Peak Oil is You
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Page added on February 10, 2014
Peak oil isn’t dead; it just smells that way
Energy analyst Chris Nelder fires back at the latest fact-free commentary on peak oil.
The Oil Drum, a Web site dedicated to informed discussions about peak oil and energy, announced on July 3 that it is closing down. (For a brief primer on peak oil, see my conversation with Brad Plumer in the Washington Post.) Those who hate the peak oil story didn’t bother to conceal their glee at the news; some even saw occasion to claim victory for their side in the “debate” over the future of fossil fuels.
“We could say ‘I told you so,’ not as a school-yard epithet, but simply as a fact,” crowed Mark Mills, co-author of a lightweight book entitled The Bottomless Well, which Publishers Weekly described as “Long on Nietzschean bombast but short on some crucial specifics.”
David Blackmon, a Houston-based consultant with a 33-year career in the oil and gas industry who is one of Forbes’ 1,300 advertorial “contributors,” called The Oil Drum “a site devoted a theory based on lack of imagination and growing irrelevance” in his mouthful of nuts.
Economist Karl Smith, another Forbes contributor, scoffed at the crucial distinction between crude oil and “all liquids” in his confusing word salad, asserting that “liquids like butane, propane and ethane are important petroleum products” without explaining why he believes they should be counted as crude oil, when they are not.
Emboldened by the recent exuberance over fracking in the United States, these pundits now claim that the only thing that has peaked “was the ability to argue that the era of oil, and hydrocarbons, was over.”
Not one of them said a single word about the global rate of oil production, which is the essence of the peak oil question. Why get into the data when merely slinging mud at your opponents and proclaiming your faith will do?
A handful of other writers offered less ideological takes. Matt Yglesias confessed that he “always found the ‘Peak Oil’ debate to be a little bit confusing” but recognized that there has been a profound price revolution: “The good old days of genuinely abundant liquid fuel really do appear to be behind us,” he wrote. Noah Smith had the most informed post of the bunch, noting that the transition to unconventional oil is a big part of why prices have been rising, and that “there is no substitute on the horizon” for good ol’ crude.
But neither of them mentioned the rate of oil production either.
Keith Kloor borrowed an Energy Information Administration (EIA) chart of U.S. production from a BBC article that repeated all the industry’s favorite talking points about how new technology has produced “a new oil rush.” Apparently, neither Kloor nor the BBC author realized that the chart represented “all liquids” production in the United States, not just crude oil, nor bothered to explore the detailed EIA data for themselves, nor tried to explain how this recent boom in U.S. production might dismiss the specter of a global peak. Kloor concluded that The Oil Drum was closing because “the numbers aren’t in your favor right now.” But like the others, he didn’t actually mention any numbers.
In short, all of these authors used The Oil Drum news to comment on the debate about peak oil — the poor predictions and demagoguing and pollyannish posturing and name-calling, which have, truth be told, tainted both sides of the issue — but none of them discussed peak oil.
I really didn’t think I’d have to say this again, but peak oil is about data, and specifically data about the production rate of oil. If you want to claim that peak oil is dead (or alive), you have to talk about data on production rates. There is no other way to discuss it.
Just for the record
Then what’s really going on here?
First, what did in The Oil Drum was volunteer burnout, falling visitor traffic, and an insufficient flow of high-quality original work and contributors. It’s unfortunate, because for the past eight years The Oil Drum has been the best free site on the Web for good rigorous work and informed discussion about energy data. I owe it a great debt for the education, the contacts, and the visibility that I gained through it.
I learned of its closing the same day I learned that Randy Udall had died. It was truly a sad and dark day for the peakists, one of those watershed moments that felt like a real turning point in the peak oil dialogue. Using the occasion to dance on their graves, as some ardent peak oil opponents did, was a low blow.
But the reason The Oil Drum has been lacking for good original content wasn’t that it had lost the argument and there wasn’t anything left to say. Far from it. The flow of content simply moved to where good analysts and writers on the subject could actually get paid for their work. That was inevitable, because a publishing model that relies on a steady flow of free articles that take days or weeks or even months of hard, highly skilled work to create simply isn’t sustainable. Freelance writers like me moved on to paying publications like SmartPlanet where we could actually make a living. Consultants and hedge funds began restricting their work to their private clients and subscribers, with maybe a teaser of free stuff posted in their blogs and newsletters. Investors and oil and gas companies began hiring capable analysts to do the work privately, after many years of enjoying the assembled intelligence on The Oil Drum (and trading it very profitably, I might add) for free. The volunteers who had put so much time into the site all these years discovered that they needed to spend their energies elsewhere. And the public got accustomed to higher prices, so the media stopped talking about peak oil, which led to a dropoff in traffic. Hey, that’s show biz.
It’s also true that many of us, having cut our teeth on the data and the dialogue at The Oil Drum, moved on to other pursuits. Once you’ve learned something, you don’t need to keep relearning it. Just speaking for myself, I moved on to grappling with the solutions to the peak oil problem: efficiency upgrades, financing, policy issues, transportation paradigms, and the transition to renewables. Merely revisiting the peak oil problem didn’t seem like a good use of my time, though I have continued to write about it as a context. I know that some other former contributors to the site changed their tacks similarly.
Second, fracking mania has been fairly well confined to the United States, because that’s where it is happening. Get outside the States for awhile, as I have done this year, and you quickly discover that people are still worried about the future of oil and gas. Probably because their oil and gas prices haven’t gone down, and their reserves haven’t gone up. There is absolutely no evidence that fracking will produce significant volumes of oil outside the United States any time soon.
