10 Basic Facts of Peak Oil

[Pops]

2. Discovery of new oil fields peaked 40 years ago and very large fields earlier still (?)
No, discovery is too ambiguous to be sure of the numbers. 1st, Most middle east supergiants discovered before 1970, the ones that make up the peak of discovery in doomer charts, would have run dry long ago if it wasn't for later much more oil being 'discovered' in those same reserviors.

Sure, reserve numbers go up (and down) with price, and technology has "discovered" more oil in fields first located in the 30's and 40's - you'd kinda expect that. How did they find oil back then anyway - divining rod or the Jed Clampett method? But revisions aren't "new" fields, and up 'till they started looking under salt things were pretty slow.

But Sugar-Loaf/Tupi/etc really could be something huge, maybe even a years worth of consumption when it's all said and done. Of course we'd better hope we make some discoveries or we really are cooked.



Still BP last year only showed a couple of years increase in reserves/use after all that.

4. As oil exporting nations deplete reserves and consume more oil internally, their exports fall.[/i]
Ok. But we're still waiting for the US to significantly deplete it's oil reserves. The US is today pulling just below 1970\1 record amounts of crude.

Piss! I didn't read this, I thought you were being serious. Go do some homework.
Here let me hekp, I've wasted this much time.
LINK

[pstarr]

He said the same thing last week and so I immediately dismissed him and everything he has ever written. However creatively formatted it is.

Ok. But we're still waiting for the US to significantly deplete it's oil reserves. The US is today pulling just below 1970\1 record amounts of crude.

Piss! I didn't read this, I thought you were being serious. Go do some homework.
Here let me hekp, I've wasted this much time.

[Pops]

I was going to argue the "wealth" part of ELM with that graph showing the US net exports shooting up after peak even though that was the exact same time income flatlined productivity decoupled from income, and oil use per GDP $ but my brain is getting tired...

10 Basic Facts of Peak Oil
1. "Peak Oil" is the point of maximum production followed by terminal decline.
2. Oil is a finite resource on a human time scale.
2. Discovery of new oil fields peaked 40 years ago and very large fields earlier still.
3. Easily extracted (inexpensive) oil will be depleted faster than difficult and expensive oil.
4. As oil production declines exporting nations become wealthier, consume more, and reduce exports.
5. Increasing oil prices can increase reserves by making once unprofitable oil profitable
6. Increasing oil prices decrease demand by reducing the amount consumers can purchase
7. Increasing oil prices reduce discretionary income available for other uses depressing the economy.
8. Scaling up substitutes for oil (i.e., electric cars), will take considerable time, after the need is recognized.
9. Significant amounts of national oil company data are unavailable, obscuring the true situation.
10. Increasing energy expended in finding and developing, and often in extracting and refining oil reduces the net energy produced.

[kublikhan]

The US is today pulling just below 1970\1 record amounts of crude.

I did a double take when I read this one too. Meemoe, I hope you correct your error here because this statement is clearly false.

[Pops]

So his inclusion of futures trading in the same sentence as spot selling (as part of the new free-market mechanism) does not verify your speculation explanation.

No it says nothing about speculation but what it does do is explain how physical oil is traded:

1. Most physical oil is sold on contract and by formula, not on the spot market

2. The formula is based on a "price indicator" like the spot or futures market to discover the "True" price

3. The spot market became very "thin" and easily manipulated because there was so little actual oil trading hands

4. Many contracts now are now based on the futures market

6. And everyone from CalPers to mutual funds to half the people on this board speculate on futures contracts.

So what am I missing?


This EIA page backs up this explanation

[Edit for dumb grammar]

[TheDude]

Nice chart, Pops. It isn't backdated but that is useful as well - it shows the status of fields at the present. Notice that Samotlor is almost at the end, despite being the 3rd large producer ever - at its late 70s peak it was providing almost half of FSU output, which would be ca. 5 mb/d - Wiki however states ca. 7 mb/d! It's the bulk of the peak of discovery in 1965, with 44 bbo. Samotlor Field - Wikipedia, the free encyclopedia

For contrast Brazil is planning to increased production about 2 mb/d, to be charitable. Maybe they will surpass expectations and produce much more, but that hasn't really been the case in UDW - read some of Darwinian's posts on ThunderHorse at TOD. All of the data he's dug up on this field shows it underproducing drastically.

