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

[free spirit]

Yes, that is an interesting question. However, high prices are also double-edged - they mean that there is increased demand from oil producers. At whichever level of production you have, prices are actually zero-sum in terms of demand, aren't they - the higher the prices, the more that demand transfers to the producers.

it's a speed of money thing though. high oil prices take money out of the pockets of people who'd have otherwise spent that money in their local areas distributed all over the world, and concentrates it in the hands of multi billionaires who mostly hoard it and occasionally splash out on a football club, and further inflating the high end property bubble.

hence recession for the vast majority, and continued growth at the very top end of the wealth spectrum.

 

[elbows]

Unlike the drawn-out consequences of the 1970's oil shocks, this time around such phenomenon didn't seem to attract quite the same level of attention in popular culture. For example when I was growing up there were things such as the 'Mustapha Million' character in a comic. I might have expected even more drooling over that considering the war on terror, but in actuality that and related 'freeing adventures' seem to have distracted from that point rather than drawn attention to it. When encouraged to drool over the wealth of some in the middle east over the last decade, attention seems to have been directed towards those building their billionaires playgrounds in the sand through other types of economic activity & silly properly bubbles, e.g. Dubai, rather than the classic oil wealth.

I suppose I shouldn't be surprised that they are prepared to blatantly wank over Iraqs oil potential now, less than 10 years after shock and awe, since many with their eyes on the prize could barely stop themselves going on about at the time, even when Blair was making his unconvincing denials that it could possibly have anything to do with oil.

A lack of mainstream acknowledgement of Russia's hefty contribution to global oil supplies also makes me scratch my chin sometimes, quite prepared to go on about their gas when it causes european energy security fretting, but when it comes to oil we are left to dwell on the middle easts staggering level of alleged reserves as opposed to the slightly more balanced picture of global oil production that exists at present. But for me Russia's potential for oil production decline interests me almost as much as Saudi Arabia's.

 

[Meltingpot]

I've just had a look at that oil drum site (thanks for the link btw), and I noticed that James H. Kunstler isn't mentioned anywhere in the blogroll, despite the fact that his book "The Long Emergency" is one of the best known accounts of the peak oil problem for most people, including me.

Is Kunstler not regarded as a serious souirce amongst experts in the field?

 

[elbows]

He is on the blogroll, clusterfuck nation is his blog and its listed.

 

[Meltingpot]

Oh right, slap me for knowing the name of Kunstler's blog Thanks for the info.

 

[Coolfonz]

Leonardo Maugeri is the senior planner at Eni, the fourth biggest oil company in Europe. A long time anti-peak oil bod. Wrote a not very well written book a few years ago, son is also in the company...

`Peak oil` is just a function of a failing political/economic system, it puts a cap on economic growth/recovery/whatever you like to call it. It's not that all the `easy oil` has gone - some of it has - it's that access is limited to the easy oil, mainly by politics. High prices stimulate lower levels of access, resource nationalism etc...even in the UK when oil reached $147 the Labour party upped taxation etc. But high prices attract lots of investment, much of which from 2007-08 is coming online now...

Sad to say a lot of the peak oil people speak utter utter bollocks, so does Monbiot in his piece you post here. So do anti-peakers. It's much much more complicated and no single person knows how energy will pan out. Just look at the monumental fuck ups with biodiesel in the EU...

 

[elbows]

Where exactly is the easy oil that is limited by politics then? Give an example or two.

 

[Nylock]

/grabs deckchair...

 

[elbows]

You might be sitting in the chair for a while before anything happens, at this rate I'll have to answer my own question.

The most obvious lazy answer is that theres loads of great cheap oil sitting around in parts of the USA that hasn't been got at due to pesky environmental concerns. Not good enough.

Elsewhere we can point to a number of countries where oil production or investment has been somewhat hampered by instability of one kind or another, but again I seriously doubt the daily production totals from these places are enough to significantly alter the equation or even begin to support a claim that the era of cheap & easy oil is not over.

Take for example that report we recently discussed which makes all sorts of happy claims about future production of all sorts of oil. Even if you believe it, its rather telling that the best the cheerleaders for oil can manage is a good news story that involves unconventional oil, not conventional dirt-cheap stuff.Thats newsworthy enough, never mind peak oil.

