability of their societies.

They buy civil order through subsidised energy (petrol mostly) and cash handouts. That creates aggressive exponential demand. Exponential domestic demand wipes out any conceivable resource you might have irrespective of any estimate you might make of its size (that's one of the unintuitive properties of exponential growth).

That is why our assumption that they will continue to obligingly prop our economies up by threatening their own is naive to say the least and, yes, why unstable regimes with alleged fantastic untapped hydrocarbon resources are building nuclear reactors.

And, when you think about it, that's pretty much how we ensure domestic civil order.

 

[elbows]

I wouldn't say Iran is mostly about gas, that paints a slightly misleading picture. Iran can be ted to demonstrate your point about domestic consumption, although again I think you rather hype that aspect. Its a real factor, but Im not sure the term exponential should be thrown around so loosely.

 

[Falcon]

Im not sure the term exponential should be thrown around so loosely.

It is the only term that can be used to describe any phenomenon which increases in proportion to its current size.

 

[elbows]

It is the only term that can be used to describe any phenomenon which increases in proportion to its current size.

OK fine, but are you really trying to tell me that the term aggressive exponential growth is appropriate in this case? Whats aggressive about it?

They buy civil order through subsidised energy (petrol mostly) and cash handouts. That creates aggressive exponential demand. Exponential domestic demand wipes out any conceivable resource you might have irrespective of any estimate you might make of its size (that's one of the unintuitive properties of exponential growth).

Misleading unless you mention how quickly the resource is wiped out, which is obviously based on the size of the estimate and the rate of growth in demand.

 

[Falcon]

OK fine, but are you really trying to tell me that the term aggressive exponential growth is appropriate in this case? Whats aggressive about it?

It is a pleonasm. There is no such thing (in finite systems at least) as unagressive exponential growth. However, given that this is not universally recognised yet, the pleonasm is justified.

 

[Falcon]

Useful review of the status of peak oil by Kate Mackenzie at the FT:

We’d sum it up as this:

- It’s the price, stupid: It’s not the amount of oil, it’s the price at which it can be produced under both technical and political constraints.

- The primacy of transport liquids: There may be plenty of coal and unconventional gas out there, but they can’t displace oil. Oil is oil. Heating oil can be substituted fairly easily, but other sources of energy are not so useful for transport, yet.

- The critical contribution of cheap energy to the modern industrialised world. You can argue the numbers on just how important it is, and there are plenty of fun debates to be had about resource economics/mercantilism/scarcity/EROI (energy return on energy invested); but… who is really willing to say that the abundant and relatively cheap oil was not an essential component in building any modern developed economy?

- There’s also this problem of carbon constraint – let’s not go there just now, but you get the idea.

-- "Peak oil goes mainstream (again)", FT, 20 April 2012 (ref)

Of course we can't go into the issue of carbon restraint. How else would we be able to continue to argue ourselves into an inert stupor over various technical mirages?

 

[elbows]

It is a pleonasm. There is no such thing (in finite systems at least) as unagressive exponential growth. However, given that this is not universally recognised yet, the pleonasm is justified.

Oh pull the other one, its not a pleonasm, you are using it to add to the impact of the phrase.

I feel that the term aggressive is not very helpful at all, because for its meaning to be completely clear you have to describe what it is aggressive towards. And when applied to behaviour of animals and evolution, a study of aggressive behaviours will look at whether the aggressive behaviour may help the animal survive & reproduce, not just negative potential of aggressiveness.

So surely its clearer to simply talk about unsustainable growth, which seems to hit the relevant nail on the head. You are acting as if the word exponential being tacked onto the word growth offers some great new level of insight about the nature of the growth, something that the masses haven't properly considered yet. I struggle to see how this could be the case, people don't even have to understand the term exponential to understand that the sorts of growth we hear about on the news is in relation to the level we have already reached, and that the bigger we get, the more is required to continue to grow at the same rate.

Maybe I'm missing some crucial aspect, but really I think the word exponential only adds what you are implying it does if its used in the context of talk of maintaining growth at a certain percentage rate over time. You were talking about how fuel subsidies cause aggressive exponential growth in domestic demand, yet you don't claim anything concrete such as 'the year on year growth rate will be sustained at x percent' or 'the growth rate will increase over time'. So I think the word growth would have been quite enough, and the words exponential and aggressive are not just obsolete there but also potentially misleading, for they may tend to lead the reader towards imagining some accelerating or consistent growth rate is implied.

I wouldn't bother making this point if you weren't being so obvious in your avoidance of mentioning timescales and rates in some of your recent posts here. Take the following statement of yours:

Exponential domestic demand wipes out any conceivable resource you might have irrespective of any estimate you might make of its size (that's one of the unintuitive properties of exponential growth).

