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10 Basic Facts of Peak Oil

General discussions of the systemic, societal and civilisational effects of depletion.

10 Basic Facts of Peak Oil

Unread postby Pops » Wed 11 May 2011, 12:46:16

Here are 10 facts about Peak Oil:

    Peak Oil
    1. Oil is a finite resource on a human time scale, unimpeded extraction of which typically follows a bell-shaped curve, with maximum flow near the middle followed by terminal decline. The "peak" is the point in time of highest flow and supply availability, with shrinking supplies thereafter. "Peak Oil" does not mean no oil, it means less oil.

    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.

If you have a fact you think is more basic or an argument with one of these feel free to post.
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Re: 10 Basic Facts of Peak Oil

Unread postby Ferretlover » Wed 11 May 2011, 13:14:52

Gosh, Pops, your number pretty much takes care of the whole thing! LOL

I guess that #2 would be: Nothing yet known to Man can fulfill all the needs that oil can.
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Re: 10 Basic Facts of Peak Oil

Unread postby rockdoc123 » Wed 11 May 2011, 13:31:26

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.

I believe this is important as it means that economics and technology will have significant impacts on timing, ultimate value and shape of the peak.
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Re: 10 Basic Facts of Peak Oil

Unread postby TheDude » Wed 11 May 2011, 13:46:37

Deploying substitutes for oil (electric vehicles etc) will be a lengthy process, taking at least a decade if not more, given the pace at which markets work.

There are various bits of evidence of imminent peak oil which might fit in:

Global discoveries peaked in the mid-1960s.

More and more production comes from offshore fields with steep decline rates.

Some 60% of production comes from giant or supergiant fields, which often decline quite abruptly.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 13:48:44

rockdoc123 wrote: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.
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Re: 10 Basic Facts of Peak Oil

Unread postby AdTheNad » Wed 11 May 2011, 13:58:32

Once oil has peaked, if population continues to rise the amount of oil per person reduces.

The easiest oil to extract will generally be extracted before other more difficult oil is. Therefore over time the net energy realised from the average barrel of oil falls.
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Re: 10 Basic Facts of Peak Oil

Unread postby Pops » Wed 11 May 2011, 14:14:32

    10 Basic Facts of Peak Oil
    1. "Peak Oil" is the point of maximum production followed by long term decline.
    2. Oil is a finite resource on a human time scale.
    2. Modern society depends on plentiful, cheap oil.
    3. Discovery of new oil fields peaked 40 years ago and very large fields earlier still (?)
    4. Easy & cheap oil will be depleted faster than harder and more expensive to produce oil
    5. Scaling up substitutes will take considerable time, once the need becomes generally accepted.
    6.
    7.
    8.
    9.
    10.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:20:46

As oil production declines exporting nations become wealthier, consume more, and thus reduce exports.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:23:34

The amount of oil used to produce oil steadily increases thus reducing oil available for useful economic work.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:27:00

In America, when oil costs exceed 4% of real GDP the economy goes into recession.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:29:27

Oil is the mother of all commodities and as the price of oil increases so do all prices.
Last edited by pstarr on Wed 11 May 2011, 14:48:27, edited 1 time in total.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:32:21

Oil is fungible and can not be stored in meaningful quantities, and thus is not subject to speculation.
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Re: 10 Basic Facts of Peak Oil

Unread postby pstarr » Wed 11 May 2011, 14:34:03

Oil production data is proprietary and all reported figures are at best mere guesses.
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Re: 10 Basic Facts of Peak Oil

Unread postby Pops » Wed 11 May 2011, 14:52:08

    10 Basic Facts of Peak Oil
    1. "Peak Oil" is the point of maximum production followed by long term decline.
    2. Oil is a finite resource on a human time scale.
    2. Modern societies and economies depend on plentiful, cheap oil.
    3. Discovery of new oil fields peaked 40 years ago and very large fields earlier still (?)
    4. Easy & cheap oil will be depleted faster than oil more difficult and expensive to produce.
    5. As oil exporting nations become wealthier, they consume more oil, reducing exports.
    6. The amount of oil used to produce oil steadily increases reducing oil available for useful economic work.
    7. Scaling up substitutes will take considerable time, once the need becomes generally accepted.
    8. Oil production data is proprietary and all reported figures are at best mere guesses.
    9. In America, when oil costs exceed 4% of real GDP the economy goes into recession.
    10.Oil is fungible and can not be stored in meaningful quantities, and so thus is not subject to speculation.

I think these should at least be debated I've seen different figures regarding oil/recession, I read one article that seemed to show recessions were more dependent on the rate of in crease than the absolute number.

And of course the speculation thing.
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Re: 10 Basic Facts of Peak Oil

Unread postby radon » Wed 11 May 2011, 15:44:26

Pops wrote:9. In America, when oil costs exceed 4% of real GDP the economy goes into recession.


