Energy Security

[Dayuhan]

How exactly would you know this? They don’t have to reveal their activities, and it is easy enough to obscure them anyhow.

Money isn't invisible, and it can be followed.... that's why we have so many people shouting "follow the money". What most don't realize is that at any given point there's a lot of money going to a lot of places, and most of those shouting "follow the money" only follow the part that's going in a direction that supports their pre-ordained conclusion.

The entire edifice that you're presenting rests on the observation that SWFs bear a vestigial resemblance to hedge funds - they both manage large sums of money, which is about as far as the resemblance goes. And from this you assume the rest, up to economic warfare. Have you any actual evidence to support that chain of assumption?

[Polarbear]

Last week I participated on an ASPO roundtable of ASPO Switzerland. Main topic was the project of the Paul Scherrer Institut (PSI), which developed a technology with which they can produce fuel from water, carbon dioxide and sunlight. The technology seems promising and the perspective of commercializing it during the next ten years made it a point of attraction for the media.

Unfortunately, I left the room a bit confused and with a lot more questions than answers. The most disturbing point for me was, that the discussion following the presentation focused more on the technological feasibility of the project than on the political realities. I was utterly shocked how even some representants of academia are convinced that a radical change in energy production can be realized within short time. From their perspective the petroleum and nuclear industries are obstructing every attempt to promote alternative energies for the reason of their own profit. Although there is some truth in this argument I think that the phantasies of some of the proponents of alternative energies are at least as far fetched as their charges against the petroleum and nuclear industry. Or what do you think about Switzerland plastered with solar panels and mountains full with windmills?

I think these people are more propagating a radical change in energy production rather than in energy consumption which makes them even more dangerous in my eyes because they are selling nothing more than an utopia rather than sollutions…

By the way, the current issue of the Scientific American contains an article about 7 technoologies that might revolutionize energy production (7 Radical Energy Solutions, The Scientific American, May 2011, pp38 – 45)

And I found a description of the project by the project director Prof. Steinfeld in English: http://www.peakoil.ch/assets/images/dsfeupload/6/steinfeld.pdf

As well as the aricle from Advances in Science and Technology: http://www.peakoil.ch/assets/images/dsfeupload/6/ast_solarfuels_2010.pdf

[Dayuhan]

I think that the phantasies of some of the proponents of alternative energies are at least as far fetched as their charges against the petroleum and nuclear industry.

With this I agree completely. If the energy industry sees a commercially viable alternative technology, the natural profit-driven impulse would not be to suppress it, but to acquire it, develop it, and market it.

[AdamG]

Sellafield nuclear site terror arrests made

See
http://council.smallwarsjournal.com/showpost.php?p=120506&postcount=6

[Rick M]

This was posted this morning:
http://www.energybulletin.net/stories/2011-06-13/review-bundeswehr-report-peak-oil-section-22-tipping-point-nov-2010

[Polarbear]

I had not realized that they released an extended version of the report. Thanks for the hint Rick!

regards PB

[Rick M]

Hi, PB

I wouldn't call it extended version: the reason it's 125 pgs (vs previous 99) is primarily due to increased font size, though there were many changes in the text.
They key point (and one which I was thrilled at) is that BW top brass did not water down the central messages. They did qualify the verbs here & there ("will" becomes "could" etc, but that is simply prudent writing).
Their report is bold in every respect and media need to get on it, so that public & elected reps will be aware.
Thanks for your interest...
- Rick

[flagg]

Here's a snippet from Eric Janszen over at the iTulip.com forum:

Has anyone ever followed Eric Janszen over at iTulip.com forum?

I'm not trying to piss in his pocket, nor spam this forum.....but the guy has been freakishly accurate(easily verifiable) on pretty much all of the big picture financial/economic/energy stuff since circa 1998.

His online rep includes:

*calling dot com crash
*buying gold at the bottom
*buying silver at the bottom
*calling the recent silver crash days before it happened(he's not a trader..it was a VERY infrequent/rare portfolio shift for him)
*calling the RE crash
*calling for a China crash/hit within the next 24 months...likely 12
*calling serious Cheap Peak Oil in the next few years potentially leading to broader conflict
*provided some very solid Int on Japan's nuclear crisis well before it became generally available/open source.

And Eric Janszen has become noticeably darker in his most recent posts due to a belief that a major conflict over debt/energy in Asia sometime during the rest of this decade is shifting from possibility to likely.

The community over there has some SERIOUS SME strengths in finance/economics/energy.....but I firmly believe that Eric and the forum over there seem noticeably lacking in the geopolitical security side of the house.....which is where the strength resides here.

I would strongly encourage members here to have a look over there....I can't fault their economic/finance/energy analysis.....if matched with the geopolitical/security SME strengths here, or cross-pollinating in some way, it could be a pretty powerful combination.

I just wanted to chuck that out there......

Personally, it feels like a 21st century version of circa-1935.

Just my 0.02c

[slapout9]

flagg, if you get a chance watch this program. It is on HBO tonight so check your local listings, if not here is a link to the YouTube version.




http://council.smallwarsjournal.com/showthread.php?p=122635#post122635

[flagg]

flagg, if you get a chance watch this program. It is on HBO tonight so check your local listings, if not here is a link to the YouTube version.




http://council.smallwarsjournal.com/showthread.php?p=122635#post122635

Cheers!

[Bill Moore]

Flagg, thanks for the lead on iTulip.com. I did a quick search to see if the site and Eric Janszen were scam artists like so many of these sites are, but by all accounts Eric is very respected, so I will be a regular reader.

You wrote,
Personally, it feels like a 21st century version of circa-1935.

I agree strongly, it doesn't take a lot of imagination or hyperbole to see the war clouds forming on the horizon. All those who predicted more Afghanistans and recommended gutting our conventional warfighting force will unfortunately be backtracking on those comments sooner rather than later. Economics will likely drive the next major conflict.

I still question our strategy and our pursuit of globalism without limits. Gas prices are high today for two primary reasons. One is the turmoil in the Middle East (spectulators driving up prices based on fear that they like to generate), and then the real reason is greater demand (no additional supply) by emerging economies (India, China, etc.). We still want to develop the economies of every country in the world so they'll buy our products (after we outsource our jobs to developing nations), but we don't calculate the risks of doing that to our standard of living. Success in this case could be failure for the U.S.. I am not proposing isolationist policies, but there needs to be some limits on our globalist agenda.

[flagg]

Flagg, thanks for the lead on iTulip.com. I did a quick search to see if the site and Eric Janszen were scam artists like so many of these sites are, but by all accounts Eric is very respected, so I will be a regular reader.

You wrote,

I agree strongly, it doesn't take a lot of imagination or hyperbole to see the war clouds forming on the horizon. All those who predicted more Afghanistans and recommended gutting our conventional warfighting force will unfortunately be backtracking on those comments sooner rather than later. Economics will likely drive the next major conflict.

I still question our strategy and our pursuit of globalism without limits. Gas prices are high today for two primary reasons. One is the turmoil in the Middle East (spectulators driving up prices based on fear that they like to generate), and then the real reason is greater demand (no additional supply) by emerging economies (India, China, etc.). We still want to develop the economies of every country in the world so they'll buy our products (after we outsource our jobs to developing nations), but we don't calculate the risks of doing that to our standard of living. Success in this case could be failure for the U.S.. I am not proposing isolationist policies, but there needs to be some limits on our globalist agenda.

No worries!

If after some time over there you find the content and analysis to be of value, I'd be interested to hear your feedback on what I perceive to be a weakness in the forum's lack of defense/security SMEs to round out effective analysis and opinion if we truly are heading into period of heightened conflict risk.

I've posted a few times over there my desire to see an analysis mashup between Small Wars Journal forum and the iTulip forum...I think it would be a win/win for both.

------
DISCLOSURE: I'm a paying member of the iTulip.com community....but I have no stake in it....just a keen student over there AND here....which means I should probably donate here as well for balance :)
------

EJ has a book on Amazon that I recommend:

http://www.amazon.com/Eric-Janszen/e/B003MF9U9C

He calls for investment in a TECI economy: Transportation, Energy, Comunications, Infrastructure to reindustrialize the US.

He's a real "glass half full" kinda guy in my opinion......and for a guy with such a strong and consistent track record.....the darker tone lately leaves me a bit troubled.

[Rick M]

The latest Oil Shockwave exercise was conducted last week in Washington. Like the first Oil Shockwave exercise in June, 2005, the 2011 top-level "war game" explored the potential effects of a large-scale oil supply shock. Conclusions from the most recent exercise concur with those of previous Oil Shockwave exercises: response options are few, and "only long-term thinking can provide more short-term options in an energy crisis."

These exercises are valuable in highlighting a major vulnerability which continues to be ignored.
Following the 2005 Shockwave, participant Robert Gates said, “The scenarios portrayed were absolutely not alarmist, they’re realistic…. The threat is real and urgent, requiring immediate and sustained attention at the highest levels of government.” Unfortunately, there is little evidence of attention to this issue apart from the increasing warnings from military researchers and from the International Energy Agency of an impending oil supply crunch and the peaking of global oil production.

Unlike some of the earlier Shockwave exercises which were described in written reports of about 20 pages, the details of last week's exercise are not available. The main focus of these exercises tends to be on damage to the US economy, strains on the transport sector, and the absence of effective response options in the short term. It would be helpful if Oil Shockwave organizers expanded the scope and duration of their exercise to include effects to the agri-food sector as well as a review of the US plan for liquid fuel emergencies.

It is my understanding that the US Standby Gasoline Rationing Plan (June, 1980) has been rescinded but I am not aware of a written federal plan which replaces it. The ESF-12 Energy Annex outlines organizational structure and processes, but I'm not aware of a federal document which identifies (for example) Essential Users, how fuel will be provided to them, etc.
There is also the particular problem of ensuring that farmers have affordable fuel: the majority of Essential Users are publicly funded (police fire, utilities, government agencies, etc) whereas many family farmers are stuck in a long-standing farm income crisis.

My understanding is the the main response tool will be "full price pass-through:" in other words, government has no plan to intervene in the marketplace and will allow price to effectively ration the available supply. Other response options (eg. attempts to ration, allocate or control prices) appear to be overwhelmingly complex and impractical, but such barriers do not obviate the need to ensure that farmers are not paralyzed by unaffordable fuel. During an emergency, we need farmers to do more, not less (since food imports would almost certainly be curtailed during a major oil shock).

Other views are welcome, and I would certainly appreciate any further information on government plans for fuel emergencies (and I invite correction if I have missed or misconstrued something).

Thank you for considering all this, and here is the Shockwave link:
http://www.secureenergy.org/media?type=25

[Dayuhan]

I still question our strategy and our pursuit of globalism without limits. Gas prices are high today for two primary reasons. One is the turmoil in the Middle East (spectulators driving up prices based on fear that they like to generate), and then the real reason is greater demand (no additional supply) by emerging economies (India, China, etc.). We still want to develop the economies of every country in the world so they'll buy our products (after we outsource our jobs to developing nations), but we don't calculate the risks of doing that to our standard of living. Success in this case could be failure for the U.S.. I am not proposing isolationist policies, but there needs to be some limits on our globalist agenda.

Certainly added demand from developing nations is putting pressure on oil supplies and driving prices up... a good thing, IMO, as we will never get serious about alternatives and reducing our use unless we have sustained high prices. Important to note, though, that these economies are not developing and increasing their energy consumption because of the US globalist agenda, or because of anything the US does. They are developing because they want to, and they will continue to develop whether we like it or not. It is not something we control.

I'm personally curious to see where the rising interest in natural gas leads... certainly there's a lot of hype, but there's more than just hype there, and there is potential for a "bridge fuel" to gradually supplant oil while the renewable alternatives develop to the point of practicality: decades, realistically.

Gas isn't perfect, but the major oil consumers (US and China) do have major reserves, and the technology to exploit them is available. There are environmental impacts, of course, but there always are, and the impact of gas across the production - consumption cycle is well below that of oil. Of course for Americans the problem is that the environmental impact of domestic gas production is local and visible, while the environmental impact from production of imported oil is, while greater, far away. As long as we insist on exporting environmental impact we will have to import energy, with all the risks that entails.

[bourbon]

They are developing because they want to, and they will continue to develop whether we like it or not. It is not something we control.
China is import dependent on over 50% and growing for its oil supply, and currently most of it is delivered via SLOC. China’s continued economic growth is contingent upon a secure oil supply.

The United States has eleven carrier strike groups, and military bases adjacent to the greatest untapped petroleum reserves in the world. Maintaining some “control” was exactly what VP Cheney had in mind when it came to invading Iraq in 2003.

[Dayuhan]

China is import dependent on over 50% and growing for its oil supply, and currently most of it is delivered via SLOC. China’s continued economic growth is contingent upon a secure oil supply.

The security of China's oil supply is assured by their dollar reserves. Oil will flow to those who can pay for it, and the Chinese can pay. Again, not something the US controls.


The United States has eleven carrier strike groups, and military bases adjacent to the greatest untapped petroleum reserves in the world. Maintaining some “control” was exactly what VP Cheney had in mind when it came to invading Iraq in 2003.

Again, money is what does the talking. If oil runs short, the price will escalate and those who can't pay will have to go without. China will be able to pay; they have money. The US will be able to pay; we have no money but we can always print some more. Others are in a harder position, and will drop out and suffer.

The desire to "control" Iraqi oil is often assumed, generally misunderstood. Of course the US wanted to get Iraqi oil back on the market, which meant either lifting sanctions or overthrowing Saddam. That worked for the Chinese as well. What is often misunderstood is that as long as that oil goes back on the market, it doesn't matter where it goes. If Iraq got back to 6mbpd someday, the US would benefit as much as China, even if every drop produced by Iraq went to China. It doesn't matter where it goes.. If China buys more from Iraq they need less from other sources, freeing up that oil for others to buy.

[Dayuhan]

There is also the particular problem of ensuring that farmers have affordable fuel

It would seem on the surface that agricultural equipment is an obvious candidate for natural gas conversion, which is particularly applicable to heavy vehicles that operate within a limited range and can thus use a single fueling point or a very limited network of fueling points. I was recently running the numbers on gas conversion for municipal buses and sanitation trucks, and they're pretty compelling, even with a fairly high conversion cost. Because those vehicles run continuously year-round the fuel savings are huge (gas is a lot cheaper and prices are much less volatile; because it's sourced primarily in the US and Canada there's a lot less politically induced volatility) ; payback on conversion wouldn't be as fast for equipment that's not in continuous use, but it could still be viable. Certainly it would be worth throwing the numbers around.

Whether gas is potentially "the solution" on a national scale is of course debatable, but it's certainly emerging as a solution for fuel-intensive heavy vehicle fleets operating over a limited geographic range.

[bourbon]

The security of China's oil supply is assured by their dollar reserves. Oil will flow to those who can pay for it, and the Chinese can pay. Again, not something the US controls.
Emphasis on secure. And a further emphasis on SLOC, something that the US Navy does control (for now). The Chinese can buy as much oil as they like overseas, but it still has to get home safely somehow – and for the time being that means by boat.


Again, money is what does the talking. If oil runs short, the price will escalate and those who can't pay will have to go without. China will be able to pay; they have money. The US will be able to pay; we have no money but we can always print some more. Others are in a harder position, and will drop out and suffer.
You are foolish to think that future Iraqi governments or an Iraqi national oil company will be able freely choose who to sell significant oil supplies or concessions to, without first getting it blessed by a foreign power (American, Iranian, whoever..).


The desire to "control" Iraqi oil is often assumed, generally misunderstood. Of course the US wanted to get Iraqi oil back on the market, which meant either lifting sanctions or overthrowing Saddam.
That’s actually debatable; I wouldn’t say that is clear. Historically, Western powers have suppressed Iraqi production. What the US really didn’t want was the Chinese, Russians and maybe even the French, developing major concessions in untapped Iraqi fields; because then they would have influence and control over the spigots.


That worked for the Chinese as well. What is often misunderstood is that as long as that oil goes back on the market, it doesn't matter where it goes. If Iraq got back to 6mbpd someday, the US would benefit as much as China, even if every drop produced by Iraq went to China. It doesn't matter where it goes.. If China buys more from Iraq they need less from other sources, freeing up that oil for others to buy.
That free-market oil is great for China, except if they ever want to do anything the US might object to. Which frankly is fine with me, but unfortunately the Chinese think otherwise and are scouring the world for equity barrels and attempting to diversify and secure supply routes.

[Dayuhan]

Emphasis on secure. And a further emphasis on SLOC, something that the US Navy does control (for now). The Chinese can buy as much oil as they like overseas, but it still has to get home safely somehow – and for the time being that means by boat.

Except in the very unlikely event of outright war, the US is not likely to interfere with, say, Saudi shipments of oil to China on neutrally flagged vessels. War is unlikely largely because the Chinese are aware of that, are unlikely to take the risk, and don't need to fight to get anything they really need. Much cheaper to buy oil than to fight for it. Similarly, the US has little or no incentive to initiate hostilities with China.

To me the single most likely flashpoint for great-power conflict is Russia-China competition over Central Asia. China-US is way overblown, unless of course the Chinese economy topples and reactionary nutcases emerge to "make China great again". Then all bets are off.


You are foolish to think that future Iraqi governments or an Iraqi national oil company will be able freely choose who to sell significant oil supplies or concessions to, without first getting it blessed by a foreign power (American, Iranian, whoever..).

Not foolish at all, since the Iraqis are already selling the concessions and the oil to whoever they please. Actually at the moment the concessions are going to whoever is willing to take them on Iraqi terms: primarily the Chinese, as nobody else sees the political risk equation as favorable. There is no reason at all, short of conspiracy theorizing, to suggest that the US intends to control where Iraq sends its oil. As stated before, it really doesn't matter, and if the Chinese are willing to take the risk to develop the resources, why not let them? Doesn't matter where the oil goes, as long as it gets onto the market, and US companies aren't terribly interested.


That’s actually debatable; I wouldn’t say that is clear. Historically, Western powers have suppressed Iraqi production. What the US really didn’t want was the Chinese, Russians and maybe even the French, developing major concessions in untapped Iraqi fields; because then they would have influence and control over the spigots.

Any source for that conclusion? In any event the Iraqi government will retain majority interest in any deal and will control the spigots and who gets to buy... meaning whoever will pay. Investors ceased to control sales decades ago. Just because a US company gets a concession doesn't mean the oil goes to the US, same with a Chinese company.


That free-market oil is great for China, except if they ever want to do anything the US might object to. Which frankly is fine with me, but unfortunately the Chinese think otherwise and are scouring the world for equity barrels and attempting to diversify and secure supply routes.

Everybody tries to diversify supply, nothing new there. All the Chinese deals are to buy at prevailing market price, and any of them can be tossed by the source country at any time: there is no real security and the idea of "locking up" sources is a fantasy. Chinese investment in high-risk areas is from an energy perspective a good thing for the US: it adds to the global production pool without us having to take high-risk investments. No reason to feel threatened by it. How it will work out for the Chinese remains to be seen. I think it's quite likely that in the next decade or so we'll see Chinese intervention to support a threatened government in which they're invested from a rebellion aiming to nationalize investments and/or cut new deals. That will be a new twist in the small wars world, and it will be a welcome relief to be able to watch somebody else mired in the inevitable mess.

Really nothing there to get all breathless, hyped up, and conspiratorial over, unless you really really want to.

[Rick M]

Whoa, you guys have been busy on this thread.

We're on the run here with haying (perfect weather this morning: sunny, warm & breezy).
I was only able to scan your exchange but will examine closely this evening.

Regarding security of oil supply, this appeared this morning re. declining Saudi export capacity:
http://www.emirates247.com/business/economy-finance/saudi-oil-exports-set-to-dive-in-long-term-2011-07-20-1.408672

Its concerns are entirely consistent with projections by Jeffrey Brown and by Chatham House.
When Saudi exports stall, we will all be in trouble.

[davidbfpo]

Via separate, non-SWC research I've located a European academic / policy research think tank, the European Centre for Energy and Resource Security, co-located in London and Berlin that may have items of interest: http://www.eucers.eu/

[Dayuhan]

Rick,

As I said before, for reasons connected to the real job I've been reading a lot about natural gas as a vehicle fuel, and it seems to me that there might be real applicability to your concerns over the impact of oil scarcity on diesel-dependent farmers.

Good overview on the gas scene from MIT:

http://web.mit.edu/mitei/research/studies/report-natural-gas.pdf

Gas is interesting for a number of reasons:

- It's consistently much cheaper than diesel... nowadays as much as $1.50 per gallon equivalent cheaper.

- The price is much less volatile, as the North American consumption is sourced within North America and is thus less subject to security and risk related fluctuation.

- The distribution grid is already in place, as gas is widely used for heating and cooking.

So, on a rough basis... supposing the government gave a farmer a zero-interest loan to convert his fleet to CNG and install an on-site fueling system (slow-fill overnight fueling systems are available and much cheaper than the fast-fill variant). The farmer then saves roughly $1.50/gallon equivalent, and uses the savings to pay back the loan. The farmer is no longer dependent on oil, and emissions are dramatically reduced... the emissions reduction could be considered the "interest" on the loan.

I have no diea if the numbers on that would stand up to detailed study (the key to assessing viability would be the quantity of fuel the farmer uses), but it certainly seems like it would be worth a close look.

[Rick M]

David,
Thanks very much for the EUCERS link. I was not aware of them or their military-energy focus, and will probably write to Prof. Frost for more details.

Steve,
You are correct on all points re NG, but several problems come to mind.
There is a distribution grid in place, but very few farm-houses are on it (I don't know of any). The cost of running pipelines to farms would be prohibitive, in which case we are looking at delivery by truck (we've had propane delivery to our island for decades).
Each farm would then need its own high-pressure tank (just as we have diesel tanks now).

A greater problem may be the range and power of a NG tractor. We can go all day without refueling, which is not a big issue for me but it would be out west... they would not want to drive miles just to refuel. I would think that an NG tank would take up much more room than a diesel tank (on the tractor).

Tractors don't have a suspension, so I don't know what all that banging about might do to high-pressure gas lines over time.

But these are not insurmountable problems, in which case your recommendation seems perfectly sensible. Assuming SG is as viable as the optimists say, we may very see things evolve in the direction you are suggesting.

However, Art Berman (for whom I have great respect) is far from convinced about the large-scale viability of SG:
http://www.theoildrum.com/node/8212#more

Farmers would want to see the uncertainties re long-term supply and price cleared up before they converted. Farm vehicles last for decades: our Ford 5000 (1968) is into its 5th decade of service and might outlive me.

[Dayuhan]

Assuming SG is as viable as the optimists say, we may very see things evolve in the direction you are suggesting.

However, Art Berman (for whom I have great respect) is far from convinced about the large-scale viability of SG:
http://www.theoildrum.com/node/8212#more

Farmers would want to see the uncertainties re long-term supply and price cleared up before they converted. Farm vehicles last for decades: our Ford 5000 (1968) is into its 5th decade of service and might outlive me.

There will always be uncertainties over supply and price. Given that limited supply and high prices for diesel are a virtual certainty, it's more a matter of looking to the area where the uncertainties are least threatening.

There's certainly a prodigious amount of hype over gas at the moment. As is so often the case, a lot of that is nonsense, but there's also a solid basis on which that overextended edifice of hype has been built.

In a lot of energy-related fields we see delayed elasticities: price does drive production and consumption, but it doesn't drive it instantly. Gas production has spiked, but consumption hasn't, so the gas price is very low. That will drive consumers to gas eventually, increasing demand and stabilizing price at a more sustainable level. That will take time, though. An oil-fired power plant can't just switch over to gas because it's cheaper. A trucker can't fill up on CNG instead of diesel just because it's cheap, and a homeowner with an oil-burning furnace can't just ring up a gas delivery instead of oil. The shift requires substantial capital investment, and it will require time.

Right now there's a fair bit of silliness going on. People are drilling gas that with current technology and at current prices should be left in the ground, because more wellheads makes better investment hype.

Right now the price is unsustainably low, but that's not all bad. It will help to drive the capital investment needed, and some of the flakier companies in the business will fail and be consolidated into those with more effective business models. Bringing the gas price up to a sustainable level would reduce the price advantage of gas over diesel (unless the price of diesel also rises, always possible) but it could still be very substantial, and domestic sourcing is a significant cushion against wild price fluctuation.

I do expect to see the current extraction technologies improve as they mature and are more widely used, reducing extraction cost. I also expect to see a moderate increase in gas demand and price as the lower price and prospect of lower price volatility attract more users.

Berman says:


The “Pickens Plan” seeks to get congressional approval for natural gas subsidies that might eventually lead to conversion of large parts of our vehicle fleet to run on natural gas. This might commit the U.S. to decades of natural gas exports at fixed prices in the face of scarcity and increasing prices in the domestic market.

That makes no sense at all to me. How would converting part of the US vehicle fleet to gas commit the US to decades of gas exports?

Realistically, I don't see "large parts of the US vehicle fleet" converting to gas, with or without the Pickens Plan. For your average vehicle user the benefits just don't justify the incremental cost, even with the proposed subsidy. Where gas really makes sense is in continuous-use, low mileage, high emissions applications like sanitation trucks, transit buses, and local heavy hauling or delivery, especially where vehicles operate on fixed routes and can refuel at a single point. Because of the huge amount of fuel these vehicles use annually, the price advantage racks up much faster and brings a much quicker payback.

I don't think we're looking at a giant wholesale conversion of the US transport sector to gas. Raising gas consumption by 10% and decreasing oil by 5% is a target I've seen quoted by reasonable analysts.


Similarly, companies have gotten permits from the government to transform liquefied natural gas import terminals into export facilities that would commit the U.S. to decades of large, fixed export volumes.

I don't see that converting a terminal commits anyone to anything. The companies involved are taking a gamble. If the gas surplus reaches a point that makes sustained exports possible, they win. If it doesn't they lose. That would suck for their shareholders, but it wouldn't be the end of the world.

In short, I would certainly not jump on the bandwagon that claims gas is "the solution" for American oil dependence. I think it can be A solution for certain sectors of the economy, especially power generation, industrial process heating, and - among vehicle operators - large fuel consumers operating over a limited geographic range and directly exposed to diesel price volatility and tightening emissions controls. Whether or not agriculture is one of those sectors I'm not qualified to say, but I'd guess it's worth looking into. The likely answer would be that it's viable for some and not for others, and that it's part of a solution, not a magic bullet.

[Rick M]

I agree with your observations, Steve, and am likewise unsure as to what Art means.
I just submitted a comment at TOD asking him to please explain.

As far as I can see, the only way that could happen would be the trap that Canada fell into under NAFTA, where we cannot reduce energy exports except in proportion to our own reduced consumption. (In other words, Canada cannot suddenly reduce oil exports to USA in order to divert that supply to eastern Canada, even during an oil supply emergency.)

This is an untested Article in NAFTA, and I'm not sure how individual companies (which own the oil & pipelines) can be forced to uphold an international agreement, but I presume that there are ways.

But the Americans (and Mexicans) are obviously smarter than Canadians and would not be so stupid as to lock themselves into such an export commitment.

We'll see what Art has to say....

[Rick M]

Hi, Steve

Art has responded at 8:26 and I submitted a follow-up question.
Just go here, then go to the very bottom and it's in the last 10 or so comments (as of now, but further comments will bump everything upward):
http://www.theoildrum.com/node/8212#comments_top

Please consider signing onto TOD if you haven't already done so. I think you would find most of the discussions pretty interesting, and you would have quite a bit to contribute as well.

- rick

[Dayuhan]

Please consider signing onto TOD if you haven't already done so. I think you would find most of the discussions pretty interesting, and you would have quite a bit to contribute as well.

If I find one more place to procrastinate online I'll never get anything done. Bad enough with SWJ...

Looking at the comments on the gas issue...


Thanks for your comment because it made me realize that we had a sentence out of place which I have now corrected:

A sensible enough explanation, but it's interesting to me that despite a fair volume of preceding comment, nobody mentioned that fairly glaring error. Selective reading? Hard to know, exactly, but odd any way you look at it.


Clearly, the Pickens Plan does not commit the U.S. to long-term natural gas contracts but it does potentially mandate certain levels of use that would alter the open market-spot price formation dynamics. I question the embedded fossil fuel costs and use to manufacture the conversion equipment, installation facilities, and infrastructure to distribute the natural gas to thousands of service stations around the country. In short, I think the plan is simplistic and does not fully consider the full-cost structure of the investment. It sounds good but, on deeper consideration, has problems.

Certainly the use of subsidies to encourage a transition to gas distorts the market to some extent, but there's also a distortion in the other direction caused by simple inertia. Alternative vehicle fuels are stuck in the mother of all chicken-and-egg ruts: nobody will build fueling infrastructure if there aren't vehicles on the road to use it, but nobody will put the vehicles on the road if there's no fueling infrastructure. Any attempt to bring new vehicle fuels into the mix will require a bit of a shove to overcome that, and I think that's what the Pickens plan (and other alternative energy incentive plans) is trying to do. I don't think it will generate a dramatic transition, because it doesn't address the primary obstacle: the very high cost of CNG conversion in the US and the limited number of approved conversions available. It costs less than $5k to convert a light vehicle to CNG in Germany, where labor cost and environmental standards are roughly equivalent to the US. In the US it costs $10-20k, and approved conversions are available for very limited numbers of vehicles. The reason is an appallingly cumbersome and expensive procedure used by the EPA to approve conversion processes.

I expect that to change over time, and I expect that gas will gradually find a place in the North American transport mix. The process of evolution will determine who makes the transition and who finds it viable.

Of course as use of gas increases the price will go up... that's not a bad thing, as a higher price will be needed to generate continued production, even though production costs will decrease as the technology improves and the scale of production increases.

Of course conversion and infrastructure costs have to be factored in, but there are similar costs to use of any other fuel. There are many billions being spent right now to expand and improve oil production infrastructure, all of which will be passed on to customers. Most of those billions are being spent abroad. At least the capital investment supporting the expansion of the role of domestically produced gas in the North American energy mix is domestic, and can generate domestic jobs and boost the domestic economy. Most of the capital is coming from private sources. Not all the ventures will succeed, but that's always the case, and I don't see that private investment in domestic industry is a bad thing.