 

[Falcon]

Leonardo Maugeri is the senior planner at Eni, the fourth biggest oil company in Europe. A long time anti-peak oil bod. Wrote a not very well written book a few years ago, son is also in the company...

So you're telling us that a chap who's company's share price and son's career depends on the proposition that oil is not limited has written a book advancing the proposition that oil is not limited. Well, well, who'd have thought.

Since bollocks is regularly trotted out on this subject (some phenomena are not subject to peak dynamics, regrettably), I don't mind periodically trotting out the fundamental public domain engineering data that helps calibrate just how bollocks it is.

• Oil discovery peaked in 1968 and has halved every 15 years since. (Source: IHS - as it happens, one of the most fervently anti-peak oil consultancies on the planet. They hate it when their data is used in this way).
• With such a distinct inflexion point and prolonged decline, the math permitting an estimate of the total discoverable volume is simple. In 1900, there were 2 trillion barrels of oil available for extraction, of which we have extracted the easiest 1 trillion barrels.
• For the number to be higher you need two things: technology improving faster than depletion - it isn't; and future investment higher than historical - it's lower (it's higher in gross terms, lower in net terms after spiralling industry costs).
• Demand is growing at around 1.65% per year. For it to be any less, you will have to convince the 80% of the planet who currently live on a quarter of your energy consumption (a.k.a. "standard of living") to be content with that, in a world of $3,000 Tata "Nano" cars, and to stop having babies. Good luck with that.
• The existing discovery base is currently supporting extraction of c. 30 billion barrels per year. That production capacity is depleting at 10% per annum i.e. halving every 7 years (Source: the European International Energy Agency). We need to mobilise 15 billion barrels per year of production in the next 7 years just to maintain current production levels. That's one tenth of Iraq's proposed (and optimistic) reserves, and another sixth in the following 7 year period. We won't.
• Assuming we could mobilise such colossal volumes, the maths of how long 1 trillion barrels will last at 1.65% demand growth is easy. Looks like this, and it's all gone by 2030 (worth reading that twice).

• The maths of how much discovery you need to make to alter that reality is trivial. Looks like this. A single 75 billion discovery (equivalent to the remaining reserves of the current largest producer, the Russian Federation), made today and mobilised immediately, extends peak 8 years. A new Russian Federation every 5 years, for 25 years (equivalent to 1.5 times remaining Saudi reserves) delays peak by 14 years.
• These are net quantities. Gross quantities are substantially higher because EROIE is dropping like a stone.
• Perhaps it is necessary to point out that the 100 million puddle discoveries over which the media fawn (i.e. reprint oil company share price supporting press releases) don't even touch the sides of the rate we would need to sustain, but that doesn't stop them describing them as "giant".

Everything else - from temporary "frac" gas production Ponzi schemes generated unsustainably from synthetic quantitive easing debt, supposed unconventional oil that either assumes the atmosphere will continue to absorb its CO2 and/or that a global economy with $700 trillion of unsupported derivative debt can absorb the colossal mitigation cost, through to adorable and charismatic but deranged aspirations for sunbeam and summer breeze transducers that ignore colossal primary material and manufacturing energy requirements and capacity mobilisation schedules necessitated by the primary depletion rate, while absurdly assuming the continued functioning of the colossal hydrocarbon powered global industrial manufacturing systems that they are the product of, despite the withdrawal of the very hydrocarbon energy sources that requires their creation in the first place - are the petrol fume induced hallucinations of understandably terrified people.

It's much much more complicated and no single person knows how energy will pan out.