Third — and I know this is gonna hurt a few writers out there, but it has to be said — very few people who have written about peak oil outside of sites like The Oil Drum ever did the hard study required to really understand it. They just picked a side, usually on tribal or ideological grounds, and commenced to defend that. Many of them don’t have a clue, even now, what the difference is between, say, proved reserves and resources, or what a reserves to production ratio is, or what a P50 estimate actually represents, or the production costs and energy content of non-crude liquids. Not a clue. I’d be willing to bet that 95 percent of them have never even built a spreadsheet of oil and gas data and tried to analyze it.
Most of what you’ve read about peak oil in the broader press has been written by generalist journalists. It’s an insanely complex topic that really takes thousands of hours of study to understand. But most of them haven’t done that study, and much of what they write is wrong. Usually they just rewrite the summary of a long and technical report written by someone in the industry. They don’t read the whole thing; they don’t have the time, or they may not have the chops to understand it. They don’t do original analysis or fact-checking. And too often they don’t seem to understand the context of the data, so they don’t give you any. What does 7, or 19, or 91 million barrels a day mean to the average person? Nothing. So they don’t talk about it. But they can certainly write the hundredth variation of a story about incipient U.S. “energy independence” and how that will overturn geopolitics, blah blah blah, while playing into the mythos of American exceptionalism, without understanding the data.
Likewise, it’s easy to speculate that the solution du jour — ethanol, biofuels from algae, the ‘hydrogen economy’, space-based solar power, fuel cells, methane hydrates, and so on — will save the day if you don’t actually dig into the data. Generalist journalists love to do that. Those articles generate lots of traffic and no one will ever hold them accountable for writing about a popular fantasy.
Actually, I’m being generous here by attributing their inattention to being generalists on tight deadlines. After a decade of this innumerate nonsense, I’ve begun to suspect either disinterest or laziness, or worse. Especially on the part of science and economics writers who clearly do have the chops to research and understand data. As Robert Bea, an expert who has studied some of the biggest civil engineering disasters in recent history, recently observed, failure is usually the result of hubris, shortsightedness, and indolence, not engineering. Our failure to prepare for peak oil is no different.
The only thing that most writers seem to have grasped is the hard reality of price. That’s easy enough; It’s published every day by a variety of agencies. A quick Google search will find it. It requires no study. Everybody cares about it. It’s cake. When prices are high, as they are now, those who only understand price look at it as evidence that the peak oil explanation has some merit. But price is fickle. When prices crashed into the $30s per barrel at the end of 2008, everybody was writing about how it was proof that the peak oil theory was wrong.
Those who do understand the technical aspects of the data are generally in the oil and gas industry. Most don’t talk about it because the data tells a story they don’t want told. So they try to divert the focus away from the data and onto the attitudes of the debaters. Or they just talk about the data that favors their point of view, like increasing technically recoverable resources and booming production in North Dakota and Texas. Most of the time, the ruse works.
So the tiresome “debate” about peak oil goes on, repeated as an endless Kabuki theatre of Malthusians vs. Cornucopians, ignoring the data in favor of another thousand words about attitudes and beliefs.
And in the middle, dear reader, is you. Caught between unwary and innumerate journalists on one side, and propaganda carefully constructed by those who are ‘talking their books’ on the other. Paying $4 a gallon for gasoline one day, then $2 six months later, then $4 again four years later. You don’t know why because the press never really explains it to you, the industry deliberately tries to confuse you, and politicians tell you whatever is needed to get your vote.
All I can say about that is: I’m sorry. It’s sad. I’ve been trying to get the facts out for years. It doesn’t seem to help.
The data
Now let’s talk about some data.
The world currently produces around 91 million barrels a day (mb/d) of ‘oil’ in the International Energy Agency’s definition, which is for all liquids. For the past two years, actual crude oil production (which includes lease condensate in the EIA’s definition) has been hovering around 75 mb/d on an annual basis, just slightly over the 74 mb/d plateau established in 2005.
The moment of truth for peak oil will be when the decline of mature fields finally overwhelms new production additions, and global supply begins to turn south. (A vogue alternative is that we’ll reach “peak demand” first, where oil is replaced by other fuels and demand falls due to greater efficiency, but as yet I find the proof that this has happened, or will happen, unconvincing.)
That moment of truth isn’t quite here yet. Fracking, along with all the other methods the world is employing to squeeze a bit more oil out of the earth, has barely budged global oil production. Here is the chart:
What do you see there? An ignominious end to an unimaginative story perpetrated by self-interested mavericks looking to raise their profiles and sell some books, or a plateau of production that just barely broke higher in the past two years after an absolutely heroic effort that required hundreds of billions of dollars of investment and a quadrupling of oil prices?
Now let’s look at non-OPEC production, without U.S. production:
Source: Peak Fish
See how production has been falling off in recent years? That’s happening because the the aggregate decline rate of all fields is around 5 percent per year. In other words, the world loses around 3.0 to 3.8 mb/d of production each year (depending on whose numbers you use). Most of the 2 mb/d “tidal wave of oil” from U.S. fracking was absorbed by the decline in the rest of non-OPEC, as we can see from the aggregate non-OPEC production in this chart:
Source: Peak Fish
The question isn’t “Can fracking save the world from peak oil?” but “How long can America make up for declines in the rest of the world?” The answer is probably not much longer. The growth rate of tight oil production has cooled considerably over the past year, and per-well production is falling.