I'm not sure it's appropriate to class commitments made by US companies as "US commitments". Companies will take risks, some will win, some will lose. That's implicit in any industrial shift. People will see opportunities and try to take advantage of them, sometimes in legitimate business with a real future, sometimes by conning naive investors into buying hot air. Lots of people lost their shirts in the .com bust, but the internet is still a very viable business with a real economic impact. Yes, some companies and some people will lose, but that doesn't mean the industry as a whole isn't viable.

Of course anyone who claims gas will replace oil is spouting nonsense, but that doesn't mean gas can't play a much expanded role in the energy mix, displace a significant amount of current and future oil consumption, and provide a useful alternative for some industries and sectors.

[Rick M]

Thanks for your detailed analysis, Steve.
No quarrel with any of it.

Meanwhile, the U.S. Chamber of Commerce recently published its energy security index, which is a rather interesting concept. I have seen nothing about it in the media.
A review of their Index was posted this morning at Energy Bulletin:
http://www.energybulletin.net/stories/2011-08-15/review-index-us-energy-security-risk-us-chamber-commerce-2011

An e-mail has been sent to the Chamber which alerts them to the review and invites them to respond.

This may also be of interest:
http://www.theglobeandmail.com/report-on-business/international-news/statoil-north-sea-find-may-be-worlds-biggest-in-2011/article2130910/

[Rick M]

The Chamber of Commerce responded to the review of their Index of U.S. Energy Security. Their response and my reply to it were posted in a single article at Energy Bulletin this morning:
http://www.energybulletin.net/stories/2011-08-24/chamber-commerce-response-rick-munroes-review-index-us-energy-security-risk-and-a

The Chamber was respectfully encouraged to look beyond info from the EIA and to incorporate the observations & concerns of military analysts with respect to peak oil and export decline.

[Rick M]

(This has nothing particularly to do with energy, but I didn't know where else to put it.)

An American military logistics expert recently recommended that I read this analysis of how the USA acquired its strength, written by George Friedman at Stratfor.
At 15 pages, it's not exactly short, but (given the scale of the topic) it is both concise and very insightful.
Friedman focuses on five strategic imperatives that America had to achieve (and did).
The logistician was correct; this is certainly one of the most interesting non-energy items that I've read in a long time:
http://www.stratfor.com/analysis/20110824-geopolitics-united-states-part-1-inevitable-empire

[Bill Moore]

Rick,

I copied your link to a new thread:

http://council.smallwarsjournal.com/showthread.php?p=125099#post125099

[Rick M]

Thanks for doing that, Bill.
The U.S. Strategy thread is a much more appropriate place for it. (I rarely explore other threads but I guess I should... not enough hours in the day.)


- rick

[Rick M]

As I have mentioned here before, the most comprehensive of the military analyses of peak oil is the recent report of the Bundeswehr Future Analysis team. Despite the credibility of these authors and the gravity of their concerns, this report has been almost entirely ignored by mainstream media.

Hopefully this will change, now that a complete English translation has been provided by the Bundeswehr, which really has made every effort to make this important information available.

Here is an intro with link to the new translation:
http://www.energybulletin.net/stories/2011-08-30/complete-english-translation-german-military-analysis-peak-oil-now-available

[davidbfpo]

A curious report, on FP Blog, alas minus a map and any references - especially when it is news to me and I suspect others.

Israel has found massive deep-sea natural gas reserves in the Mediterranean, which naturally do not follow clear boundaries and the report ends with:
But in the short term, the lure of riches makes conflict resolution more difficult and gives hard-liners on all sides another casus belli. Tamar and Leviathan are unfortunately not the catalyst for regional peace and prosperity, but, rather, more fuel in an already combustible mix.

Link:http://www.foreignpolicy.com/articles/2011/09/15/the_land_of_gas_and_honey?page=0,0

[Dayuhan]

http://i22.photobucket.com/albums/b329/dayuhan/oilgas-lebanon-israel-300x339.jpg

Hardly a reassuring picture; the border as drawn - presumably the Israeli version - does look like it's certain to be disputed by the Lebanese.

[Surferbeetle]

A curious report, on FP Blog, alas minus a map and any references - especially when it is news to me and I suspect others.

David,

Last year's Economist had an interesting article on this topic, as did the NYT.

Israel and its natural resources (http://www.economist.com/node/17468208) Israel’s new gas finds may affect its strategic friendships too, Nov 2010

Gas Field Confirmed of Coast of Israel (http://www.nytimes.com/2010/12/31/world/middleeast/31leviathan.html), by Ethan Bronner, Dec 30, 2010

[Rick M]

As posted above, last month the Bundeswehr released an English translation of their very thorough report on peak oil:
http://www.energybulletin.net/stories/2011-08-30/complete-english-translation-german-military-analysis-peak-oil-now-available

Last Friday two American energy analysts spent 12 minutes discussing the Bundeswehr report, the need for resiliency/redundancies and the ongoing inaction of governments.
This provides an intro:
http://www.getreallist.com/

- rick

[Rick M]

Further to the recent posts on Leviathan, etc:
http://oilprice.com/Energy/Energy-General/Turkey-Egypt-to-Drill-for-Natural-Gas-in-the-Mediterranean-Threatening-Israels-Energy-Dreams.html

[Dayuhan]

Further to the recent posts on Leviathan, etc:
http://oilprice.com/Energy/Energy-General/Turkey-Egypt-to-Drill-for-Natural-Gas-in-the-Mediterranean-Threatening-Israels-Energy-Dreams.html

This quote from the above:


Quite aside from the ominous regional implications, there is the possibility that the U.S. could become involved in the looming dispute, as Texas-based Noble Energy has partnered with Israel’s Delek Group Ltd. to develop Israel’s Leviathan, Tamar, Dalit, and Noa offshore natural gas fields, and also has a concession to Cyprus's Bloc 12 offshore Mediterranean field, located near Leviathan.

... seems to me well overstated, as I do not believe that the presence of an American company in a joint venture would lead to US military involvement, especially one that involved Turkey and Egypt, both of which have extensive links to the US.

I expect a fair bit of dispute among Israel, Turkey, Cyprus, and Egypt, but I doubt that it wil, but I doubt that it would come to fighting. Israel and Lebanon are a different story.

[slapout9]

Link to "Sustainable Critical Infrastructure Systems-A Framework For Meeting 21st Century Imperatives" Go to the link and you can download the PDF for free. Critical Infrastructure are the life blood systems for any country to survive. They are Water,Energy,Transpostation,and Communications.




http://www.nap.edu/catalog.php?record_id=12638

[Rick M]

Thanks for the Infrastructure report, Slap.
I had not seen it... interesting list of conference participants.

Energy is the heart of DOD's infrastructure, and last week Pew released an 88-pg report which updates DOD's progressive work on alt-energy:
http://www.pewenvironment.org/uploadedFiles/PEG/Publications/Report/DoD-Report_FINAL.pdf

Much of it is has been reported elsewhere, but there are many details which I was not aware of, and this report pulls it all together. It also has an extensive bibliography.

[Rick M]

Lt. Col. Fleming's study is both concise and useful:
http://www.energybulletin.net/stories/2011-10-17/review-lieutenant-colonel-fleming’s-us-army-war-college-thesis-peak-oil

Please note his observation on the need for realistic planning: “It is important to make the distinction between a temporary oil supply disruption and oil’s terminal production decline. Managing the risk of one is much different than managing the risk of the other” (p. 12).

Thank you for considering this information.

- rm

[davidbfpo]

Something to consider Rick and others, although I await the actual production of natural gas off Mozambique's coast:http://oilandglory.foreignpolicy.com/posts/2011/10/20/mozambiques_bonanza_feeds_evidence_of_a_coming_cle aner_china

[Misifus]

"Peak Oil" theory is simply another manifestation of the psychosis of anti-development, anti-civilization. Other examples of this are Malthusian food shortages, global cooling, ozone depletion, global warming, etc. There seems to be one or two of these manifestations per decade. The psychosis is developed as a defense mechanism by those who "think" as a way to mask their shame of not being members of those who "do." In other words, men who don't build railroads will often hate men who do build railroads. Why? This is a psychological reaction by those who see themselves as bystanders to events that they do not participate in.

Unfortunately the psychosis can even spread to those who would normally be classified as reasonable men, including soldiers at a war colleges. The would-be general needs to be studying how to maneuver his battalions, not how to maneuver oil companies.

Hydrocarbon Man and the Petroleum Age? The author of the paper needs to reference Daniel Yergin and his book The Prize when using such phrases. In fact a good deal of that section is a paraphrase of Yergin's work for which I do not see footnotes or endnotes other than endnote 6 regarding Drake's well.

You will find that that most of those spreading the Peak Oil hysteria have backgrounds in economics, politics, international affairs, etc., with very few participating who are actually in the business of extracting oil.

[Misifus]

Something to consider Rick and others, although I await the actual production of natural gas off Mozambique's coast:http://oilandglory.foreignpolicy.com/posts/2011/10/20/mozambiques_bonanza_feeds_evidence_of_a_coming_cle aner_china

Not so fast with the promotion. Look up the definition of "stranded gas."

Author's definition via PM (added by Moderator):Stranded Gas is gas that we can't get too either due to lack of infrastructure and/or too costly to develop.

[Dayuhan]

Something to consider Rick and others, although I await the actual production of natural gas off Mozambique's coast:http://oilandglory.foreignpolicy.com/posts/2011/10/20/mozambiques_bonanza_feeds_evidence_of_a_coming_cle aner_china

For perspective... Anadarko is claiming a find of 10tcf off Mozambique, ENI says they found 15.

Qatar has almost 900tcf in proven reserves

The Mozambique finds are significant, and it will be interesting to see how much more is found. Whether it's viable to extract the gas at current prices is another question, but current prices won't last forever. Still, talk of the finds as "huge" or as game-changers in gas markets is a bit exaggerated.

[Rick M]

Misifus,
I presume that you accept that petroleum is a reasonably finite/non-renewable substance. Given that we are are consuming over 1,000 barrels per second of the finest fuel that mankind has ever discovered, I really cannot understand why you would call legitimate concerns over future oil supply a "psychosis."

Second, you say that officers should be studying "how to maneuver [their] battalions, not how to maneuver oil companies."
I agree, but surely you accept that for the foreseeable future, an uninterrupted flow of affordable oil is essential to the maneuverability of military operations.
Therefore it is entirely prudent of military officers to examine the best evidence (which may not come from oil companies) regarding future oil supply.

As for peak oil analysts, I would argue that many of the leading PO proponents have been veteran geologists and petroleum engineers, while the leading opponents have been economists who argue that higher prices will readily bring on more supply, which is the very point that LTC Fleming refutes.

[Dayuhan]

As for peak oil analysts, I would argue that many of the leading PO proponents have been veteran geologists and petroleum engineers, while the leading opponents have been economists who argue that higher prices will readily bring on more supply, which is the very point that LTC Fleming refutes.

Like most of the work done on elasticity, I think the Fleming study misses the point completely. You can't look at 2005-2010 without looking at what came before that, if you want to reach any kind of reasonable conclusion.

We've been through this before, but for benefit of others...

World oil prices were in a deep trough from 1986-2005, with a brief spike for gulf war 1. That led to a general reduction in exploration and in spending to maintain and upgrade production capacity at existing facilities.

When prices first started curving up, the industry perceived it as a risk premium due to the deteriorating situation in Iraq and the potential for continued instability in the Middle East... they'd been there before, prices always spiked on the basis of political events. It wasn't really perceived as a basic alteration in the supply/demand picture until 2007-2008.

At that time investment in new capacity did start. However, there is a substantial time lag between the decision to invest in new capacity and the time new capacity actually comes onstream (new capacity not just meaning new fields or discoveries, but improved production at existing ones). By the time any of those plans started becoming real, prices were already plunging again.

We actually don't know how much capacity was added, especially in the Arabian Gulf, where a great deal of money has been spent, because the countries involved aren't using it. Capacity and actual production are different things. The GCC wants the political leverage of added capacity, but they don't want to use it if they don't have to, because they have a vested interest in holding prices up.

At the moment I think politics is constraining production more than geology. The few producers with excess capacity are deliberately restraining it to keep prices high. Iran's exports are constrained by sanctions. Iraqi production is still way below geologic potential. Venezuela has been in a steady decline for years, driven by underinvestment, not geology. Libya has been plodding along below 2mbpd for decades despite huge potential; again due to political factors.

Higher prices will bring up more oil and they will eventually constrain consumption, but they won't do it overnight and the reactions will be shaped by politics and will not necessarily conform to expectations based on "pure" elasticity: it's naive to expect a nice little graph like you'd find in econ 101, where there are no externalities. I see no reason at all to think a geologic peak has arrived or is imminent. We're still in the process of a shift out of glut mode - these changes take time - and there are all kinds of politics involved, so we have to expect the unexpected... but the evidence overall does not suggest to me that geology or absolute quantity of oil in place is what's constraining production.

One of the problems with "peak oil" discourse, much like climate change discourse, is that the discussion is heavily influenced by emotional hyperventilating, much of it coming from people who are mainly looking for leverage to advance other political causes.

Look at this citation


“The synchrony of unprecedented low production variance, unprecedented high price variance, and the number of peak oil forecasts in the range of 2005 to 2010 provide strong evidence that, regardless of price pull, geological factors could be presently limiting world oil production”

The number of forecasts simply isn't evidence, especially since so much forecasting is done by people with political agendas and vested interests. We already know there was no peak from 2005-2009, since 2010 production was higher than any of those. If 2011 dips or stays flat - and it could, for reasons discussed above - there will be howls that the peak has been reached. If 2012 pushes up the forecasters will have to push back a year or two.

[Misifus]

Misifus,
I presume that you accept that petroleum is a reasonably finite/non-renewable substance. Given that we are consuming over 1,000 barrels per second of the finest fuel that mankind has ever discovered, I really cannot understand why you would call legitimate concerns over future oil supply a "psychosis."

Second, you say that officers should be studying "how to maneuver [their] battalions, not how to maneuver oil companies."
I agree, but surely you accept that for the foreseeable future, an uninterrupted flow of affordable oil is essential to the maneuverability of military operations.
Therefore it is entirely prudent of military officers to examine the best evidence (which may not come from oil companies) regarding future oil supply.

As for peak oil analysts, I would argue that many of the leading PO proponents have been veteran geologists and petroleum engineers, while the leading opponents have been economists who argue that higher prices will readily bring on more supply, which is the very point that LTC Fleming refutes.

Pardon me if this sounds too direct.

1. Oil for the most part it is a finite resource. We can find agreement on that. Peak Oil psychosis, however, goes beyond that.

2. "Affordable" is a subjective term. Most would like oil for free. The market, with its imperfections, determines what is "affordable." With regards to oil’s use for warfighting, it is another commodity to be procured. Just like ammo.

3. Peak Oil is indeed a psychosis. It is presented as an "end of days" scenario like in the novel "The Crash of '79."

4. The US has more than enough domestic oil production to support any war efforts, here or abroad. For foreign theaters the easier route is of course to purchase what's needed. In fact, that is what we have done in OIF/OEF. Perhaps Fleming should be focusing more on the procurement process so we don't have fuel scandals like we did in OIF/OEF. This would be more relevant to the Army's needs.

5. Look closely. Most of the PO analysts are in fact not geologists, unless disgruntled retirees. I know of none that are bona fide petroleum engineers. Academicians and think tank types dominate, and these are where most of the Chicken Little types come from.

6. Fleming is simply wrong. He is a bystander to the industry. Probably not his fault, but the Army really should focus on having its lieutenant colonels focus on matters more relevant to their craft, instead of trying to create the next American Cesar.

7.
...while the leading opponents have been economists who argue that higher prices will readily bring on more supply...This is a laughable statement. It is not even economists who run investment economics in oil companies. It is petroleum reservoir engineers. Any bystanders out there in the cackling masses really need to see how these guys work and how a decision to drill and produce is made before commenting or joining fashionista waves like Peak Oil. These onlookers would also get a real idea of oil-in-place estimates, what is recoverable at current prices, what gets left behind, current/past/future extraction technologies, etc.

8. Dayuhan seems to have the more correct perspective on the issue.

***

[Rick M]

I'm glad that we at least agree on #1: after all, there are believers in abiotic oil. That said, there is the matter of how we define what oil is (and is not), all-liquids, etc (which we can address later).

2. Agree: "affordable" is both subjective and relative to one's ability to pay. Fuel may be just "another commodity to be procured" with one proviso: it is finite and increasingly expensive.
Fleming chose a worthy topic.

3. Disagree. You seem to have tarred all PO analysts with the same brush (psychotic and focused on "end of days" scenarios).
Could you please let us know exactly which PO analysts you are referring to and what they said about "end of days?"

4. Disagree. If you are claiming that US domestic production exceeds US military requirements then of course you are correct.
However, the US military is funded by the larger US economy, which consumes more than double the US domestic production.
Since the military cannot be divorced from the economy which sustains it, I fail to understand your point.

5. Before I provide a list of credible PO analysts with formal scientific training/certification in fields such as geology, petroleum engineering, energy, etc., I would ask (if you don't mind) you to please first identify which PO analysts you consider to be the Chicken Littles.

6. Disagree. I'm also a "bystander to the industry:" are you suggesting that only industry insiders are qualified to analyze and comment on energy data and trends?

7. Your final statement strikes me as rambling and unclear.
I will be clear regarding my point about economists. For the past several years I have been in ongoing contact with senior Government of Canada officials in several department (and with US gov't as well). Most of these individuals are described as Senior Economists (or if they are Directors, they say that their training/background is in economics).
So far these bureaucrats have been unanimous in reiterating the government position that "there is no imminent peak oil challenge... Canada's oil supply is secure for about 200 years."
They base this view on what they view as an economic truism: higher oil prices will "incentivize"/bring on new supplies of higher-cost fuels, thus solving the problem.

Fleming argues that the past half-decade does not support this truism: we had sustained high prices but very little increase in the production of liquid fuels in general (and no increase whatsoever in conventional crude oil).

I believe that LTC Fleming is correct in his analysis, and I certainly believe that military analysts are correct in voicing their unequivocal concerns over future oil supply, which they have done for many years.

[Dayuhan]

Fleming argues that the past half-decade does not support this truism: we had sustained high prices but very little increase in the production of liquid fuels in general (and no increase whatsoever in conventional crude oil).

Where in this chart do you see "sustained high oil prices"?

http://i22.photobucket.com/albums/b329/dayuhan/oilprices.jpg

I see a long period of low prices followed by a brief spike, a plunge, and another rise. Again, given the time lag between the decision to invest in increased capacity and the point where that capacity comes onstream, and given the enormous political obstacles to investment in many producing areas, I see no reason at all to interpret this appearance of inelasticity to a geologic or absolute-quantity peak... unless of course you really want to.

I do think there's a danger that all the "end of days" talk will obscure the much more immediate danger of supply constraints due to underinvestment and insecurity/instability issues.

IMO it will take 5-10 years of really sustained high prices, not an up-and-down yo-yo, to see a real impact on either production or consumption. I think the elasticity is there, it's just a very viscous elasticity. People and nations react to energy price spikes by cutting spending elsewhere. Long-term high prices will eventually alter consumption and production patterns, but it will happen over an extended time frame.

[Rick M]

Steve,
You are the person who in # 298 said that we need to look "at what came before that [2005-2010]."
You ask, "Where in this chart do you see "sustained high oil prices"?

Well I'm 60 and my eyes aren't what they used to be, but I see a vague flat-line until about 1999, then a distinct upward break-away which continues to this day.
A brief spike? That lasts from 1999 until the end of 2008... almost a decade, which I would not view as brief except in geologic terms, which does raise a point....
The plunge (which was most pronounced between Jan & May 09... 150 days out of almost 4,000 days). Those 150 days (near-vertical in your graph) made no difference to investment, which was committed long before-hand and in any case global demand was down, so there was no need for additional supply during that time-frame.
Then another rise: the fact that oil prices bounced back during troubled, recessionary times should tell us all something.

As for geological factors, unless you are aware of data which I'm not, global production of conventional crude oil has been stuck between 74-75 mbpd since late 2004. Seven years is a very long time in the oil market, especially considering the incentive of sustained high prices (apart from those 150 days in early 09).
A couple of brief dips in a dozen years is hardly a yo-yo.

By the way, I have never argued that we will hit an 'absolute geologic peak': there are many factors which could converge to cause the eventual peaking of global oil production. I would argue that it matters little which combination of factors 'causes' the peak/plateau, nor when it occurs.
I do argue that its occurrence is inevitable, and that when it occurs it could have serious implications.
Nor have I ever argued that such an event means "end of days," etc.

[Misifus]

7. Your final statement strikes me as rambling and unclear. I will be clear regarding my point about economists...

No, my statement was not rambling if the reader appreciates that economists are famously wrong on just about everything. Economists only score one scale mark lower than politicians on the bullscheisse meter.

As for others that you may cite, I don't need other "experts" to simply echo a faulty theory. In fact I can think of no other experts with more expertise than me in these matters who could provide me with any information whatsoever that oil had peaked. In general, those who cite others do so generally because they have no expertise in a given specific matter themselves. Hence they become information input/output devices of what others have said, or simply are someone who studies an issue from afar, such as war college students.


...By the way, I have never argued that we will hit an 'absolute geologic peak': But that is what Peak Oil theory claims, hence the end of days nonsense. So now you would like to define Peak Oil as something different? Than just what is your definition? This sounds like the altering of "Global Warming" to "Climate Change" back when the evidence came out that the Earth is in fact not warming. Like I said earlier, just another manifestation of the same psychosis.

[Misifus]

...
IMO it will take 5-10 years of really sustained high prices, not an up-and-down yo-yo, to see a real impact on either production or consumption...

Even if that were to occur, it would be no indication that oil had peaked.

Back when we were paying about $2/barrel for sustained periods of time (pre-1973 embargo) people were still complaining about the price of gasoline. In those times (the '60's) we were supposed to run out of oil by 1980. We were also supposed to run out of food. The psychosis goes on.

[Dayuhan]

Even if that were to occur, it would be no indication that oil had peaked.

I didn't mean to suggest that it would mean that, only that it will take a sustained high price environment to produce significant changes in patterns of either production or consumption.


Steve,
You are the person who in # 298 said that we need to look "at what came before that [2005-2010]."
You ask, "Where in this chart do you see "sustained high oil prices"?

Well I'm 60 and my eyes aren't what they used to be, but I see a vague flat-line until about 1999, then a distinct upward break-away which continues to this day.

I think we're using different definitions of "sustained". The low-price period from 87 to 2000, that was sustained, and it had a real impact on shaping investments and attitudes. To me a "sustained perion of high prices would mean 5+ years in or above the $80-100 band, not the choppiness we've seen.


A brief spike? That lasts from 1999 until the end of 2008... almost a decade, which I would not view as brief except in geologic terms, which does raise a point....

Again, you have to look at the background. For much of that period rising prices were seen as a response to political instability in the Middle East, not to any fundamental change in the supply/demand equation. Producers will not respond to what they perceive as a transient phenomenon; you wouldn't expect them to. As I said above, it really wasn't until 2006/7 that people started looking beyond the "risk premium" explanation and seeing the impact of Asian demand. That cuts the time period down quite a bit.


The plunge (which was most pronounced between Jan & May 09... 150 days out of almost 4,000 days). Those 150 days (near-vertical in your graph) made no difference to investment, which was committed long before-hand and in any case global demand was down, so there was no need for additional supply during that time-frame.
Then another rise: the fact that oil prices bounced back during troubled, recessionary times should tell us all something.

The spike/plunge pattern is largely evidence of the extent to which the spike was driven by speculation... physical demand doesn't dive like that, speculative demand does. There are lots of factors involved in price shifts other than supply and demand... you have to factor in the impact of the declining dollar, for example.


As for geological factors, unless you are aware of data which I'm not, global production of conventional crude oil has been stuck between 74-75 mbpd since late 2004. Seven years is a very long time in the oil market, especially considering the incentive of sustained high prices (apart from those 150 days in early 09).
A couple of brief dips in a dozen years is hardly a yo-yo.

Again, the response time was significantly delayed by the extended period during which the price rise was not seen as a long term phenomenon. In practical terms that cuts the dozen years to less than 5. In oil, mining, or other capital intensive industries where a large project may take a decade to move from concept to full production and the recovery horizon may stretch to several decades, 5 years is a very very short time.


By the way, I have never argued that we will hit an 'absolute geologic peak': there are many factors which could converge to cause the eventual peaking of global oil production. I would argue that it matters little which combination of factors 'causes' the peak/plateau, nor when it occurs.
I do argue that its occurrence is inevitable, and that when it occurs it could have serious implications.

Probably true, but the absolute peak hysteria is there and serves as a distraction from more practical issues.

A geologic constraint - physically running out of oil - would be absolute. Constraints driven by politics and policy are not absolute; things can be done about them, though they often aren't.

Political and policy constraints are numerous. If you look at the top 10 countries in terms of reserves, you'll see that 6 of them - Iran, Iraq, Venezuela, Russia, Nigeria, Libya - have major political obstacles to the kind of investment that would significantly increase production. In a seventh, Canada, environmental policy is a significant political constraint.

There are real problems, but to solve problems you have to identify them, and the problem is not that the oil has run out. The problem is that politics and policy are keeping the oil in the ground. That's not altogether a bad thing, if you ask me.

[Rick M]

"As for others that you may cite, I don't need other "experts" to simply echo a faulty theory. In fact I can think of no other experts with more expertise than me in these matters...."

Misifus,
You have made some extraordinary pronouncements, and I was hoping that you could back them up.
You accuse PO analysts of being psychotic doomers, yet you are unable to provide a single name or example?

It sounds as if your mind was made up long ago, which apparently negates any need to actually examine the evidence & arguments which are advanced by PO analysts.
If you can think of no other experts with more expertise than yourself, I guess you are not about to start examining other info now.

And just to be clear on your point that “oil had peaked,” I have never claimed that oil production has peaked, nor did LTC Fleming. The IEA has stated that conventional oil peaked in 2006, and I believe that they are correct in that, but time will tell.

You deride people who cite references as “information input/output devices,” suggesting that people have nothing to learn from each other. This thread was started (and the one at Armed Forces Journal as well) to facilitate a thoughtful exchange on energy security issues. There is a great deal that we can learn from each other and from various research communities.

“Absolute geologic peak” is certainly not my primary focus, nor would I (or most PO analysts) define the issue in that way. Nor do I support the “half-way” argument (that peaking will occur when we’ve extracted about half of the oil). Furthermore, there is the matter of defining oil: do we mean conventional (the definition of which keeps changing), do we include bitumen, shale oil, oil shale/kerogen, NGLs, CTL, GTL, all-liquids including biofuels, etc.

Peak Oil refers to the point at which global oil extraction reaches its maximum, for whatever combination of factors/reasons. If we find better alternatives and we have a “demand peak” as some have argued, then PO may blow over as a non-event and people like me will have worried for nothing.
However, if production should stall while mankind is so dependent on petroleum, then we certainly could face “an unprecedented risk management problem,” as Dr. Hirsch and his team put it.

Ever heard of them, Misifus?

[Misifus]

I didn't mean to suggest that it would mean that, only that it will take a sustained high price environment to produce significant changes in patterns of either production or consumption...

You are correct. My comment was for the broader audience who might infer differently.

[Misifus]

...You have made some extraordinary pronouncements, and I was hoping that you could back them up.
You accuse PO analysts of being psychotic doomers, yet you are unable to provide a single name or example?

You didn't ask me to provide a name. However, a name is not needed. Just examing the very premise of Peak Oil is enough to categorize it as being in the same pyschobable category as Malthusian Food Shortage. Global Cooling, Silent Spring, etc.


It sounds as if your mind was made up long ago, which apparently negates any need to actually examine the evidence & arguments which are advanced by PO analysts. If you can think of no other experts with more expertise than yourself, I guess you are not about to start examining other info now.

Actually, I look at the info quite often. It continues to be nonsense.


And just to be clear on your point that “oil had peaked,” I have never claimed that oil production has peaked, nor did LTC Fleming. The IEA has stated that conventional oil peaked in 2006, and I believe that they are correct in that, but time will tell. Actually both you and Fleming imply it pretty strongly.


You deride people who cite references as “information input/output devices,” suggesting that people have nothing to learn from each other. Actually I don't deride the study of the issue. But to study it and then sound off like an authority on it while promoting a Chicken Little psychosis is irresponsible.


“Absolute geologic peak” is certainly not my primary focus, nor would I (or most PO analysts) define the issue in that way. That is exactly how Peak Oil is defined. Like I said upthread, the latest tactic of the wackos is to redefine it, like redefining Global Warming to Climate Change.



PO may blow over as a non-event and people like me will have worried for nothing. Now you are making some sense.


However, if production should stall while mankind is so dependent on petroleum, then we certainly could face “an unprecedented risk management problem,” as Dr. Hirsch and his team put it.

That's not a brilliant pronouncement. It's an obvious statement similar to "if a plane runs out of fuel at 30,000 feet, it will surely crash." Hirsch's statment is simply more of the Crash of '79 mentality. Like I said, it's a psychosis. I did refer upthread to disgruntled employees. And by the way, there are many others, who like Hirsch are also former Exxon employees and who may even be considered more qualified than Hirsch, that realize his theory is simply a psychosis.

