10 Basic Facts of Peak Oil

[pstarr]

Sure. ME reserve reporting is squeaky clean. Like a pig in a possum belly.



Maybe we should add Rule # 11 (like the volume control in "Spinal Tap")

11) ME oil producers lie.

[Ayoob]

how about the simple definition which so many people seem to misunderstand?

it is the point at which global production of oil will reach its maximum rate, after which production will gradually decline at an annual rate 6.7%, thus dropping to half in ten short years and essentially zero in forty five.

I believe this is important as it means that economics and technology will have little significant impacts on timing, ultimate value and shape of the peak.

There. I fixed it for you.

And there it is. This is what peak oil boils down to. Find the halving time, multiply that time by 5.5, and that gives you the zero date. If your 6.7% number is correct, the zero date is 55 years. That would be the most optimistic scenario, assuming that no producers sit on their yield, that political instability has no effect on oil production, that none is lost somehow, that we suck out the last drop and sell it for fair market value.

What happens at the first halving time? Well, half the oil consumption that happens today will cease. I'm sure some will continue their lifestyle by virtue of efficiency, others by inherited riches. However, the rest will share the loss of production. I wonder what the curve will look like? Will people walk five or ten miles to a minimum wage job because the cost of fuel will eat their whole paycheck? How much oil goes into the food that fuels that ten mile walk to the minimum wage job?

I've wondered for some time whether we'll go back to having human servants for the upper middle class to do their cooking and cleaning in the home or something like that. You hire somebody to be your personal servant, share living quarters. One works in the public or private sectors, the other picks up the crumbs left behind by that former middle class person as their servant.

What does the second halving time look like? We're down to 25% oil production in 20 years, I figure it's game over for all but the very few to buy internal combustion engine vehicles, or all oil is shunted to food production and people go back to reading books, playing sports, going to school, and hanging out. And working in the fields. Hard manual labor for almost all of us. The few remaining will be doctors, a few high ranking military and police officials, and the guys who make sure the sewer system keeps working.

The third?

Everyone fighting over a job picking apples with baseball bats and an image of their hungry children at home in the back of their minds.

[Pops]

Just the facts's Ma'am!
Lets try to keep this one thread to a discussion of specific provable facts, please, no forecasting allowed.

Personally the reserve jiggering isn't as big a deal to me anymore. When the argument was about an impending conventional oil peak this seemed important but we're past that - now it's about trying to get by on expensive energy until whatever big transition occurs.

But at any rate, most of the questionable reserves revisions are in countries with NOCs and no independent auditing and I've never seen an explanation for that aside from simple coincidence.

[rockdoc123]

Sure. ME reserve reporting is squeaky clean. Like a pig in a possum belly

a point made several times is the bump coincides with the point at which OPEC changed the manner by which calculation of production allocations would be handled. One entirely credible possibility is that they included probable reserves with proven as the criteria. This would explain a sudden bump of this nature.

[Pops]

OK! Sorry about the distraction.
Thanks to everyone for trying to talk down our latest suicide-spammer. A couple of you went to some trouble so if you want me to resurrect your posts just let me know.
-------

One entirely credible possibility is that they included probable reserves with proven as the criteria.

The thing that makes this a problem is that we are just guessing. Just as KSA wants to bring down the cost of oil right now to keep the junkie on the hook, publishing big numbers gives the impression there is no need to move away from oil.

[Serial_Worrier]

I'm sure we'll discover some magical fuel to replace oil in 30-40 years. Cornucopia forever.

[Pops]

I reworded a little for clarity and added the appropriate buzzwords in case someone would want to search the term, I don't think I changed any definitions. Whadda ya think?


1. Oil is a finite resource on a human time scale, unimpeded extraction typically follows a bell-shaped curve with a maximum followed by terminal decline. [Peak Oil]

2. Discovery of new conventional oil fields peaked 40 years ago and very large fields earlier still.

3. Easily discovered and extracted oil has been depleted first, leaving the difficult and expensive oil for last. [Low-Hanging Fruit]

4. Increasing energy expended in finding, developing, extracting and refining oil reduces the 'net energy' available for work. [Energy Return On Energy Invested]

5. As oil production declines and oil exporting nations become wealthier, they consume more oil internally, thus reducing their oil exports. [Export Land Model]

6. A tightening oil supply causes oil prices to increase, making once unprofitable oil profitable, however,
7. Increasing oil prices decrease oil demand by reducing the amount of oil consumers can afford to purchase. [Supply and Demand]

8. Increasing oil prices reduce consumption in other categories, depressing the world economy.

9. Scaling up substitutes for oil (i.e., electric cars), will take considerable time, and only after the need is recognized.