Its not unintuitive. People understand this, and they know that the word EVENTUALLY belongs in the sentence. People know that finite resources don't last forever, and that the rate you use them at matters, and the rate you discover matters. Where the disagreement is to be had is down to timescale, alternatives, and what can be sustained in the absence of growth, in decline, how much we can learn to live without, how much more efficient we can make certain things, etc.

 

[elbows]

Im going to stop picking on you soon and take a break from these discussions for a few weeks, honest, but before I do I'll return to your subsidies & domestic demand in oil-producing countries point again, since that was what the aggressive exponential stuff I moaned about was related to.

When looking at the future of oil, its certainly important to look at how domestic demand is doing, and we will see it play a noticeable role in stagnant or declining exports from various places. Subsidised fuel obvious has an impact on demand, but obviously there are other factors at work, such as whether peoples incomes are growing, shrinking or stagnating and a bunch of other aspects of the state of the economy.Under some conditions even an increase of subsidies or cash handouts may not keep up with other factors, and there will not be growth in demand.

One of the ugly ways the world may absorb the oil supply issues for a bit is by the dramatic decline of demand in certain countries, as economic factors cause them to drop of the list of countries whose populations have the routine ability to afford oil products. We have seen attempts at lowering or removing subsidies in some countries, a scenario that populations obviously react to with horror, and sometimes there is plenty of turmoil and a hasty undoing of the subsidy cuts. It is certainly appropriate to draw attention to the fact that when this happens in oil-producing countries, oil production can suffer, amplifying the problem for all concerned. And how the fear of this will contribute to demand-sustaining policies in many of the producing countries that can afford them (and producing countries are certainly more likely to be able to afford them).

So Im not moaning at you for bringing these issues up, just wanted to talk about them a bit differently.

 

[Falcon]

Oh pull the other one, its not a pleonasm, you are using it to add to the impact of the phrase.

pleonasm |ˈplēəˌnazəm|
noun
the use of more words than are necessary to convey meaning (e.g., see with one's eyes), either as a fault of style or for emphasis.

I can't quite make out if you are making a joke. Apologies if you are.

Its not unintuitive. People understand this, and they know that the word EVENTUALLY belongs in the sentence.

A drop of water, placed in your hand and allowed to double every minute, fills the volume of Wembley stadium in 50 minutes.

It does that essentially irrespective of your estimate of the volume of Wembley stadium.

4 minutes before you drown, chained to a chair on the top row, Wembley Stadium is 94% empty space.

People don't really know where they stand in relation to EVENTUALLY, and their intuition doesn't serve them well.

My experience of having giving talks to thousands is that almost no-one understands the exponential growth function properly.

Which is why a little pleonasm doesn't go amiss.

 

[Dr Jon]

I was looking for Bartlett's classic lecture on the exponential function, but found this:



http://www.blindspotdoc.com/

Modern agriculture is the use of land to convert petroleum into food.
...
This isn't high level mathematics, it isn't rocket science, it's just plain common sense - and it's universally rejected by the business community, the commercial community, and the political community.

If you look at the total of solar energy that is collected by all agriculture, all forestry, lawns and everything else in the US, all of that solar energy is less than one half of what we're burning as fossil energy

 

[Falcon]

Bartlett's original lecture is "Arithmetic Population & Energy - The Most IMPORTANT Video You'll Ever See" (youtube).

It is.

 

[elbows]

I can't quite make out if you are making a joke. Apologies if you are.



A drop of water, placed in your hand and allowed to double every minute, fills the volume of Wembley stadium in 50 minutes.

It does that essentially irrespective of your estimate of the volume of Wembley stadium.

4 minutes before you drown, chained to a chair on the top row, Wembley Stadium is 94% empty space.

People don't really know where they stand in relation to EVENTUALLY, and their intuition doesn't serve them well.

My experience of having giving talks to thousands is that almost no-one understands the exponential growth function properly.

Which is why a little pleonasm doesn't go amiss.

No I wasn't meaking a joke, I stumbled badly over the definition of pleonasm, as I attempted to demonstrate that the word aggressive is ambiguous and so the emphasis which you sought to obtain from using that word was not really a pleonasm.

Anyway all this stumbling around, which I am in danger of repeating, will hopefully not distract from your dishonest use of the term exponential. Your Wembley stadium example demonstrates this point well. You are talking about exponential growth where the growth rate is a constant percent.

What has such a nice clean and dramatic exponential curve got to do with the graphs for consumption of oil in Iran, or indeed the vast majority of the graphs we look at when discussing peak oil and related issues? Very little, for the growth rates of production, discovery, consumption and economy are seldom constant for long enough to get such curves.