[TheDude]

I locked horns with Meemoe here: Re: EIA reports a new peak in crude oil at 75.282 million bp

[kublikhan]

I locked horns with Meemoe here: Re: EIA reports a new peak in crude oil at 75.282 million bp

Oh I see what happened. Meemoe just made an apples to oranges error. I though he was trolling us. He took the US total oil supply numbers from Dec 2010(~10 Mbpd) and compared them to the crude only numbers from 1970(~9.5 Mbpd). Then he thought we were all blind ignorant doomers who ignore facts when we did not agree that 10 Mbpd was bigger than 9.5 Mbpd.

Ok I'll see if I can explain this for you Meemoe. The graph that Pops posted was crude only. It shows the US peaking in crude only production at around 9.5 Mbpd in 1970. It has fallen to around 5.5 Mbpd today. Again, that is crude only.

There is a different metric called total oil supply. This includes not only crude, but also Natural Gas Liquids, Other Liquids, and refinery processing gain. The Total Oil Supply of the US also peaked in 1970 at around 11.7 Mbpd. Today it's around 9.7 Mbpd.

There is a nice graph here, but the info is a bit dated: The Petroleum Gap

There is nothing wrong with using the Total Oil supply metric instead of the crude only numbers. But you have to compare crude to crude or all liquids to all liquids, you can't mix and match TheDude mentioned this in the thread linked above, yet you still posted that wrong info in this thread. I hope this clears up any confusion you had.

I hate to confuse you further on this issue, but total supply can be misleading because it includes things like ethanol. Corn Ethanol EROEI and MROMI is MUCH poorer than crude oil. That means even though total liquids has not fallen as sharply as crude(2Mbpd fall instead of 4Mbpd fall), the average EROEI of total liquids is going to fall as we get ever increasing amounts of liquids from sources like Corn Ethanol and less from sources like crude oil.

[sparky]

.
Pops , great curve for the oil fields

On the physical market and future market relationship for crude

the physical market is for users , they will need some crude and intend to obtain it
this , typically.....

Refineries , their main concern is stability of prices and delivery of the most advantageous grades to process ,they enter the future market as a stabilizing factor
if the price goes up too fast they will sell a portion of their deliveries and make profits
the net result is that their storage will be run at a lower level .
ultimately they will have to purchase enough crude to make up the difference but the critical factor for them is the rate of increase , a slow long term increase is not a problem
If the price drop too fast , they buy some futures , at worst they will have plenty of crude in storage

That's management at the margin , they never loose

Airlines companies , their operating cost is strongly influenced by the oil price
they buy more that they need , selling the excess
if the price goes up they make a profit but loose on their jet fuel bill
if the price goes down they loose some but are singing with glee because the jet fuel is cheaper
anyway they lose a little but gain a lot more , like an insurance

That's management by mitigation , they cover their loses

another ( small ) player is the government(s) purchase for their strategic reserve
the goal is to keep the reserve full at the cheaper price .
they can sell small amounts when price explode and buy when they crash
Their purchase policy is of course secret ,
a good guess is that they use oil companies to hide their trading

That's management by "inertia " ( like a fly wheel ) can't loose , except taxpayer money

But then there is another type of players
the greater bulk of future trading is by people who have no intention or means of handling physical deliveries , thus they are in a zero trade game , all the contracts will have to balance
they have no particular interest if the price goes up or down ,
their only concern is that it change , providing a differential , the greater the better

That's management by gambling opportunism

As gamblers they provide the bulk of the losers


P.S. What I just said could be nonsense , but it's a good rule of thumb

[Expatriot]

5. Scaling up substitutes will take considerable time, once the need becomes generally accepted.

There are no substitutes - the word "substitute" implies some sort of equality.

Belief that there are "alternatives" and/or "substitutes" is a major part of the problem.

[Pops]

.
Pops , great curve for the oil fields

On the physical market and future market relationship for crude

Thanks Sparky, if you read the paper I linked and the eia page, what you see is the futures markets are used as the "price discovery" mechanism for the majority of physical oil trades.