10. Significant amounts of national oil company data are unavailable, obscuring the true situation.

[MD]

...
But at any rate, most of the questionable reserves revisions are in countries with NOCs and no independent auditing and I've never seen an explanation for that aside from simple coincidence.

No? It's my understanding that in 1986 or so OPEC tied annual production allowances to stated reserves. The next year Kuwait suddenly discovered an extra 50 billion barrels or so, thus allowing them to ramp up production. The following year most other members followed suit.

[Pops]

I'm not sure of your point MD.

OPEC raised their reserve numbers drastically but since their books aren't open - or haven't been for a long while, I'm not sure you can say for sure much more than 'no one knows' without it being speculation, can you?

Personally I think they're just paper barrels or p5 wishful guesses but I have no facts.

[kublikhan]

Nice list. I went ahead and linked to various article on these facts to make it easier. Feel free to change any of the links to a better article if you know of one:

Peak Oil
1. Oil is a finite resource on a human time scale, unimpeded extraction typically follows a bell-shaped curve with a maximum followed by terminal decline.

Discoveries
2. Discovery of new conventional oil fields peaked 40 years ago and very large fields earlier still.

Exploration Costs
3. Easily discovered and extracted oil has been depleted first, leaving the difficult and expensive oil for last.

Energy Return On Energy Invested
4. Increasing energy expended in finding, developing, extracting and refining oil reduces the 'net energy' available for work.

Export Land Model
5. As oil production declines and oil exporting nations become wealthier, they consume more oil internally, thus reducing their oil exports.

The Consequences of Cheap and Expensive Oil
6. A tightening oil supply causes oil prices to increase, making once unprofitable oil profitable, however,
7. Increasing oil prices can decrease oil demand by reducing the amount of oil consumers can afford to purchase and/or
8. Increasing oil prices can reduce consumption in other categories, depressing the world economy.

Scaling Time
9. Scaling up substitutes for oil (i.e., electric cars), will take considerable time, and only after the need is recognized.

Unreliable Information
10. Significant amounts of national oil company data are unavailable, obscuring the true situation.

[Pops]

That's great Kub!

[Plantagenet]

7. Increasing oil prices decrease oil demand° by reducing the amount of oil consumers can afford to purchase. [Supply and Demand]

Great list. #7 could be clarified a bit more...

7. Decreasing oil supply causes increases in oil prices which reduces the amount of oil consumers can afford to purchase [Supply and Demand]

-----------------------

The demand for oil doesn't go down. The amount of oil being consumed goes down solely because people can't afford to buy as much at higher prices.

[MD]

...I'm not sure you can say for sure much more than 'no one knows' without it being speculation, can you?
...

Well, the facts are few:
-OPEC changed their production quotas
-within a few years the members raised their reserves.

Given those facts what are the possible reasons for the sudden increase? Here are a few that I can think of off the top of my head. I am sure there are more.
-changes to reserve calculation methods
-they all discovered 40% additional reserves around the same time.
-The big oil companies grossly underestimated reserves as they initially developed the fields in previous decades, and the opec revisions were corrective actions.
-OPEC members individually fudged their reserve numbers upwards so that they could ship more product as compared to the other members. Kuwait was first, most of the rest picked up on the game the following year, and Saudi Arabia finally tagged along.

OK, given the possible reasons as stated above, which speculation or combination of speculations is most likely the closest to the truth?

Or of course you can just shrug your shoulders and say "who knows?" By now it's mostly moot, so a shrug and a move-along is as good an answer as any, I guess.

[kildred590]

a point made several times is the bump coincides with the point at which OPEC changed the manner by which calculation of production allocations would be handled. One entirely credible possibility is that they included probable reserves with proven as the criteria. This would explain a sudden bump of this nature.