Now let’s look at U.S. production in isolation. Here’s the “all liquids” chart that Kloor reprinted, presumably without realizing that it wasn’t just for oil:
Looks great, right? Huge turnaround. We’re back to 1985 levels!
Now let’s look at the chart of actual U.S. crude and condensate production, without all the natural gas liquids and biofuels and refinery gains:
Source: EIA
Hey, what happened to that huge spike in production returning us to 1985 levels?
Now look at the article where I explained the difference between those numbers, and why the “all liquids” numbers overstates actual U.S. oil supply by about one-third. Do you still believe Karl Smith, who explained none of that and offered no data but simply asserted that “ ‘liquids’ is not a weaselly term” and that we should count all liquids equally “because the US Presidential Primaries begin in Iowa?”
A few more facts about U.S. oil, since there has been so much confusion disseminated about it in recent months: America consumes 19.5 mb/d of oil and produces 7.4 mb/d. On an annual basis through 2012 it was the world’s largest crude oil importer, but has probably been surpassed since by China on a monthly basis. It exports more refined products like gasoline and diesel than it imports, but that’s simply because it has a very large refining complex and falling domestic demand, not because it’s on its way to energy independence. The United States will never be a net oil exporter, nor will it surpass Saudi Arabia in oil production, no matter what you may have read about “Saudi America.”
Now let’s talk about price. Since 2003, who forecast the global repricing of oil best, the peakists who expected prices to spike into record territory, or the Cornucopians who consistently predicted that oil prices would return to historical levels? The answer is indisputable: the peakists.
For the past decade, the Cornucopians have told us that a new abundance was coming from deepwater oil, tar sands, enhanced oil recovery, biofuels, and other unconventional sources. Global oil production would rise to 120 million barrels per day, and prices would fall back to $20 or $30 per barrel. Those stories were all completely wrong. The peakists called it.
Here’s what happened: Oil repriced in response to scarcity. Triple-digit prices were responsible for the new flush of unconventional production. That production, including fracking for tight oil in the United States, raises prices, it doesn’t lower them. We’ve hit and fallen back from the consumer’s price tolerance repeatedly for the past six years.
For a last bit of data, look at this forecast from the final post that petroleum engineer Jean Lahèrrere did for The Oil Drum:
(I used another of Laherrère’s charts in my post from March.)*
Laherrère concludes: “With the poor data available today, it seems that world oil (all liquids) production will peak before 2020, Non-OPEC quite soon and OPEC around 2020. OPEC will cease to export crude oil before 2050.”
Looking closely at Laherrère’s data, it seems essentially in line with my view that in another 18 months or so we’re going to get the signal that oil needs to reprice higher still to maintain production. That will be very difficult for U.S. and European consumers to stomach. Whether that repricing will bring more oil to market, or simply kill demand, remains to be seen.
This is what the data — not beliefs or rhetoric — tell me.
What’s your bet?
So here’s what we know.
High value crude oil — the good stuff with 5.8 million BTU per barrel that we can make into diesel and gasoline and a million other things — has been generally holding on to a global production plateau since 2004. Global production will fall when the decline of mature fields overwhelms new additions. When, precisely, that will happen, no one can say for certain. But it’s almost definitely before 2020.
Most of the non-crude liquids are not equivalent to crude. Apart from tar sands and heavy oil, they contain less energy and are far less useful. Some of them can’t be made into gasoline and diesel. But with regular crude production trapped at around 75 million barrels a day, these other liquids must meet all future increases in demand for oil. As they take an increasing share of the liquid fuel market, they gradually increase the price of “oil.” Nothing on the horizon will change that.
Eventually, the price will become too high, and we’ll have “peak demand” alright, but it will be primarily because of price, not efficiency gains, and will lead to economic contraction, not growth. That price will owe to increasingly marginal and difficult — hence, expensive — prospects. In that sense, it’s a supply side problem, a concept at the heart of peak oil. Is it clear now why the “peak demand” vs. “peak supply” argument isn’t really that interesting?
If U.S. consumers are able to tolerate, say, $5-7 a gallon for gasoline by 2020, then it’s possible that the production plateau could extend a bit farther, and my expectation that global supply will begin to slip around 2015 could be wrong. It won’t be off by much, and in the grand scheme of what it means for the global economy, a year or three plus or minus is essentially irrelevant. But if I am off by even six months, you can be sure that my detractors will come out of the woodwork to say I’m all wet, and that production is going to da moon.
But my bet is that U.S. and European consumers can’t tolerate significantly higher prices. Price tolerance is something that Cornucopians never talk about, so you won’t hear that argument from them. If I am correct on that point, then production will have to decline as prices become intolerable. By virtue of its upward pressure on price, unconventional oil production contributes to, not cures, peak oil.
I expect world oil production to rise, weakly, for another two years or so, as America falls into a deeper slumber believing that fracking has cured everything. The media will reinforce that belief. And when it comes, the wake-up call is going to be harsh. In the meantime we’re just going to be waiting for the punchline.
So to those who can grasp the data, here’s my final thought: How will you prepare yourself for The Great Contraction? You’ve got perhaps two good years left of business as usual, and maybe another three or four after that before things really get difficult. I encourage you to use them well, and do what you can to make yourself resilient and self-sufficient. What will you do 10 years from now if the price of gasoline is $10 a gallon?