[Rick M]

In response to the recent assertion that PO analysts suffer from psychosis, I offer the following list of sensible, well-informed PO analysts:

Dr. Albert Bartlett, emeritus professor of Physics:
http://en.wikipedia.org/wiki/Albert_Bartlett

Art Berman, with 32 years in oil & gas industry:
http://www.aspousa.org/conference/2011/speakers.cfm?bid=1189

Jeffrey Brown, geoscientist who is probably the world’s leading authority on oil export decline:
http://aspo-usa.com/conference/2011/speakers.cfm?bid=1228

Dr. Colin Campbell, with over 40 years in the oil industry.
http://en.wikipedia.org/wiki/Colin_Campbell_(geologist)

Dr. Ken Deffeyes, retired petroleum geologist:
http://en.wikipedia.org/wiki/Kenneth_S._Deffeyes

Jeremy Gilbert, former BP Chief Petroleum Engineer:
http://www.businessinsider.com/former-bp-exec-jeremy-gilbert-just-shot-down-every-argument-against-peak-oil-2010-11

Dr. James Hamilton, Professor of Economics at UCSD who has done extensive research on the economic effects of oil shocks:
http://weber.ucsd.edu/~jhamilto/

Dr. Robert Hirsch, lead author of the landmark report on PO for the US Dept. of Energy:
http://en.wikipedia.org/wiki/Robert_L._Hirsch

Dr. M. King Hubbert, Shell geoscientist who correctly predicted the peak in US oil production:
http://en.wikipedia.org/wiki/M._King_Hubbert

Dr. David Hughes, who worked for 32 years as a geoscientist with the Geological Survey of Canada.
http://www.postcarbon.org/person/36208-david-hughes

Dr. Jean Laherrere, retired French petroleum engineer:
http://en.wikipedia.org/wiki/Jean_Laherrère

Chris Skrebowski: 38 years in the oil industry.
http://en.wikipedia.org/wiki/Chris_Skrebowski

Tom Whipple, retired CIA analyst:
http://www.postcarbon.org/person/36222-tom-whipple

[Rick M]

I see that this was posted during the past few hours.
It includes statements from several of the individuals whom I flagged as leading PO analysts:
http://www.energybulletin.net/stories/2011-10-26/individual-statements-support-aspo-usas-letter-energy-secretary-steven-chu

[Misifus]

From your latest link:


We are not running out of oil. But we appear to be running out of oil that we can afford.

Like I said upthread, whining about the price of oil (actually gasoline) has been around since Henry Ford made the automobile available to the masses. We would like our gasoline for free.

The list you provided is as regal as any list composed of Global Warming experts/wackos. Bartlett? LMAO!

Nevertheless, I do enjoy this song, and hope you do too!

http://youtu.be/lZMGTsyOAG0

[Rick M]

Steve,
Thanks for your detailed response and I apologize for the slow response.
You and I often disagree, but I always appreciate the detailed, constructive way that you present your counter-arguments.

I have no significant quarrel with most of your points, but I would add the following observations.

1. You said, “The low-price period from 87 to 2000, that was sustained, and it had a real impact on shaping investments and attitudes.”
True, but did it make any difference? Exports from the North Sea and Cantarell were booming and there was plenty of supply (hence the low prices).

2. “To me a "sustained period of high prices would mean 5+ years in or above the $80-100 band….”
I agree with the 5+ year time-frame (for the reasons which you mentioned) but I fail to see why we need $80+ prices to constitute high prices. For most of us, a mere doubling or trebling constitutes a significant increase, whether we are referring to our salaries or to our expenditures.
If this table is correct, we had a doubling in 2000 of the 98 price, then triple the 98 price by 2004 and a quadrupling by 2005, and that was just a warm-up for the following half-decade:
http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

If you or I had salary increases on that scale, we would surely view it as highly significant.

3. “For much of that period [1999- 2008] rising prices were seen as a response to political instability in the Middle East, not to any fundamental change in the supply/demand equation.”
I would argue that the market was pinched at both ends: UK peaked in ’99, Norway in ’01, Cantarell in ’04, with Prudhoe declining throughout.
Meanwhile demand surged in Asia and MENA, etc.
I would rate those factors above geopolitics, though it is of course impossible to ‘prove’ such aspects either way.

4. As for your final points, I can only say that neither I nor any of the military analysts have engaged in “absolute peak hysteria.”
As for “physically running out of oil,” that is not the central thesis of PO concerns.
First of all, we will never run out of oil, partly because of the relatively low extraction rates and also because we will have all sorts of kerogen, etc which may be left in the ground as well.
Second, the central warning of PO is that difficulties may start not when we ‘run out’ but ironically, as we enjoy the most oil that we have ever produced.

5. I certainly agree re. political and policy constraints, but please note what I’ve said repeatedly on this website: it really does not matter what combination of factors eventually ‘causes’ the ultimate peak in global oil production (nor when).
Unless we have ‘peak demand’ first, we will indeed face “an unprecedented risk management problem.”

6. I certainly support your final point about keeping oil in the ground (if only for our great-grandkids to extract).

[Rick M]

FYI,
This open letter to Energy Secretary Chu was issued yesterday:
http://www.energybulletin.net/stories/2011-10-26/letter-aspo-usa-energy-secretary-steven-chur

[Dayuhan]

1. You said, “The low-price period from 87 to 2000, that was sustained, and it had a real impact on shaping investments and attitudes.”

True, but did it make any difference? Exports from the North Sea and Cantarell were booming and there was plenty of supply (hence the low prices).

The difference would lie in the sharply diminished incentive for exploration and investment in new production capacity... even, in some cases, investment in maintenance of existing production capacity. There's also a less tangible impact on attitudes and practices. The idea that oil is fundamentally plentiful and cheap, and that price spikes are primarily driven by risk premiums, gets entrenched and does not immediately vanish.


2. “To me a "sustained period of high prices would mean 5+ years in or above the $80-100 band….”
I agree with the 5+ year time-frame (for the reasons which you mentioned) but I fail to see why we need $80+ prices to constitute high prices. For most of us, a mere doubling or trebling constitutes a significant increase, whether we are referring to our salaries or to our expenditures.

It's my less than scientific assessment of the level of sustained pain needed to drive really meaningful efforts to reduce consumption, and the level of sustained incentive required to drive meaningful investment in production and alternative fuels.


If this table is correct, we had a doubling in 2000 of the 98 price, then triple the 98 price by 2004 and a quadrupling by 2005, and that was just a warm-up for the following half-decade:
http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

If you or I had salary increases on that scale, we would surely view it as highly significant.

Look at it from the perspective of a company or nation that produces oil. Rising prices aren't an immediate incentive to go out and toss tens of billions into producing more oil. You like high prices, and your first reaction to high prices, especially after a prolonged and miserable glut, is to leave production where it is and enjoy the good times. You're also keenly aware that the price rise might easily be a transient phenomenon driven by a bubble economy and/or trouble in the middle east, and your instinct is to keep the money in the old oak chest until you're really sure the higher prices are going to last.


3. “For much of that period [1999- 2008] rising prices were seen as a response to political instability in the Middle East, not to any fundamental change in the supply/demand equation.”
I would argue that the market was pinched at both ends: UK peaked in ’99, Norway in ’01, Cantarell in ’04, with Prudhoe declining throughout.
Meanwhile demand surged in Asia and MENA, etc.
I would rate those factors above geopolitics, though it is of course impossible to ‘prove’ such aspects either way.

Price movements that start as a response to supply and demand trends are often wildly exaggerated by speculation and hedging. Fear of potential disruption can spike prices faster and more dramatically than actual disruption, because fear is open ended and the impact of what is feared is more difficult to assess than that of an existing event. Again, you have to factor in that entrenched attitude of glut, and the deep-set assumption that if demand perked up the Gulf, which had been running well below capacity for years, could simply open the tap a little.


5. I certainly agree re. political and policy constraints, but please note what I’ve said repeatedly on this website: it really does not matter what combination of factors eventually ‘causes’ the ultimate peak in global oil production (nor when).
Unless we have ‘peak demand’ first, we will indeed face “an unprecedented risk management problem.”

I don't think a production plateau due to political and security constraints should be seen as a peak or called a peak. "Peak" implies an absolute from which all must descend. Stagnating production growth or a transient decline due to constrained investment is a reversible condition calling for a different set of policy responses.

[Rick M]

Good morning

Thanks for your responses and I have no quarrel with any of them.
You also raised several interesting points:

1. "There's also a less tangible impact on attitudes and practices. The idea that oil is fundamentally plentiful and cheap, and that price spikes are primarily driven by risk premiums, gets entrenched and does not immediately vanish."

One constructive aspect of PO concerns is that they remind us that oil, though plentiful and previously cheap, is finite. I'm presently reading the most recent paper by James Hamilton (which I hope to get time to review for Energy Bulletin) in which he states:
"... although oil is in principle an exhaustible resource, in practice the supply has always been so vast, and the date at which it will finally be exhausted has been thought to be so far into the future, that finiteness of the resource had essentially no relevance for the current price... the observed price is practically the same as the marginal extraction cost" (Hamilton, p. 4).

2. "Price movements... are often wildly exaggerated by speculation and hedging."
This is precisely the point that the Bundeswehr analysts stressed: confidence in markets, confidence in the over-all economy, confidence in financial institutions is critical to national & international stability. Financial markets are hyper-sensitive to confidence & outlooks and have the power to quickly magnify/accelerate emerging trends:
http://www.energybulletin.net/stories/2011-06-13/review-bundeswehr-report-peak-oil-section-22-tipping-point-nov-2010

3. "I don't think a production plateau due to political and security constraints should be seen as a peak or called a peak. "Peak" implies an absolute from which all must descend. Stagnating production growth or a transient decline due to constrained investment is a reversible condition calling for a different set of policy responses."

I agree with your final point, but please note what you are saying: if it's just a temporary situation due to constrained investment then it is possible to increase production. If this were to occur, then the peak would be postponed yet again.
Again, the two central points of PO are that the peak/plateau must inevitably come: inevitably because of geological limitations, but the latter only provide the inevitability: many other factors could/would determine the timing of the peak. (We can make the same argument for phosphorus, etc.)

Second, when peaking does occur (ie. as we hit max, not minimum) mankind will face some unprecedented problems. The two most likely exceptions to this (ie. avoidance of problems) would be if we have "peak demand" first (eg. we have a break-through with hydrogen) or if we go on a crash mitigation program as Hirsch and others have advocated.

A mitigation program seems to be what the US military has embarked on, with recent intensive efforts in alt-energy, conservation, islanding of bases, etc.
Again, I have yet to find a military study from any country which dismisses PO as premature alarmism (or psychosis, as some have argued).
If anyone is aware of such conclusions by an analyst from the military/security research community, please post it.

[Dayuhan]

One constructive aspect of PO concerns is that they remind us that oil, though plentiful and previously cheap, is finite...

...I agree with your final point, but please note what you are saying: if it's just a temporary situation due to constrained investment then it is possible to increase production. If this were to occur, then the peak would be postponed yet again.

Again, the two central points of PO are that the peak/plateau must inevitably come: inevitably because of geological limitations, but the latter only provide the inevitability: many other factors could/would determine the timing of the peak. (We can make the same argument for phosphorus, etc.)

To some extent true, but overplaying the "near peak" arguments and generally raising excessive alarm also raises a "boy who cried wolf" risk. There are only so many times people will listen to "this is THE peak and it's all downhill from here" before deciding that the whole thing is a load of bollocks.

I know you're not raising hysteria, but some really do. I recall all sorts of declarations that 2008 was the absolute peak, generally based on the observation that production fell despite rising prices. There were quite obvious simple reasons for that, but they were ignored, and the elasticity argument was overplayed. If that happens too many times, people stop listening even to the more reasonable end of the spectrum.


Second, when peaking does occur (ie. as we hit max, not minimum) mankind will face some unprecedented problems. The two most likely exceptions to this (ie. avoidance of problems) would be if we have "peak demand" first (eg. we have a break-through with hydrogen) or if we go on a crash mitigation program as Hirsch and others have advocated.

I don't think a hydrogen breakthrough is coming any time soon. The nature of the element is not promising: there's a lot of it and it's a great fuel, but it's all bonded to something - generally to oxygen - and those bonds take more energy to break than you get from the hydrogen.

I don't like the idea of "crash mitigation" at all. It would require granting government draconian powers, very likely dictatorial powers that would effectively mean using an "emergency" to suspend democratic process. That is a very dangerous thing.

My own feeling is that even if conventional liquid fuels hit a plateau, sustained high prices will make unconventional production more attractive and that will take up some of the slack. Sustained high prices will also slow consumption growth. Point source large users, like power generation and industrial process heating, will be shifting to natural gas, as will some parts of the transport sector (fleet vehicles, sanitation trucks, buses, etc). There may be serious work on better coal technologies, realistically a more likely candidate for a breakthrough than hydrogen.

In sum, I think we're more likely to see a large number of relatively small changes, rather than a sudden tectonic shift in energy use patterns enforced by government fiat. This I think is a good thing.

[Rick M]

re. crying wolf:
It's unfortunate that people are so unfamiliar with the more credible PO analysts. I never met MKH but have heard the presentations of and met 8 of the 12 analysts listed above (#309).
I therefore have every confidence that anyone who troubled themselves to attend an ASPO conference would come away feeling quite impressed with the intelligence, sincerity and reasonableness of the presenters.
They are not interested in predictions of timing nor crying wolf; rather, they present sourced data and trends which the rest of us (and especially our elected officials) would do well to consider.
The sector which seems most attuned to these data & trends is the military, and their concerns should lend additional credibility to this complex issue.

I do not think that they are overplaying 'near peak' arguments or raising excessive alarm. One of the more imminent aspects of PO is export decline, and the leading analyst on that aspect would be Jeffrey Brown, but he is meticulous with his data and presents it as such, without sounding alarmist.

I have also seen arguments that 2008 was the peak, which I regard as foolish. First, all-liquids is now around 89 mbpd which is an all-time high, and a few years will always be insufficient to 'prove/verify' the all-time peak.
Second, people have claimed with certainty that the USA peaked in Dec 1970, and 40 years should be long enough for people to accept that fact.
That said, there are those who believe that thanks to shale oil and oil shale, the USA may eventually surpass the 1970 peak. Personally, I do not think that this is feasible, but I would never deny that it's a possibility, however remote. (So in a sense, we can never be 100% sure.)

re. Hydrogen: I agree.

re. crash mitigation: I agree that this could/would require draconian powers, at least in some aspects. Kunstler (who I regard as being more toward the alarmist/doomer end of the scale) has repeatedly wondered whether our democratic structures/institutions/processes can withstand the pressures which such circumstances could apply, and I share his concern.
The Bundeswehr analysts came pretty close to saying the same thing, warning that public confidence could be shaken not only with regard to financial institutions & the larger economy, but shaken with regard to government itself.

re. conventional liquid fuels: you say, "if they hit a plateau." According to the IEA, they already did a half-decade ago,and I share that view, as does Hirsch and many other credible PO analysts. Seven years is a very long time to be stuck at 74-75 mbpd despite sustained high prices, which is the point that LTC Fleming was trying to reinforce. Conventional oil has been the mainstay of our supply for 150 years, and the prolonged stall in its production ought to be front-page news. But it isn't, no thanks to those who dismiss PO as alarmist doomerism (I would not put you in that category: your disagreements with PO are founded on details which I find legitimate & sensible, even though I may disagree with them, if that makes any sense...).

re. unconventional sources: true, but they have much lower net energy/EROEI. Which reminds me, I should have added Charlie Hall to that list of credible PO analysts: he has done pioneering work on net energy for many years and has mentored a new generation of sharp, insightful analysts like Dave Murphy.

re. small changes from diverse sources: I agree, as would all the ASPO folks (who do not see any magic bullet on the horizon).

[Misifus]

...Look at it from the perspective of a company or nation that produces oil. Rising prices aren't an immediate incentive to go out and toss tens of billions into producing more oil. You like high prices, and your first reaction to high prices, especially after a prolonged and miserable glut, is to leave production where it is and enjoy the good times. You're also keenly aware that the price rise might easily be a transient phenomenon driven by a bubble economy and/or trouble in the middle east, and your instinct is to keep the money in the old oak chest until you're really sure the higher prices are going to last...

Most of your viewpoints are right on target. This includes the one above - almost. No oil company (major, independent, or state-owned) really has the mentality where they will
...leave production where it is and enjoy the good times... The companies are always under pressure to replace reserves, as the mantra is that "an oil company that does not replace reserves is an oil company that is going out of business." Nevertheless, some companies, like Pemex, are slow to replace reserves because of politics and bureaucracy, but that does not change the mantra.

Also, prospects for new drilling are always under evaluation regardless of current prices or forecasted prices.

[Rick M]

" No oil company (major, independent, or state-owned) really has the mentality where they will
Quote:
...leave production where it is and enjoy the good times..."

What about Saudi Aramco?

[Misifus]

" No oil company (major, independent, or state-owned) really has the mentality where they will
Quote:
...leave production where it is and enjoy the good times..."

What about Saudi Aramco?

What about them?

[Rick M]

Sorry, I should have been more clear.

The Saudis seem very happy to leave production where it is and enjoy these very good times.
For a country which claims that it can put out over 12 mbpd if they wish, they recently announced a cut-back to 9.4.

Furthermore, we have the oft-quoted statement from King Abdullah indicating that KSA is perfectly happy to "leave [at least some of] it in the ground" for their children.

[Fuchs]

Saudi oil reserve statistics / estimates have no value or credibility. Same for Kuwait.

[Rick M]

Hi, Fuchs

We are on slightly different topics, which is fine....

I was responding to Misifus' point about mentality/mind-set re. production (which I interpreted to mean that no oil company would be content to sit back and enjoy the status quo).

Your point is about reserves.
I would not say that Saudi reserve estimates have no value or credibility: for all we know, they could turn out to be correct (just as they could turn out to have been greatly inflated).
But if your point is that Saudi claims are unproven (even suspect) then I certainly agree:
http://www.energybulletin.net/node/36458

[Fuchs]

The unproven-ness of the reserves is linked to the unproven-ness of their ability to ramp up production.

They were pretty much caught lying about their oil and thus there's no real reason to believe them in regard to their oil any more.


Furthermore:
Let's assume a hypothetical situation in which the Saudis basically run out of oil in 15 years. No rise in oil prices would motivate them to invest in more production. They could just as well enjoy their remaining 10-15 years instead of shortening that to 5-10 years.

Their entire society is patriarchalic to the extent of being similar to the mafia: Very much overall income goes to top and is then redistributed in exchange for loyalty.
Their society, their late, would collapse if they run out of oil, and they know it.


The survival of the Saudi society in its current form is being threatened by increased oil exports because they shorten the life expectancy of their society/state model.
They're thus in a target conflict between more revenues and longer survival.

It seems they merely want enough revenues for sustainment, and everything in excess is very low priority in comparison to delaying the inevitable.

The whole concept of reacting to oil prices is thus in their preference system perverted; they may decide to produce more when prices are low in order to meet their revenue target for sustainment, and reduce production when prices are high in order to avoid excess consumption of their finite wealth.

[Dayuhan]

No oil company (major, independent, or state-owned) really has the mentality where they will "...leave production where it is and enjoy the good times..." The companies are always under pressure to replace reserves, as the mantra is that "an oil company that does not replace reserves is an oil company that is going out of business." Nevertheless, some companies, like Pemex, are slow to replace reserves because of politics and bureaucracy, but that does not change the mantra.

Also, prospects for new drilling are always under evaluation regardless of current prices or forecasted prices.

Replacing reserves and raising production are two very different things. There's always an incentive to find new reserves, though that incentive is much greater when prices are high. There isn't always an incentive to actually raise output, especially when raising output might depress prices. Restricting output to sustain high prices is not exactly unheard of in the oil world.

New drilling isn't all it takes to increase production. You have to drill, you have to pump the oil, you have to move the oil to market. Drilling new wells or increasing output per well doesn't do you any good if you haven't also invested in pipelines, loading terminals, and all the other infrastructure needed to move the product.

It's true that oil producers are always evaluating ways to expand reserves and production. During a period like the 87-99 glut, though, this process is likely to be generally neglected and pretty perfunctory, and the plans will need a lot of upgrading before they are ready to implement.

First a producer has to make a decision to increase production (again, distinct from increasing reserves). That means facing the questions of whether this price increase is going to last or whether it's a passing phenomenon, and again the glut mentality had a real impact on those decisions. Once the decision is made you have to evaluate huge numbers of very complex plans and proposals to decide exactly how you want to increase production. Then you have to break that down into projects and bids and actually get the work done. It doesn't happen overnight.

In 2008 Gulf production dropped even as prices soared, which was widely interpreted as evidence that the oil had run out. Of course the reality was much simpler. The production increases in 2006 and 2007 were not achieved by adding new capacity, they were achieved by running existing capacity at 100% 24/7/365 and tweaking everything possible to get a transient boost. You can only run an industrial process at 100% 24/7/365 for so long before stuff simply starts to break down, especially if it's been neglected during a 15 year glut. Production didn't fall because there was no oil to pump, it fell because the equipment could no longer keep pace, no matter how high the price went.

Since then the Gulf producers have spent a whole lot of money on increasing capacity. At one point the Saudis claimed they would raise capacity to 16mbpd. How much they've actually added we don't know, because they haven't run to capacity yet. Of course they have no intention of producing that much on a sustained basis... what they want is the very large political clout gained from holding effectively the world's only significant reserve capacity.


Saudi oil reserve statistics / estimates have no value or credibility. Same for Kuwait....

The unproven-ness of the reserves is linked to the unproven-ness of their ability to ramp up production.

Certainly there's a lot of doubt over Saudi reserve estimates, but I've never heard anyone knowledgeable claim that actual production capacity at this point is being constrained by lack of reserves. There's real doubt over how many years they can sustain output, but at this point the constraint is infrastructure, not the amount of oil in place.

Venezuela now claims reserves greater than those of Saudi Arabia... those claims are open to doubt of course, though some of the raised estimates source back to USGS, not the Venezuelan government or PDVSA. How much is technically or economically recoverable is questionable, though both technological and economic conditions are subject to change.

Rick...

The liquid fuel plateau seems largely a function of an equation that's been fairly static over the last decade. We have a few large producers with steady high output... Canada, Russia, Saudi Arabia, Kuwait, UAE, etc. There are political constraints in some of these (unfavorable investment climate in Russia, environmental regulation in Canada, etc) but they still sustain production. There are also mature areas where production is decreasing. In some (North Sea) this is a function of depletion. In others (Mexico, Indonesia) depletion is a factor but there are also major political constraints, typically nationalist investment policies that prevent effective exploration. There are also areas where production is increasing as new money comes in... Africa, Central Asia, Brazil etc.

The decliners and the gainers more or less cancel each other out, the steadies stay steady, hence a plateau.

There's potential for a shift in either direction. Political instability can knock one or more major producers out of the picture completely and could break the plateau on the downside. The upside jokers in the deck are Iraq, Iran, Venezuela, and Libya, all of which are producing far less than they can due to political, security, and/or investment constraints. If one or more of these sees a period of improved stability and better policy, there's potential for an increase sufficient to break the plateau on the upside.

PS: The miserable state of PDVSA is clear from this:

http://www.businessweek.com/news/2011-10-07/russia-lends-venezuela-4-billion-in-return-for-oil-projects.html

Brent Crude is over $100/bbl and Venezuela is borrowing money.

[Dayuhan]

re. crash mitigation: I agree that this could/would require draconian powers, at least in some aspects. Kunstler (who I regard as being more toward the alarmist/doomer end of the scale) has repeatedly wondered whether our democratic structures/institutions/processes can withstand the pressures which such circumstances could apply, and I share his concern.

My concern is less that an actual crisis will break the democratic edifice - though that's not impossible - but that people with a vested interest in breaking the democratic edifice will use the whipped-up fear of crisis as an excuse to dismantle the edifice.

[Rick M]

Steve: I’ll respond in reverse order.

1. “My concern is less that an actual crisis will break the democratic edifice - though that's not impossible - but that people with a vested interest in breaking the democratic edifice will use the whipped-up fear of crisis as an excuse to dismantle the edifice.”
Steve: No quarrel.
It’s rather like the cause-of-peak argument: it may matter little which factors conspire to cause the result… it’s still a problem.
In the case of PO and/or the subversion of democratic institutions & processes, they could be very serious problems.

2. “We have a few large producers with steady high output... Canada, Russia, Saudi Arabia, Kuwait, UAE, etc.”
Please don’t put Canada in the same category as Russia & KSA. Don’t forget that we eastern Cdns import about 1 mbpd.
When we subtract that volume from our US exports we are hardly the “energy powerhouse” that our Prime Minister claims we are. As a net oil producer, we are certainly not in the top echelon.
If one factors in the amount of natural gas that is used to produce the oil sands oil which we export, the net factor is further reduced.

3. re KSA:
“There's real doubt over how many years they can sustain output, but at this point the constraint is infrastructure, not the amount of oil in place.”

From the standpoint of the rest of the world (and for Saudi finances) what matters is Saudi exports. I would argue that the limitation in that regard will not be Saudi infra nor reserves, but rather the surge in domestic demand.
In 2008, a Chatham House paper warned that the Saudi exports could start to decline before 2015 and that they could be effectively done as an exporter of significance before 2040:
http://www.chathamhouse.org/publications/papers/view/108858

Last summer’s Jadwa paper expressed similar concerns:
http://www.emirates247.com/business/economy-finance/saudi-oil-exports-set-to-dive-in-long-term-2011-07-20-1.408672

The issue of export decline is surely one of the more imminent aspects of PO: we can’t all be importers, and the list of major producers which are post-peak (presumably permanently) keeps growing, with no reversals (ie. new peak) that I am aware of.
Jeffrey Brown will speak on this issue at ASPO next week in Washington. There is no history of psychosis in his family....

[Misifus]

Sorry, I should have been more clear.

The Saudis seem very happy to leave production where it is and enjoy these very good times.
For a country which claims that it can put out over 12 mbpd if they wish, they recently announced a cut-back to 9.4.

Furthermore, we have the oft-quoted statement from King Abdullah indicating that KSA is perfectly happy to "leave [at least some of] it in the ground" for their children.

Just because there is a curtailment of the rate being produced, does not mean that the effort to replace reserves goes on hiatus. So even when KSA is benefiting from high prices and is choking back wells, Saudi Aramco itself would still be looking for new reserves and still be drilling new wells. It's not like these oil companies are saying "oh let the good times roll and let's kick back now and relax."

[Misifus]

Replacing reserves and raising production are two very different things. There's always an incentive to find new reserves, though that incentive is much greater when prices are high. Not always true. Reserve to Replacement ratio is a yardstick closely watched by analysts. It is an important yardstick regardless of pricing. To dismiss reserves replacement as a function of pricing or production curtailment connotes a lack of understanding of the true nature of the business. However, I am certain this is not the case with you.


There isn't always an incentive to actually raise output, especially when raising output might depress prices. Restricting output to sustain high prices is not exactly unheard of in the oil world.The above is correct. In fact much of this was done with natural gas here in the USA during the 80's and 90's.


During a period like the 87-99 glut, though, this process is likely to be generally neglected and pretty perfunctory, and the plans will need a lot of upgrading before they are ready to implement.I'm not sure where you are getting that there was a glut from 87-99. Over that 22 year period drilling has been pretty intense globally. In fact that is the period of all of the deepwater advances - globally. It is also a period of significant investment by KSA (Saudi Aramco).


First a producer has to make a decision to increase production (again, distinct from increasing reserves). That means facing the questions of whether this price increase is going to last or whether it's a passing phenomenon, and again the glut mentality had a real impact on those decisions. Once the decision is made you have to evaluate huge numbers of very complex plans and proposals to decide exactly how you want to increase production. Then you have to break that down into projects and bids and actually get the work done. It doesn't happen overnight.Nope. What you say sounds logical, and I wish it really worked like that, but that's not really the way it works in oil companies. Have you even worked for an oil company? Are you currently in the business?


In 2008 Gulf production dropped even as prices soared, which was widely interpreted as evidence that the oil had run out. Of course the reality was much simpler. The production increases in 2006 and 2007 were not achieved by adding new capacity, they were achieved by running existing capacity at 100% 24/7/365 and tweaking everything possible to get a transient boost. You can only run an industrial process at 100% 24/7/365 for so long before stuff simply starts to break down, especially if it's been neglected during a 15 year glut. Production didn't fall because there was no oil to pump, it fell because the equipment could no longer keep pace, no matter how high the price went.

I'm not sure what Gulf you are talking about here. Gulf of Mexico (GOM) or the Gulf of Arabia (GOA). If you are referring to GOM the issue there was the hurricane damage. If you are referring to GOA no new capacity was needed.



Certainly there's a lot of doubt over Saudi reserve estimates, but I've never heard anyone knowledgeable claim that actual production capacity at this point is being constrained by lack of reserves. That's immaterial. The mantra remains as a commandment for them as well as for any other oil company. Reserves must be replaced. That is the main mission operational mission of any oil company. Curtailment scenarios to take advantage of pricing are secondary.


Venezuela now claims reserves greater than those of Saudi Arabia... those claims are open to doubt of course, though some of the raised estimates source back to USGS, not the Venezuelan government or PDVSA. How much is technically or economically recoverable is questionable, though both technological and economic conditions are subject to change. I can assure you that just about everything coming out of Venezuela these days is a lie. Anything reliable coming out of PDVSA ceased on Thu April 11, 2002. I was over there when it happened.

[Dayuhan]

Just because there is a curtailment of the rate being produced, does not mean that the effort to replace reserves goes on hiatus. So even when KSA is benefiting from high prices and is choking back wells, Saudi Aramco itself would still be looking for new reserves and still be drilling new wells. It's not like these oil companies are saying "oh let the good times roll and let's kick back now and relax."

Nobody said that efforts to replace reserves goes on hiatus. The comments made quite specifically referred to production, not exploration.

Certainly the effort to seek out new reserves goes on all the time. Both experience and reason suggest that this effort receives a higher priority and a greater resource allocation when prices are high and demand is rising than it does during a glut period.

Three different levels of response to higher prices:

- Increase production with existing capacity (run the infrastructure harder)

- Increase capacity on existing reserves (build new infrastructure)

- Find and develop new reserves

The point I'm trying to make is that the initial response to a price spike is likely to be in the first category, until the producer is convinced that the price spike will be sustained. The large expenditures required to install new capacity - whether on existing or new reserves - will be delayed. The decision to invest will be delayed until the producer is convinced that the price rise is sustainable, and actual production will be delayed until that decision can be executed, often a substantial time.

What that means is that expecting immediate elasticity - higher prices inspiring a rapid rise in production - is generally not realistic. Failure of high prices to instantly summon up new production doesn't mean the oil isn't there, it means the elasticity is delayed, usually for reasons that are not that difficult to find, if we look for them.