Speaking as someone with distinctions in a couple of advanced degrees in relevant subjects, and a couple of decades as an industry practitioner at a senior level, I can say with some authority that it actually isn't all that complicated, at least at the level necessary to understand the fundamental dynamic rehearsed in this post. The assertion that it is is merely a device for holding onto the possibility that, within the supposed complexity, the possibility of magic - a.k.a. "technology", "human ingenuity", etc. - still resides. Technology, it turns out, is just an energy intensive mechanism for converting surplus energy into "stuff". Unfortunately, the only "stuff" it can't make is surplus energy in the quantities necessary to sustain the energy intensive industrial manufacturing processes it depends on - an annoyingly self-referential fallacy, and obvious when you think about it, but which people generally don't. Once you strip out the mythology and rhetoric, it's all fairly straightforward. The problem, of course, is that our basic fear makes us extremely susceptible to that mythology and rhetoric. But if you can understand that you can't drink beer you haven't poured, you understand the relationship between production and discovery. If you can visualise your speed if you tie a bungee to a lamp post and your waist and start running, you can intuitively feel the dynamics of depletion based production physics. If you understand that you can't attach a dynamo to the front wheel of your bike and use it to power a motor to drive the back wheel, you understand the dynamics of the renewable energy sector. From my experience, 10 year olds readily grasp these concepts, once properly explained - there is no reason why any Urban75 reader should accept coolfonz's implied assertion that this is all too difficult for them.

I'll tell you what is complex, though. It's taken me over a year to learn how to reliably get 4 lb of meat a week from a sustainable population of rabbits without them dying on you, and that is with a ready supply of money and materials (and rabbits). I'm not stupid, and I still can't figure out how to store large quantities of summer surplus through the winter without it rotting, or how to sustain initial yields through healthy composting now I've depleted the initial nutrient stock in the soil. I'm sure I will, but I'm also sure I'm glad that I'm not living in a place that looks like post-collapse Soviet Union while I'm learning. I'm also glad I cashed in my worthless money vouchers (my individual claims on a virtual reality which didn't exist) and converted them into a system that keeps my family warm, dry, and fed, rather than waiting for a bunch of politicians to stop protecting bankers and start protecting me - a "no regrets" strategy if ever there was one.

All this fucking about and time wasting that many indulge in, imagining that the basic principles of common sense mysteriously stop working once you apply them to systems larger than your own household, thereby admitting the possibility of magic, all seems most unwise to me...

 

[Coolfonz]

Elbows - most obvious places are Saudi Arabia and Iran, Russia. That might change fairly soon. Politics restricts exploration. We've just seen resource nationalism again in Bolivia, Argentina, it's generally a function of high prices. OECD nations tend to do it with taxation like the UK wrangling with Total over west of shetlands. But France has banned gas frac-ing for example...

Falcon - I should rest my case really. Yes you got the point i was making about Maugeri, he has been a long time anti-peaker. Sorry about your rabbits, glad to hear about your X degrees.
You've plenty of assumptions - like anti-peakers and technology - and a few errors...it's the IEA not EIEA, 10pc global depletion rate? Total word discoverable oil levels? Russian reserves 75bn bl? Proven reserves are not the same as resources which I'm sure you know. Again a function of economics/accounting/exploration/development rates. If Russian opens up the Arctic/more of Siberia, there are even more resources there for them. They will do it eventually. Function of price. Plus tar sands/Brazil/more in the m/east yada yada, lots of hydrocarbons out there, but yes likely they will be more expensive...but high prices stimulate exploration plus investment in renewables/efficiency, which also co-driven by politics, see my point about European biodiesel mandates.

At the same time - as i said - any economic recovery, even slight, would stick Brent back into the $120+ range capping lasting `growth`, especially in EU/US/Japan. Industry is too reactive to price signals. Demand increasing per capita China/India/Asia as you say. All messy.
You use IHS stats, they see the `bumpy plateau` no? A form of peak. Looks fairly bumpy to me. The recession bought the industry time to bring on all the stuff they developed at $80-100+ oil...same time we have what looks like (not certain but) a demand peak in the OECD...

Now WTI (wonky benchmark but) at ~$80/bl, not far off the bottom line, any lower pressure will grow on OPEC to cut production, its also going to make smaller companies worry about investments, like 2007-08 did and so on...remember Brent spiked into $120-30 range because of Libya...cut spare capacity to ~3pc

In this debate you get a lot of very very shouty people all absolutely convinced they can see the energy future. I can't, too complex. Best to look back at what people said and see how wrong their predictions were...

 

[two sheds]

Interesting summary Falcon, ta.

Technology, it turns out, is just an energy intensive mechanism for converting surplus energy into "stuff". The only "stuff" it can't do is surplus energy in the quantities necessary to sustain the energy intensive industrial manufacturing processes such technology depends on - an annoyingly self-referential fallacy and obvious when you think about it, but which people don't.