Yes, we do need to have a serious talk about our values, hopes, beliefs, mythologies, and ambitions; about the embedded growth paradigm, the debt overhang, and economic theory in an age of diminishing marginal returns. Those are all important discussions. But let’s have them after we understand the facts about energy. Not before.
Whatever you do, don’t think that peak oil is dead just because some guy who doesn’t know what he’s talking about said so in a fact-free blog post. It’s coming. Later than some thought, but sooner than you think.
33 Comments on "Peak oil isn’t dead; it just smells that way"
rockman on Mon, 10th Feb 2014 1:36 am
Is PO dead? Very easy answer. No. Nor is it alive. PO is not a living entity…never was and never will be. PO is jut a statistical data point: the date on which global oil production reaches a level that will never be again reached.
Otherwise it’s a nice article. But I just don’t care for anyone’s effort to redefine the meaning of PO. It just adds to the confusion for Joe6pack IMHO. Arguing against the misuse of the concept tends to lend some support to those spurious pronouncements. But I suppose it has to be done to some degree. Just seemed like a lot of verbiage to make a simple statement of definition. Maybe I’m jut feeling a little too cranky tonight.
Makati1 on Mon, 10th Feb 2014 2:08 am
Price will crash the oil system before 2020 for sure. Probably by 2016-18. There will be recoverable oil in the ground when the last well shuts down and there it will stay.
I think the changes will be rapid and permanent this time. We may be entering the new Dark Ages, and, with climate change, may be also entering our species extinction event.
Northwest Resident on Mon, 10th Feb 2014 3:52 am
“…in another 18 months or so we’re going to get the signal that oil needs to reprice higher still to maintain production.”
“…my expectation that global supply will begin to slip around 2015…”.
“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in
output could reach nearly 10 MBD.” — From the Joint Operating Environment 2010.
A ten million barrels per day shortfall in 2015 will impact much more than the price of oil, IMO. It will be a huge psychological wake-up call, a shockwave to all those currently practicing the fine arts of the Cornucopians. Fear will be felt. It will start to get real.
Chris Nelder seems to think that after that initial shortfall which he also predicts in 2015-or-so, we will have another four years “before things really get difficult.” But, after shortfalls begin to hit, people around the world will finally realize once and for all that we are headed for contraction. Fear and panic will start to set in. Hope in maintaining BAU will fade rapidly. Investors will pull their money and start investing in survival bunkers instead. Those additional four years will certainly be interesting, if indeed we end up with “four more years” before things really get difficult.
PapaSmurf on Mon, 10th Feb 2014 5:09 am
Reading your comments is just so hilarious. You guys are all so deeply into the fetal position it is just amazing. Such narrow minded focus on the end of your world. The worship you guys have for oil is really amazing.
I just hit 14,000 miles on my Nissan Leaf. 15 months since I have visited a gas station.
Oh yeah, Tesla just finished a cross country corridor of Superchargers and ran a cannonball run race from LA to NY in 3 days.
You guys are living such a fatalistic fantasy. I was there with you back in 2004-2009 when there were no other options. But seriously, you guys need to wake up.
Gasoline is optional. Stop worshiping it.
PapaSmurf on Mon, 10th Feb 2014 5:15 am
Here is the current map of installed and operational Superchargers from Tesla. Recharge in 20 minutes and go.
http://supercharge.info/
They already cover 80% of the popular in the USA. By the end of 2014 they will have 98% of the USA covered. Europe also.
http://www.teslamotors.com/supercharger
Northwest Resident on Mon, 10th Feb 2014 5:39 am
PapaSmurf — Your high class approach to presenting a point of view is admirable. It is pointless to debate somebody on the subject of peak oil who has driven 14K miles in a Nissan Leaf. I mean, that proves your point beyond any doubt — who can argue with that indisputable proof that peak oil is a non-issue. Always looking forward to you next post, Smurf. Stop by in another few days or so when you feel compelled to release another burst of your inspiring wisdom. Until then, I’ll stay in my fetal position, worshipping oil and gasoline, as usual.
Stilgar Wilcox on Mon, 10th Feb 2014 5:55 am
Great summarization of peakists vs. cornucopian positions leading up to the current oil situation and of things to come. Data as it should settles the arguments.
PapaSmurf on Mon, 10th Feb 2014 6:18 am
You guys are great!
Davy, Hermann, MO on Mon, 10th Feb 2014 7:12 am
SAID – Northwest Resident
Chris Nelder seems to think that after that initial shortfall which he also predicts in 2015-or-so, we will have another four years “before things really get difficult.” But, after shortfalls begin to hit, people around the world will finally realize once and for all that we are headed for contraction. Fear and panic will start to set in. Hope in maintaining BAU will fade rapidly. Investors will pull their money and start investing in survival bunkers instead. Those additional four years will certainly be interesting, if indeed we end up with “four more years” before things really get difficult.