Here is a relevant excerpt:

The declining liquidity of the physical base of the reference crude oil and the narrowness of the spot market have caused many oil-exporting and oil-consuming countries to look for an alternative market to derive the price of the reference crude.

The alternative was found in the futures market. When formula pricing was first used in the mid-1980s, the WTI and Brent futures contracts were in their infancy. Since then, the futures market has grown to become not only a market that allows producers and refiners to hedge their risks and speculators to take positions, but is also at the heart of the current oil-pricing regime. Thus, instead of using dated Brent as the basis of pricing crude exports to Europe, several major oil-producing countries such as Saudi Arabia, Kuwait and Iran rely on the IPE Brent Weighted Average (BWAVE).

The shift to the futures market has been justified by a number of factors. Unlike the spot market, the futures market is highly liquid which makes it less vulnerable to distortions. Another reason is that a futures price is determined by actual transactions in the futures exchange and not on the basis of assessed prices by oil reporting agencies. Furthermore, the timely availability of futures prices, which are continuously updated and disseminated to the public, enhances price transparency.

[Pops]

5. Scaling up substitutes will take considerable time, once the need becomes generally accepted.

There are no substitutes - the word "substitute" implies some sort of equality.

Belief that there are "alternatives" and/or "substitutes" is a major part of the problem.

Hmm, still, there are substitutes even if they aren't perfect replacements - like it says in my sig...
What do you suggest?

[Pops]

I would slightly amend point one, to reflect the availability of oil to individual consumers.

Top 10 peak oil facts:
1. "Peak Oil" is the point of maximum availability per consumer followed by long term decline.

I'll be interested to see how this looks when the new BP numbers come out, probably next month?

Here is per capita primary energy (the Olduvai chart I've been keeping up) through '09 and there was a new low in oil/person after the downtrend the last few years although it's more than made up for by a big increase in coal and gas. And notice also the huge drop in "other"! The amounts are layered so you can better see the relative change.




Off the chart to the left is where actual peak oil per capita happened, I can't remember exactly but it was in the mid- 70s. Dieoff, my first peak oil page...

[Pops]

We've also neglected Mr. Jevons...
Anyone pay attention to him any more?

An interesting article...

??

[Pops]

And before I forget how about this?

"2. Modern society depends on plentiful, cheap oil. In America, when oil costs exceed 4% of real GDP the economy goes into recession."

My point was that what an oil-importer sees as a problem, an oil-exporter may view as a bounty, and the other way round. And the oil pricing at a specific point in time does not have to be necessarily peak-oil related.

I'd rather stay away from absolutes and figures (especially those where there is still debate) and just stick with "principles". I've seen convincing paper that have higher numbers and also a paper that indicates it's not the absolute percentage but the rate of price increase that causes a downturn.

[Expatriot]

Hmm, still, there are substitutes even if they aren't perfect replacements - like it says in my sig... What do you suggest?

All POer understand that oil is running out and that it will be world changing.

I learned a few years back on this site, however, that there are two types of POers.

The first type understand that, given human propensity for war and aggression and resource monopolization, carnage must result from PO.

The second type see the PO problem, but like the cornucopians who don't want to understand PO, they suffer from a tremendous normalcy bias. These POers go on and on about substitutes, alternatives, electric cars, high speed rail, battery technology, and so on. They use words like "soft landing" and discuss how people, gee whiz, will come together when, finally, after all of our waiting, Peak Oil is understood by the masses. They will come together and "work on solutions" and so on.

In short, this second type suffers from the exact same normalcy bias that restricts the thought process of the non-PO crowd. They have, essentially, taken one further step toward understanding where we're going, but they refuse to take any further steps. Ironically, they do so for the same reasons the non-PO crowd does - a fear of shedding the normalcy bias.

So, Pops. To answer your question. I don't suggest anything, because there's nothing that can be done.

Substitutes will not "come on line" after "investment" and "years of development."

It's a f----ing cornucopian, normalcy bias-induced pipe dream.