You're ignoring the huge amount of energy falling on the earth that is now just being wasted.

If we converted some of the resources we put into (say) automotive and pc production into solar & wind power generation, would that not give enough energy to keep societies going?

I'm not saying it would happen, and we would need to improve energy efficiency, but in theory like.

 

[ItWillNeverWork]

Interesting summary Falcon, ta.



You're ignoring the huge amount of energy falling on the earth that is now just being wasted.

If we converted some of the resources we put into (say) automotive and pc production into solar & wind power generation, would that not give enough energy to keep societies going?

I'm not saying it would happen, and we would need to improve energy efficiency, but in theory like.

Not under a system that requires an exponential increase in growth to maintain standards of living. I don't know what the solution is though.

 

[Crispy]

Different system, innit

 

[Falcon]

Falcon - I should rest my case really.

No. You really shouldn't. If you aren't even aware of the base depletion rate (the rate determining parameter for all the other phenomena you attempt to describe), your other speculations are of little relevance. Meanwhile, you might find the IEA World Outlook 2008's well written tutorial on natural decline rates pages 221 onwards helpful, both on this specific point and on a number of other fallacies in your post.

(By the way, the IEA is a European institution. Noting the fact is not an error. Trying to discredit my argument by asserting false errors most certainly is.)

 

[Falcon]

You're ignoring the huge amount of energy falling on the earth that is now just being wasted.

No, I'm not. You are ignoring the even larger amount of energy consumed in its upgrade into a useful format:

1. the energy that falls on the earth is in a highly diffuse, low grade format
2. complex, industrial society requires energy in a highly concentrated, high grade format
3. the task of converting [1] into [2] consumes so much [1] there is insufficient [2] left over

Thought experiment: try manufacturing the industrial oxygen facility required for the steel required for the axle of the truck that transported the material from which the factory that manufactured the smelter in which the silicon used in the solar panel was made … using sunlight.

 

[Falcon]

[I have never understood Urban75's editing facility, which seems to randomly create a new post rather than edit the target post. Sorry.]

 

[two sheds]

Thought experiment: try manufacturing the industrial oxygen required for the steel required for the axle of the truck that transported the material from which the factory that manufactured the smelter in which the silicon used in the solar panel was made … using sunlight.

My thoughts would be directed towards Concentrated Solar Power to concentrate the diffuse sunlight (which lets admit it does make things fucking hot in deserts) to boil water and drive the same steam turbines that produce the oxygen for the steel ... etc.

I'm not disagreeing with you except for your seeming statement that it is theoretically impossible to generate enough power renewably. It isn't, you just need enough of it.

The problems are practical - getting politicians to stick their heads above the layers of shit they are mired in to make the (initial) investments that are needed - rather than theoretical.

 

[rover07]

14.7 Twh should cover it, Falcon.

http://cleantechnica.com/2012/07/04/germany-sets-a-new-solar-power-record-14-7-twh-in-6-months/

 

[Falcon]

14.7 Twh should cover it, Falcon.

http://cleantechnica.com/2012/07/04/germany-sets-a-new-solar-power-record-14-7-twh-in-6-months/

Yes. Provided we still have the use of the hydrocarbon powered industrial manufacturing system that enabled them to build that 14.7 Twh. Do you happen to know the power consumption of that industrial manufacturing system, in Twh?

 

[Falcon]

Elbows - most obvious places are Saudi Arabia and Iran, Russia. That might change fairly soon. Politics restricts exploration.

This is what is called a "creaming" curve. It shows the amount of oil cumulatively discovered for each new discovered field. It shows the data for Saudi Arabia - the "most obvious place", in Coolfonz's estimate, of where new oil is to be found.

If politics was restricting exploration, then the quantity of discovered oil would rise as exploration rose.
If the quantity of discoverable oil was restricting exploration, then the quantity of discovered oil would level off as exploration rose.

By 1970, after one quarter of all the fields currently discovered, 90% of all the oil that has ever been found, was found. Saudi Arabia went on to develop three times more fields, and added 10% more oil.