N/R, I am on the fence on this one. Can we manage a stair step which others like Nelder advocate? “OR” will the systematic risk really be the tipping point in vital areas and lead to catastrophic bifurcations unraveling our complex global system collapsing our delocalized local. One fragile weak link is of course the financial system. This makes me think you may be right N/R. If we had a healthy economy there could be enough “capex” and confidence to engineer a continuation of a bouncy plateau of pseudo growth. I mention pseudo growth because all we are really doing now is cannibalizing our support systems and pillaging the social fabric in a monumental wealth transfer to a global elite from the lower classes. I also think in the end lady luck will play a roll. I doubt it will be the Lone Ranger delivering the magic bullet of Technology. IMHO it is too little too late for technology. I see luck in the way the systematic risk unfolds. We get lucky and take a series of gentle steps down to a “not so hard” landing. In this case the one essential element of “time” allows for an unprecedented awakening of the world wide human spirit. This awakening further allows a significant level of the population to transition to a postindustrial mentality. We would still be in the bones of BAU but driven something like the Muslims of the 4th century to adapt to a new simplicity. QUIT DREAMIN DAVEY..ok sorry
PapaSmurf it is cats like you that name call that I know we got you spooked. Are you having panic attacks Ha….In any case I admire your car. I have a vw jetta tdi 40mpg.
Nony on Mon, 10th Feb 2014 2:13 pm
There were a LOT of screwed-up mid 2000s predictions. TOD died for a reason. People like Gail still selling the “cliff” meme show the silliness remains and some people are more faith oriented than fact oriented (most people really).
Peak Oil frenzy peaked in 2006, little repeak in 2009 and down significantly now.
http://2.bp.blogspot.com/-hC819n9EoFM/UfkIFielYMI/AAAAAAAAAlw/wgwD7GDqfqQ/s1600/screenshot_12.jpg
Score. Board.
Davy, Hermann, MO on Mon, 10th Feb 2014 2:37 pm
Nony, TOD died for a reason i.e. it planted seeds in multiple blogs elsewhere. The message became mainstream. Witness the overwhelming response by the “Lobbyist of Plenty”, MSM advertorial, and techno-optimist defending themselves. These folks are on the defensive and scrambling. If PO was dead it would be a mute subject. Why talk about it otherwise?
The mid 2000 prediction were correct because collapse almost happened and in a sense did happen. The old system of finance of fundamentals, real value, and real price discovery is gone. We have replaced it with a pseudo-centrally planned capitalism at the highest level. Some market structures exist but within these changes to the entire structure.
I find you guys who bash our cliff meme as unbalanced. Might be you are afraid of what we talk about. I in no way want this to happen and hope someone proves me wrong. I want to look like a dud with you all here, family, and friends. I have my small localized blog. I am fighting for a gradual decent with doing everything possible with BAU to assist us in this energy gradient decent.
P.S – In the simplest terms, an advertorial is an advertisement that disguises itself as an editorial.
SteveO on Mon, 10th Feb 2014 2:39 pm
“Peak Oil frenzy peaked in 2006, little repeak in 2009 and down significantly now.”
It will pop back on the sheeple’s radar the next time gasoline spikes to $4.00 a gallon. But as soon as demand destruction takes it back below that $4.00 magic number interest will fade again.
Northwest Resident on Mon, 10th Feb 2014 2:52 pm
Davy — If the population as a whole was logical, intelligent, hard-working, fit and altruistic then I would agree that we might be lead through a series of stepdowns to a post-industrial plateau. But they aren’t — not even close. The economy as we know is founded on faith and trust in “the system”. Once that faith and trust disappears, credit freezes up, investors run for the hills, people panic and raid their bank accounts and the supermarkets — the economy will fall. A 10mbd oil shortfall will leave somebody in the world without energy, with dire consequences. That shock will be felt worldwide when it happens — or at various points leading up to that 10mbd shortfall. That’s when faith and trust in the economies of the world will dissolve, if not before due to any number of major issues brewing in China or perhaps emerging markets or any other of numerous weak links in the chain. I hope that I’m wrong — a stepdown would be so much better for everybody. Especially for people like Nony and PapaSmurf who due to their inability to determine fact from fiction will be totally unprepared — and they represent the majority of people.
Nony on Mon, 10th Feb 2014 3:15 pm
NR: Check out a book called “Wolf and Iron” by Gordon R. Dickson. Written in the mid-80s and predicts an apocalyptic future, but based on a breakdown of the financial system. Pretty good book (it’s a novel, you can enjoy it without politics or predictions).
Davy, Hermann, MO on Mon, 10th Feb 2014 3:27 pm
NR, just trying to hold on to some optimism but much of my reading between the lines points to your conclusion.
Nony, will check out that book. My central concern is the finance system now with the brick wall the energy gradient. The energy gradient can be looked at scientifically the financial system is human nature. All of us know human nature????
bobinget on Mon, 10th Feb 2014 3:45 pm
IMO attention will shift to climate change as principal concern. Forget about ‘fracking’ controversies, it’s all hands on deck to protect costal cities worldwide against flooding. If you have a moment look at the news out of the UK. With more rain on the way, Southwest England is suffering the worst flooding in its long history. Records back to the 16th century have all washed out.. Recriminations are running rampant. One side saying rivers should have been dredged another saying that will make matters worse.
My point, interjecting GW in a PO discussion is this;
Most scientists agree it’s too late to stop GW but
still time to begin taking remedial action.
If it were only scientists few would bother to look up from their smart phones. As it happens there’s lots of money to be made before humans give up on our little planet. Big business, got the message.
For that action, we (humanity) will require every and all
energy forces mustered.
As for alternatives. Important questions need answering. Are we building massive solar or wind farms to “save the planet” or to produce electricity cheaper? Did railroads choose electricity to power locomotives over diesel because of the environment
or to cut costs? Does a Georgia farmer use PV’s to power a remote irrigation pump to keep her carbon footprint lower or save on diesel? (get the picture)
To further a point; It matters not if people believe in
‘peak oil’ or AGW. People will do what people need to do to survive. When over the counter costs for alternatives compete with peaked fossil fuels on performance, price and cleanliness, discussion over.