[Misifus]

Nobody said that efforts to replace reserves goes on hiatus. The comments made quite specifically referred to production, not exploration. Found reserves are considered production. Exploration departments don't own reserves, production departments do, and that's because production departments, uh...produce the oil. Production doesn't go on hiatus when prices are high, they are stressed to produce even more. What I am try to convey to you, or actually more for the audience is that there is no, "Hey! Let's kick back and relax now that prices are high." In fact it is quite the opposite in production departments.


Certainly the effort to seek out new reserves goes on all the time. Both experience and reason suggest that this effort receives a higher priority and a greater resource allocation when prices are high and demand is rising than it does during a glut period. No. I know you are using reason here. However, your frame of reference is off. The pace to replace reserves is fairly constant regardless of price. Think 'tortoise.' Exploration departments are not reactive like production departments. Exploration lead times are too long for that. Exploration departments have to continue the process regardless of current or forecasted pricing. Elasticity theory doesn't apply to exploration. Elasticity theory can apply to production (sometimes) which is more reactive. Think 'hare.'

To make this more succinct. The time period in which a project goes from exploration to production, the swing in pricing could go from $60-$140 per barrel. The exploration train can't stop for this type of volatility. To do so would be suicide for the oil companies. Hence the mantra that I stated earlier - replace reserves.

[Rick M]

Misifus,
1. “Found reserves are considered production.”
Pardon? Reserves are in the ground. Production is what’s passing through the pipes. Reserves are potential production (with varying degrees of probability).

2. “Exploration departments don't own reserves, production departments do, and that's because production departments, uh...produce the oil.”
Shell has its “Exploration and Production (E&P) business unit,” apparently a single entity.
Furthermore, in most countries companies don’t own reserves, they lease them.

3. “Production doesn't go on hiatus when prices are high, they are stressed to produce even more…. Exploration departments are not reactive like production departments. Exploration lead times are too long for that. Exploration departments have to continue the process regardless of current or forecasted pricing. Elasticity theory doesn't apply to exploration.”

These are sweeping generalizations, but they raise an interesting point which takes us back to the issue of PO:
If as you say, exploration efforts are non-stop & inelastic, and production goes all-out when prices are high, then how do you account for the fact that conventional crude production (ie. what flows out of pipes, not ‘found reserves’) has been flat for 7 years despite the obvious incentive of very high prices?

4. “I'm not sure where you are getting that there was a glut from 87-99. Over that 22 year period drilling has been pretty intense globally. In fact that is the period of all of the deepwater advances - globally. It is also a period of significant investment by KSA (Saudi Aramco).”

First, the period is 12/13 years, not 22.
Second, every point that you raise would lead to an increase in supply (ie. the glut that Dayuhan mentioned).

5. “Reserve to Replacement ratio is a yardstick closely watched by analysts. It is an important yardstick regardless of pricing. To dismiss reserves replacement as a function of pricing or production curtailment connotes a lack of understanding of the true nature of the business.”

The usual term is reserve replacement ratio (RRR). I don’t recall anyone dismissing it or failing to understand the "true nature" of the business (however that might be determined).

6. “Have you even worked for an oil company? Are you currently in the business?”
Perhaps you’d like to tell us about your own areas of expertise.

[Misifus]

Rick M,

I am telling you how it is. Not how you want it to be. You simply display your ignorance by arguing with those who know and do, as opposed to those who watch and wish they knew. You apparently don't understand the industry jargon, nor how an oil company really works.


Misifus,
1. “Found reserves are considered production.”
Pardon? Reserves are in the ground. Production is what’s passing through the pipes. Reserves are potential production (with varying degrees of probability).


Production departments steward the reserves. Once an exploration department finds them, the exploitation of the reserves is passed over to a production department for development and further production. This can happen with as little as three wells drilled in a major field or find. Production then "owns" the reserves.


2. “Exploration departments don't own reserves, production departments do, and that's because production departments, uh...produce the oil.”
Shell has its “Exploration and Production (E&P) business unit,” apparently a single entity.
Furthermore, in most countries companies don’t own reserves, they lease them.

See above for item 1. Again you don't understand the industry vocabulary nor how a company works.


3. “Production doesn't go on hiatus when prices are high, they are stressed to produce even more…. Exploration departments are not reactive like production departments. Exploration lead times are too long for that. Exploration departments have to continue the process regardless of current or forecasted pricing. Elasticity theory doesn't apply to exploration.”

These are sweeping generalizations, but they raise an interesting point which takes us back to the issue of PO:
If as you say, exploration efforts are non-stop & inelastic, and production goes all-out when prices are high, then how do you account for the fact that conventional crude production (ie. what flows out of pipes, not ‘found reserves’) has been flat for 7 years despite the obvious incentive of very high prices? No these are not sweeping generalizations. These are statements of what specifically goes on. When prices are high, production operations are stressed to produce more oil from existing reservoirs. This is done in a variety of ways such as optimization of artificial lift, drilling of infill wells (not to be confused with exploration wells), doing uphole completions, stimulating existing completions, and doing a whole bunch of other things that you probably don't even have a clue about.


4. “I'm not sure where you are getting that there was a glut from 87-99. Over that 22 year period drilling has been pretty intense globally. In fact that is the period of all of the deepwater advances - globally. It is also a period of significant investment by KSA (Saudi Aramco).”

First, the period is 12/13 years, not 22.
Second, every point that you raise would lead to an increase in supply (ie. the glut that Dayuhan mentioned).

Sorry, typo. I'll fix it if the editor hasn't timed us out yet. Nope, no glut. Prices went up overall in that time period (even if the trader speculation spikes are discounted). More demand for oil from developing economies like China & India.


5. “Reserve to Replacement ratio is a yardstick closely watched by analysts. It is an important yardstick regardless of pricing. To dismiss reserves replacement as a function of pricing or production curtailment connotes a lack of understanding of the true nature of the business.”

The usual term is reserve replacement ratio (RRR). I don’t recall anyone dismissing it or failing to understand the "true nature" of the business (however that might be determined).

I think it is pretty certain the you misunderstand the business. And again you don't understand the terminology of the industry. You are simply reading and passing along what you read and drawing conclusions from an incorrect frame of reference. "A fish does not know it is all wet simply because it has never been out of water." Think about that.


6. “Have you even worked for an oil company? Are you currently in the business?”
Perhaps you’d like to tell us about your own areas of expertise.

Okay. I'm an oil & gas expert with global experience in every major oil & gas producing region of the world except for former Soviet Bloc countries. However, this is the internet, so we could all be full of BS ;)

Instead of arguing with me. You should really be asking me questions about how the industry works so that your frame of reference gets set correctly.

[Fuchs]

Keep in mind that different companies from different continents might actually be different. ;)

[Rick M]

Misifus,

You are the first O&G expert I've encountered who claimed that reserves (found or otherwise) ARE production.
You are also the first to display such arrogance (for which the O&G people I know would have little tolerance).

You forgot to answer answer my rather important question in #3: if your observations/understanding/mantras are correct, why have we not seen a surge in conventional oil production during the past 7 years?

re #4: "Prices went up overall in that time period [1987-99] (even if the trader speculation spikes are discounted)."
http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

"You are simply reading and passing along what you read and drawing conclusions..."
True (as with the price history above): I have never claimed otherwise.
I conclude from the price history that inflation-adjusted oil prices dropped from $35 in 1987 to $16 in 1998 and that Misifus is incorrect on that point.

If you go back to the origin of this thread (and its counterpart at Armed Forces Journal), I wanted to present credible, sourced info on energy security issues (much of it from military analysts) to the audience at SWC and AFJ and I hoped to receive constructive feed-back on it.

Both audiences have displayed a good deal of interest in these timely issues and have offered countering/opposing (as well as supportive) info in a polite & constructive manner, which is no doubt appreciated by all who participate in these discussions.

[Misifus]

Keep in mind that different companies from different continents might actually be different. ;)

This is correct. Of course there are many similarities largely because the process of finding and extracting is the same. Hence the organizations have to build themselves around these processes.

[Misifus]

Misifus,

You are the first O&G expert I've encountered who claimed that reserves (found or otherwise) ARE production.
You are also the first to display such arrogance (for which the O&G people I know would have little tolerance).

You seem to be confusing the verb to produce with the entity within oil companies known as Production (a noun). This reflects your lack of understanding of how these companies work. Again, reserves are stewarded by production departments. As for your quip on arrogance, your posts since the start of this thread are laced with the arrogance of one who thinks he knows, while your writings indicate that you actually don't know, at least when read by someone in the industry. And actually other O&G people tolerate me very much, in fact you might be surprised to find that I am actually quite known in the business and that these companies retain me regularly to do real work for them and to advise them in just about every location in the world except for those places where I choose not to travel to. This includes majors, independents, and state-owned companies. Nevertheless, I can't just stand by and have ignorance be further propagated out there by Peak Oil'ers. The oil & gas industry suffers enough from bystanders, etc., who simply spew incorrect knowledge or misinterpret data and events. Easy for Peak Oil'ers to villainize the industry (even if they don't intend to) being that the emotional state of the population is that they would like gasoline to be "almost free." The mind can connect with the most simplest of concepts if it is not taxed too much. Unfortunately, Ockham's Razor does not always apply.


You forgot to answer answer my rather important question in #3: if your observations/understanding/mantras are correct, why have we not seen a surge in conventional oil production during the past 7 years? No, I did not forget. First I would have to get you to the basics of understanding the exploration and production process before taking you on to more advanced matters. However, you appear resistant to even the basics.


re #4: "Prices went up overall in that time period [1987-99] (even if the trader speculation spikes are discounted)."
http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

"You are simply reading and passing along what you read and drawing conclusions..."
True (as with the price history above): I have never claimed otherwise.
I conclude from the price history that inflation-adjusted oil prices dropped from $35 in 1987 to $16 in 1998 and that Misifus is incorrect on that point. Well good. At least you are coming to the realization that you are acting as nothing more than an input/output device. In other words, processing information out of journals and such. Again, pricing is not the driver that you think it is in the exploration process.


If you go back to the origin of this thread (and its counterpart at Armed Forces Journal), I wanted to present credible, sourced info on energy security issues (much of it from military analysts) to the audience at SWC and AFJ and I hoped to receive constructive feed-back on it. No, it appears that your real agenda is to promote the Chicken Little psychosis. The energy security threat is that we as nation, or at least our government, has essentially capitulated on matters of oil & gas as "energy security." The threat is that we threaten our own oil & gas companies.

I am here to help you understand with any questions that you may have about the industry. I have not heard you ask any questions. I have only heard you make proclamations. You should really start with a fundamental understanding of how the business works before trying to establish yourself as a "global thinker." I would extend this same advice to anybody studying at a war college as well.

[Ken White]

You are also the first to display such arrogance (for which the O&G people I know would have little tolerance).I do know and associate with some O&G types and they're arrogant enough. :wry:

There are varying types of arrogance IMO. Brash is one, Quiet but persistent belief in infallibility or the rectitude of one's position is another and there others between those poles.
You forgot to answer answer my rather important question in #3: if your observations/understanding/mantras are correct, why have we not seen a surge in conventional oil production during the past 7 years?Again, no expert but it strikes me that combination of wars, political troubles (notably in Iran and Venezuela), violence (Mexico, Nigeria...), cartels holding prices down and Brazil having unplanned difficulty drilling its offshore fields may all be contributors to that. I also suspect that 'Environmental' objection worldwide but particularly here in the US have played a significant part.

That brings up an aside; I wonder how much of the opposition to the Keystone Pipeline is truly 'environmental' and how much is backed under the table by US oil interests trying to stall competition?
If you go back to the origin of this thread (and its counterpart at Armed Forces Journal), I wanted to present credible, sourced info on energy security issues (much of it from military analysts) to the audience at SWC and AFJ and I hoped to receive constructive feed-back on it.While without O&G 'expertise,' I do have some knowledge of things militaire. Military 'analysts' tend to worst case everything in an excess of caution and a desire to avoid being proven wrong -- the career kiss of death -- so one is advised be skeptical, make that very skeptical, of such analyses...
Both audiences have displayed a good deal of interest in these timely issues and have offered countering/opposing (as well as supportive) info in a polite & constructive manner, which is no doubt appreciated by all who participate in these discussions.Not least by us observers -- however, I've noticed that field workers and academics have rather different definitions of polite. Neither IMO is wrong but they do differ. Add the fact that the field guys do not like to waste verbiage and they can be blunt. Bluntness in and of itself is not impolite, it is aimed, usually, at removing any ambiguities that can result from excessive politeness. Ambiguities are necessary in truly polite conversation in many circles but in a field environment conversational ambiguities can lead to misunderstandings and those can have sometimes fatal consequences and thus are to be scrupulously avoided. :wry:

I have enjoyed your posts for months and I enjoy Misifus' posts. I hope you both continue this dialogue. I learn from both of you.

[Misifus]

...Ambiguities are necessary in truly polite conversation in many circles but in a field environment conversational ambiguities can lead to misunderstandings and those can have sometimes fatal consequences and thus are to be scrupulously avoided. :wry:...

You have either been on an oil rig or were a good NCO, or maybe even both :D

[Rick M]

Thanks for your observations, Ken

Re. flat conventional crude production, I agree that the factors you mention play a role. But you did not mention other factors which seems to be just as probable: that we have been finding fewer giant & super-giant oilfields in recent decades, and we continue to draw heavily from oilfields which are in decline.
In other words, we may in fact be maxing-out on conventional oil production.

Re. military analysts, believing that our world faces a looming problem with its supply of liquid fuels can hardly be a popular/widely-supported position, including within the military. In some circles, PO is viewed as a cult, doomerism (even psychosis, etc) so one would think that there could be some risks in expressing support for PO concerns.
I would think that this is even more true within the O&G industry, where there may be significant career risks in expressing concerns over future supply. However, that has not stopped several industry insiders from doing so, to their credit.

I’m glad that you have enjoyed this thread (you were the first person to welcome me to SWC).

[Rick M]

Misifus,

“I have not heard you ask any questions.”

I recall asking at least two direct questions, neither of which you have answered.
The first was several days ago, when I asked you to please identify which PO analysts you feel are Chicken Littles, and what they have said about “end of days.”
I provided a list of PO analysts whom I consider to be well-informed, sensible and credible: perhaps you could let us know why you feel that their research and their concerns are not credible.

The second was yesterday regarding the ongoing plateau of conventional oil, which you declined to answer (apparently because I’m too resistant to understand).
But I’m not your only audience here: I am willing to present sourced info (data & trends) which indicates that we appear to have a problem with our future supply of conventional oil.
SWC readers might be interested in your explanation as to why that info is incorrect.

[Ken White]

...In other words, we may in fact be maxing-out on conventional oil production.All true. "May" being the operative word. My suspicion is that we probably are but I would also emphasize the word "conventional" -- we humans can be innovative when pushed. It's always prudent to look ahead but it's equally prudent to be aware that view will always be rather murky with few absolutes discernible... :confused:
Re. military analysts, believing that our world faces a looming problem with its supply of liquid fuels can hardly be a popular/widely-supported position, including within the military...Don't know, long retired but I strongly suspect that is OTOH pretty popular for a variety of reasons mostly involving job security... :wry:
In some circles, PO is viewed as a cult, doomerism (even psychosis, etc) so one would think that there could be some risks in expressing support for PO concerns...However, that has not stopped several industry insiders from doing so, to their credit.Certainly logical and probably true. Without more knowledge than I now possess on the topic, I'm inclined to 'know' there is a peak oil issue but to not know when it will occur. IIRC, there have been a number of predictions thus far and most have proven wrong -- that human innovation factor again, I think -- so I suppose we need to keep a weather eye cocked, be prepared as best we can and continue to explore alternatives without undue angst. :wry:

[Misifus]

I recall asking at least two direct questions, neither of which you have answered.

[1]...which PO analysts you feel are Chicken Littles...


[2]...The second was yesterday regarding the ongoing plateau of conventional oil, which you declined to answer (apparently because I’m too resistant to understand)...

None of those are questions about the industry or the exploration and production process, which is where you need to start. Your questions were simply styled as questions to defend your Peak Oil psychosis.

You might want to start by learning about something as simple as drive mechanisms in petroleum reservoirs and then work your way up from there. Good luck to you!

[Fuchs]

Misifus, it's a common scientific (empirical) practice to look at outcomes in addition to models on what constitutes inputs.

It's thus totally legit to look at global output over time in search for clues. Then you can check whether the input model as it is explains the outcome and if it doesn't you need to look at additions to the inpout model (such as in this case a depletion of opportunities for "production").

[Misifus]

Misifus, it's a common scientific (empirical) practice to look at outcomes in addition to models on what constitutes inputs.

It's thus totally legit to look at global output over time in search for clues. Then you can check whether the input model as it is explains the outcome and if it doesn't you need to look at additions to the inpout model (such as in this case a depletion of opportunities for "production").

Agreed. And since I am in the scientific & engineering community, I would know that.

I would add that after a macro observation is made, the the diligent researcher would start at the ground level to understand the processes and individual components that contribute to the observation BEFORE drawing conclusions and making bold assertions that "oil has peaked." Looking at graphs/tables and citing a few like minded individuals is not due diligent research, nor does it prove a theory.

[Fuchs]

The scientific way is not to demand conclusive evidence for a theory; it merely needs superficial plausibility and falsifiability (dunno if that's the correct word, I learned this stuff in German).

Incomplete information before drawing conclusions is utterly human. The scientific way isn't to outlaw this, but to insist that conclusions be expressed in potentially falsifiable statements - and then those who disagree go to work falsifying them.



Maybe you should rather look at how peak oil could be falsified instead of discussing some of practically endless input variables of this complex problem.


(The most obvious way of trying to falsify 'peak oil' is of course to just wait and see, but that's kinda useless if 'peak oil'ers were correct.)

[Misifus]

...Maybe you should rather look at how peak oil could be falsified instead of discussing some of practically endless input variables of this complex problem...

No. Actually it is the Peak Oil'ers who should be doing that. It's called null hypothesis testing. Brought to us by Francis Bacon. Verstehen Sie?;) The Peak Oil'ers should have been doing this when they presented their "theory" so that it could be "proven."

However, you have given me an idea...

[Fuchs]

Their hypothesis rests on the quite self-evident limitation of total deposits.
This hypothesis can be proved wrong by future events.

The assumption that these deposits will last long is not scientifically superior or inferior to the hypothesis that they won't.

Scientific methodology has (in theory) no prejudice against non-mainstream hypothesises.


Besides; proving the other's hypothesis wrong equals proving one's hypothesis to be right in this case.

[Misifus]

Rick M,

I am going to give you the benefit of the doubt and say you that you have convinced me that Peak Oil theory is valid - it's predictions. To make such an assertion on the global level that oil has peaked or plateau'd surely indicates a level of knowledge and skill beyond my understanding. Surely if this can be predicted on a global level, then it can be predicted on a smaller field level. So I am asking you to please make a similar prediction for me on a smaller level, since the smaller scope may help me understand better. When you do this, please make sure that you respect some of the terms like "under-investment" that have been talked about in this thread. Keep in mind that you are also bound by fiduciary responsibility to company shareholders, and to safety/environmental operating practices. Here is the information for you to make on when oil will peak (or even plateau) in this newly discovered oil field.

1. The field is in 7,000 ft of water. 100 miles offshore Louisiana in the "dead sea" (as was described upthread).

2. The reservoir where the oil lays is 14,000 ft deeper. For a total depth of about 21,000 ft. from reservoir to sea level.

3. Three exploration wells have been drilled by Exploration. They have declared that there are 1.2 billion barrels of oil in the reservoir based on the geologic structure from previous seismic data. These 3 wells are sitting on the seafloor, capped now and temporarily abandoned. They are awaiting to be hooked up with the further development of the field by the Production department. Of course there is no facility topsides (at sea level) and no pipelines have been laid yet. This of course will have to be considered as part of the investment to capture the reserves.

4. The thickness of the reservoir varies from 200-800 ft. as seen in the 3 well logs from the three wells.

5. The permeability of the rock which contains the oil is 120 millidarcies, seen from cores.

6. We don't have relative permeability data.

7. No PVT data yet, but we think that Petrosky's correlation applies with a Rsi of 600 scf/bbl, 31 API oil, and .69 gas gravity.

8. Porosity of the rock is .26

9. The initial water saturation of the rock is .15.

10. Initial pressure is about 15,600 psig.

11. We saw no gas cap while drilling.

12. We saw no aquifer while drilling.

13. The oil appears non-volatile.

14. While we think Petrosky's correlation applies for the PVT, we also think that the bubble point of the fluid is below 2,000 psig.

15. The reservoir appears to be faulted into three distinct units, each of which is hydraulically separated from the other.

Please predict when this oil will peak, or when it will come off of plateau. Keep in mind investment guidelines. The discount rate is 12%.

Thanks and looking forward to your guidance.

[Misifus]

...The assumption that these deposits will last long is not scientifically superior or inferior to the hypothesis that they won't.

Sehr gut! You are correct. So the discussion then becomes similar to a hamster in his cage running on his exercise wheel in the wrong direction.

So let's see how our Peak Oil guru predicts peak oil with the data I have provided ;)

[Rick M]

Misifus,
This exchange is getting more bizarre by the moment.

You know perfectly well that I am not capable of predicting when your hypothetical reservoir would peak or start to decline (partly because I do not understand many of the scientific details).
Furthermore, you also know that even if I did understand all those important elements, I still would not be able to predict with any precision because no-one can, including yourself.

Meanwhile, since this thread was started over two years ago, I have repeatedly said that I have no interest in attempting to predict the timing of peak nor in the predictions of others.
Nor do I agree with those who argue that the peak will occur when roughly half of the oil has been consumed.
For starters, there is the issue of definition. What are we talking about: peak of conventional? peak of all liquids? Could we include kerogen? Do we factor in net energy?

Meanwhile, returning to my two questions, you replied:
“None of those are questions about the industry or the exploration and production process….”
I provided the names of a dozen individuals, nine of whom are (or were) in the O&G industry, and all of whom have expressed concern about the future of oil supply.
Their concerns are increasingly supported by industry executive like Total’s de Margerie:
http://www.forbes.com/forbes/2011/0214/features-christophe-de-margerie-total-high-friends-low-places.html

Surely such concerns are at the heart of the long-term viability of your industry, yet you see them as irrelevant and refuse to discuss them.

As for the relevance of exploration & production, we clearly cannot produce oil which we cannot find, and discovery rates peaked decades ago. If we consume more oil than we find, surely this is a problem.
One does not need to be a technical expert like yourself to understand that.

It would also be appreciated if you would make your points without distorting mine. I have never said that “oil has peaked,” rather, the reverse: all-liquids production is presently around 89 mbpd, an all-time high.
I do believe that conventional oil has probably peaked, but I certainly accept that anything is possible.
More discoveries like your hypothetical 1.2 billion would help: it would supply the world for an extra couple of weeks. At a depth of almost 4 miles, perhaps you could let us know how much of that 1.2 would actually be net energy.

I certainly agree with your most recent statement, “citing a few like minded individuals is not due diligent research….”
I think I’ve covered the literature as widely as an ordinary citizen could: from CERA and industry forecasts to documents from the EIA & IEA, to industry insiders like the nine professionals cited above, to the military analysts and emergency planners.
If you have published info, I’ll be happy to examine yours as well.

[Rick M]

Hi again, Ken

I would also emphasize the word "conventional," though perhaps for a different reason.
Conventional oil has been the mainstay of global production for 150 years. We have added unconventional oil and natural gas liquids, but they are relative slivers compared to volume of conventional oil: it still provides the bulk of the 1,000 barrels per second that we consume (roughly 75/89 mbpd).
When conventional oil stalls, we will surely face an unprecedented problem.

I still fail to see why espousing PO concerns would be a popular one within military circles. I've sat in on several discussions with Canadian Forces analysts and I'd say that the debate is as vigorous within those circles as it is elsewhere: ie. a considerable divergence of views, which is entirely healthy.
That said, the written literature seems to be more unequivocal, with a near unanimity in favour of PO concerns.

You already know my views on prediction, and I certainly agree that we need to keep our 'weather eye' cocked. I think the North American public is largely unaware that PO is even a possibility in their lifetimes.

[Misifus]

You know perfectly well that I am not capable of predicting when your hypothetical reservoir would peak or start to decline (partly because I do not understand many of the scientific details).

Bingo! Which is why you may need to reconsider being a Peak Oil acolyte. And by the way, the reservoir is not hypothetical, it's one of many I have worked on around the world, this one actually being in the Gulf of Mexico, which is what some of you Peak Oil'ers referred to at one time as the Dead Sea (see upthread). How ironic, eh? Nevertheless, the admission that you are not capable of generating a production profile at least provides the audience here with a data point for them to consider when listening to your lectures.


Furthermore, you also know that even if I did understand all those important elements, I still would not be able to predict with any precision because no-one can, including yourself. Actually, you would be able to do it if I trained you (or if others trained you), and you would be surprised to see just how close these predictions can be made even with limited data this early in the development of a field. In fact we in the industry have to do this in order to decide how we are going to invest in and develop an oilfield and we also have to do this to calculate the investment economics, i.e., rate-of-return, profit-to-investment ratio, etc., for a given development/investment.


Meanwhile, since this thread was started over two years ago, I have repeatedly said that I have no interest in attempting to predict the timing of peak nor in the predictions of others. Nor do I agree with those who argue that the peak will occur when roughly half of the oil has been consumed.
For starters, there is the issue of definition. What are we talking about: peak of conventional? peak of all liquids? Could we include kerogen? Do we factor in net energy?

I have actually read the whole thread and the references where your links were still active. Like most Chicken Little scams, the definitions change the more foolish Chicken Little looks. This is why Global Warming now likes to be called Climate Change. This is also why most Peak Oil'ers like to refrain now from making actual predictions as to the peak. The depletion of oil reservoirs should not be called Peak Oil simply because there is no predictable peak on a global basis, which is why I asked you to do it on a single reservoir. It can be done for reservoirs, then summed up globally, but that would leave out future discoveries, secondary, tertiary, recompletes, artificial lift, etc. One simply adds to the psychosis of an untrained audience/population by using terminology like Peak Oil. However, I do grant that the security of hydrocarbon supply in general and fuel supply in particular are of importance to the military.


If we consume more oil than we find. We cannot consume more than we find. We can only consume what we find. Have you considered that this plateau that you talk about and refer to as a glut, may just be a plateau because we are at steady-state? In other words, oil production is meeting the current industrial needs quite nicely. No one is out there crying right now that they must have more oil. What they are crying about is that they want it to be cheaper. They have been crying about wanting it cheaper since the advent of the automobile. And while I don't believe in inflation adjustment pricing, even you claimed that the stuff is pretty damn cheap today when inflation adjusted.


It would also be appreciated if you would make your points without distorting mine. I have never said that “oil has peaked,” ...I do believe that conventional oil has probably peaked.A contradiction in the same paragraph from you? Plus the references you cited say that Peak Oil applies to conventional oil. So has oil peaked or not?


I certainly agree with your most recent statement, “citing a few like minded individuals is not due diligent research….” I think I’ve covered the literature as widely as an ordinary citizen could... You cannot depend on the testimonials of others in order to be considered an "expert." You have to gain the expertise yourself and become an expert. Hence the exercise I gave you for the reservoir you believe to be fictitious.

As for the references you cited, I won't comment on them, not only because some of them are bunk (though the CERA stuff is somewhat okay) but also because I know some of the authors personally. I will however state that even within the source documents you cited, that Peak Oil is not seen as a valid theory, i.e., Hofmeister's comments (though I disagree with some of his views as well).

We can agree that oil & gas are indeed a finite resource. However, the fix on that does not reside within the Peak Oil community, nor does it reside with the alarms that Peak Oil raises which generally suggest some type of government intervention.

[Fuchs]

The somewhat funny thing for me is that I do not care the least about global warming or peak oil.
I think there are already enough motivations to switch towards sustainable energy technologies without such macro scenarios.


Crude oil is a carbon-hydrogen raw material that should best be used for material purposes (so far 10%), not energy purposes (90%...).
Crude oil and carbon-hydrogen substitutes (CTL and so-called "bio-fuels") are difficult to replace in some applications, of course (fuel for small aircraft, for example).

[Rick M]

You said,

you would be surprised to see just how close these predictions can be made even with limited data this early in the development of a field. In fact we in the industry have to do this in order to decide how we are going to invest in and develop an oilfield and we also have to do this to calculate the investment economics, i.e., rate-of-return, profit-to-investment ratio, etc., for a given development/investment.

Of course, but are you telling us that industry projections are never wrong?
BP's Thunderhorse is a classic example of industry hype and underwhelming results.
After vilifying Hubbert, American industry experts were stunned when his prediction proved correct re. US lower 48.
And I'm sure that the Brits never dreamt in the heady days of 1999 that they were in fact turning an irreversible corner.

You say that you have read this entire thread, including the active links.
Was there anything cited which you did not find credible? If so, please let us know what it was that you do not find plausible.

You say:
The depletion of oil reservoirs should not be called Peak Oil simply because there is no predictable peak on a global basis....

So are you saying that PO is an invalid concern simply because we can't predict it? (I thought the inability to predict timing of peak was my argument, not yours... how dare you steal my argument... just joking!).

You say:
We cannot consume more than we find. We can only consume what we find.

Actually, given the time-lag that Dayuhan correctly reminded us of, we can only consume what we found several years ago.

What we consume now (30+ billion barrels/yr) exceeds what we find minus the depletion rate on existing fields. That's a problem.

You said:
..even you claimed that the stuff is pretty damn cheap today when inflation adjusted.

I did?

I fully support the statement, and cited LTC Fleming's excellent example of how oil is undervalued, but I don't recall saying so.

I did, however, point out the incorrectness of your claim that oil prices increased between 1987 and 1999 (inflation adjusted & otherwise).

You said:
You cannot depend on the testimonials of others in order to be considered an "expert.

I have never claimed to be an expert in anything.

I have simply offered information which I believe is important & worthy of consideration, and which I believe is from credible sources (like the 12 PO analysts cited above, military analysts, etc).

You said:
I know some of the [12] authors personally.

Then you are even better positioned to tell this audience why their analysis is incorrect. If they are the leading PO analysts, and you regard their viewpoint as a mental illness and a threat to your industry, why would you not expose their unfounded nonsense with detailed, sourced information? (Please add that to my list of questions.)