What's going to happen is that there is going to a brutal, worldwide riot to fight for the remaining oil. It will last a very long time. It will kill many people. It will upset any balances that have been established in the world. It will result in the end of the modest liberty we now have. It will sic brother upon brother. It will be merciless..

We are, in fact, in the very early stages of the scrum.

Think on it, delusional POers. Gasoline is still reasonably priced in the Western world. Most people still have a reasonable living. Most people are still well fed. Most people still believe that things can get better, and that the economy is in a temporary downturn.

In short, mob mentality is still in the nascent formation stages, and we have not yet arrived at the time when self-interest overtakes any urge toward humanity we may have.

Times are still, in fact, better than they were at any time before about 30 years ago.

And what are we seeing? Riots and revolutions across N. Africa and the Middle East. Ongoing protests and dissension in Europe.

We're on the cusp. This is with oil at 100 a barrel.

Carnage imminent.

Any discussion of "alternatives" and "substitutes" is misguided, because it takes the focus off of where it needs to be - which is on the fact that the world is a powderkeg that has a lit fuse. The focus needs to be on preventing a complete breakdown in social order.

[dolanbaker]

The second type see the PO problem, but like the cornucopians who don't want to understand PO, they suffer from a tremendous normalcy bias. These POers go on and on about substitutes, alternatives, electric cars, high speed rail, battery technology, and so on. They use words like "soft landing" and discuss how people, gee whiz, will come together when, finally, after all of our waiting, Peak Oil is understood by the masses. They will come together and "work on solutions" and so on.

You're making the classic mistake in thinking that oil is the only fossil fuel currently available, in the near term 30-50 years other fuels can indeed fill the gap left by declining oil supplies.

Of course these substitutes are inferior and will cost consumers more, but they will be available to those who can afford them. In the future the real issue is likely to be which nations will be able to afford to use those fuels and what percentage of the fuel will be left for the others. There is a great levelling in global per capita consumption going on at the moment, led by Chindia one litre of fuel provides much more useful energy to an Indian family than the same litre in the US.

Wasteful consumers will eventually be left high and dry and nothing (except war) will change that fact. In the long term of course, there will only be substitutes, but without some future developments, they will not be able to sustain BAU as we know it.

[Expatriot]

You're making the classic mistake in thinking that oil is the only fossil fuel currently available, in the near term 30-50 years other fuels can indeed fill the gap left by declining oil supplies.
Of course these substitutes are inferior and will cost consumers more, but they will be available to those who can afford them.

Time will prove you wrong.

Consumers can barely afford the very inexpensive 4 dollar gas.

It's a cornucopian dream to think that 20 dollar a gallon synthgas derived from coal will somehow prevent chaos.

You are correct in seeing that "they will be available" and "some will be able to afford them," but you are missing that chaos will ensue when enough standard of living is taken from a certain portion of the population, regardless of some other portion being able to buy the 20 a gallon fuel.

[Pops]

[

10 Basic Facts of Peak Oil
1. "Peak Oil" is the point of maximum production followed by terminal decline.
2. Oil is a finite resource on a human time scale.
2. Discovery of new oil fields peaked 40 years ago and very large fields earlier still.
3. Easily extracted (inexpensive) oil will be depleted faster than difficult and expensive oil.
4. As oil production declines exporting nations become wealthier, consume more, and reduce exports.
5. Increasing oil prices can increase reserves by making once unprofitable oil profitable
6. Increasing oil prices decrease demand by reducing the amount consumers can purchase
7. Increasing oil prices reduce discretionary income available for other uses depressing the economy.
8. Scaling up substitutes for oil (i.e., electric cars), will take considerable time, after the need is recognized.
9. Significant amounts of national oil company data are unavailable, obscuring the true situation.
10. Increasing energy expended in finding and developing, and often in extracting and refining oil reduces the net energy produced.

[Pops]

The first type understand that, given human propensity for war and aggression and resource monopolization, carnage must result from PO.

There are potential outcomes all across the spectrum. Since they are all conjecture, they are all subject to eternal debate, revision, and of course, error. I'm not saying your prediction is wrong, but as you said yourself, only time will tell.

I'm trying to figure out 10 basic facts that no amount of fluffery can argue, which is why this point still needs massage - or maybe surgery:

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