Current lifting costs alone for tight oil and gas
is proof enough for any business person.
Believe me, from Biggest of BigOil to independents
none are making huge profits or growing reserves.
When our own ‘shadow government’, Exxon Mobil,
takes risks once unthinkable, you know we have
‘peaked’ in oil production. XOM in fact panicked a few years ago and paid a huge premium for a natural gas
company of moderate prospects. Exxon, not alone
making last ditch natural gas stands, most BigOil are following suit.
It was BigOil, not Obama or Putin who called off bombing Syrian poison gas stashes. It was BigOil (including KSA and Russia) that put a hold on Israel’s bombing Iran.
Why? Because we, humanity, simply can’t get by w/o
Iran’s oil while we wait two thousand years for Iran to cool. The US, Russia, Saudi Arabia don’t give two
pins about Iran’s population or lack of human rights.
We simply need that gas and oil for our survival.
Why incidentally, sanctions on Iran’s oil deliveries are quietly being put to bed.
Growth as we once understood it, is no longer THE question. Entire new industries, “Environmental Remediation” which includes water purification,
fossil fuels & alternative energies, massive building projects to protect costal cities, dredging, pumping,
geoengineering, agricultural land and water rights speculation, on and on.
I’ll end my rant now. If you doubt this new climate industry is real, look at GE’s or your fav conglom’s recent acquisitions.
Northwest Resident on Mon, 10th Feb 2014 3:58 pm
Nony — I’ll check that book out too. BTW, I’ve read your posts with a lot of interest. You seem like a very reasonable and intelligent person. Which makes me wonder how you think that fracking will solve or eliminate our peak oil problem. Especially given the high decline rates and poor quality fuels derived from fracking, not to mention the extremely high $$$ and energy cost to get that fracked fuel out of the ground. Hope is a good thing, but these days it is better to place your hope “bet” on the number that’s likely to be a winner, and from my point of view, fracking ain’t it.
bobinget — I agree, climate change is a wild card in all this. It is the monster hiding behind the curtain, ready to jump on us just when we think we’ve duct-taped everything else together for another day or two. We talk about shortfalls in oil/energy — what happens when we hit shorfalls in food production? And those shortfalls, due to climate change, are just around the corner.
paulo1 on Mon, 10th Feb 2014 4:09 pm
A couple of things.
Smurf’s statement : “gasoline is optional. Stop worshiping it.”, is one of the most ignorant things I have read lately. Some examples: My neighbours are all retired and are pretty poor by suburban standards…but they don’t owe any money, they just don’t have any to spend. Their shared water line is under bureaucratic attack and they face the prospect of having to put in wells….here the costs will range from $5,000 for hoe dug well to $10,000 for a drilled well. They are sweating because they don’t have the money. Two have cancer. And they’re supposed to buy a Leaf or a Tesla for happy motoring? Tesla trucks will deliver groceries to the supermarkets for them to get food they can afford? US cities will explode with anger and unrest as far as I can see (when the fear hits) and I am pretty sure there will be many many no-go zones for those who have fancy electrics. I would guess that charging stations will be vandalised on a regular basis by those who can no longer afford to drive, (like those Leaf factory workers making $14.00 hr. in some sweltering southern state.) I could buy a Leaf, tomorrow. I won’t because I think they are too complex and they also do not have the range. I can’t haul firewood or sheep in a Leaf, can I? I plan on getting a new wheelbarrow before I ever buy electric and long before I park my ’86 Toyota 4X4 PU…..which I paid $5,000 for another lifetime ago. By the by, I was going to buy a new bicycle this year. Instead, I dropped $100 into the old one. That is the reality of Peak Oil….making do and fixing things.
When TOD shut down I was very very sad. It really provided a lot of information and links. It was an excellent site. But it was burnout that did it. I have always volunteered for whatever company I worked for to be Union rep and also worked with management, occasionally becoming management. I used to hear, all the time, Unions are dead…we don’t need them anymore. Funny that, now the same people who say that are whining about the demise of the middle class and how there are no benefits, health plans, or pensions. In my day we fought for them. In my day, if the company was in trouble or hard times time we were either laid off, we job shared, or took cuts in pay. When good times returned it returned for everyone….not just for the shareholders or owners (like today). But, and I am sure it was similar at TOD, I would look around and see only the same old faces. It was only the same dozen or so doing all the work and spending all the time and energy volunteering. The year before I retired I stepped down from management committees and union activities and I noticed everyone else I knew did too.
Now, I just don’t care anymore about it, which is also a symptom of burnout. As I write this I am looking out my window at a frozen river. The wind has switched around to the north and the snow is coming down, burying the daffs and snowdrops that dared poke their heads out a couple of weeks ago. But it is supposed to warm up and rain for a week. Soup is cooking on the stove and fresh bread is in the basket waiting for suppertime. Wine is satying cool in the cellar and the woodstoves are cozy warm. We have no booze bill, no heat bill, minimum electric costs, and minimal food costs as we produce most of our own. This is what Peak Oil knowledge did for us and what the The Oil Drum provided….knowledge and incentive. I will be forever grateful to Leanan and Ron P, Rockman and RMG, to name a few folks….Todd of course. My family, children, and grandchildren will also be thankful as they have resources waiting for them far more substantial than the promises of renewables and a garage with a Leaf in it.
regards….Paulo
Northwest Resident on Mon, 10th Feb 2014 4:24 pm
paulo1 — I love what you just wrote. Just wanted to say that. It goes without saying of course that converting the one billion or so autos/trucks in the world to run on rechargeable batteries is about the stupidest most ignorant and asinine idea that could possibly be put forth, but we come to expect “bright ideas” like that from some people.