Again, I'd appreciate it if you would please stop distorting what I have said.
I think I've taken exceptional care not to distort your assertions.

[Misifus]

RickM,

I see I am driving you over the edge.


Of course, but are you telling us that industry projections are never wrong? I never said that. But listen carefully, the industry doesn't make Peak Oil predictions. Pundits make Peak Oil predictions.


BP's Thunderhorse is a classic example of industry hype and underwhelming results. Uh...you said BP. They have been considered a bastard in the industry for years. Poor management, poor leadership, yuppies at the helm. Nobody was surprised when they had the Macondo disaster. If it had to be any company, then it would have been BP. Nevertheless, you need to be the man in the arena. Thunderhorse is not "classic" it is atypical.


After vilifying Hubbert, American industry experts were stunned when his prediction proved correct re. US lower 48. I don't think anybody was stunned. Hmmm, but it looks like he was not correct after all. Eh?


You say that you have read this entire thread, including the active links. Was there anything cited which you did not find credible? If so, please let us know what it was that you do not find plausible. I already told you, most of it was not credible except that the CERA stuff was somewhat okay and the Hofmeister comments were somewhat okay. The historical stuff of most of the comments was accurate, but that is historical data. We can all read history. However, predicting what lies ahead is a different story. Why would I believe a man (like you) who indicates what lies ahead with regards to global petroleum production when that man can't make a prediction for just a single oil field? Especially when that man then says he didn't want to make a prediction anyway. I guess you just want to talk about the concept of running out of oil. That concept has been around since Drake's well. Anybody can talk "concepts." "Doing" is something quite different.


So are you saying that PO is an invalid concern simply because we can't predict it? Yes, and this is because PO'ers started out making predictions about...the peak. Then when the predictions didn't come true, they changed the date of the prediction. This is like the wackos who predict the end of the world, then when the date comes and the world doesn't end they pick another date. Others then just say that the world will end "someday", just like others then say we will run out oil "someday." Why try to intellectualize the obvious when you really don't want to?


You say, "We cannot consume more than we find. We can only consume what we find." Actually, given the time-lag that Dayuhan correctly reminded us of, we can only consume what we found several years ago. What we consume now (30+ billion barrels/yr) exceeds what we find minus the depletion rate on existing fields. That's a problem. Now you are being obtuse. Time lag is immaterial. There's no queue based on when a discovery was made as to when that oil is used. But since you wish to be silly, "We can only consume what we find or found." Happy now? What we can't do is consume what we haven't found, which is what you said earlier in your rush. This is because it isn't there to consume, simply because it hasn't been found...yet. :rolleyes:


You said, "even you claimed that the stuff is pretty damn cheap today when inflation adjusted." I did? I fully support the statement, and cited LTC Fleming's excellent example of how oil is undervalued, but I don't recall saying so. I did, however, point out the incorrectness of your claim that oil prices increased between 1987 and 1999 (inflation adjusted & otherwise). Now you are being silly. You've implied it is cheap by agreement. And prices did increase in absolute dollars. The viewpoint depends on whether you believe inflation adjustments apply to oil. Do you believe inflation adjustments apply to oil?


I have never claimed to be an expert in anything. I have simply offered information which I believe is important & worthy of consideration, and which I believe is from credible sources (like the 12 PO analysts cited above, military analysts, etc). Okay, then you are a collator of information seeking to spread a hysteria.


Then you are even better positioned to tell this audience why their analysis is incorrect. If they are the leading PO analysts, and you regard their viewpoint as a mental illness and a threat to your industry, why would you not expose their unfounded nonsense with detailed, sourced information? Because in the world of oil their work is already discounted.


Again, I'd appreciate it if you would please stop distorting what I have said. I think I've taken exceptional care not to distort your assertions. Peak Oil itself is a distortion.

[Surferbeetle]

Actually, you would be able to do it if I trained you (or if others trained you), and you would be surprised to see just how close these predictions can be made even with limited data this early in the development of a field.

Hmmmm....who knew things were this simple? :wry:

Familiarizing oneself with the work of Newton, Darcy, Hubbert, Meinzer, Biot, Cooper, Jacob, Navier, Stokes, Gibbs, hydraulic gradients, temperature gradients, electrical gradients, chemical gradients, boundary-value problems, ordinary differential equations, partial differential equations, one dimensional modeling, two dimensional modeling, three dimensional modeling, workbreakdown structures, cost estimating (rough-order of magnitude, 80%? what?), project scheduling, performing geotechnical surveys, operating high powered workstations needed to run large finite element models overnight (or longer in energy exploration applications), assembling teams of highly educated & experienced folks so that they can generate (and compare/apply) proprietary data from many many investigations involving thousands and thousands of man hours of work, forecasting upfront costs for a decade or so of work...and I have not even touched the structural engineering concerns (costs, requirements, etc) which need to be addressed to successfully operate at those depths/pressures, temperatures, corrosive environments, etc, etc, etc...all of this is just overkill apparently for the always imprecise & inaccurate answers (relative to the absolute truth) which we engineers generate in this imperfect world!

From my money Musifis, neither you, nor Rick M, nor anyone else will ever have the final, definitive answer. Engineering, economics, demographics, biology, psychology, sociology, innovation, chaos, screwups, inshallah, and many, many other variables are always involved in the the equation...try 42 (http://en.wikipedia.org/wiki/42_(number)), it's as good as anything.

And don't get me started on the whole calculate six significant figures (using flawed geotechnical, survey, etc, data), mark it with crayon in the dark, and cut it with a chainsaw while blindfolded execution process either...ok, ok, I will suspend my disbelief....post the new business model tutorial you-tube link which explains it all to the hoi polloi.... :rolleyes:

[Misifus]

There are other ways to index the cost of oil. Rather than just doing compounding exercises (inflation adjustments). Relate the cost to common items that use petroleum products. Take cars for instance (gasoline) and homes (energy to heat and cool). Seems like oil/gasoline is actually quite affordable with respect to the principal products that use petroleum. You will find the same for items such as plastics, which also use oil, clothing, and a whole host of household products that you buy everyday.

The bottom line is that we are not really running out of oil in the doomsday fashion that Peak Oil'ers would like us to believe. While there are emotions at work when there are price spikes at the gas pump, the oil & gas industry continues to find and produce the oil & gas that you need and does so at an affordable price to the consumer. The average car has quadrupled in price over the last 30 years. While gasoline has only a little more than doubled, and a barrel of oil has less than doubled over that same time period. Don't forget that there has been an additional tax burden put on gasoline over the last 30 years in several installments. You pay this at the pump, and that is included in the price table below, none of which is passed to the oil company.

The average price of a home has about quadrupled. Again, oil has not.

In the US

Average price for a car in 1980 $7,210.
Average price for a car in 2010 $29,217.

Average price of a gallon of gas in 1980, $1.25.
Average price of a gallon of gas in 2010, $2.80.

Average price of a barrel of oil in 1980, $37.42.
Average price of a barrel of oil in 2010, $71.21.

Average price for a home in 1980 $76,400.
Average price for a home in 2010 $272,900.

[Misifus]

Hmmmm....who knew things were this simple? :wry:

Who said it was simple? Which is precisely why Peak Oil'ers need to be called on the carpet.

And as for your tone Surferbeetle, don't get me started blah, blah, blah, blah :wry:

Unlike some others, I don't post all over the place here at SWJ, nor do I grab something off of the web or wiki to make myself look informed. I only post on those subjects where I actually have expertise/experience which is exactly what I said when I signed up here last year.

[Bill Moore]

Average price of a barrel of oil in 1980, $37.42.
Average price of a barrel of oil in 2010, $71.21.

I recall gas being under 20 cents per gallon when I was a kid and it is over $4.00 a gallon now where I live. I also remember we thought the world as we knew it was over when gasoline first went over a dollar a gallon (we thought that was simply impossible at one time). Informed analysts from an investors stand point stated oil needed to remain over $70.00 per barrel to enable oil companies to profitably produce oil, especially since the cheap oil is getting harder to find, and now they have to drill deeper and used advanced extraction methods. Tends to make sense, and I haven't seen it drop below $70.00 in recent months/years for an extended period, so that does appear to be the current base or true value (without speculators).

As for peak oil, there are plenty of experts (and no I can't compare the creds of each expert, but it is fun to watch them debate on the business shows)who claim we're rapidly approaching it, but regardless the demand for oil is increasing rapidly based on the rise of the rest (India, China, and numerous others) and even minor interruptions in global supply have caused major panics among the economists, which tends to indicate that current production is barely meeting demand. When Bush senior was President I had to sit in a briefing presented by a couple of experts "in" the oil industry for about four hours. Have to admit I was impressed by their strategic view of the world and their grandiose plans for ensuring there would be sufficient oil for the next couple of decades, but after researching some of their proposals I noted very little of the production they planned for actually happened? I suspect more could be produced, but if major producers like Saudi are thinking strategically long term, I doubt they would want to produce more which in turn would drive down the price and two drain their fields quicker (whether in a few years, or a few decades). Why we're not producing more is a bit of mystery to me and can lead to a good conspiracies on price fixing.

As for oil being cheap (adjusted for inflation), well that may be the mantra in the oil industry, but the effect of recent prices on the lives of real people is quite significant and one of the key reasons for food inflation among other challenges for families and businesses. Where I live the power plants are fueled by oil, so you can imagine what the cost of electricity is. Oil is the life blood of any modern society (which everyone in this discussion understands well), and when the price of oil goes up so does the price of everything else, and with the additive pain of average wages decreasing the impact is further magnified.

[Misifus]

All good points Bill Moore.

Here's what I add:


...[1] but regardless the demand for oil is increasing rapidly based on the rise of the rest (India, China, and numerous others) and [2]even minor interruptions in global supply have caused major panics among the economists...

1. True that the industrialization of emerging economies has increased the demand for oil. However, I believe the effect on price is not as catastrophic as our emotions would lead us to believe. Hence my comparisons of the priced products I posted upthread.

2. This is true. Much of this is panic trading. While I don't favor heavy regulation/intervention by government, one regulation to consider is not to allow "traders" to trade oil unless they can actually take delivery of the oil. This would keep the Goldman Sachs types from driving up the price via speculation when some temporary world event creates a panic. Another factor overlooked is the increase of the price due to the devaluation of the dollar.


I was impressed by their strategic view of the world and their grandiose plans for ensuring there would be sufficient oil for the next couple of decades, but after researching some of their proposals I noted very little of the production they planned for actually happened?

Most oil people at senior technical or managerial levels are well-traveled and many become fairly sophisticated regarding the global interactions of the world. Nevertheless, plans and strategies are not always implemented as envisioned, and even if they are outcomes may not always be as expected. Really not too different from man's others endeavors/follies - like our recent wars abroad, social engineering programs like Welfare, the design of the Edsel, etc. Once upon a time when I was uniform a really attractive lady in Washington, D.C. told me how surprised she was that military officers were so well-informed about the world, well-traveled, and could even speak multiple languages. I felt a little bit insulted but I was nice to her since I was trying to get a date with her...which I did ;)


[3]I suspect more could be produced, but if major producers like Saudi are thinking strategically long term, I doubt they would want to produce more which in turn would drive down the price and two drain their fields quicker (whether in a few years, or a few decades). [4]Why we're not producing more is a bit of mystery to me and can lead to a good conspiracies on price fixing.

[3] KSA could easily produce more. Part of the reason they don't is that they tend to produce their key reservoirs more responsibly than private oil companies do. [4] I have never been privy to any conspiracy on price fixing other than what OPEC does out in the open regarding curtailments. Apparently the US doesn't really care about price-fixing anyways. Iraq and Kuwait continue to be OPEC members, which is something we could have easily prevented in the wake of Gulf wars 1 & 2. While I don't believe there is any price conspiracy on the part of non-OPEC oil companies, they are all pretty happy to take any windfall that comes from OPEC curtailments. Nevertheless, the oil does remain cheap in spite of OPEC efforts when compared to the price increases of other products as I have shown upthread.


Where I live the power plants are fueled by oil, so you can imagine what the cost of electricity is. I am pro-nuclear power. We need the oil for other stuff. Subject for a different thread.


...and when the price of oil goes up so does the price of everything else, and with the additive pain of average wages decreasing the impact is further magnified. True, but the multiplier is less when compared to other products as shown upthread. It's not really the oil company's fault if wages are falling in the other industrial sectors. That has more to do with what our culture here in the US has done to our own industries and what we have done to our financial system, IMO.

[Surferbeetle]

Misifus,

Stimulating conversation on the cocktail circuit can, in the right instances, secure resources to accomplish projects, but it is not wise to conflate such conversational ability with the technical ability needed to make a definitive call on peak oil.

What would be interesting (on this thread) would be polite, ego-free when possible, informed discussion in English, German, or Spanish ;) regarding energy and commodities and how they relate to war. Daniel Yergin writes interesting books and 10K's and 10Q's can be very interesting reads. Links provide an opportunity for others to follow a thought process and to delve more deeply into a topic than the SWJ format allows.

Incorrect assumptions regarding ones presumed 'abilities', 'superiority', and 'entitlement' are in large part what's wrong with America today. #SWJ is a rank free, free market of ideas that, in some ways, mirrors the forces of globalization...status quo is dead, problem solving is valued and rewarded.

#

[Misifus]

Misifus,

Stimulating conversation on the cocktail circuit can, in the right instances, secure resources to accomplish projects, but it is not wise to conflate such conversational ability with the technical ability needed to make a definitive call on peak oil. Actually the cocktail circuit secures few resources in any instances. And if you are conflating such with technical abilities, then you are sadly mistaken. Try again, and try to be less mysterious about your qualifications regarding the oil industry. You are not impressing anybody, at least not me.


What would be interesting (on this thread) would be polite, ego-free when possible... Yes, it would be and judging from your tone on an array of the many subjects you post on SWJ, it would be interesting indeed. You appear to style yourself as a global expert on many subjects. I limit myself to two, oil & gas being one of them.

[Fuchs]

Misifus, you play the insider expert card a bit too much.

Experts of all kinds disagree with experts of their very same kind quite often. Being an expert does not equal being correct, nor does being an outsider equal being unqualified.

As case in point, my hero Jan Gotlib Bloch (http://en.wikipedia.org/wiki/Jean_de_Bloch), who got right what the experts of the trade did not get right.

Also keep in mind that many dissenting insiders shut up in order to keep their fine job. We're talking about a big business sector, after all - not a sector of freelancers.

[Misifus]

Misifus, you play the insider expert card a bit too much. This thread needed an insider. Just read the thread before I entered. It was pretty much a "group think" thread with no form of self-calibration. This party needed to be crashed in order to get some thought injected into it.


Also keep in mind that many dissenting insiders shut up in order to keep their fine job... Agreed! Perhaps Superbeetle is really an insider, or at least hints at it. Olly-olly-oxen-free! Or is it more correct to say "Alles, alles auch sind frei!" :D

[Misifus]

Okay, since y'all like to link around. Consider the following:

From http://www.guardian.co.uk/commentisfree/2011/oct/18/energy-price-volatility-policy-fossil-fuels


The peak oil brigade is leading us into bad policymaking on energy

From http://online.wsj.com/article/SB10001424053111904060604576572552998674340.html


The date of the predicted peak has moved over the years. It was once supposed to arrive by Thanksgiving 2005. Then the "unbridgeable supply demand gap" was expected "after 2007." Then it was to arrive in 2011. Now "there is a significant risk of a peak before 2020." Lol! Just like I said upthread about the end-of-the-world forecasters. "No problemo! If the aliens don't come pick us up this year, then they will come pick us up next year."


This is actually the fifth time in modern history that we've seen widespread fear that the world was running out of oil. The first was in the 1880s, when production was concentrated in Pennsylvania and it was said that no oil would be found west of the Mississippi. Lol! And they are still finding oil & gas in Pennsylvania even. Yup.


By 2010, U.S. oil production was 3½ times higher than Hubbert had estimated: 5.5 million barrels per day versus Hubbert's 1971 estimate of no more than 1.5 million barrels per day. Hardly a "minor deviation." When one is ordained a "prophet," then one needs to prophesize correctly. Ya think?

From http://reason.com/archives/2006/05/05/peak-oil-panic/singlepage


In 1969 Hubbert predicted that world oil production would peak around 2000 [it didn't]. Lol! Again! When one is ordained a "prophet," then one needs to prophesize correctly. Ya think?


"Colin Campbell has the worst forecasting record on oil supply,” says Lynch, “and that’s saying a lot.” He points out that in a 1989 article for the journal Noroil, Campbell claimed the peak of world oil production had already passed and incorrectly predicted that oil would soon cost $30 to $50 a barrel. As for Matthew Simmons, Lynch dismisses him with a sneer: “Petroleum engineers know a lot more about petroleum engineering than a Harvard MBA." I certainly agree with that!


One petroleum engineer— Michael Economides of the University of Houston—calls peak oil predictions “the figments of the imaginations of born-again pessimist geologists.” Like Lynch, Economides, who worked in Russia to boost that country’s oil production in the last decade, rejects Simmons’ analysis. Saudi Arabia, which currently produces about 10 million barrels of oil a day, “is underproducing every one of their wells,” he claims. “I can produce 20 million barrels of oil in Saudi Arabia.” And that is still the case in KSA. Around here Economides is affectionately known as My Big Fat Greek Professor.

From http://tucsoncitizen.com/wryheat/2010/11/09/peak-oil-prognosticators-at-it-again-and-are-wrong-again/


The Energy Information Administration shows that world petroleum reserves in 1980 were put at 642 billion barrels. In 2010, EIA puts world reserves at 1,354 billion barrels. How can reserves more than double in the last 30 years in spite of the increasing consumption?Well? Lucyyyyy! Youz gotz some 'splainin to do.

From http://articles.businessinsider.com/2010-01-05/green_sheet/30068666_1_peak-oil-hubbert-s-peak-crude


Peak Oil Believers Wonder Why Every Government Ignores Them, Conclude It's Due To A Giant Cover Up LMAO! No surprise to me why they are ignored. Should have ignored this thread myself!

From http://peakoil.com/enviroment/7-billion-reasons-malthus-was-wrong/

7 Billion Reasons Malthus Was WrongMost doomsayers are wrong. Like I mentioned upthread, it's a psychosis from not being a true participant in making the world go round. C'mon now, get out of your mom's basement.

From http://www.postpeakliving.com/preparing-post-peak-life


Preparing for a Post Peak LifeOMG! This guy is a wacko and hilarious! You can even purchase his survival course. Very entertaining!

[Dayuhan]

I go away for a few days and find a lot of posts on return... hard to remember where I last was in the discussion, but a few points and opinions...

First, peak oil hysteria does exist. Here are a couple of classic examples:

http://i22.photobucket.com/albums/b329/dayuhan/peak_oil.jpg

http://i22.photobucket.com/albums/b329/dayuhan/poster2.gif

You can go to any image search engine, type in "peak oil", and get dozens more. Many are deeply detailed, admirably referenced... and complete nonsense. Some go for the elegant bell curve, others for the abrupt dive; in some cases you get the feeling that they drew the chart first and then made the projections to fit.

I don't buy the idea of an imminent geological peak, a peak driven by an absence of oil to pump. I don't buy it for a whole lot of reasons, some of which I've explained in the past.

I do see potential for limited production due to political, security, and investment-related constraints. Any number of scenarios can be envisioned, all of which could result in major price spikes and significant economic dislocation. Again, the problem would not be an absence of oil, but that oil would become very expensive for some time. I don't see the idea of a "peak" being a useful way to describe this: it's more a situation where ability to increase production might be constrained, or where output might see a transient decrease, in response to factors not at all related to the geology or engineering of oilfields... factors like war, revolution, state collapse, etc, ad infinitum.

The idea that the US military or a key ally might be unable to fight a war because there isn't any fuel seems to me much overblown. Again, there would be fuel, it would just be very expensive. War is already very very expensive, it would just become a bit more so. It would also become more expensive for whoever was on the other side, though not all potential antagonists are as energy-intensive as we are.

We might speculate that added cost might make us a bit more cautious about embarking on wars, but that's probably overly optimistic. An unfavorable cost/benefit picture hasn't stopped us in the past.

I think what's generally neglected, particularly from the small war perspective, is the potential impact of major oil price spikes on oil-importing developing countries, especially those that have developed enough to be oil-dependent but remain in very tenuous economic condition. In many of these countries there's real potential for governments to fall and for potentially extended instability and conflict. Whether or not any such situation would require US intervention is of course another question, but it's an outcome worth considering.

In short, I don't by the "peak oil" argument, but I do see reason to be concerned over, and prepared for, the impact of possible supply interruptions or inability to increase supply, and associated price responses.


OMG! This guy is a wacko and hilarious! You can even purchase his survival course. Very entertaining!

The marketing of imminent doom has been very profitable for many people, throughout history... not quite as profitable as the marketing of salvation (though they often go together), but close. Being wrong is not an obstacle.

[Surferbeetle]

Agreed! Perhaps Superbeetle is really an insider, or at least hints at it. Olly-olly-oxen-free! Or is it more correct to say "Alles, alles auch sind frei!" :D

I have run back through some of your posts, which I probably should have done before posting in this thread. Didn't/don't particularly care for your tone with Rick M. in your most recent couple of posts, thus my tone with you in my recent posts.

The anagram makes the antenna twitch as well.

No, I am not an industry insider, just a civil engineer (most days, soldier some days) who is allergic to smoke, mirrors, and feathers. As for being an expert on things, I don't have a phd or four or five decades in the same field of work so I don't claim that particular moniker either.

Your phrase in German is literally translated as "everything, everything also are free" Fuchs will most likely be by to give me a hard time about my translation, as he usually does, but if I didn't have the preceding english to go by I wouldn't have got what you are trying to say. For context I regularly enjoy the Neue Zurcher Zeitung, Frankfurter Allgemein Zeitung, Deutsche Welle Podcasts, El Pais, and occasionally Le Monde (it's my feo Spanish which gets me through so comprehension is low), and have spent over a decade living in Europe plus a couple of years in Iraq and some visits to Central America.

Again, from where I stand, the jury is still out on peak oil...too much uncertainty with man-made measurements/estimates given the surface area of the globe (estimated at 510072000 km2 (http://en.wikipedia.org/wiki/Earth)) and the associated volume number which increases as drilling goes ever deeper. I also question issues with time scales (geologic or centuries, or decades?) when measuring peaks (and I am visualizing hydrographs (http://en.wikipedia.org/wiki/Hydrograph) and thinking about peak flows) and considering the relationships with demographics and constraints such as economics or war. I contrast the concept of no peak oil with the claimed 'only 161,000 tons of gold mined have been mined in human history' (http://ngm.nationalgeographic.com/2009/01/gold/larmer-text/3) estimate.

Appreciate the recent links. I write and post here with links in hopes that the bs card is thrown when I am out to lunch on whatever topic I happen to be thinking and writing about. I, of course, will do the same :wry:

__________________________________________________ ________________

I appreciate the nudge.... :wry:

[Misifus]

I have run back through some of your posts, which I probably should have done before posting in this thread. Didn't/don't particularly care for your tone with Rick M. in your most recent couple of posts, thus my tone with you in my recent posts. RickM can fight his own battles. I don't recall him asking for help. This isn't a team sport ;)


No, I am not an industry insider Then you should quit hinting/masquerading as such with your "...who knew things were this simple..." post upthread. Posts like that imply that you are an insider, especially when you mention things like Darcy, 3D simulation, etc.


Your phrase in German is literally translated as "everything, everything also are free" You must not be familiar with the game of "Hide and Seek." It is believed that "olly-olly-oxen-free" derives from the German that I posted. See http:// en.wikipedia.org/wiki/Olly_olly_oxen_free (http://en.wikipedia.org/wiki/Olly_olly_oxen_free). In other words, come out and say whether you are an industry insider or not. You have finally done this.


For context...[your bio]Not really interested in that, unless applicable to this topic. I'm sure my wanderings/experience outside of this topic might be interesting to some, others may find it to be bragging. But I can assure you that if I make a definitive statement on a topic in this forum it is indeed because I have experience and/or expertise on it. I don't feign what I don't have. Nor do I go to the internet to grab something that makes it look like I know something that I really don't. Using the internet to back up one's expertise is different than using the internet to create a mask of expertise. This is what many Peak Oil'ers today have done.


Again, from where I stand, the jury is still out on peak oil...too much uncertainty... The jury will always be out on this subject. This is why the topic is so attractive to anti-development types and Chicken Little doomsayers. They love to grab topics where there is no certainty of outcome so that they can propagate a crisis mentality and then help manage the crisis.


Appreciate the recent links. I write and post here with links in hopes that the bs card is thrown when I am out to lunch on whatever topic I happen to be thinking and writing about. I, of course, will do the same :wry:

Links can be helpful to research certain topics. Of course you are correct in that regard. There are certain subject matters that all reasonable men can discuss/debate on without specialized knowledge/training. There are other subjects that require specialized knowledge. Yourself being an engineer, already realize that it would be pointless for a civil engineer to debate bridge design with someone who only had an academic background in Political Science. OTOH, with today's "Wiki scholarship" we have created a race of pseudo-experts that only have superficial knowledge on a variety of subjects, for which they proclaim themselves to be experts. This becomes dangerous with regards to our economic, political, and military policies.

[Surferbeetle]

Hmmm....:wry:


Then you should quit hinting/masquerading as such with your "...who knew things were this simple..." post upthread. Posts like that imply that you are an insider, especially when you mention things like Darcy, 3D simulation, etc.

Yes, with qualifications. ;)


Links can be helpful to research certain topics. Of course you are correct in that regard. There are certain subject matters that all reasonable men can discuss/debate on without specialized knowledge/training. There are other subjects that require specialized knowledge. Yourself being an engineer, already realize that it would be pointless for a civil engineer to debate bridge design with someone who only had an academic background in Political Science. OTOH, with today's "Wiki scholarship" we have created a race of pseudo-experts that only have superficial knowledge on a variety of subjects, for which they proclaim themselves to be experts. This becomes dangerous with regards to our economic, political, and military policies.

Ok, let's try a different tack regarding Darcy (and I failed to mention Manning among the other giants during my initial post) modeling (1D, 2D, and 3D) and some of my previous comments.

My, enjoyable but limited, classes/education in political science stressed the values of comparative analysis. Darcy was a very smart guy and his work is used in a variety of technical fields to include chemical engineering, civil engineering, mechanical engineering, petroleum engineering, geology, etc.

A degree in engineering from an ABET program (http://en.wikipedia.org/wiki/ABET,_Inc.) introduces one to modeling forces in three dimensions in the first year via statics and dynamics. Second year of the civil program includes fluid mechanics (Darcy, Manning, et al) and soil mechanics (Darcy and others) surveying (coordinate systems, projection systems, etc). If one is able to specialize in H & H (hydraulics and hydrology) at the undergraduate level, coursework will include advanced fluid mechanics, wells & pumps, aquifiers, etc. 1D, 2D, and 3D modeling education is accomplished in all engineering classes. Later on at the work site training (not education) helps to solidify buttonology and concept skills used for some of the latest and greatest modeling software. Long story short...not just oil & gas folks use engineering modeling.

Continuing on with the technical approach....lacking stated bonafides (more than what has presented so far), links, etc are used to gauge the quality/applicability of statements of expertise. After all, any of us could just be some kid in his mom's basement :D

[Misifus]

Very good. Okay Darcy. His main contribution is known as Darcy's Law. Which is used to predict the flow rate of a reservoir at any instant in time. In the more simpler method, we can just consider it the ability of a fluid to flow through a rock. In the more complicated form it's simply the conduction equation for heat or electricity whereby we are looking at the conduction of those flows. The exception here is that that flow will change depending on the pressure decline of the reservoir (which is dependent on the size of the reservoir). So consider it a heat problem whereby the heat source diminishes at the boundary for each time step where heat is passed at the sink. Hence from your own background you can probably surmise that to predict a reservoir's flow, as a minimum, one must know the size of the reservoir, the permeability (conductivity), etc. Hubbert was not privy to that data on a local or even a global basis when he made his Peak Oil predictions, which is why he was wrong. He was full of scheisse. Geologists and Geophysicists come up with reservoir "structure," they do not determine reservoir "size." However, Hubbert wasn't even respecting his own academic discipline.

As a simple example, two reservoirs that both flow 200,000 bopd when they are both discovered but that have different sizes will have different flow rates after discovery at later points in time. A year later the smaller one may only be flowing 150,000 bopd while the larger one may be flowing 190,000 bopd. Hence Hubbert did not respect the physics of the problem when he did his work being that he ignored size. He simply did empirical trending analysis and kept on guessing until one of his predictions "looked" correct.

There are another set of equations known as the Arps equations. These are simple decline equations of a hyperbolic nature (with a subset of exponential and harmonic cases), in other words curve fitting. These equations are often used for simple empirical evaluations on reservoir decline and sometimes the amount of ultimate recovery, but reservoir size is NOT calculated from these decline curves. These equations are dangerous to use in anything beyond the field or well level. This kind of trending is why Hubbert was wrong. Hence his estimating of a peak was was simply luck. He actually guessed several dates and finally one of them came true for the Lower 48 in the US. Enough rolls of the dice and we will eventually roll sevens. As cited upthread, global reserves have gone up not down, we are not running out of oil, but are increasing the amount that is available. It would have been a monumental task for Hubbert to go through a study of each of the world's reservoirs to do this, nor would he have been given access to the proprietary data to do so. Nor could he know the size of future reservoirs. The engineering aspect, as you probably already guessed, becomes even more complicated because oil shrinks as it is brought to the surface and because the gas that comes with it expands. As an engineer yourself, you are probably then aware that in order to know reservoir size, then one also has to conduct material balance studies and know the PVT (pressure volume temperature) properties of the oil. All oils are different in this regard.

As for the real reason of the "peak" in the Lower 48, it was simply economics it's not because "the easy oil had been found" like the Peak Oil wackos like to say, it's because there was even easier and more abundant oil to be found overseas. That is, for the given investment dollars, the rate of return was higher overseas and offshore US. A bigger prize and bigger bang for the buck. Hubbert's peak was nothing more than an illusion of economics. The industry is now coming back to the Lower 48 because the economics now look attractive again even though there is anti-oil sentiment here in the US. Trends like the Bakken shale are proving Hubbert and his followers to be the fools that they were and are.