I am perplexed as to why you feel the need to do this. Please explain, isn't the measured reality bad enough?

 

[Falcon]

What has such a nice clean and dramatic exponential curve got to do with the graphs for consumption of oil in Iran, or indeed the vast majority of the graphs we look at when discussing peak oil and related issues? Very little, for the growth rates of production, discovery, consumption and economy are seldom constant for long enough to get such curves.

Great example of how unintuitive this is. Apparently tiny growth rates yield colossal numbers. A general audience (even well educated) does not generally understand that 5% energy growth rate eliminates 15 million barrels of Saudi export capacity by 2030. All you are saying is that the numbers vary between different colossal amounts.

Meanwhile:

According to Iran's leaders, the nuclear program has been developed to provide electricity. Let it be assumed, for argument's sake, that this is the real and only reason for the program. If so, it is worrying that a country so rich in hydrocarbons is in need of nuclear power. It is an indication of the wastefulness of the current policies that the regime has to buy off the public with massive subsidies, resulting in energy wastage, pollution, and consequent damage to the health of the population. At a deeper level, it reflects the weakness of the regime.

-- "Iran's Energy Vulnerability", Paul Rivlin, Dec 2006 (ref)

This is not a regime that is easing its colossal domestic subsidies any time soon, which is why domestic demand growth is so high.

I am perplexed as to why you feel the need to do this. Please explain, isn't the measured reality bad enough?

Not bad enough, apparently, to actually get anyone to do anything about it. Do you feel we are all in need of a little more "nudging", and a few more telly adverts suggesting we walk to the corner shop for our Sunday paper?

 

[free spirit]

I'd have to say that the graphs of Iranian gas consumption figures for the last decade don't match up with your agressive exponential growth description.

If anything the growth looks more linear than exponential for that period, and a 3% drop in consumption reported for last year doesn't really fit your description either, though obviously it could just be an anomaly.

 

[Falcon]

If anything the growth looks more linear than exponential for that period,

As does a graph of water level in Wembley Stadium for the first 46 minutes of the 50 minute experiment. Exponential curves in finite systems have a "hockey stick" point of inflexion, and look linear before that point. You need a longer timescale. I know this is per capita and electricity, but this is the underlying energy demand function. Energy intensity is growing at 5% per annum since 1980 i.e. doubling every 14 years. Population is growing at 1.4% per annum i.e. doubling every 50 years. Energy demand is growing at (5.0+1.4%) = 6.4% i.e. doubling every 11 years. They are trying to substitute domestic oil consumption for gas to boost oil export revenues so you can't say anything about the balance, but the aggregate domestic hydrocarbon demand growth is ferocious.

The real point is that global demand growth is exponential (non-OECD population growth is exponential and 80% of global population, non-OECD energy intensity is 25% of OECD, and they are industrialising).

1.45% per annum global demand rate is a doubling time of under 50 years. In that 50 years, we would need to produce as much oil cumulatively (1 trillion barrels) as all the oil that has ever been produced until now (1 trillion barrels). There is nothing about the exponent "1.45%" that hints at that colossal quantity, to the uninitiated.

1.45% is aggressive.

 

[Crispy]

Britain may have enough offshore shale gas to catapult it into the top ranks of global producers, energy experts now believe

Wow! Energy independence beckons!

"Commercially exploring offshore oil and gas in the North Sea would probably cost four or five times as much as current marginal costs of $50 to $60 required to operate at a profit," one industry expert said.

Oh.

 

[Falcon]

Wow! Energy independence beckons! Oh.

Indeed. Here is latest academic opinion on that:

Several reports sponsored by the gas industry have estimated the economic effects of the shale gas extraction on incomes, employment, and tax revenues. None of these reports has been published in an economics journal and therefore have not been subjected to the peer review process. Yet these reports may be influential to the formation of public policy. This commentary provides written reviews of several studies purporting to estimate the economic impact of gas extraction from shale beds. Due to questionable assumptions, the economic impacts estimated in these reports are very likely overstated.

-- Kinnaman, T. (2011), ‘The economic impact of shale gas extraction: A review of existing studies’, Ecological Economics

Shell give the game away, at least to the discerning:

"The figures appear to suggest the shale resources are so large that the question is not how much is out there, but how much can be retrieved - how much can be economically accessed in an environmentally acceptable way"

-- Melvyn Giles, global head of unconventional gas and light tight oil at Shell

which is a problem since:

Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon and is comparable when compared over 100 years’

-- Howarth, R. W., Santoro, R. & Ingraffea, A. (2011), ‘Methane and the greenhouse-gas footprint of natural gas from shale formations’, Climatic Change

So, to summarise: the UK just found colossal quantities of a fuel source environmentally worse than coal, that you can't afford.