BS on Mon, 10th Feb 2014 7:23 pm
A long time ago, I went to Ms for my work. A hurricane has just blown through. I went to the motel to check in and they gave me a key and told me where the room was located. I walked up a sidewalk and saw sheets hanging from a tree. I saw a huge tree blown over which had destroyed the sidewalk. I went to the room, unlocked the door and went in. Everything was soaked.
The next day I found another motel. When I went to a gas station, I could not get gas because electricity wasn’t yet available. I did not even think about a gas pump requiring electricity.
I never forgot those experiences. We expect our food to come from a large grocery store. We expect our lights to work essentially all the time. We expect to be able to drive where ever we choose. We expect too much.
Nony on Mon, 10th Feb 2014 8:10 pm
NR:
Thanks for the kind comment. You should check out Frank Herbert’s books. He was from the Northwest and interested in ecology. Just cool books too (Dosadai Experiment is a good one).
I recognize the decline rate. Everyone knows it. The wells are getting drilled based on high initial cost and high initial return. The long term helps of course, but NPV values a cash flow more in the present. Besides, everyone knows it. Even the proponents call it more like “manufacturing” or “mining coal”. So what. Not everything has to be a 10 year out, megaproject with huge upfront CAPEX and long term payout. It’s actually kind of cool that it can be done more well by well.
I don’t think that fracking will “save us” if you mean $30/barrel oil. But it is keeping the wolf away from the door (the 150/barrel oil). No one predicted 2 MMbpd of US tight oil in their PO charts. I think the long term prospect of tight oil drilling in other regions is interesting too and has some downward impact on futures (and therefore current prices). Sand is important too.
I think it’s also important to look at failed predictions and why…and to take predictors biases into account. Is it really surprising that people who hung out at TOD or ASPO underpredicted the Bakken? No. They underpredicted it because that is where there heart was. Heck Rune predicted 600-700 peak in a month that had 665! Just a little over a year ago. No the shale is not going to turn into enough to satisfy US demand. And it will peak in a couple years and then decline rapidly. But if the people who mispredicted it (and had all this apocalyptic other mispredictions, back in 2005), what makes me think they will get it right now? Especially if not updating their approaches and…just applying skepticism to themselves.
(I hope that made sense.)
Go Redskins, beat Cowboys. RG3, RG3!
Nony on Mon, 10th Feb 2014 8:12 pm
Oh…and the oil is not low quality. It’s light and sweet and would get a premium over sour heavy stuff on the world market. the reasons for local prices involve transport bottlenecks and export restrictions. It’s just a meme that any new oil would be like the stuff from sand. That’s what the peakers were peddling in 2005. So when this new source of oil comes in, y’all just assume it has to be low quality.
Davy, Hermann, MO on Mon, 10th Feb 2014 8:33 pm
Paulo, sounds like good livin to me. I had a mind’s eye of your view and home just now. I could smell the soup and bread. I felt the heat of the wood stove!
YEA, N/R, this plug in crowd sees it as green somehow. “But” then they bitch about coal, nuke, or gas. I would like to know what percent of all the plugins running in the world are running off renewable produced power. I imagine it is not significant enough to be considered green. Look at the renewables current market share that should tell you right there. Look at all the energy lost in conversion from fuel to electricity to battery to the wheels. Let’s just ask about the energy content of the manufacture??? There is some serious environmental impact in modern battery manufacture. I would also ask them how efficient is a single occupancy Leaf compared to a big American pickup full of people??? This whole electric transport thing is a niche nothing more. It does appear the plug in’s get high equivalent MPG but the whole life cycle cost is less rosy. I will say the hybrids are good applications for city driving. I have a jetta tdi (40mpg) but it stinks in the city. My driving is hwy mostly. On the farm I have a truck.
Northwest Resident on Mon, 10th Feb 2014 8:44 pm
Nony — I’m pretty late to the “peak oil” subject, to be honest. So, what peak oilers and doomers were predicting back in 2005, I’m don’t know because I wasn’t paying attention back then. In fact, in 2005, when my doomer brother and his friends were discussing the subject, I thought they were kind of nuts. But picking up from the here and now, who care if the peak oilers and the doomers were wrong back then. What is the situation now? Based on all kinds of evidence and expert analyses, it is clear that this shale boom will not last — you mention keeping the wolf away from the door, and that is IN FACT all it is doing. A couple more years, a few more years — how long before the major shale oil fields simply can’t produce the “abundance” that we have been told they will? What other major shale reserves are there that will replace the big ones now being tapped? I’ll have to leave it to the experts to argue the point that shale fuels are anything but low quality — your statement that shale oil is not low quality defies everything I read on the subject, and I read a lot. Maybe a thin portion of the total is “good quality” — possible?
What stands out to me in the below-quoted blurb is the low-octane value from gas distilled from fractured oil — which confirms (most everything) I’ve read about fracked oil/gas. But again, I’m not expert or even a novice — just trying to make sense of the situation.