Normal engineering programs do not cover what petroleum engineering programs cover. And "buttonology" doesn't quite get you there either. However, oil companies routinely hire civil, mechanical, and chemical engineers and then turn them into petroleum engineers via in-house or industry training. In fact many advise not to get an undergrad in petroleum engineering, but to get that undergrad in one of the more basic engineering disciplines, like mechanical (or civil) and then pick up a master's in petroleum engineering.

Okay, I think I am done with this topic. Hopefully those who have blindly bought into it or were buying into it have picked up a thought or two. I am glad that some military officers are concerned about energy security issues, because you know they really screwed up with Gulf War 1 in spite of having been given the proper advice. But when one doesn't know enough to know what one doesn't know, then dangerous recommendations can be made to policy makers.

[Dayuhan]

As for the real reason of the "peak" in the Lower 48, it was simply economics it's not because "the easy oil had been found" like the Peak Oil wackos like to say, it's because there was even easier and more abundant oil to be found overseas. That is, for the given investment dollars, the rate of return was higher overseas and offshore US.

Was that also, to some extent, because the US prefers to export its environmental impact, even if that means importing its energy?

I've sometimes noted, in the fracking debates (another place where hysteria sometimes reaches a deafening pitch), that while, say, the overall environmental impact of producing oil in Nigeria vastly exceeds the overall impact of producing fracked gas in Pennsylvania, many Americans would rather burn the Nigerian oil, because that environmental impact is far away, out of sight, and in someone else's back yard.

[Rick M]

Hi, Misifus

Thanks for your links: I have examined & enjoyed all of them and would like to offer a few observations on WSJ-Yergin, Sept. 2011:
http://online.wsj.com/article/SB10001424053111904060604576572552998674340.html

Although I do not share Yergin’s confidence in future oil supply, I have great respect for his intellect.
I read “The Prize” very carefully many years ago: it is a magnificent example of scholarship and writing style.

In the WSJ article, Yergin regards PO as “a point of maximum oil output.”
I agree with his definition: we don’t need to complicate the matter with “absolute geologic peak” or anything else.
Unless we have “peak demand” first, the maxing-out of global oil production (or, more imminently, the maxing-out of available oil exports) will be “an unprecedented problem.”

Hubbert predicted “that children born in 1965 would see all of the world’s oil used up in their lifetime.”
If living to 80 is not an unreasonable assumption, MKH was not that far off the mark, based on the oil world as he knew it in 1978 and the oil supply situation as we know it now. If I'm not mistaken, both the IEA and BP predict that proven reserves will not last another half-century.

Again, we have the sticky problem of definition, but if we take the definition of oil as Hubbert would have known it in his day (ie. liquid, pumpable crude), excluding NGL, GTL, bitumen & biofuels, then Hubbert’s 1978 prediction is certainly consistent with the more recent projections of both the IEA and BP Statistical Review.
By 2045, most experts concur that there will indeed be little conventional oil left, and the world will forever be dependent on lower-grade, less accessible sources of liquid fuels which will have a much lower net energy return.

You said, “By 2010, U.S. oil production was 3½ times higher than Hubbert had estimated: 5.5 million barrels per day versus Hubbert's 1971 estimate of no more than 1.5 million barrels per day. Hardly a "minor deviation."
Could you please provide a source for this? Yergin didn’t, and I can’t find one. I am aware of earlier projections by MKH re. US lower 48 oil production, but not one in 1971.
Yergin seems to be the only source for this: I don’t doubt his word, and I’m sure he has a citation for it, but I don’t yet have a copy of “The Quest.”

I agree with Yergin’s point about “proved reserves” being an economic & a technical concept as well as a physical/geological concept.

Yergin states, “… the discovery rate for new oil fields is declining. But… most of the world’s supply is the result not of discoveries but of additions and extensions in existing fields.”

I agree with both his points, but I disagree with his implied conclusion: Yergin seems to imply that because of additions, extensions, EOR, etc, our future supply is assured.
This recent study by James Hamilton points out (p. 9) that until recently, the great bulk of new oil has not come from EOR and extending active reserves, but rather from new exploration frontiers (virgin territory), which we’ve pretty much run out of:
http://dss.ucsd.edu/~jhamilto/handbook_climate.pdf

So Yergin may be correct, but for a rather unhappy reason: most of our future supply will come from more intensive work in existing fields, primarily because we've exhausted all reasonable new exploration prospects.
We should hardly view that as reassuring.

[Dayuhan]

In the WSJ article, Yergin regards PO as “a point of maximum oil output.”
I agree with his definition: we don’t need to complicate the matter with “absolute geologic peak” or anything else.
Unless we have “peak demand” first, the maxing-out of global oil production (or, more imminently, the maxing-out of available oil exports) will be “an unprecedented problem.”


How do we know if any given peak is "maxing out"? If global production this year is lower than it was last year, that doesn't mean it can't be higher next year.

One of the great problems with much peak oil discourse is the common assumption that once a "peak" is reached only decline can follow. I've seen a number of PO analyses, for example, stating that Venezuela has "peaked". Certainly Venezuelan production has declined, but the constraints are in no way absolute and it's perfectly possible that Venezuelan production could at some point in the future exceed previous "peaks". "A peak" is not necessarily "the peak".

[Misifus]

Was that also, to some extent, because the US prefers to export its environmental impact, even if that means importing its energy? Not really. It's really just like I said above. Later, however, the US became a pain in the butt to operate in. It's still a pain in the butt today with places like California. However, what we are doing regulatory-wise in this country is chasing away manufacturing. That's a topic for another thread.


I've sometimes noted, in the fracking debates (another place where hysteria sometimes reaches a deafening pitch), that while, say, the overall environmental impact of producing oil in Nigeria vastly exceeds the overall impact of producing fracked gas in Pennsylvania, many Americans would rather burn the Nigerian oil, because that environmental impact is far away, out of sight, and in someone else's back yard.

The fracking debate is indeed another hysteria. We have been fracking for decades. So some wacko a couple of years ago figures out he can say this causes earthquakes and stuff, and now we have the latest hysteria. Many of the reservoirs are already fractured to begin with. Take for example the Austin Chalk here in Texas. The Cantarell field offshore Mexico is also naturally fractured. Almost everything in Iran is naturally fractured. These reservoirs have huge fracture networks that go on for miles. The most one is going to get with a hydraulic fracture is about 1,000 ft. fracture. But in every well where a service company claims they have a created a 1,000 ft fracture, when I have gone back and done a pressure transient test on the well, I find that the fracture is only a couple of hundred feet at most. The fractures do help the wells flow better. It effectively increases the permeability of the rock in the near wellbore area.

[Misifus]

...I've seen a number of PO analyses, for example, stating that Venezuela has "peaked". Certainly Venezuelan production has declined, but the constraints are in no way absolute and it's perfectly possible that Venezuelan production could at some point in the future exceed previous "peaks". "A peak" is not necessarily "the peak".

All true. I was on the last plane out of Caracas before they closed the airport during the coup attempt on Chavez back in 2002. The field I had been looking at had great potential. It and several other fields had a complete halt in their development after the coup attempt. One must remember that the events of April 11, 2002 stared at the PDVSA headquarters and ended at the Miraflores presidential palace. Chavez purged PDVSA of its best technical people after the coup attempt. These former PDVSA employees I now run into all over the world. Venezuela production fell drastically after that. It was economic suicide for Venezuela.

[Misifus]

You said, “By 2010, U.S. oil production was 3½ times higher than Hubbert had estimated: 5.5 million barrels per day versus Hubbert's 1971 estimate of no more than 1.5 million barrels per day. Hardly a "minor deviation." Could you please provide a source for this? Yergin didn’t, and I can’t find one.

I'm not going to do all of your research for you. You now seem to be defending Hubbert due to his time frame and the circumstances of his time. Like it's an excuse for being wrong. When one is in the business of predicting the future, then one should take his own time frame into account when making predictions. Now you question Yergin though you have cited him in the past. You also seem to be ignoring the fact that Hubbert was wrong about reserves. We have more oil now than ever.

But just to be nice to you, the Journal of Petroleum Technology, published by the Society of Petroleum Engineers, September 2011 issue, page 6, shows the world production by country with every monthly issue with a lag of a few months. Here's a sampling: For April 2011, USA is 5.594 million barrels per day (mmBOPD), Canada 2.854 mmBOPD, Saudi Arabia 8.940 mmBOPD, Mexico 2.573 mmBOPD, China 4.127 mmBOPD, and the Big Kahuna is Russia at 9.795 mmBOPD. And by the way, Russia is under-explored and under-optimized. There's so much oil in Russia it's unbelievable. They can't even use it, because they are knuckleheads. I mentioned upthread that I only work in the countries I choose to. I choose not to work in Russia because they are (1) the stupidest in the industry, and (2) one never knows when one is dealing with a criminal. It's actually safer in Mexico even with all the cartel nonsense there.

P.S. In fact I have a new theory. The stupider God made you, the more oil he put under the ground you breed on. This is why I like the Swiss.

[Surferbeetle]

Misifus,

Greatly appreciate the excellent posts.

Thermo was a tough, but fun class; and you are right, 'buttonolgy' does not do justice to the really interesting things (often black-box unfortunately) that are happening...mostly HEC-RAS, sometimes FLO2D, with the occasional CAD and ArcView when I get to play. MBA too, so, more time with SOW's, cost estimates, mods, meetings, budgets, and keeping track of the troops and projects.

So it goes :wry:

[Dayuhan]

Chavez purged PDVSA of its best technical people after the coup attempt. These former PDVSA employees I now run into all over the world. Venezuela production fell drastically after that. It was economic suicide for Venezuela.

I recall poor Hugo at one point claiming that if necessary the army would run the oil industry. I also recall wondering if he would order the oil industry people to fight a war... though given what I hear of the Venezuelan Army, there might not have been much difference.

[Rick M]

How do we know if any given peak is "maxing out"? If global production this year is lower than it was last year, that doesn't mean it can't be higher next year.

One of the great problems with much peak oil discourse is the common assumption that once a "peak" is reached only decline can follow. I've seen a number of PO analyses, for example, stating that Venezuela has "peaked". Certainly Venezuelan production has declined, but the constraints are in no way absolute and it's perfectly possible that Venezuelan production could at some point in the future exceed previous "peaks". "A peak" is not necessarily "the peak".

I agree, and have indicated up-thread that there is the possibility that the USA may exceed the 1970 peak, which is generally accepted as "the peak."

A few years ago this list of 54 oil-producing countries was posted at The Oil Drum:
http://www.theoildrum.com/node/5576

In determining whether a country should be considered post-peak or not, the following criteria were used:
"To be considered past-peak, a producer's current (2008) production has to be at least 10% less than its best year, and the best year must have occurred prior to 2005."

I find those criteria to be insufficient.
That said, just as we should not jump to premature conclusions, we also should not ignore the data and trends.
If a country like Romania peaked decades ago and is down by 68%, I think we can conclude that the world has almost certainly lost an important oil producer.
We can debate the time-lines and the circumstances & "ifs" in each country, but the overall trend seems pretty clear: we have a growing list of countries whose oil production is well below a prior production peak, and has been so for many years.
Whether that prior peak is "the peak" remains to be seen.

[Misifus]

If a country like Romania peaked decades ago and is down by 68%, I think we can conclude that the world has almost certainly lost an important oil producer. We can debate the time-lines and the circumstances & "ifs" in each country, but the overall trend seems pretty clear: we have a growing list of countries whose oil production is well below a prior production peak, and has been so for many years. Whether that prior peak is "the peak" remains to be seen.


RickM,

OMG! You make laugh :D You just won't give up! You persist in propagating the myth of Peak Oil. I have already showed you and the others here how Hubbert was full of mierda. Now that you are on the ropes you want to highlight the Romanian problem in your desperation to look legitimate.

The Romanian oil industry is in shambles, not because they have "peaked," but simply because they have mismanaged. They are as dumb as the Russians, actually dumber. Consider that Russian oil is easier for them to purchase then for them to get off of their lazy mismanaged butts and produce their own fields. Think Greece with an oil company.

Here's my suggestion to you. Get your butt on an airplane and go visit a Romanian oilfield. You will find half of the oil that the fields produce just laying on the ground there in puddles. Don't forget to take your knee-high galoshes. Sheeesh! :rolleyes:

Now would you please quit posting on this subject so that I can go away? :p

[Rick M]

RickM,

The Romanian oil industry is in shambles, not because they have "peaked," but simply because they have mismanaged. They are as dumb as the Russians, actually dumber. Consider that Russian oil is easier for them to purchase then for them to get off of their lazy mismanaged butts and produce their own fields.

No-one can prove that Romania's 1977 peak will never be surpassed: miracles do happen. But do you believe that a turn-around of that scale is likely?

In James Hamilton's recent article, he provides a data appendix with some interesting historical data on American oil production.
He paired Indiana and Illinois and tracked their combined oil production, which reached a peak of almost 37,000,000 barrels in 1908 (ie. annual production). By 1936 this had fallen to around 5,000,000 barrels.
Given the length of time and the scale of the reduction, it would not have been unreasonable for people in 1936 to assume that the 1908 peak was probably permanent. But production suddenly surged in 1939 and the following year hit a new peak of 152,625,000. (It's currently around 11,000,000 per year.)

But such miraculous production turn-arounds are rare. As the years tick by with so few of them, would it not be prudent to assume that many of the apparent production peaks may indeed turn out to be permanent?

Given the vital importance of oil to us all, I really don't understand your aversion to even discussing this data & this issues which arise from it.

[Misifus]

http://www.smugmug.com/photos/i-kj9Xpvx/0/M/i-kj9Xpvx-M.jpg

[Rick M]

I do see potential for limited production due to political, security, and investment-related constraints. Any number of scenarios can be envisioned, all of which could result in major price spikes and significant economic dislocation. Again, the problem would not be an absence of oil, but that oil would become very expensive for some time. I don't see the idea of a "peak" being a useful way to describe this: it's more a situation where ability to increase production might be constrained, or where output might see a transient decrease, in response to factors not at all related to the geology or engineering of oilfields... factors like war, revolution, state collapse, etc, ad infinitum.

I can't of a credible PO analyst who would claim that the eventual peaking of global oil production will be due solely to geological factors.
Each factor that you have mentioned (and many more) is a very significant piece of this highly complex puzzle, and this is well understood by contemporary PO analysts.
PO thinking has evolved over the years and I think that most analysts these days place a much higher weighting on above-ground factors and less on the issue of reserves, which would be a shift from Hubbert's position in the 1940s & 50s.

Gail Tverberg would certainly be considered a PO analyst (and a thoughtful, reasonable one in my opinion), but she (like you) wonders about the usefulness of the "PO" term in describing the current situation:
"Some people would describe the phenomenon as "peak oil," but I am not sure that this is the best description of the issue."
http://www.theoildrum.com/node/8551#more

The PO debate has become highly charged over the years, which is not helpful. While PO analysts are characterized as alarmist doomers, cultists, failed predictors, psychotics, etc, we continue to consume 1,000 barrels per second of a fabulous resource which is finite. This is clearly unsustainable, yet people spend their time squabbling over who said what, and name-calling (not you, as I've said before).
The importance of the 'geological' argument is in highlighting the eventual inevitability of PO, but I believe other factors will play a much larger role, especially in the near term. Either way, surely we need to pause to examine the data and trends (re. discoveries, production & consumption) and consider the needs of our grandkids.

Returning to the examples of Romania and Indiana/Illinois (etc.), as the years progress it matters less & less what set of factors caused the peak & decline decades ago.
Unless there is a rare & miraculous turn-around, the result is pretty much the same.

[Rick M]

Caption under photo was:

"Sorry, guys, I assumed that we had plenty of fuel.
I won't make that mistake again...."

[Misifus]

Caption under photo was:

"Sorry, guys, I assumed that we had plenty of fuel.
I won't make that mistake again...."

Nice try, but the Enterprise, starship or aircraft carrier, does not run on fossil fuel :D

[Rick M]

Fatih Birol is Chief Economist for the International Energy Agency, which will issue its annual World Energy Outlook in 36 hours or so.
Mr. Birol's interview today with EurActiv ended with this exchange:


You’ve said in the past that you believe that the world has already passed its ‘peak oil’ moment – the point at which the amount of oil already used outweighs the amount left in the ground. How far past that moment do you think we are, and what are the economic and environmental consequences?

[Birol:] We have said that we have seen the peak of commercial oil. There is still uncommercial oil and other forms coming and we will definitely need oil for our mobility systems for cars, trucks and jets and for our economic daily life to continue.

However, one day we will run out of oil - not tomorrow or the day after but one day we will. Given its strategic importance for our societies, it is important to prepare our societies for that very day and try to find alternatives to oil especially in transportation systems. These could be electric cars, hybrid cars, natural gas, or biofuels-driven cars, or putting more emphasis on mass transportation.

When we talk about CO2 emissions, people think directly about coal. But if you look at the numbers, the contribution of oil to global CO2 emissions is only a few percentage points lower than coal. Therefore it needs to be taken closely into consideration.

We’re not running out of oil today or tomorrow but we need to prepare ourselves for the day that we do. We have to leave oil before it leaves us.

I do not recall Birol saying that we have peaked in "commercial oil" before. There has been some discussion about the IEA conceding that we may have peaked in conventional oil, but I do not recall previous statements about "commercial oil."

[Ken White]

Man taketh away but the Lord giveth...:D

LINK (http://online.wsj.com/article/SB10001424052970204554204577024302471954104.html?m od=googlenews_wsj).

Not to dispute the gist of Mr. Birol's comment but to me he did not say the world was past its peak oil moment in that quote; he did say it will come some day and we should prudently plan for that. No argument from me on that.

I earlier today ran across the Argentine find and I suspect there are others to come around the world. I also suspect that the world energy picture is about to undergo a major transformation and many people will try for various reasons to forestall the changes that are coming.

Long way of saying I see no absolutes in this but do see a lot of vested interests trying to skew the picture... :wry:

That last item doesn't apply to anyone here, just to the world at large.

[Rick M]

Birol... did not say the world was past its peak oil moment in that quote; he did say it will come some day and we should prudently plan for that. No argument from me on that.

No argument from me, either.
But there are others who view the PO issue as alarmist nonsense. There is little likelihood of prudent planning so long as that view prevails: indeed, there seems to be some antagonism to even discussing the matter, which is surely a prerequisite to planning.

The situation is similar re. the issue of carbon emissions & climate change.

Tomorrow's WEO should be interesting:
http://www.youtube.com/watch?v=M8NWnA64A_4

[Rick M]

I was very skeptical of claims that some earthquakes, however minor, may have been caused by nearby hydraulic fracturing.

This recent article provides some interesting information, enough to make a person wonder whether there might be a causal connection in some cases:

http://www.minyanville.com/businessmarkets/articles/earthquake-natural-gas-Rocky-Mountain-Arsenal/11/9/2011/id/37856?page=full

[sappeur]

Good evening. Just endeavoring to post my first thought to this blog and try it out. I'll keep it short. I believe it is not wise for DoD to bifrucate its energy policy between OSD-Installations, Energy and Environment and OSD-Operational Energy.

[Bill Moore]

Ken and Rick,

The arguments I have heard presented by the so called experts is we're past peak oil for the easy/cheap oil. Now the majority of oil will require advanced methods to recover, deep water drilling, special techniques to extract the oil, etc. Regardless of whether we hit peak oil or not, the rise of the rest and the corresponding greater demand for oil and other natural products will no doubt move us much more rapidly to peak oil and beyond. At least there "seems" to be a fair amount of investing in alternative energy forms, but unless I'm missing it there seems to be an under investment in energy efficiency (vehicles MPG rating, smart grids, new materials for tranferring energy, etc.).

[Rick M]

Welcome, Sappeur
I don't know enough about the inner workings of DoD to say whether the current structure is wise or not, but Andy Bochman & Dan Nolan run a website which is very thorough in examining DoD's approach to energy use (in terms of departmental organization, mandates, budgets, implementation, etc... just in case you aren't aware of it):
http://www.dodenergy.blogspot.com/

Bill,
I agree.
Again, DoD is a leader in both research and in application when it comes to energy conservation. At the 2010 ASPO conference, RADM Larry Rice said that he felt DoD was doing its part (and mentioned several efforts by USN) and that the civilian sector needs to get serious/on board as well.

[Misifus]

http://www.economist.com/node/14548839

[slapout9]

Link to the Rocky Mountain Institues newest Energy project called Reinventing Fire, pretty interesting stuff.

http://rmi.org/reinventingfire

[Dayuhan]

Not for lack of oil...

http://www.economist.com/node/14548839

I'm curious on this... is there tangible evidence of significant currently unknown reserves in Mexico? I've always suspected that there's a lot of potential, simply because PEMEX is so thoroughly inept (they obviously haven't caught up with the "reserves must be replaced" mantra) and so little effective exploration has been done, but I've no hard evidence to back that suspicion up. I'm sure your opinion is better informed than mine... what do you think?

[Misifus]

I'm curious on this... is there tangible evidence of significant currently unknown reserves in Mexico? I've always suspected that there's a lot of potential, simply because PEMEX is so thoroughly inept (they obviously haven't caught up with the "reserves must be replaced" mantra) and so little effective exploration has been done, but I've no hard evidence to back that suspicion up. I'm sure your opinion is better informed than mine... what do you think?

Yes, I have seen the data there. Mexico is under-explored. There are many structures there that have been seen with seismic surveys, but no wells have been drilled to test these structures for oil. This is in shallow waters. Furthermore, they really haven't even looked in deep waters.

[Rick M]

Misifus,
Thanks for the Economist post... I had not seen it.
The article mentions the work of David Shields... are you familiar with his analyses of Mexican oil production?

[Misifus]

Misifus,
Thanks for the Economist post... I had not seen it.
The article mentions the work of David Shields... are you familiar with his analyses of Mexican oil production?

No. I've worked enough with Pemex in their centers in Cd. Carmen, Villahermosa, and D.F. to draw my own conclusions.

[Rick M]

The UK's Energy Institute describes itself as:

"the professional body for the energy industry, delivering good practice and professionalism across the depth and breadth of the sector....
A Royal Chartered membership organisation, the EI supports around 15,000 individuals and 250 companies across 100 countries, serving society with independence, professionalism and a wealth of expertise in energy matters."

Virtually everyone views EI and its membership as highly credible.

Please note the topic of their conference in 3 weeks, as well as the involvement of PO analysts like Skrebowski and Bentley, etc:
http://www.energyinst.org/events/view/591

EI is taking a rather open-ended approach to the PO issue. Their conference will focus on the practical aspect which ultimately matters, "Have we reached the end of cheap oil and if so what effect will this have?"
Whatever combination of factors prevents us from having a steady flow of affordable oil, the fact remains that (unless we find an adequate replacement very quickly) we may face risks on an unprecedented scale.

[Rick M]

Last week the Defense Science Board released its study, "Trends and Implications of Climate Change for National and International Security" (175 pgs):
http://www.acq.osd.mil/dsb/reports/2011-11-Climate_Change.pdf

I have not finished reading the entire report, but it is clear from the outset that the DSB views CC as ongoing and serious, and that it accepts the "compelling evidence that climate impacts are observable, measurable, real, and having both near and long-term consequences" (p. vii).
The report has a particular focus on Africa, water and the potential for failed states.
The report also contains a detailed set of recommendations for various federal agencies (both civilian and military).

[Misifus]

So Rick we are now moving from Peak Oil to Global Warming. What's next? Ozone depletion anyone? How 'bout Malthusian food shortages?

[Bill Moore]

So Rick we are now moving from Peak Oil to Global Warming. What's next? Ozone depletion anyone? How 'bout Malthusian food shortages?

Misifus if you have something to add that contributes to the discussion please do so, but it is long past time to knock off the snide remarks that contribute nothing to the discussion. If you disagree with the study, state the points you disagree with and why. SWJ doesn't tolerate personal attacks, nor should they. It is an open forum where ideas are debated, not a forum for personal attacks.

From a department of defense of view climate change is taken very seriously as it should be. It is politically incorrect to assign cause and effect, so instead analysts just focus on the effects. As for food shortages, climate change much more than population growth is driving challenges in food production in some locations due to floods and droughts. Whether it passes in a year or two is immaterial to the current food security challenges in parts of the world most effected by climate change, which often happen to the least resilient.

[Misifus]

Misifus if you have something to add that contributes to the discussion please do so...but it is long past time to knock off the snide remarks that contribute nothing to the discussion. What personal attack did you read in post #402 above? Seems to me you are just another guy looking to pick a fight.

This thread is not about Global Warming, so that article has no place here. The thread is about Energy Security, and I have contributed to this thread with real information on my area of expertise, oil & gas. Do you have comparative expertise in this area? The psychosis of Peak Oil needs to be debunked so that people can truly understand what the real issues are with oil & gas production. Not only that, I did warn further upthread that Global Warming would eventually creep into this thread because the same psychosis that feeds Peak Oil is the same psychosis that feeds Global Warming, Global Cooling, Silent Spring, Malthusian food shortages, over-population, etc. Now Global Warming has crept into this thread just like I predicted.


From a department of defense of view climate change is taken very seriously as it should be. DOD needs to concentrate on winning our current wars. You guys (DOD) are out of your element when it comes to these other topics.

What's long past due, since you are here to lecture now, is the deconstructing of pundits who simply Google from one link to another spreading false knowledge solely to participate in whatever the latest political fashion trend of the Left is. Peak Oil offers such an example in this thread.

[Rick M]

Misifus,
Far from predicting that "Global Warming has crept into this thread just like I predicted," you yourself raised the topic in your very first post here (pg 15, #294).
Also, others have mentioned climate change and provided supplementary links on this thread over the years, which I guess you were not aware of.

You said earlier that you confine your postings to your two areas of expertise, oil & gas being one of them. Unless climate science is the second one, you seem to have some very strong views on an area which is outside your expertise.

I provided the DSB link because their document is newly-released, thorough, and because DSB is an organization which most SWC readers probably view as credible. In short, I thought that such a document on a topic of this magnitude would be of interest to this audience.

A similar (ie. similar in that CNA, like DSB, takes CC seriously) document was issued by CNA four years ago:
http://www.cna.org/reports/climate

As for the relevance of CC to energy security, Homer-Dixon and other analysts have argued that fossil fuel depletion and CC must be viewed as "twin" problems which are interconnected and must be dealt with simultaneously.
I agree with this view, but have largely avoided posting CC issues here not because I don't think they are relevant, but because they usually receive a good deal of coverage in the mainstream media, while the issues of PO and government plans for oil shocks do not.

I posted this one because it is an indication that military analysts take CC seriously, as they do PO.

As for your dismissive point about food shortages, common sense surely warns us that CC and water problems can have direct effects on food production. So would any constriction (for whatever reason) of the availability of affordable fuel to farmers (and the rest of our food supply chain).

[Misifus]

Misifus,
Far from predicting that "Global Warming has crept into this thread just like I predicted," you yourself raised the topic in your very first post here (pg 15, #294).

I think that's an attempt on your part for a circular argument. If you'd like to start a thread on Global Warming have at it, but this thread was about Energy Security and specifically Peak Oil. Do you have to conflate the two, or three, or ten? Regarding the topic of Global Warming you will find even more controversy. We could make this the Chicken Little Conflated Crises Thread if you wish, after all, it is your thread, whereby we could put every anti-development psychosis in this one thread. As such, we could probably find room for the "occupy" crowd here as well.


You said earlier that you confine your postings to your two areas of expertise, oil & gas being one of them. Unless Climate Science is the second one, you seem to have some very strong views on an area which is outside your expertise. No, meteorology is not my second area of expertise. There is no technical discipline known as Climate Science, which is simply a fashionista term started by the Global Warming crowd. A better term would be political science. My second area of expertise may not be relevant to anything on this board, so I don't mention it here. Anybody can talk about Climate Change, and everybody does. It takes no expertise because it is a dreamed up concept and when it was proven wrong the wackos changed the name from Global Warming to Climate Change.

Why don't we just talk about air pollution in the developing world? That's a real problem. The reason we don't talk about air pollution is because the Liberals are intent on giving the developing world a free pass on this issue. The Right is not any better in this issue as they can manufacture goods overseas cheaper and dirtier than they can here at home. Hence dirty countries like China, India, Brazil, Mexico, etc. get a free pass on pollution. Meanwhile anti-development intellectuals in the developed world make up pseudo-crises regarding benign gas emissions like carbon dioxide, something that we and other mammals exhale, and something which promotes plant life. We need to get real about our priorities. It is the psychosis of self-loathing that sparks anti-development movements like Global Warming, Global Cooling, Silent Spring, etc. I went over this already upthread.


As for the relevance of CC to energy security, Homer-Dixon and other analysts have argued that fossil fuel depletion and CC must be viewed as "twin" problems which are interconnected and must be dealt with simultaneously. Well let's use your logic on this then. Do the guys who intend to solve the Peak Oil issue also have degrees in Climate Science and petroleum engineering? Yes, I am being facetious. But do you see how silly this can get? So it looks like I am correct, the psychosis of one leads to the other. It's all the same gang. Homer-Dixon's degrees are in political science, not real science. Who cares what he says? Besides I don't trust men with hyphenated last names.


I posted this one because it is an indication that military analysts take CC seriously, as they do PO.Military analysts need to focus on military matters. Fuel logistics and theater supply is valid and in their realm. DOD does not have the skill set to even think about Peak Oil. They do not have the skill set to discuss Global Warming either. They are simply on the bandwagon because these are political/fashionista issues with doubtful origins.


As for your dismissive point about food shortages, common sense surely warns us that CC and water problems can have direct effects on food production. Here we go again. Like I said, it's all the same crowd. And again, do you have to conflate the two, or three, or ten?

Now before a moderator steps in here (they are prone to do that lately), or before you hit the complaint button, let me ask you this...

Have I directly called you a derogatory name in this thread? Have I delivered a personal attack on you, whereby I said specifically that you are a so and so?

