[SHiFTY]

I am posting this in the interests of rational scientific debate about this subject. I have some serious problems with the theory behind peak oil and would like to hear people's opinions.

My problems are threefold:
1)Peak oil theory relies on dubious assumptions;
2)Peak oil fails to count any geo-political factors which influence oil production; and
3)peak oil theory fails to account for other economic factors, including how markets work.

1) Non-proven assumptions: The basic theory of peak oil is that US oil discoveries peaked, and about 15 years later, production peaked and then declined irreversably. The main assumption is that the aggregate production of the entire world's vast oilfields will also follow a similar distribution- the peak production will follow peak discovery. This incredibly crucial assumption is the chief flaw in the peak oil theory.

The problem is the classic western mindset- the whole idea that, through technology and capitalism you can ruthlessly exploit a resource as much as you can, for maximum profit, until it is gone.

In the US boom days, there were wildcat drillers and companies competing against each other, the race was on. When one player got too big (Standard oil) it was broken up by the government. Profit was the motive, free markets allowed anyone to have a go, and property rights created the conditions for the oil boom.

None of this is true in the dominant oil producers of today.

There exists a vast world out there with many different mindsets to the one we are all used to. Most OPEC countries have a single oil producer- the government, or more accurately the governemnt owned oil company. As I'm sure the free marketeers will attest, governments are generally bad at running efficient for-profit businesses, and often have very different motives, for example sustainability/conservation, local development and particularly staying in power.

This may lead to deliberate underinvestment in oil production- why should a government strip-mine their resources when they can leave some for future generations. I believe this is the reason that Iraq has only a few thousand wells that have been drilled, while Texas has over a million.

So if this is the case, could it not be possible that there are many billions of barrels being extracted very inefficiently, or deliberately left in the ground. The motive of OPEC and the other state producers is to produce oil at a huge profit, but not so expensive that alternatives are viable. This does not sound like the US oil producers at all- it is a cartel versus a competitive market.

In my mind tends to suggest a plateau of production rather than a peak production.


2) Geo-political factors. Many oil producers have much more riding on oil than just a change in lifestyle. The west basically keeps half the mid east at peace- the luxury existence of the princes Saudi are legendary. Most of these countries and their rulers are supported militarily by the west, so long as the oil keeps flowing. However, if and when it stops flowing, the people will probably rise up in an Iranian-style revolution. Therefore it would be in the interests of these rulers to keep production tight and underinvest.

I also believe that the US has done itself a disservice in playing hardball with Iran. Not only does it now probably have nukes, but the hardliners have whipped the population into a frenzy of fundamentalism. This is witnessed in their choice of a fairly anti-west president. This is a shame as Iran seemed to be "coming around" towards a more moderate outlook.

With oil supplies tight, and possible nukes, they know they have the west by the balls. Just by cutting production, they can cause an economic recession! If they overproduce their oil, they lose this advantage. Another reason to underinvest.

Russia is the same- their oil resources are incredibly strategic to their interests. They are unlikely to want to burn through their resources just to keep Americans in SUVs.

3) Other economic factors make peak oil less likely. It may have escaped many, but the value of the US dollar is very low, it has been effectively devalued heavily against many other world currencies and commodities. The price of gold, for example, has increased roughly the same percentage amount as oil. See the graphs below.





This implies that the price of oil is high because the value of the US dollar is low, or has been manipulated that way.

The other economic factor that I question is the behviour of markets. Some seem to think that markets would discover a peak of oil and crash and never come up, just kind of give up. I dont think this will happen, simply because markets are so short-term in their thinking. Certainly the world may be due for a recession or depression anyway, but I doubt high oil prices would suddenly discourage vast hedge funds from trying to make a quick buck. Investments in alternative energy will soar- they already are- and another "manhatten project" for fusion could be a realistic scenario.

I do also think the peak oil theory is a bit of a doomsday cult. Why couldnt we also have an oil consumption peak? It happened in the 1970s- people ditched their old fuel inefficient cars, conserved energy and bought local. This could easily happen again- get rid of $10 airfares, 3000 mile farm produce and SUVs and you would probably reduce oil consumption by a significant amount.

My theory is that, as long as there is no shock (like tripling of prices overnight) but a slow, steady increase along the oil plateau, then peak oil will not be the end of the world at all- it may be hard, and involve driving 600cc cars, but the markets will prevail. At least in the west.

Phew, sorry about the length of this!

[NevadaGhosts]

Yawn...