The properties of the Bakken crude used in this study closely matched those in the published assay. Similar to other light crudes, raw Bakken crude has a low amount of FCC feed (< 28% at 680°F+). The straight-run (SR) Bakken sample was distilled into a 430°F− gasoline cut and a 430°F–650°F light cycle oil (LCO) cut, and the properties of these cuts were measured. The gasoline composition and properties were analyzed via proprietary octane calculation software based on detailed The gasoline fraction from the straight-run Bakken sample was highly paraffinic and had low octane numbersgas chromatography analysis.6,7 [a research octane number (RON) of 61 and a motor octane number (MON) of 58]. The LCO fraction had an aniline point of 156°F and an API gravity of 37.6°, resulting in a diesel index of 59. While the Bakken crude sample was light and paraffinic, it also had a heavy end.
http://www.hydrocarbonprocessing.com/Article/3250397/Processing-shale-oils-in-FCC-Challenges-and-opportunities.html
Davy, Hermann, MO on Mon, 10th Feb 2014 9:28 pm
N/R, Rock, I heard on an NPR podcast, on dangers of transporting oil in North America, Bekkan product is corrosive and high in salt content??? Maybe the chemical nature you mentioned above N/R is more corrosive then normal crude. I understand the product shipped from the tar sands is corrosive because of the process needed to make it mobile in a pipeline. This all spells further issues for the transport system and that is a depreciating high cost infrastructure wearing out quicker. This does not factor into any of these shale gas lovers. Don’t get me wrong, I remember a few years when I thought US was going to get the serious depletion hammer in both oil and gas and then this shale godsend! See how lady luck plays out or should I say high prices!
Northwest Resident on Mon, 10th Feb 2014 9:59 pm
Davy – I read in several places that fracked fuel/liquid is much more flammable, news that caused a drop in the stock prices of the companies working those frack fields.
Northwest Resident on Mon, 10th Feb 2014 10:02 pm
Davy — Sorry all for hogging this discussion board, but here is an interesting blurb that kind or relates to what you and I have been talking about, from ZeroHedge (in case you haven’t read it already):
All of these nearly incomprehensible shenanigans have been going on because debt all over the world can’t be repaid. The world’s economy, as constructed emergently over the decades, can’t function without repayable debt, which is the essence of “credit” — the fundamental trust implicit in banking. You have “credit” because other persons or parties believe in your ability to repay. After a while, this becomes a mere convention in millions of transactions. What’s happened is that the conventions remain in place but the trust is gone. It’s gone in particular among the parties deemed too big to fail.
Everybody knows this now and everybody is trying desperately to work around it, led by the Federal Reserve. Trust is gone and credit is going and debt is sitting between a rock and a hard place with its grubby hands pressed together, praying that it will be forgiven, forgotten, or overlooked a little while longer. By the way, the reason trust and credit are gone is because oil is no longer cheap and world economies can’t grow anymore. They can’t afford to run the day-to-day operations of a techno-industrial society. They can only pretend to afford it. The stock markets are mere scorecards for players who can only lie and cheat now to keep the game going. Somewhere beyond all the legerdemain and fraud, however, there remains a real world that is not going away. We just don’t know what it will look like when the smog of fraud clears.
http://www.zerohedge.com/news/2014-02-10/guest-post-smog-fraud
Davy, Hermann, MO on Mon, 10th Feb 2014 10:32 pm
N/R, Zerohedge posted Kunstlers Blog. Yea, Jim has a good handle on this stuff. Jim is highly entertaining I might add. This leads us to the clear and present danger of debt and the finance system. The problem for us is predicting human nature. That is all you can call a Ponzi scheme. It sure is not science. With this whole PO thing you can look at it scientifically and apply risk management ideas to it. You can easily see the systematic risk of a declining energy gradient to a complex global economy and a delocalized local life support system. This finance system is another story. When we had some fundamentals some years ago we could look at our finance system with a pseudo-science of economics. Today in the new normal we are dealing with smoke and mirrors. What is real? It is interesting how during the TOD days how many financial topics were discussed? Look at today and how many here on this PO site. We do know that the high oil price has led to the growth issues with knock on the debt issue door. This whole narrative has gotten so complicated but I find it interesting because it is starting to resemble fictional story. This would be fine except it is our lives in the balance in this story being told. At least oil is science and the story follows nonnegotiable laws. I guess there is quantum geology right Rock! Oh, yea, that is all the stuff you hear from the “lobby of plenty and eternal optimism”
Davy, Hermann, MO on Mon, 10th Feb 2014 10:36 pm
Davy — Sorry all for hogging this discussion board.
N/R, I am the hog. Pray for good weather guys so I can get back in the fields and put a honest day of work in and not hog your discussion board all day! Oh well N/R they don’t have to read us. Attorney say the more you open your mouth the more you will incriminate yourself…Ha
Northwest Resident on Mon, 10th Feb 2014 11:10 pm
Yeah, Davy. They also say it is better to keep your mouth shut and let everybody think you are a fool than to open your mouth and prove it beyond all doubt. I’m definitely taking my chances here… 🙂
J-Gav on Mon, 10th Feb 2014 11:18 pm
Davy & NW – You don’t sound like fools to me.
Dave Thompson on Tue, 11th Feb 2014 12:57 am
Chris Nelder has written an extra informative article here, with some great links no matter what your bend on the future of energy resources and their impact.
Davy, Hermann, MO on Tue, 11th Feb 2014 2:18 am
Thanks J, I value your opinion!