Politics is not restricting exploration. Oil is. Which is precisely why Saudi Arabia is now constructing a fleet of nuclear reactors within conventional missile strike of Israel to service its domestic power consumption, at enormous potential risk. It has rather less faith in its unexplored potential than Coolfonz has.

There will be new puddles of discovery. What there will not be will be the 40 billion barrels of mobilised old discoveries and new discoveries that we need in the next 7 years to offset base depletion. Nor will the puddles we discover in the Arctic, Brazilian deepwater, or the Falklands, get converted into usable production at the rate at which usable production vanishes from the system - a situation, if you think about it for a moment, which is indistinguishable from it not being there at all, from the perspective of the economy.

Oil is festooned with mythology of the sort Coolfonz peddles. Caveat emptor.

 

[Coolfonz]

Well one thing that isn't running out are anti-peak and peak oil people who are absolutely convinced of their own ability to see the future of energy. Folks who start bouncing around polemic and the usual kind of rather lame abuse about believing in magic/mythology, cornucopians/Malthusians. It's so silly. So many internet clichés already.

So if I might be excused (another) riposte I've got a looooong experience of both sides and all they really are, are the smartest kid in the class shouting. It's a really weird phenomenon. Both sides are so similar.

Anyway, politics and its subset economics - `market` economics - restricts exploration all over the world. That can be in forms like Saudi Arabia, Russia, Iran where outside companies are in the main excluded, some exceptions apply. It can be in OECD countries by taxation, Norway, UK North sea as recent/current examples. It can be in places like Venezuela, Ecuador, Bolivia, Argentina due to nationalism. I'm not judging these cases they just exist.

Of course as Falcon points out that doesn't mean the case Monbiot puts - enough oil to fry us all - is also a reality. Falcon rightly says there are enormous pressures on the oil industry to keep pace with demand. Obviously that is coming from Asia, M/East, Africa. Places like the US and the UK North sea have long peaked in supply terms.What the oil industry wants is high prices, over $70/bl at least to make investing in new areas profitable. It doesn't want oil gluts combined with recessions as a collapse in the oil price - like the one which saw oil drop from $147 - $35/bl in six months - screws investment plans. So geology, the location and type of oil, does play a part in the mess. Falcon rightly says replacing depletion rates is a huge task, nevertheless it is one the industry has completed - so far.

Renewables will be hard pressed to alter things as the main problem is liquid transport fuels. Electricity generation - as we can see from the low price of piped gas - is less of an issue currently, electrifying the transport fleet would be a huge undertaking. Third generation biofuels - which like 1G don't compete with corn/seed production, or 2G which gives a value to agricultural/forest waste and has all the same problems - are a long, long way off.

As someone said above the `system` - just like in the financial markets - is malfunctioning badly. Private oil companies, especially the six majors and the big integrated companies - like Maugeri's Eni - are simply arms of their owners, the banks/funds. They are torn between long term investment, supply issues and the corporate quarterly reporting treadmill. NOCs like Gazprom, Saudi Aramco, PDVSA are cash cows for fiscally inept and/or corrupt/brutal governments. A few exceptions exist like Statoil who would be my best pick (65pc owned by the state, %age of profits into state fund etc etc).

Oil prices were the main factor in pushing up interest rates around the world in 2004-07, which unhinged the US housing market and exposed the madness in the financial system, CDOs CDO2/3s etc. And in the biggest recession/depression since the 1930s oil has stayed around the $100/bl mark, unthinkable eight years ago...

If you stir all that into a big mix, add in other things like potential Iran-Israel conflicts, a possible hard landing for the Chinese economy, Eurozone problems, climate change/emissions legislation and predicting the future is a mugs game.

Apart from of course Chelsea will win everything next year and Frankel kicks horsey arse

 

[littlebabyjesus]

Oil prices were the main factor in pushing up interest rates around the world in 2004-07, which unhinged the US housing market and exposed the madness in the financial system,

Um, no. You're falling into the trap of relating everything to oil. The story of the US housing boom really really has nothing at all to do with oil. As an example, interest rates in the US had fallen to a 50-year low in 2003, and increased from there, but only back up to 4-5 %, a 'normal' area for them to be in. At the same time, the price of oil went up from 30-odd to 60-odd. But interest rates weren't put up as a response to this rise in oil prices - the opposite if anything: they were put up despite the rise in the price of oil as people were still borrowing very strongly. And now interest rates across the world are down at historic lows with the price of oil far higher.