[Bill Moore]

Military analysts need to focus on military matters. Fuel logistics and theater supply is valid and in their realm. DOD does not have the skill set to even think about Peak Oil. They do not have the skill set to discuss Global Warming either. They are simply on the bandwagon because these are political/fashionista issues with doubtful origins.

Thanks for telling us we don't need to focus on issues of strategic concern. Most of us thought we had a role in predicting the probable locations and causes of conflict or instability that the military may be asked to respond to, which is why the military in concert with others in the government, academia and private industry explore issues like climate change (a reality), energy, food, and water security. Agree this forum should be restricted to energy security, but sometimes there is a nexus. For example, due to the hype associated with energy security, the U.S. government offers incentives (criminal in my view) to farmers to grow corn for ethanol production, which in turns equates to higher food prices and less food being grown, because it is more cost productive to grow corn for ethanol. Another example of where the market failed because it was over rode by dumb government policies in this case.

Encourage you and others to read the Joint Operating Environment 2010, which is produced by DOD, but informed by experts both in and outside of DOD.

http://smallwarsjournal.com/blog/joint-operating-environment-2010

Excerpts:

Energy:

To meet even the conservative growth rates posited in the economics section, global energy production would need to rise by 1.3% per year. By the 2030s, demand is estimated to be nearly 50% greater than today. To meet that demand, even assuming more effective conservation measures, the world would need to add roughly the equivalent of Saudi Arabia’s current energy production every seven years.


A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment.

Much more in the document on energy (statistics), food, and water security and why it is relevant.

[Rick M]

Misifus,
You asked, "Have I directly called you a derogatory name in this thread? Have I delivered a personal attack on you, whereby I said specifically that you are a so and so?"

Since you asked the question, I would have to answer, "Yes, you have used a variety of ways to insult me and others with whom you disagree. Most are indirect (eg. "Chicken Little doomsayers"), but some have been direct and personal."
Here is a sample:

pg. 18, #343:
"your Peak Oil psychosis."
(I believe that people who suffer from psychosis are called psychotics. These are not terms which should be tossed around lightly.)

also #350:
"our Peak Oil guru"

#353:
"you may need to reconsider being a Peak Oil acolyte."

#356:
"you are a collator of information seeking to spread a hysteria."

Back on pg. 19 #365 you said,
"This thread needed an insider. Just read the thread before I entered. It was pretty much a "group think" thread with no form of self-calibration. This party needed to be crashed in order to get some thought injected into it."

This thread would welcome the constructive observations of someone with first-hand O&G experience, but to suggest that this audience is stuck in group-think, lacking independent thought (and in need of your crashing it) is a touch arrogant on your part.

As Bill Moore politely put it, please "state the points you disagree with and why."
You do not need to imply insanity, nor that someone is trying to be a guru, nor that anyone is trying to create hysteria, in order to present sensible counter-arguments.

[Misifus]

Thanks for telling us we don't need to focus on issues of strategic concern. Most of us thought we had a role in predicting the probable locations and causes of conflict or instability that the military may be asked to respond to, which is why the military in concert with others in the government, academia and private industry explore issues like climate change (a reality), energy, food, and water security.

Oh c'mon Bill. How are those predictions working for us? Some good, some not so good. However, jumping on the political bandwagons of Peak Oil and Global Warming is a stretch. I don't want my tax dollars wasted like that by DOD.


For example, due to the hype associated with energy security, the U.S. government offers incentives (criminal in my view) to farmers to grow corn for ethanol production, which in turns equates to higher food prices and less food being grown, because it is more cost productive to grow corn for ethanol. Another example of where the market failed because it was over rode by dumb government policies in this case. I agree with the above and keep in mind that ethanol is a net energy loser. However, it is the anti-development psychosis that is pushing ethanol. The same people who brought you Peak Oil, Global Warming, etc. Another backfired program. It takes more energy to produce ethanol than what ethanol provides when it is burned. Brilliant!


Excerpts:

To meet even the conservative growth rates posited in the economics section, global energy production would need to rise by 1.3% per year. By the 2030s, demand is estimated to be nearly 50% greater than today. To meet that demand, even assuming more effective conservation measures, the world would need to add roughly the equivalent of Saudi Arabia’s current energy production every seven years.

A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment.


Same old stuff Bill. Alarmists without a real basis for the predictions. Same horse, different saddle blanket.

[Bill Moore]

Same old stuff Bill. Alarmists without a real basis for the predictions. Same horse, different saddle blanket.

If that was true, I don't think we would see the level of tension we do we do in the South China Sea over access to potential energy sources. Lots of open source stuff indicated this analysis is accurate and will drive a potential conflict (if not war) between states. This isn't a peak oil alarmist argument, so much as we're not producing (and then refining) enough oil to meet demand.

Next weekend I'll pull some articles (well researched) that point out how energy politics is impacting the global security environment and it has nothing to do with anti-development intellectuals, that is just background noise. It has everything to do with maintaining economic growth and stability.

[Rick M]

Misifus,

Military researchers in the USA, Canada, UK and Australia consistently warn of both PO and CC, yet you dismiss their objective determinations as "jumping on the political bandwagons?"

Honestly, have you examined any of their reports?
As Bill suggested earlier today, please tell us (especially since you have insider expertise) precisely where/why these military analysts are so wrong.

[Misifus]

If that was true, I don't think we would see the level of tension we do we do in the South China Sea over access to potential energy sources. Lots of open source stuff indicated this analysis is accurate and will drive a potential conflict (if not war) between states. This isn't a peak oil alarmist argument, so much as we're not producing (and then refining) enough oil to meet demand.

Next weekend I'll pull some articles (well researched) that point out how energy politics is impacting the global security environment and it has nothing to do with anti-development intellectuals, that is just background noise. It has everything to do with maintaining economic growth and stability.

Nope not referring to Peak Oil. "Same horse different blanket," by that I mean that oil is in contention. Hasn't it always been in contention since Churchill and Fisher decided to replace coal with oil as the British fleet's fuel? There has always been contention about oil security. As I pointed out upthread, there are more reserves now than ever. Nevertheless, I do remember when China was a net exporter of oil, now it is a net importer.

[Rick M]

Misifus,
"I do remember when China was a net exporter of oil, now it is a net importer."
Excellent point.... I remember as well.

Given your insider knowledge, could you please provide us with a list of oil producing countries which were once major oil exporters, but are now net importers?

[Misifus]

Misifus,
"I do remember when China was a net exporter of oil, now it is a net importer."
Excellent point.... I remember as well.

Given your insider knowledge, could you please provide us with a list of oil producing countries which were once major oil exporters, but are now net importers?

No. I'm not going to sleuth that. I'm sure you can Google it! :D

I anticipate you would like to show that reversals of net exporter to net importer means that oil has "peaked " ;) However, such is not the case, there are more reserves now than ever, as has already been indicated.

[Bill Moore]

Hasn't it always been in contention since Churchill and Fisher decided to replace coal with oil as the British fleet's fuel? There has always been contention about oil security. As I pointed out upthread, there are more reserves now than ever. Nevertheless, I do remember when China was a net exporter of oil, now it is a net importer.

True, but the question is regardless of there being more reserves now than never, does that keep pace with the growing demand? The point that oil has always been contentious I believe reinforces the point about why we need to be concerned about it. More players with the rise of the rest competing for secure supplies, and it is this new great game that is driving a new geopolitical map consisting of new alliances and tension points, where states bid for influence either through coercion or attempts to bribe secure access to oil fields or secure pipelines/seaways to allow for the transport of it.

I think we're seeing a shift away from wars of ideology back to wars over resources and markets. Once again we're going back to the future.

[Misifus]

Misifus,

Military researchers in the USA, Canada, UK and Australia consistently warn of both PO and CC, yet you dismiss their objective determinations as "jumping on the political bandwagons?"

Honestly, have you examined any of their reports?
As Bill suggested earlier today, please tell us (especially since you have insider expertise) precisely where/why these military analysts are so wrong.

Rick we have been over this already upthread with Hubbert's work and other.

Now look at my avatar, I'm just poor little Misifus.

[Rick M]

Misifus,
You said, "there are more reserves now than ever."
No quarrel with that statement.

But as has been pointed out many times, PO refers to peak flow, not peak reserves.
I know that you are unique in claiming that "Found reserves are considered production" but that is rather like confusing the tank with the spigot.
If I have a tank of immense volume, but the spigot/tap/outlet valve allows less flow than I require on a daily basis, then I will have an ongoing supply problem despite the immensity of my reserve/tank.

As for the growing list of post-peak oil producers (with rapidly decreasing export capacity), would you accept such a Google list if I posted it?
Or would that be beyond my area of expertise, and therefore invalid?

[Misifus]

True, but the question is regardless of there being more reserves now than never, does that keep pace with the growing demand? The point that oil has always been contentious I believe reinforces the point about why we need to be concerned about it. More players with the rise of the rest competing for secure supplies, and it is this new great game that is driving a new geopolitical map consisting of new alliances and tension points, where states bid for influence either through coercion or attempts to bribe secure access to oil fields or secure pipelines/seaways to allow for the transport of it.

I think we're seeing a shift away from wars of ideology back to wars over resources and markets. Once again we're going back to the future.

Well Bill of course. But that has always been in the game, yet we still always have had the oil to meet the demands. In fact if we are to believe what Peak Oil'ers have been saying, we now have a glut of oil. So right now the Peak Oil logic is that we have too much oil but that we are running out. Huh?

We covered this already upthread. We have been running out of oil since it was discovered. That however does not mean it has peaked.

Okay guys, I gotta go now.

[Rick M]

Misifus,
You said, "we still always have had the oil to meet the demands."

True, but that is what PO is all about: if oil is finite (and you thankfully accept that it is), then despite 153 years of ever-increasing commercial supply (which surely shapes our ongoing expectations) we must accept that we will inevitably reach a point in human history when we no longer have sufficient supply to meet demand.
At that point (as Dr. Hirsch's PO study stresses) humanity will face "an unprecedented risk management problem."

[Rick M]

Misifus,

Perhaps you can provide an explanation for this recent and rather bleak prognosis from ND-DMR regarding future shale oil production:
https://www.dmr.nd.gov/pipeline/assets/Video/11102011/NDPA%20Nat%20Gas%20Slides%2011-10-2011.pdf

My sense was that almost everyone expected significant, sustained production increases at least throughout this decade.
But slide #3 shows production declining around 2015, and never reaching the 1 mbpd that so many people expected.

Any thoughts as to what's caused the sudden (and rather significant) change in expectations?

[Rick M]

Where is Misifus when we need him?

I'd like to know why the forecast for ND/Bakken shale oil has suddenly turned so pessimistic.
Given the importance of shale oil to the recent reversal of declining US oil production, this is a fairly significant question.

[Ken White]

IIRC, he wrote a couple of weeks ago that he had to go back to the field / area where he was working and would be back to post in a few weeks...

ADDED:

Yep; he posted this last week:
Actually I have only been here the last few days because I have been off. Will back to work soon and then y'all can be merry again without me At least until the next break

[Rick M]

Thanks, Ken

We'll just have to wait until he returns and see if he can shed some light on what's going on in ND.

Meanwhile, there is some compelling video evidence from ND which supports many of the animal & human health concerns which have recently been raised in PA.
If readers can tolerate the first 40 seconds of noisy music, the rest of the video is worth watching. Sick cattle, congested cats, human rashes, weird white stuff on walls & floors... surely something is not right:
http://www.youtube.com/user/BakkenWatch#p/u/9/850VKyFnxIk

I find it hard to believe that so many rural citizens in various states have simply made all this stuff up.

[ganulv]

I shove everything into carry-on because I don’t trust that outfit with my luggage, but the author of this piece (http://news.cnet.com/8301-13506_3-57336531-17/should-homeland-security-control-the-electrical-grid-maybe/) says, “Maybe.”

[Fuchs]

The electrical grid is a classic example of a natural monopoly and should not be run by for-profit companies anyway.

I doubt that bureaucrats and their hirelings are a competent choice for overseeing infrastructure, though.

[Rick M]

This is a very important issue, one which I know little about.

For those who wish to explore the matter in detail, I would offer this recent (and very thorough) MIT study, 280 pgs:

http://web.mit.edu/mitei/research/studies/documents/electric-grid-2011/Electric_Grid_Full_Report.pdf

[Misifus]

...We'll just have to wait until he returns and see if he can shed some light on what's going on in ND... Huh? You guys can't have a conversation without me? Why not? Y'all don't even like me :p

Try the below thread from Armchair General. I have not posted over there, nor have I read the IER report. But the thread indicates that the report from IER is a myth buster for Peak Oil types and other wackos. The thread is also very entertaining :D

http://www.armchairgeneral.com/forums/showthread.php?t=117369

Not sure I will be discussing energy matters here at SWC, nor Mexico drug trafficking matters, nor my experiences in Africa for much longer. My free time is running short. Also, the posts here at SWC seem to be mostly from the mods with heavy background traffic as well, etc. Y'all need more participants and less inbreeding. Nevertheless, thanks.

[Rick M]

Welcome back, Misifus

I was hoping that you could shed some light on ND's sudden pessimism re. future shale oil production.

I did have a look at your ACG link. You are correct, it is entertaining.
-rm

[Rick M]

French oil analyst Olivier Rech worked at the IEA between 2007-09. He was involved in their landmark 2008 World Energy Outlook which examined oil-field depletion rates (and then stated the need to find and bring on-stream flows equal to six times that of Saudi Arabia between 2007 and 2030).

This concise interview was published last week in French, and the English translation was posted yesterday:
http://petrole.blog.lemonde.fr/2011/12/30/oi-will-decline-2015-according-to-a-former-expert-of-the-international-energy-agency/

Best wishes for 2012 to you all.

- rick

[Rick M]

Britain's leading organization of planners recently published a report on Peak Oil (Nov. 2011, 59 pgs).

The central message of their report is that the peaking of global oil production is a pervasive issue whose effects could be profound, yet it remains almost entirely overlooked by civic officials in the UK, including by planners themselves.

The review provides further details:
http://www.energybulletin.net/stories/2012-01-03/review-rtpi’s-discussion-paper-peak-oil-implications-planning-policy-nov-2011

[Rick M]

On Wednesday Chatham House released a study on the Saudi's "hidden energy crisis" which indicates that surging domestic demand may start to constrict the Kingdom's export capabilities in about ten years' time, after which exports could plummet:
http://www.chathamhouse.org/publications/papers/view/180825

Please note Fig. 1 on page 2 which shows increasing domestic demand eating into Saudi export capacity around 2021, followed by plummeting export capacity. This scenario is consistent with warnings issued by Jeffrey Brown, Jadwa Investment's report last year (from within Saudi Arabia), and an earlier study by Chatham House in 2008.

Wednesday's warning ought to have been front-page news around the world, but of course it wasn't.

[Dayuhan]

I haven't read this report, but it's getting a good deal of press...

http://www.zawya.com/story.cfm/sidZAWYA20120325051844/lok051800120325/US_to_top_oil_output?weeklynewsletter&zawyaemailmarketing

Key excerpts...


The United States is set to become the largest oil liquids producer in the world overtaking Russia and Saudi Arabia before the decade is over, says Citibank in a new report.

"North America has been the fastest growing oil and natural gas producing area of the world for the past half-decade," says Ed Morse, managing director of Managing Director and the Head of Global Commodities Research at Citigroup Global Markets, in a report.


"The US alone could add 6.6 million bpd to bring liquids from 9 million bpd at end-2011 to over 15.6 million bpd in 2020-22. In total, North America as a whole could add over 11 million bpd of liquids from over 15 million bpd in 2010 to almost 27 million bpd by 2020-22." notes Morse.


Saudi Arabia has recently noted that it may hold back on its production target of 15 million bpd from its current 12.5 million capacity, notably due to the rise in U.S. shale oil.


Total OPEC crude oil production averaged 315,000 bpd in February, according to IEA data, led by a three-decade peak in Saudi output and a sharp recovery in Libyan production.

"Output of 31.42 mb/d was the highest level since mid‐2008," said the IEA in its latest report. "The 'call on OPEC crude and stock change' for 2012 is raised by 0.2 mb/d for 2Q12 and 3Q12, to average of 30.1 mb/d, due to lower forecast non‐OPEC supplies."

[Ulenspiegel]

The basic issue is that the amount of crude that is available for western countries is decreasing with amost 3% per year, the main causes are

1) global production of crude is stagnating

2) domestic consumption of producers is increasing

2) India and China import despite increasing prices a larger percentage of the produced crude.

Since 2005 we have an avarage increase of crude price of 12% per year.

The question for western countries is whether we can compensate for the 3% with higher energy efficiency and substitution of crude with natural gas or do we hit the wall first.

Arguments like "The US alone could add 6.6 million bpd to bring liquids from 9 million bpd at end-2011 to over 15.6 million bpd in 2020-22. In total, North America as a whole could add over 11 million bpd of liquids from over 15 million bpd in 2010 to almost 27 million bpd by 2020-22." assume that there is enough prodcution capacity for the conversion of natural gas into liquids.

IIRC these production capacities do not exist and I have not found a serious study which claims that can be done in time.

Some good discussions are on the Econbrowser:

http://www.econbrowser.com/

[Dayuhan]

US consumption has also declined recently; whether that will last in a recovery remains to be seen. What interested me was the projection of higher output from N America and from OPEC, which directly contradicts the widespread assumption that what once has "peaked" must thereafter go into continuous decline.

Of course I haven't read the report (and won't, if I have to pay for it), so I can't comment on the underlying assumptions.

[Ulenspiegel]

US consumption has also declined recently; whether that will last in a recovery remains to be seen. What interested me was the projection of higher output from N America and from OPEC, which directly contradicts the widespread assumption that what once has "peaked" must thereafter go into continuous decline.

Of course I haven't read the report (and won't, if I have to pay for it), so I can't comment on the underlying assumptions.


Here one relevant discussion:

http://www.econbrowser.com/archives/2012/03/a_rational_reas.html#comments

There is no real increase, small plus in NAmerica and Opec is compensated by losses of other producers.

For me the question is, can we substitute and save for a longer span of time at the same rate as the available volume of crude, i.e. global production minus demand of China and India, decreases, this was 3% p.a. since 2005.

[Rick M]

This analysis was recently posted at The Oil Drum:
http://www.theoildrum.com/node/9079#more

[Rick M]

This review (with link to the Dec. 2011 thesis) was posted this morning:
http://www.energybulletin.net/stories/2012-04-03/review-lt-col-eggen’s-thesis-impact-peaking-world-oil-production-global-balance-p

[AmericanPride]

There is some market analysis against peak oil and persistent high gas prices (http://online.wsj.com/article/SB10001424052702303816504577321183930308916.html?m od=googlenews_wsj). Essentially, we are experiecing a global oil price bubble (and it isn't the first). Also, this article (http://www.theoildrum.com/node/9085)suggests that increased US oil production is not necessarily the most effective strategy for escaping foreign oil dependence or high oil prices.

[Ulenspiegel]

There is some market analysis against peak oil and persistent high gas prices (http://online.wsj.com/article/SB10001424052702303816504577321183930308916.html?m od=googlenews_wsj). Essentially, we are experiecing a global oil price bubble (and it isn't the first). Also, this article (http://www.theoildrum.com/node/9085)suggests that increased US oil production is not necessarily the most effective strategy for escaping foreign oil dependence or high oil prices.

We have a stagnating global production since 2005, OTOH the demand of India and China, which buy more despite increasing prices, increased, the domestic consumption in most producing countries increased.

How do you really expect a falling price? This is only possible if you substitute or save crude at a rate of more than 3% p.a.
That would be a lot and requires huge effords (industrial programmes), which I do not see in the USA.

Here a new contribution on the econbrowser:

http://www.econbrowser.com/archives/2012/04/replacing_irans.html

[Firn]

Energy intensity (http://en.wikipedia.org/wiki/Energy_intensity) is a neat indicator, putting energy consumption into the relation of the GDP.

Needless to say that many factors go into both variables, especially the transfer of energy intensive industries has had recently an important impact. Overall demand and supply interact through the price and the curves have been surprisingly elastic over the long term. Cheap ressources are of course of great benefit to the economy however key and finite ones should not come to cheaply to give enough early incentives to increase the overall efficiency and the development of alternatives.

In the mid term the high price increases the attractivness of investment into the sector.

[AmericanPride]

We have a stagnating global production since 2005, OTOH the demand of India and China, which buy more despite increasing prices, increased, the domestic consumption in most producing countries increased.

Declining oil production is not sufficient of itself to determine whether production is in irreversible decline; or to prove that high oil prices are here to stay. There are two problems: first, the oil market in general is not stable; prices and production constantly cyclical rise and fall. There are at least four previous eras in which production appeared to peak, but was only followed by an oil glut and collapsing prices. The second problem is that the oil market is now dominated by speculation, which is driving up prices despite slowing demand. 2005 saw what Daniel Yergin termed a demand shock, where the simultaneous tightening of capital investment in oil production and market contraction (a response to the unexpected oil price collapse in the 1990s) collided with growing consumption in the developing world. This has stressed global spare capacity, with the consequent rise in prices encouraging intense speculation and more rising prices (the inflationary pressures of the GWoT, Iranian confrontation, and instability in Nigeria don't help matters either). And now more cynical than in the 1990s, oil producers are not about to rush to increase production without significant external pressure. Sustained high prices produces countervailing forces (increased production, reduced consumption) that will eventually dry up investment. This is already happening (high oil prices partly contributed to the 2008 recession as trillions of dollars of wealth was transferred from consumer-intensive modern countries to savings-focused third-world producer governments). Governments around the world are taking alternative energy seriously. And the oil market is throwing billions of dollars into exploration and production. We may or may not be transitioning from an economic dependency on oil (it's hard to say), but we are definitely not in some world ending peak oil crisis.

[Rick M]

"we are definitely not in some world ending peak oil crisis."

AP,
I would not argue that we are yet in a PO crisis, nor that it would necessarily be "world ending."
But there is much to be concerned about re. global supply of liquid fuels, and Ulen flagged three of the main ones:
- flat conventional production for 7 years
- demand growth in China & India
- demand growth within KSA and other major oil exporters.

Here in eastern Canada, the UK used to be our #1 supplier of crude only a decade ago, but it is in ever-worsening terminal decline (17% for 2011).
Chatham House warned that the export capability of KSA is likely to start to decline in about 10 years' time: should this occur, we will certainly enter a new era.

I agree with Lt. Col. Eggen that (for many reasons) nations may stick with oil until the last minute despite he risks of doing so. We still have no scaleable replacement for petroleum, least of all at the last minute. I see little room for complacency re. liquid fuel supply.

Meanwhile, we have the ill-informed claiming that we have trillions of barrels of shale oil, apparently just waiting to be pumped:
http://opinion.financialpost.com/2012/03/30/lawrence-solomon-a-world-awash-in-oil/

[AmericanPride]

But there is much to be concerned about re. global supply of liquid fuels, and Ulen flagged three of the main ones:
- flat conventional production for 7 years
- demand growth in China & India
- demand growth within KSA and other major oil exporters.

Sure, demand is up and production has not responded to keep prices within what was previously considered a reasonable price band. I mentioned this in my previous post. But that does not indicate we are entering a period of sustained high prices or entering into terminal oil decline. I agree that there are serious security and political consequences that emerge from the behavior of the oil market, and this has been demonstrated throughout the course of the 20th century.

[Rick M]

"demand is up and production has not responded"

AP,
If demand is likely to stay up (or even accelerate, as seems pretty certain in Asia and MENA) and if conventional production can barely stay even with depletion, then I don't understand why you say "that does not indicate we are entering a period of sustained high prices." Surely both fundamentals point toward high prices for the foreseeable future (which admittedly is not very far ahead).

Like so many other analysts, I see little hope of a return to sustained low prices for liquid fuels. I agree with those who claim, "The era of cheap oil is over."

As for entering terminal decline, I agree that we have not yet peaked (much less entered decline), at least in terms of all-liquids. And perhaps seven years is insufficient to claim (as many have) that we have peaked in conventional oil... things could pick up on that front.

Also, the risks continue to mount: we have minimal spare capacity, refineries closing, Israel & Iran which will not back down, this week's announcement that Russian oil output will stay flat for the next 20 years, fierce UK decline, etc.
And all of this with no effective means to deal with a major global oil shock, should one suddenly occur (no matter what the cause). Surely north-eastern North America would be highly vulnerable in such a situation: Canada has no strategic reserve and USA would have difficulty moving SPR oil to assist PADD 1.

[AmericanPride]

If demand is likely to stay up (or even accelerate, as seems pretty certain in Asia and MENA) and if conventional production can barely stay even with depletion, then I don't understand why you say "that does not indicate we are entering a period of sustained high prices." Surely both fundamentals point toward high prices for the foreseeable future (which admittedly is not very far ahead).

Because I do not think that the tame response from the producers is an entirely a forced condition.

[Polarbear]

This week an article by Robin Mills, an energy consultant, appeared on the website of the European Energy Review. The piece sparked a controversial debate among the readers.
Especially questionable appear his assumptions about the energy value of different sources ("to the consumer, the source of the fuel that goes into the tank is irrelevant"), his belief that oil as fuel can be replaced by alternative fuels without any difficulty, as for example the substition by LNG or nuclear power on ships, as well as his total neglection environmental effects by the production of unconvetional oil (e.g. tar sand).

Mills' opininion is also contrasted by the article of James Murra and David King ("Oil's tipping point has passed") in Nature (http://www.nature.com/nature/journal/v481/n7382/full/481433a.html) (No. 481, p. 433-435).

[AmericanPride]

Oil demand and speculation (http://www.bloomberg.com/news/2012-04-23/oil-drops-from-three-day-high-as-china-crude-consumption-falls.html) may be topping off. This should not come as a surprise since consistent high oil prices produce countervailing forces in supply increases and demand reduction (http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/high-oil-prices-threatened-by-high-oil-prices/article2409670/).

[Rick M]

AP,

I posted a few observations re. your Globe article (in the Comments section for that article).

As for the larger energy supply picture, the big hope/"game-changer" has been shale/tight oil and shale gas.
The Globe recently ran an article on Art Berman, who was warning several years ago that shale gas was over-hyped and that investors should be careful.

Having been roundly criticized for expressing his concerns, the ongoing difficulties at Chesapeake Energy are exactly the sort of thing that Art warned about.
Please see Comments here:
http://www.theglobeandmail.com/globe-investor/investment-ideas/david-parkinson/meet-the-man-the-shale-gas-industry-hates/article2405737/

[AmericanPride]

Rick,

I appreciate your comments on that article; very well written. I agree with you that shale oil and gas are not an effective replacement for crude. Where I disagree is the claim that we are in, entering, or have past a point in which oil production is in terminal decline. I think this 2011 EIA report (http://www.eia.gov/forecasts/ieo/liquid_fuels.cfm) is a good starting point. I also mentioned in a previous post about the problems of demand shock, speculation, and global security issues (GWoT, Iran, etc), which all contribute to high oil prices. I think this graph (http://www.wtrg.com/oil_graphs/OPEC1.gif)and this graph (http://www.wtrg.com/oil_graphs/OPEC2.gif) are important to understanding the long-term context of oil prices and production.

[Rick M]

"in, entering, or have past a point in which oil production is in terminal decline."

Thanks for your reply, AP

It's a matter of definition (re oil production).
What is oil?

I certainly accept that although the evidence gets stronger with each passing month, the IEA could be proven wrong in its assertion that conventional oil is unlikely to surpass its 2006 peak of around 74-75 mbpd. There is plenty of evidence that this plateau was reached in 05, even as early as late 2004, but there is little to be gained by haggling over minor details.

Meanwhile, there is no evidence that global all-liquids production has peaked: we are now near 90 mbpd and there is nothing to indicate a peak (much less a subsequent decline).
I have no idea what the global all-liquids peak might eventually be, nor when such a peak/plateau might occur, but I do believe that it will be very problematic when it does occur.

What does seem clear is this: conventional oil production has been stalled for a worrisome length of time. depletion of the very large oil-fields (which provide most of our liquid fuel supply) is ongoing, perhaps accelerating, and new sources of liquid fuels (ie. deep-water pre-salt, shale oil, etc) are both more energy-intensive and more capital-intensive.

Both of these trends are consistent with the warnings that peak oil analysts have been arguing for many years.

[slapout9]

Dr. Jerome Corsi Interview on Abiotic Oil and NAZI technology from WW2.... on how to liquefy coal.
The interview starts at about the 12 minute mark.


http://www.youtube.com/watch?v=z998uKCahQo

Yes this is a conspiracy theory but he does raise some interesting questions like why is Oil found 40,000 feet(7 miles) below the surface if it is composed of dead plant and animal matter? Someone hear should know the answer if there is one.

[Fuchs]

Dr. Jerome Corsi Interview on Abiotic Oil and NAZI technology from WW2.... on how to liquefy coal.

Not Nazi technology, especially not NAZI technology.

The tech dates back to 1920's
http://en.wikipedia.org/wiki/Fischer_Tropsch
and is German technology.

Several plants were running (or are), including in East Germany, South Africa. The PRC gave a huge CTL program up, prolly because of coal supply issues.

I read years ago (~2004 info) that CTL would be commercially useful at 40 $/barrel. Very little has happened in regard to more CTL production during the recent oil price peaks, though.

[Ulenspiegel]

Dr. Jerome Corsi Interview on Abiotic Oil and NAZI technology from WW2.... on how to liquefy coal.
The interview starts at about the 12 minute mark.


http://www.youtube.com/watch?v=z998uKCahQo

Yes this is a conspiracy theory but he does raise some interesting questions like why is Oil found 40,000 feet(7 miles) below the surface if it is composed of dead plant and animal matter? Someone hear should know the answer if there is one.

There is one issue with abiotic oil: Many of the compounds in oil are chiral and you often find only one of the the two possible forms in oil, this clearly points to a biogenic origin. :)

Reason: The enzymatic proteins in plants (=biological catalysts) are build up from chiral amino acids. Therefore, they can only accelerate the reaction of one of two chiral product, which is enriched.

If the oil has an abiotic origin you would find both chiral forms in a 1:1 ratio.

[slapout9]

Not Nazi technology, especially not NAZI technology.