They also happened all to have foreign deficits at that point.
And the reserves were used as capital to secure loans - funny that.

4. Increasing energy expended in finding, developing, extracting and refining oil reduces the 'net energy' available for work.

It's much more important than that.
It reduces "net labour"
Labour drives growth (a commodity has no value until labour is applied).
So a reduction in labour will reduce the money supply (which is what we are seeing right now).

[quote6. A tightening oil supply causes oil prices to increase, making once unprofitable oil profitable, however,
7. Increasing oil prices decrease oil demand by reducing the amount of oil consumers can afford to purchase.
8. Increasing oil prices reduce consumption in other categories, depressing the world economy.][/quote]

You've ignored two points,
first, energy can be obtained from other sources,
secondly, this energy requires more labour (COST), and therefore net labour-surplus and money supply is LOWER.
This means that less CAPITAL is available to secure loans and CREDIT becomes scarcer.

[Keith_McClary]

I still think it should say something like:
"Even if there is twice as much oil as we think, it only moves the peak ahead a few years."

Also it should mention that consumption has exceeded discovery for decades.

I know this isn't about countering the standard cornie talking points (that's your next assignment ), but the knee-jerk response of many people is "we've got X years of reserves, same as we had 20 years ago, what's the problem?". Of course the answer is that the reserves 20 years ago were of $10 oil. This could be addressed in #6.

I think some people have a conceptual problem with "finite" and "infinite". They can accept that resources are not infinite, but also seem to believe that they can grow without bound (which is the definition of infinite).

[Pops]

4. Increasing energy expended in finding, developing, extracting and refining oil reduces the 'net energy' available for work.

It's much more important than that.
It reduces "net labour"
Labour drives growth (a commodity has no value until labour is applied).
So a reduction in labour will reduce the money supply (which is what we are seeing right now).

I think you misunderstand the point here, or I don't understand your point.

No 4 is talking about how much energy is left over to use once you subtract the energy required to produce whatever is the final product - crude oil lets say. All the energy used to explore, drill, pump, refine, etc.
So if it takes 20 BTUs input to produce 100 BTUs of gasoline, you are getting a better Energy Return on Energy Invested than if you must put in 40 units to get 100 units out - 80 net units vs 60 net units.

The upshot is that as conventional, onshore wells (like the gusher in Giant) become extinct and we expend more and more energy on harder and harder oil, eventually we'll be using more than we're getting.

(EROEI is always negative of course if you count the energy embodied in the oil itself but that's another thread :^) )

[Pops]

Peak Oil
1. Oil is a finite resource on a human time scale, unimpeded extraction typically follows a bell-shaped curve with a maximum followed by terminal decline.

Discoveries
2. Discovery of new conventional oil fields peaked 40 years ago and very large fields earlier still.

Exploration Costs
3. Easily discovered and extracted oil has been depleted first, leaving the difficult and expensive oil for last.

Energy Return On Energy Invested
4. Increasing energy expended in finding, developing, extracting and refining oil reduces the 'net energy' available for work.

Export Land Model
5. As oil production declines and oil exporting nations become wealthier, they consume more oil internally, thus reducing their oil exports.

The Consequences of Cheap and Expensive Oil
6. A tightening oil supply causes oil prices to increase, making once unprofitable oil profitable, however,
7. Increasing oil prices can decrease oil demand by reducing the amount of oil consumers can afford to purchase and/or
8. Increasing oil prices can reduce consumption in other categories, depressing the world economy.

Scaling Time
9. Scaling up substitutes for oil (i.e., electric cars), will take considerable time, and only after the need is recognized.

Unreliable Information
10. Significant amounts of national oil company data are unavailable, obscuring the true situation.[/quote]

[Pops]

I know this isn't about countering the standard cornie talking points (that's your next assignment ),

I think it would be cool to have internal discussion threads linked from each fact, that way we could expand on each point to our hearts content.

[DomusAlbion]

Excellent work Pops! And all you collaborators, too.

Now we have talking points with links to data and further elaboration.

Thank you all.

[pstarr]

Just like spinal tap, the basic facts need to go up to 11. One more; people are too self-obsessed to ever consider that the universe doesn't revolve around them.