Please don't fall into the trap of thinking that everything is to do with oil.

 

[Falcon]

So if I might be excused (another) riposte I've got a looooong experience of both sides and all they really are, are the smartest kid in the class shouting. It's a really weird phenomenon.

You are making some sweeping statements. I am providing some industry data that demonstrate that such statements have no basis in measurable reality. That is not the smartest kid in the class shouting. That is an argument. (Out of interest, what other form do you imagine it would take?)

Of course as Falcon points out that doesn't mean the case Monbiot puts - enough oil to fry us all - is also a reality.

I haven't pointed out any such thing, and I agree with Monbiot. My post has concerned itself with what we know about the discoverable quantities of oil in relation to its consumption. It has not concerned itself whether atmospheric limitations confer the discretion to consume those volumes. I would note that current scientific consensus already puts us on a trajectory which take us above the safe concentration of atmospheric carbon dioxide even without the new discoveries you hypothesise.

Falcon rightly says replacing depletion rates is a huge task, nevertheless it is one the industry has completed - so far.

As even a casual glance at the graph I supplied of discovery rate vs production rate, the industry has not completed, so far. You are confusing discovery (the sustainable basis of the calculation of reserves replacement) with the mobilisation of reserves from previous discovery, an error you mistakenly accused me of earlier. The industry currently replaces on average 1 barrel of oil for every 5 barrels consumed. It is mobilising nearer 5, through a combination of earlier discovery and, increasingly, on the basis of liquidising the lunches of peasants in far away places, who are now starting food riots in response. We are now running the planet from a barrel, the volume of which we know within any range of uncertainty that matters at current offtake rates.

 

[Falcon]

Um, no. You're falling into the trap of relating everything to oil. The story of the US housing boom really really has nothing at all to do with oil.

The integrity of a debt finance, fractional lending, interest based financial system rests implicitly on an expanding supply of affordable energy to underpin its expansion stability criterion. The supply of affordable energy is contracting. Any rules regarding the operation of the financial system predicated on its expansion no longer apply.

The supply of conventional (i.e. affordable) oil saturated in 2005. The price of oil hit $140 in 2008. The global financial system entered its terminal crisis phase in 2008. The convolutions and special consideration that adherents to pre-saturation finance must invoke to reconcile their world view to that most fundamental observation are spectacular.

But can I suggest, rather than rehearsing all the arguments that overlook that fundamental property of the financial system (there are very many, all equally fallacious), we move it over to the "Financial Collapse" thread (where it has been discussed ad nauseam) - I understand this thread to be about the properties of the physical petroleum system.

 

[rover07]

Have you seen the Tesla Model S, Falcon?

It's totally awesome!

 

[littlebabyjesus]

But can I suggest, rather than rehearsing all the arguments that overlook that fundamental property of the financial system (there are very many, all equally fallacious), we move it over to the "Financial Collapse" thread (where it has been discussed ad nauseam) - I understand this thread to be about the properties of the physical petroleum system.

I agree that these things have been discussed ad nauseam, but if Peak Oil is to be linked to the financial crisis here, it becomes necessary to discuss the causes of the financial crisis here, too.

 

[gosub]

http://www.telegraph.co.uk/finance/...ak-cheap-oil-is-an-incontrovertible-fact.html

 

[elbows]

That seems like an appropriate rebuke to the stupidly optimistic articles we saw about an oil glut. The desperate eagerness with which those previous articles spoke, the way they openly revelled in being able to claim 'peak oil isnt true!' spoke volumes to me. I've still taken into account the possibility that the alternative oils which enabled such giddy optimism may have altered the picture somehow, but much like that telegraph article I decided there was no need to retreat any further than the 'peak cheap oil' position, and probably not even that far.

 

[Falcon]

Thanks gosub. I'd point out that the headline is dangerously misleading.

The problem isn't that cheap oil has peaked. That happened a decade ago.

The problem is that affordable oil has peaked. In the former case, there was still the prospect of economic viability, not least to fund (financially and energetically) replacement energy infrastructure.

In the latter (our reality), there isn't.