The tech dates back to 1920's
http://en.wikipedia.org/wiki/Fischer_Tropsch
and is German technology.

Several plants were running (or are), including in East Germany, South Africa. The PRC gave a huge CTL program up, prolly because of coal supply issues.

I read years ago (~2004 info) that CTL would be commercially useful at 40 $/barrel. Very little has happened in regard to more CTL production during the recent oil price peaks, though.

Yes, I think the NAZI connection was due to the fact that the information was found by the Allies after WW2 during Operation Paper clip. Shell Oil company is supposedly making huge investments in this technology(Fischer-Tropsch Process). They think it is a big long term solution.There is also a conspiracy angle on this to. Shell Oil has a symbol of a sea shell which is supposed to be some kind of connection to Shale Oil:eek: again this was a popular conspiracy back in the 70's.

[slapout9]

There is one issue with abiotic oil: Many of the compounds in oil are chiral and you often find only one of the the two possible forms in oil, this clearly points to a biogenic origin. :)

Reason: The enzymatic proteins in plants (=biological catalysts) are build up from chiral amino acids. Therefore, they can only accelerate the reaction of one of two chiral product, which is enriched.

If the oil has an abiotic origin you would find both chiral forms in a 1:1 ratio.

Thanks for the response.

[davidbfpo]

The Lowy Institute had a recommendation / pointer to this book 'Earth Wars: The Battle for Global Resources' by Geoff Hiscick, published April 2012 and link, without reviews:http://www.amazon.com/Earth-Wars-Battle-Global-Resources/dp/1118152883/ref=tmm_hrd_title_0

The Amazon summary (in part):
The global competition for scarce natural resources that pits the West against the super-hot economies of China and India, plus a clutch of other contenders including Russia, Brazil, and Indonesia, has become one of the biggest issues facing the world today. Whether it is the rare metal lithium found in salt pans in the Andes, gas from the Caspian Sea, oil off the coast of Brazil, coal from Africa's Zambezi River, or uranium from Kazakhstan, China and India are desperate to ensure the security of their future energy supplies. The same goes for food and water, as contamination and over-use take their toll, the need to provide continued access for the next generation and beyond has increased exponentially. In Earth Wars: The Battle for Global Resources, international business journalist Geoff Hiscock explores the problems, potential solutions, and inevitable tensions in this ongoing scramble for finite natural resources.

[Polarbear]

This week another article appeared in the European Energy Review taking nealry the same line as Robin Mills piece two weeks ago.

Investment and sustainability are the real challenges in oil, not availability.

[Ulenspiegel]

This week another article appeared in the European Energy Review taking nealry the same line as Robin Mills piece two weeks ago.

Oil does of course not run out within a few years, CHEAP oil does!
Here the author uses a strawman, public deception is only a minor problem when even "experts" ignore some fundamentals.

All the new projects or revitalized old ones work, because the price of crude is high, therefore, they will not decrease the price but in best case slow down its increase.

The only positive developement is the higher production of natural gas in the US and Canada and the savings in the last two years.

Whether the transition from oil to methane is fast enough is for me interesting questions. We are talking about rates: rate of transition vs. increase of crude price

BTW: Some really good contributions to the decline of easily accessible crude is are found on "The Oil Drum": http://www.theoildrum.com/

Here I recommend the latest article on Norway's production, see figur 5 to get a feeling for the issue:

http://www.theoildrum.com/node/9166#more

[Ulenspiegel]

Addendum: A few minutes ago a IMF study on this topic was posted on TOD:

http://www.theoildrum.com/node/9182#more

[davidbfpo]

Peak oil hasn't happened, and it's unlikely to happen for a very long time.So says a leading UK ecology advocate, George Monbiot.

Link:http://www.guardian.co.uk/commentisfree/2012/jul/02/peak-oil-we-we-wrong


The world's most powerful nation is again becoming an oil state, and if the political transformation of its northern neighbour is anything to go by, the results will not be pretty.

Rick,

I don't follow Canadian politics, what is going on that is not pretty?

[Dayuhan]

I don't follow Canadian politics, what is going on that is not pretty?

Conservatives got elected. Whether that is or isn't pretty depends, like many other things, on your perspective.

[ganulv]

Conservatives got elected. Whether that is or isn't pretty depends, like many other things, on your perspective.

Where there just happens to be a lot of petroleum.

[Rick M]

Like the Citigroup report which came out in February, Maugeri's report is very optimistic. Both reports express a complacency re. future oil supply which is unjustified. Both celebrate the "end of peak oil" (Maugeri says, "no 'peak-oil' in sight"), primarily because of the recent developments re shale/tight oil in the Bakken.

George Monbiot's article appeared on July 2nd, one week after the release of Maugeri's 86-page report. Given the complexity of the issue (ie. the future of global oil supply) and the uncertainties involved, Monbiot would have done well to take his time, consider the validity of some of Maugeri's assertions, and seek out the observations of knowledgeable, experienced analysts before quickly declaring, "We were wrong on peak oil."

Several of these analysts came forward this month to point out where Maugeri is in error.
Dave Summers (aka "Heading Out") posted his rebuttal the same day as Monbiot's article appeared:
http://www.theoildrum.com/node/9292

Steve Sorrell at UKERC is certainly one person Monbiot should have consulted before jumping to his conclusion. Sorrell's updated rebuttal was posted at The Oil Drum on July 11:
http://www.theoildrum.com/node/9292

The responses to both TOD articles are worth examining.

Olivier Rech is also a knowledgeable analyst. The English translation of his observations appeared on July 9:
http://petrole.blog.lemonde.fr/2012/07/09/denying-the-imminence-of-peak-oil-is-a-tragic-error-says-ex-iea-petroleum-expert/

In summary, these are 'tough times' for peak oil advocates: optimistic reports (despite the 'selectivity' of their info) are quickly heralded by mainstream media. Meanwhile, well-reasoned, detailed studies like the German military report on PO (2010, 99 pgs) received no media analysis at all.

Personally, I see little to mitigate my concerns.
Production of conventional oil remains flat, global demand continues to rise, we are increasingly forced toward liquid fuel sources which are more energy intensive/lower EROEI, and alternative energy sources are struggling on multiple fronts.
Furthermore, the focus of PO analysts has shifted during the past few years.
At the risk of over-simplifying/generalizing, I would characterize this shift as moving beyond a relatively narrow focus on oil supply (reserves & reserve reporting, flow rates, EROEI, geopolitics, etc) and more toward economics (the importance of affordable oil to our economy & our food supply chain, the potential reversal of globalization, unsupportable transfer payments, risks to currencies and financial institutions & markets, etc).

Given the inevitability of PO and the scale of the potential dilemma, unfounded encouragements to complacency are not helpful (and more likely a tragic error, as Rech argues).

[Fuchs]

the German military report on PO (2010, 99 pgs)

Which one?

Our military has no oil production experts. We've got a civilian agency for minerals stuff (http://www.bgr.bund.de/EN/Home/homepage_node_en.html;jsessionid=DA33EC41AE86953CB 3A72E9DED840CE6.1_cid289) that bristles with experts instead.

Its latest report. (http://www.bgr.bund.de/EN/Themen/Energie/Downloads/annual_report_2011_en.pdf?__blob=publicationFile&v=2)


In accordance with BGR’s updated projection, oil
production could be increased until around 2036. The
growing proportion of NGL and oil from oil sands
and extra heavy oil have no signifi cant influence on
the projected time of peak oil production but does
boost the maximum production level. According to
the projection, this maximum will be around 4.6
billion t annual production. Crude oil will therefore
be the first fuel which will no longer be able to
satisfy rising demand.

[Rick M]

What's not pretty?

Yes, Conservatives got elected (in 2006, re-elected with a minority in 08). What is significant is that they were re-elected in 2011 with a majority, which has given PM Harper much greater scope to exercise his agenda.

Harper is widely viewed as controlling, and the perception is that he is rather ruthless in pursuing his vision of a pro-corporate, pro-free trade, lean government, reduced public services, etc.

And yes, we have lots of bitumen (we peaked in conventional oil in 1973) and tight gas (we are post-peak in conventional gas as well).

Harper is all in favour of opening up our west coast to export large volumes of LNG and raw bitumen. The latter idea has sparked disagreement this week between the premiers of Alberta and BC.

But I think what Monbiot is referring to is more the issue of Canada being a pariah at the CC conferences, Harper cutbacks re gov't scientists, our general foot-dragging on CC, and our support for USA doing the same

[Rick M]

Hi, Fuchs

The Bundeswehr report was addressed on pg. 13 up-thread.
The link to the English translation was posted on p. 15 (#283 up-thread).

I have a few contacts in Germany, all of whom reported that this study received virtually no media attention: Der Spiegel was first to publicize, but only in its on-line version. If you have other info, please let me know.

One of these German contacts met several of the Bundeswehr analysts one evening and was very impressed with both their knowledge and their sincerity.
Their study is thoughtful, realistic and worthy of much greater attention than it has received, IMHO.

[Fuchs]

I recognize that one.
That's a speculation on security policy consequences of peak oil and a literature review of peak oil literature without original research on "peak oil yes/no and when?" itself.

It's got the quality of a master's thesis and its conclusions are about as sophisticated as what'd say in a five-minute brainstorming about peak oil consequences for Germany.

My country produces a couple ten thousand reports of this quality every year. I don't see why the major media outlets should take notice.

[Rick M]

"I recognize that one."

You recognize it, but did you read it?

It seems that your measure of a credible, newsworthy study on PO is two-fold: "peak oil yes/no and when?"
The Bundeswehr team addressed the first question directly referring to it as inevitable/unavoidable.
I see no reason why they or anyone else should attempt to predict when or why the eventual peak/plateau might occur.

Military analysts bring interesting perspectives on PO, and the Bundeswehr study stands out among the publicly-available military analyses of PO.
It was written by a team of objective analysts, not by some book-peddling doomsayer, nor by Exxon or the API.

Furthermore, it was approved by Bundeswehr top brass without its compelling "tipping point" warnings being watered down. This section drew heavily on the Feasta report, which also has received no media attention (but warrants it).

[Fuchs]

Look, crude oil is widely recognised as being a non-renewable resource and there is substantial consumption which won't stop on its own.
So there has to be some peak production sometime.

The "peak oil" discussion is about something different; it's about whether said peak is either close or even in the past. It's about whether time has already run out for normal adaption to increasing scarcity.


The Bundeswehr study doesn't have the flesh to make a real statement about this important question. Instead, it's citing other sources and muses about possible consequences of a peak (when it happens) for Germany and specifically German security policy.


The real, official experts in Germany concerning the peak oil discussion are in the BGR.

[Rick M]

Thanks for the BGR study: I thought the link was no good but it finally did download (after about a minute). I will examine it carefully.

I still think that you are overly focused on timing: how close it may be, are we already post-peak, will there be time for an orderly transition (to what?), etc.

I'm sure you are correct: when it comes to energy resources, BGR will be your experts. Here in Canada, our government expertise supposedly resides within Natural Resources Canada. But NRCan has never done a study on PO or energy security, nor does it intend to (though that does not stop them from stating, "There is no imminent peak oil challenge").

But PO is not simply a geological/resource issue; the issue of affordable liquid fuels affects every sector of society: transport & supply chains, mineral extraction, agri-food, emergency service budgets, etc. Ripple effects include employment, tax revenues for governments and social programs, which in turn affect things like mortgage defaults, property values, stability of financial institutions, currency valuation, and globalization itself.

Surely the issue is so complex that it requires a multi-disciplinary approach.
The O&G industry has first-hand expertise, but it also has vested interests. Government departments are often too cozy with industry, as we have seen (and both have an interest in focusing on the positive/optimistic). Financiers and economists may be ignorant of certain geological realities. The geopolitical situation changes daily.
So who are the real experts?

My point is that military analysts have a useful perspective, and within that sector the Bundeswehr study is unique. It was done by a team (unlike the various war college theses, which contain the disclaimer that it's only the view of the officer candidate, etc). It's over 100 pages long (often we're lucky to get 100 words on PO, usually in a text box).

The section on Tipping Point goes well beyond the usual observations on geopolitics, fueling the troops, the potential for resource wars, etc. It points out that some of the largest threats from PO will be internal: unemployment, reduced government revenues, food supply difficulties/unaffordability, social unrest (with insufficient government services to contain/curtail disorder), unstable financial institutions and currencies, etc.

Are you aware of any other study (within BGR or anywhere) which addresses the issue of PO in such a comprehensive manner?
The only other ones that come close are the Feasta study and UKERC's excellent 2009 study, but I don't recall the latter addressing the internal financial & social dimensions the way the Bundeswehr team does.

[Fuchs]

Not in English.

[Dayuhan]

A bit of a digression, but one with some relevance to energy politicas and environmental politics...


Harper is widely viewed as controlling, and the perception is that he is rather ruthless in pursuing his vision of a pro-corporate, pro-free trade, lean government, reduced public services, etc.

I'm familiar with that perspective... most of my Canadian friends are either academics or kayakers, and they uniformly view Harper as being somewhere between Darth Vader and Lord Voldemort.

But on the other hand...


Yes, Conservatives got elected (in 2006, re-elected with a minority in 08). What is significant is that they were re-elected in 2011 with a majority, which has given PM Harper much greater scope to exercise his agenda.

Yes, on the other hand he gets elected. So while he is "widely" viewed in a very negative way within a certain demographic segment, his message apparently has some resonance and some traction in other segments.


But I think what Monbiot is referring to is more the issue of Canada being a pariah at the CC conferences, Harper cutbacks re gov't scientists, our general foot-dragging on CC, and our support for USA doing the same

Yes, in some quarters that which is not PC is not pretty. Again, this view is not universal.

The point on a political level is that leaders are not accountable to the politically correct climate change squad or to any other issue-based group, and while certain political perspectives may seem anathema within those groups, people in those groups have to recognize that there's a wide wide audience out there that may not share their perspective.

[Rick M]

Hi again, Steve: I knew you'd jump in on this one.

You said, "within a certain demographic segment" but I would argue that Harper's unpopularity goes much further: it's not just a segment, but a clear majority.
First, the 'left' is split 3 ways (Liberal, NDP, Bloc Quebecois) whereas the right sensibly amalgamated (Conservative & Reform Party) but collectively had more votes than the Tories.
Second, we often hear of life-long Tories who are dismayed by Harper and his agenda and vow that they will never vote for him again (which remains to be seen).

[Rick M]

I presume that by "Not in English" you know of well-conducted analyses of PO in other languages (German?).
If so, please provide the links: I have contacts who are fluent in German, Swedish, Italian, French, etc who have assisted with translation in the past and will help out again if they are asked, esp. if the study is significant.

[Fuchs]

I presume that by "Not in English" you know of well-conducted analyses of PO in other languages (German?).
If so, please provide the links: I have contacts who are fluent in German, Swedish, Italian, French, etc who have assisted with translation in the past and will help out again if they are asked, esp. if the study is significant.

Their related publications of the last years are here:
http://www.bgr.bund.de/DE/Themen/Energie/Erdoel/erdoel_node.html
http://www.bgr.bund.de/DE/Themen/Energie/Produkte/produkte_node.html

[Rick M]

Fuchs,

I examined both links but see no reference to peak oil.
Could you please direct me to the pages/sections which deal with PO?

[Rick M]

The new issue of ADF Journal contains two articles which touch on peak oil, declining US power, etc:
http://www.adfjournal.adc.edu.au/UserFiles/issues/188%202012%20Jul_Aug.pdf

The first ("Dangerous Assumptions," pgs. 11- 22) is by Maj. Cameron Leckie, who has written several insightful papers re. PO and its potential effects on his nation, esp. re future military capabilities.

The second ("Seven Sinister Strategic Trends," pgs. 23- 33) is by Lt. Nick Deshpande of the Canadian Forces. It's an abridged version of his article which appeared last fall in Cdn Military Journal.

Both papers contain extensive bibliographies.

Also, I wrote to BGR in Germany on Aug. 1st and asked what research they had done on peak oil but did not receive a reply.

[AdamG]

NEW YORK (CNNMoney) -- Mexico, one of the largest suppliers of oil to the United States, has a big problem: Its production of crude is falling fast.

In 2008, the country's production peaked at 3.2 million barrels a day, according to the U.S. Energy Information Administration. Last year, it didn't even produce 3 million a day.

http://money.cnn.com/2012/08/17/news/economy/mexico-oil/index.html?iid=Lead

[davidbfpo]

The bonanza from North Sea oil has spectacularly declined, almost without the public noticing. In 2011 oil 47.5mt and gas 28.1 kms - approx. halved in ten years. From: https://www.og.decc.gov.uk/pprs/full_production.htm

IIRC the UK is now importing more from Norway and we have restarted large-scale LNG imports.

[Bill Moore]

http://energypolicyinfo.com/2012/08/u-s-reliance-on-saudi-oil-increasing-again/


Naturally, this demand growth is coming at a time when the market is facing numerous disruptions, both political and physical. Iran’s output, formerly OPEC’s second largest behind Saudi Arabia, has been hamstrung by international sanctions to deter its nuclear program (although it has been relentlessly seeking to dodge them at every viable opportunity) while field depletion is threatening output in the North Sea and Brazil, and production has been sliding in Mexico and Venezuela. The combination of these factors has led to price spikes in Brent Crude, which reached a three month high of $117 earlier this week.

In response to the disruption of Iranian supply, the New York Times reported this morning that the United States is increasing its dependence on oil from Saudi Arabia, the imports of which have increased by over 20 percent this year. The United States and Saudi Arabia have enjoyed a strategic alliance for decades, due to the Kingdom’s ability to compensate for production shortfalls from other OPEC member states. For the past five months, the United States has imported a daily average of 1.45 million barrels of Saudi crude, compared to 1.15 million for the first five months of 2011. However, while this is far from the first time Saudi Arabian spare capacity has proved an invaluable resource, the geopolitics surrounding this reliance are increasingly troubled, and the alliance is a precarious one.

Seems that is will all be temporary once the sanctions issue gets straightened out with Iran. Not sure about the North Sea, but if investment is facilitated the Mexican oil fields may still be productive. The core of the issue is the U.S. default to economic sanctions. Besides being a bullying tactic that generally backfires in ways that are not always apparent at first such as, increased anti-Americanism, collateral damage to the economies of our allies and partners, hurts U.S. businesses, increases control of the government we're targeting by further centralizing power (Iraq), etc., it is frankly getting harder to enforce in the era of a globally interdependent economy where both friends and foes will look for ways to bypass these sanctions. We'll be forced to back down or have sanctions in name only.

[AdamG]

In response to the disruption of Iranian supply, the New York Times reported this morning that the United States is increasing its dependence on oil from Saudi Arabia, the imports of which have increased by over 20 percent this year.

Oh yeah?


Saudi Aramco, Saudi Arabia’s national oil company and the largest in the world, has confirmed that is has been hit by a cyber attack that resulted in malware infecting user workstations, but did not affect other parts of its network.

http://earlywarn.blogspot.com/2012/08/saudi-aramco-network-hit-with-cyber.html

[Bill Moore]

No impact on production, so overall an ineffective attack, but none the less a sign of the times and various ways that activist groups can disrupt states and businesses. An Arab Youth hacking group took credit for this one, but of course it would be a viable tactic for Iran to make our sanctions more painful on those enforcing them.

[Rick M]

Sadad al Husseini is a knowledgeable veteran re oil, esp in Saudi Arabia.
He recently wrote a concise (842 words) response to Maugeri's report in PIW, which is behind a pay-wall.
TOD has re-posted it:
http://www.theoildrum.com/node/9411#more


al Husseini's credibility comes through very nicely in this video (7:22)... his English is perfect. The video which also gives you an opportunity to see what some of the main PO analysts have to say:
http://www.youtube.com/watch?v=0ccUPutDZMM

He hits two key points around the 6th minute:
- production of oil (ie. conventional petroleum) has been stuck since late 2004
- the increase in prices started back in 2002

[Bill Moore]

Contrary arguments from the investment community against the doom and gloom. Green energy stocks have crashed, while fossil fuels are making a come back, especially in the U.S. due to INCREASED production.

http://www.smartmoney.com/invest/strategies/the-return-of-fossil-fuels-1341347671314/?link=SM_mag_lstop&mod=sm_mag#tabs


The Return of Fossil Fuels
Enormous new oil and gas discoveries under American soil are having a game-changing impact on the entire economy. How to play the new energy boom.

[Rick M]

Optimism re. US oil supply is founded primarily on shale oil, which in turn is founded primarily on the ND Bakken (and Eagle Ford in Texas).

Rune Likvern is a veteran Norwegian oil & gas analyst who examined recent data on Bakken shale oil wells. Yesterday he posted this graph indicating that the average production for the first 12 months of Bakken wells has been declining:
http://www.theoildrum.com/files/Fig03developmentinwellproductivity.PNG

Rune's info has sparked an ongoing debate today at The Oil Drum, where a veteran O&G supervisor ("Rockman") said:
Older Bakken horizontal wells did not have the production potential of newer wells. As you point out newer wells are longer and have more frac stages. Additionally I think it’s safe to assume they have improved the frac quality itself. So a new horizontal well should have a much better production profile than an older well.

Which is why it’s so freaking important for folks to look at Rune’s chart above so closely. It shows the productivity of the Bakken wells in discrete time frames. If I’m reading the chart correctly the new better improved (and more expensive) Bakken horizontal wells are not producing like wells drilled some years ago: they are not as good as the older wells. For example Bakken wells drilling during the summer of 2010 recovered about 110,000 bo during their first 12 months of life. Wells drilled December 2011 produced 90,000 bo their first 12 months. And wells drilled during July 2011 produced closer to 80,000 bo their first 12 months.

So as knowledge of the trend increased and companies drilled longer, more heavily frac’d and much more expensive wells the quality of the production decreased. Above I said the potential of new wells is greater…not the actual production. The simple explanation IMHO is that the better areas of the trend have been drilled and now operators are moving into less productive areas. And even though they are drilling wells that should produce better results than the early wells they are actually producing poorer results.

And this the path that every trend in the history of the oil patch has followed: the better acreage is drilled first. And even as the technology improves, the rocks don’t. We have to spend more money to produce less hydrocarbons. What shocks me a tad is to see how quickly it has shown up in the Bakken. About 30 years ago I was typically drilling 12,000’ wells to test potential conventional NG reservoirs that might cover 1,500 acres. In the last 3 years I‘ve been drilling 16,000’+ wells (that can cost 2X what a 12,000’ well costs) for potential NG reservoirs that cover 120 acres. But that transition happened over a 30 year period. The Bakken transition, if it continues to decline at the current rate, will be the most dramatic transition I’ve seen in my career.


The entire discussion is here:
http://www.theoildrum.com/node/9474#comments_top

[Ulenspiegel]

Contrary arguments from the investment community against the doom and gloom. Green energy stocks have crashed, while fossil fuels are making a come back, especially in the U.S. due to INCREASED production.

http://www.smartmoney.com/invest/strategies/the-return-of-fossil-fuels-1341347671314/?link=SM_mag_lstop&mod=sm_mag#tabs

1) To correlate stock values with actual performance and long-term perspective of a company is dangerous :-)

2) Investment guy have no problem with creating a hype, making then their money and letting other pay for the damage/losses.

3) Hard data on production tells a different story, esp when production costs are discussed: Production of cheap oil decreases and OTOH domestic consumption of the producers and global demand increases.

4) The models used by economists for cude production and prices were piss poor in the past, the better models were developed after the productions has stalled and are still not what a scientist would call robust models. :-)

5) Increased production in the USA and Canada replaces imports at a very high price level. There is no chance that the prices for crude will go down in the medium term without a recession.

6) Energy required for production: You need a lot of energy ro extract the unconventional stuff, so your decision basically is, do you sell the natural gas or do you use it to get more crude? The picture drawn by many economists like "The USA can sell NG and produce large amounts of shale oil etc." will not work in reality.

[Fuchs]

Contrary arguments from the investment community against the doom and gloom. Green energy stocks have crashed, while fossil fuels are making a come back, especially in the U.S. due to INCREASED production.

http://www.smartmoney.com/invest/strategies/the-return-of-fossil-fuels-1341347671314/?link=SM_mag_lstop&mod=sm_mag#tabs

Green energy stocks have crashed in Germany because the Chinese state subsidised its green energy (mostly photovoltaic) industry greatly. There are now surplus output capacities and the Chinese are beating us in terms of price/Watt (they focused on this more than on photovoltaic efficiency).

The green energy sector is experiencing a boom, and it's utterly irrelevant what Wall Street or Deutsche Brse say about it.

http://solarfeeds.com/wp-content/uploads/wind-solar-germany.jpg

http://go635254.s3.amazonaws.com/solarpowerrocks/files/2012/01/china-solar-production.png
(I saw a newer graphic; the story continued with exponential growth in 2011.)

The Americans are losing this market race badly and are falling behind (even more so than the Germans), but that doesn't mean that green energy is in trouble globally.

[Bill Moore]

Fuchs,

I'm only aware of this through painful experience, but several Chinese solar company stocks have collapsed also. That doesn't refute what you're stating, and I agree the U.S. currently is competitive and will be positioned badly when they bounce back. I jumped too quickly into solar and wind without doing the normal level of research, so I deserved to get burnt, but green energy is still problematic. I think there are some emerging opportunities in green energy, but I don't think alternative forms of energy will be profitable for awhile. Profitable now are technologies that increase the efficiency of legacy carbon based energy sources.

[Firn]

I wonder how the turnover in the housing sector will affect the energy consumption of especially northern/central European economies. In the last decades houses have been increasingly better insulated with more efficient heating. Even when we discount energy production with solar&geothermal power the replacement of far more inefficient units should have a big impact on the energy consumption.

Maybe there is an interesting paper out there.

[Fuchs]

Bill, profitability and economic activity (or growth thereof) are different pairs of shoes.

My standard example which I offer to people who expect huge profits from growth market are airlines; huge growth sustained for decades, but many of them including big ones are barely able to avoid bankruptcy, if at all.

[Bill Moore]

Posted by Fuchs


My standard example which I offer to people who expect huge profits from growth market are airlines; huge growth sustained for decades, but many of them including big ones are barely able to avoid bankruptcy, if at all.

Excellent point, and one I haven't really considered. Obviously I need to do more studying in this field.

[Fuchs]

This is not meant as a guide to make money or other economic advice, but if I was looking for profitable businesses or sectors, I'd -among other things- look at their relative position in the chain of added value.

One example that shows the opposite of profitability, a business model that was good enough to survive but not good enough to pay more than bills:

I once calculated a business plan for a company that was modelled after another company. The other, existing, company had agreed to provide me internal data. Their reasoning was that the market needed more marketeers to widen demand and needed more companies in business to assure customers of security of supply. an additional competitor was more of a gift than a problem in this sector.
So I calculated and calculated and the result was no substantial profit under realistic assumptions. That turned out to be correct for the existing company.
Here's why:
The companies of that sector processed a single raw material. Their suppliers (farmers) were able to choose freely whether they want to supply this raw material or instead grow something else. The customers for the processed stuff on the other hand were free to choose freely between it and multiple synthetic substitutes.
These processing businesses were in a sandwich; zero market power against suppliers and zero market power against customers. Their only hope of profit laid in their skill at misleading their business partners about how much was left to squeeze out of themselves.

The opposite - a company with superior relative market power against suppliers AND customers - is almost inevitably a gold mine.

[Dayuhan]

Many alternative energy stocks were run up to absurd speculative levels during the oil price surge in 2007-2008. In most cases the "values" of these shares were totally disconnected from any fundamentals and were not sustainable. What followed was less a "collapse" than a return to realistic valuations.

There's certainly a future in alternative/renewable energy, but many of the companies in the field have a minimal track record and it's still way too early to determine what direction that future will take and which companies will be the main beneficiaries. Unless you have some serious technical expertise it's a sector to be cautious with: lots of hype flying around and you need to be able to sort the hype from the reality.

Chinese stocks... don't get me started. There may be some good companies there, but given the standard of reporting it will be difficult to find them.

[Bill Moore]

Dayuhan,

I generally stay away from the Tulip mania stocks and the ones I bought had moderate PE ratings (25 or less, which is low for a high tech company). Their value was reduced significantly due to the proliferation of competitors and the rising cost of raw materials. To be competitive they had to sell at lower prices (supply and demand), and combined with the rising costs of basic materials that means less profit, or maybe even a loss so they can keep the doors open. Add to that the global financial downturn which equates to fewer businesses and individuals buying solar it isn't hard to see what the drove the prices down. It will eventually sort itself out and the winners may turn out to be big winners in the long run.

As for China they have a couple of superb companies, but not more than a couple:D, but don't underestimate their ability to steal great ideas and technologies from the U.S. and Europe and market them at a cheaper price!

[Dayuhan]

Problem with trying to assess things like P/E ratios on Chinese stocks, especially with smaller companies, is that you have no idea whether the reported figures have any basis in reality. The accounting can be sloppy at best and fraudulent at worst. It's a serious minefield and one worth staying well away from unless you're willing to do a whole lot of digging into situations where accurate information may be very difficult to find.

[Rick M]

Over the past few years we've had several studies & articles posted here re. Saudi export decline.

This article from yesterday's Gulf News reviews some of those previous studies and offers a balanced, reasonable view of what may lie ahead:
http://gulfnews.com/business/opinion/alarm-bells-on-the-longevity-of-oil-wells-in-saudi-arabia-1.1082656

[Ulenspiegel]

The simple solution for Saudi Arabia and Asianand African countries with a high percentage of their electricity produced with oil and used during daytime for running ACs:

PV is cheap in these countries and makes economically sens with crude at 65 USD. At the moment Saudi Arabia losses 30 USD per barrel they burn.

[Fuchs]

(...) with crude at 65 USD. At the moment Saudi Arabia losses 30 USD per barrel they burn.

This doesn't seem to fit.
You seem to forget to include opportunity costs into how much they lose.

[Firn]

Without having the numbers it is difficult to make an educated guess, but I think one can say that the internal oil prices do not cause the forces of the market to create a lot of photovoltaics, even if the conditions for them might be close to ideal.

[Ulenspiegel]

This doesn't seem to fit.
You seem to forget to include opportunity costs into how much they lose.

will provide some data later