Is this relevant?
You can equally say that in some oil-producing countries, when the oil revenues fall below 25% (or whatever % threshold) of GDP, their economy goes into recession.
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Re: 10 Basic Facts of Peak Oil

Unread postby Pops » Wed 11 May 2011, 16:18:07

radon wrote:
Pops wrote:9. In America, when oil costs exceed 4% of real GDP the economy goes into recession.


Is this relevant?
You can equally say that in some oil-producing countries, when the oil revenues fall below 25% (or whatever % threshold) of GDP, their economy goes into recession.


I agree, is this too bombastic or not bomb enough?

All modern economies depend on the ready flow of affordable oil.
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Re: 10 Basic Facts of Peak Oil

Unread postby Daniel_Plainview » Wed 11 May 2011, 16:24:29

Pops wrote:
    10 Basic Facts of Peak Oil
    1. "Peak Oil" is the point of maximum production followed by long term decline.
    2. Oil is a finite resource on a human time scale.
    2. Modern societies and economies depend on plentiful, cheap oil.
    3. Discovery of new oil fields peaked 40 years ago and very large fields earlier still (?)
    4. Easy & cheap oil will be depleted faster than oil more difficult and expensive to produce.
    5. As oil exporting nations become wealthier, they consume more oil, reducing exports.
    6. The amount of oil used to produce oil steadily increases reducing oil available for useful economic work.
    7. Scaling up substitutes will take considerable time, once the need becomes generally accepted.
    8. Oil production data is proprietary and all reported figures are at best mere guesses.
    9. In America, when oil costs exceed 4% of real GDP the economy goes into recession.
    10.Oil is fungible and can not be stored in meaningful quantities, and so thus is not subject to speculation.

I think these should at least be debated I've seen different figures regarding oil/recession, I read one article that seemed to show recessions were more dependent on the rate of in crease than the absolute number.

And of course the speculation thing.


We should consider mentioning the phenomenon of "demand destruction", such as the following: "Demand destruction" occurs when a sustained period of high prices or constrained supply reduces the demand for oil and oil-derived products.

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Re: 10 Basic Facts of Peak Oil

Unread postby TheDude » Wed 11 May 2011, 16:37:37

pstarr wrote:
rockdoc123 wrote: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.


I'm sure rock will personally tear you a new one about this, but I'll step in and point out that the ca. 6.7% figures are what obtains after the industry is done intervening with infill drilling and other measures to maintain production levels. Then they bring a surplus of new production to counter this decline, and overcome it if possible. The industry as a whole won't just drop dead when the absolute peak of production is attained, so in all likelihood the global decline will be gentle - 2% perhaps, as Staniford found when using declines extrapolated from HL in various nations.

Of course when the public at large finds out that supplies are dwindling they could demand that their respective militaries sieze oil producing assets on their own, which we can term "Lebensgas." :cry: Which would send production through the floor, probably for good. For years I've argued with people that peak oil should be taken seriously purely on its potential geopolitical risk.
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Re: 10 Basic Facts of Peak Oil

Unread postby ian807 » Wed 11 May 2011, 16:52:35

pstarr wrote:Oil is fungible and can not be stored in meaningful quantities, and thus is not subject to speculation.

Heavy, sulfur-laden oil with the consistency of tar extracted from a deep water rig off the coast of Brazil simply does not compare with light-sweet crude from Saudi Arabia in either cost or energy return.

So no, oil is not fungible. The oil market makes it appear so, but this hides the differing costs of exploration, extraction, refining and distribution. Neither is EROEI even remotely same for all extracted oil.

Peak oil is all about the aggregate of worldwide oil costs going up, and worldwide EROEI going down.
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Re: 10 Basic Facts of Peak Oil

Unread postby Queaks » Wed 11 May 2011, 17:01:30

Pstarr said: Oil is fungible and can not be stored in meaningful quantities, and thus is not subject to speculation.


I am afraid I can't agree with your premise at all!

Certainly to an extent oil is fungible (with the caveat that there are different "sweetnesses" which are not the same),but can not be stored in meaningful quantities, and is not subject to speculation? Can't agree there. First, by just "not drilling" (or more exactly not pumping) an oil producer can effectively store his whole reserve. If Saudia Arabia were to cease production, essentially storing all oil in their current location, speculators would go crazy!

Even consumer nations can store oil in empty oil wells (strategic reserve anyone), and affect the speculators by releasing that reserve when they need to move prices.

The whole price of gas in America is currently driven by speculation not supply. Our supply is nearly what it was last year, yet gas prices are higher. Speculators drive the prices in the short run more than any peak oil reality.

I make a good deal of money "speculating" in the Commodities and options market, and "risk premium" or volatility (which is speculation) drive the market more than fundamentals. That is true whether the good be oil or corn or gold.
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