Peak oil is not a theory, but a proven fact. Do you even realize that many oil producing countries arouund the world have already peaked and are in terminal decline? The US oil peak and decline in the early 70's is a perfect example. The US is the most (oil) explored country in the world, and it is depleting more every year. World peak oil is not a question of 'if', but 'when'.

I suggest to try doing more research before posting such ignorant statements.

[Geology_Guy]

The issues you raise-OPEC not pumping as much oil as they could and economic recessions only serve to lower the ultimate peak production-not eliminate it. If we have a recession and use much less oil it will just push the peak into the future-there will still be a peak. It might be our grandchildren's peak oil.

You cannot escape physics-there will be a peak-the only question is when. Read this weeks editorial by the state Geologist of Texas-Tinker I think his name is. He believes there will be a peak in oil production. He just does not believe it will happen until many years from now. The USGS (United States Geological Survey) believes the peak will occur around 2037. That is only 32 years from now. I hope to be drawing a big fat Social Security check in 32 years!

It will be an interesting 32 years.

[MD]

1) Your concluding statement supports a plateau instead of a peak. If you would study, you would discover agreement from many analysts that have studied peak energy models. The rest of your objection is remarkably devoid of data except one comparison between Texas and Irag well counts, which is hardly overwhelming.
2) True, and the geopolitical factors, given human history, are likely to make the problems much worse, in aggregate.
3) Same answer as number two. The market structure can't effectively respond to the changing conditions, especially since numerous government entities are interfering.

You have hope for a soft landing. So do I. The data and history do not support our hope.

[jato]

1) Non-proven assumptions: The basic theory of peak oil is that US oil discoveries peaked, and about 15 years later, production peaked and then declined irreversably. The main assumption is that the aggregate production of the entire world's vast oilfields will also follow a similar distribution- the peak production will follow peak discovery. This incredibly crucial assumption is the chief flaw in the peak oil theory.

In order to produce oil, first you have to find it.


Why have many other countries peaked in addition to the USA?

[SHiFTY]

Those (mostly western) countries that have peaked have capitalist governments, competitive industries and transparent accounting. Their main motive is profit- get as much as you can, as fast as you can. As I see it, the mid-eastern governments motives are very different.

It also boggles my mind how some people can predict a peak without any numbers- there is a thread here about how Iraqs reserves could be 200 billion barrels, 400 billion or even more!

BTW I don't mean to offend anyone with the doomsday cult comments- but you do realise that you can opt out of the industrial society already? There is plenty of land in the world, I know several people living a very sustainable lifestyle already (and loving it). If thats what you want to do, why wait?

[Jaymax]

rational scientific debate

Ok then...

Non-proven assumptions

Scientific debate is predicated on formulating and testing hypothesies, either practically or hypothetically. The formulae behind peak-oil were not developed AFTER peak oil, to fit the facts.

Anything 'scientific' inherently includes assumptions - more evidence equals more faith in the assumptions. So far peak-oil stands up, unless you can actually show the assumptions to be incorrect, stating the assumptions are simply 'unproven' gets us nowhere. To date, those assumptions seem to stack up (not just for the US, but for something like 14 or 15 oil producing nations now)

Geo-political factors. Many oil producers have much more riding on oil than just a change in lifestyle.

No doubt these will impact the shape of the curve - but there are other potential scenarios, equally valid (and based on equally untested assumptions as yours here), which might have the inverse effect - who's to say what the political situaltion in Saudi will be ten years from now, peak or no peak.

the value of the US dollar is very low, it has been effectively devalued heavily against many other world currencies and commodities

All I can say is that my profit from a very small handful of oil futures is in pounds sterling, and very healthy in just 8 months or so. Any plot of oil against other world currencies I've seen shows a climb, albeit not as steep as against the US dollar in many cases. I find the Gold chart is interesting however.

The increase in the price of crude in US$ is demonstrably not soley due to the devaulation of that currency, as a little more research will prove.

the peak oil theory is a bit of a doomsday cult

You can't be scientific, and call a 'theory' a cult. But I agree with the essence of what you're saying. There's plenty of folk on here with what I regard as a delusional disregard for human adaptability. But there's no need to lump the theory in with the cult. Lots of folk believe they've been abducted by aliens, that doesn't mean there can't be life outside Earth, does it?

I think the likelyhood of cracking fusion in short order is pretty good too, once the necessity is obvious. Maybe only a decade or two. I see no reason why that should exclude a tripling of the price of oil (probably not overnight, mind)

--J

[Free]

Isn't it weird how we go over and over through the same flawed thinking and arguments again and again?

This is not ment as an attack on Shifty, at least he started to think and analyze by himself, that's more than the most people do, including myself, who just listen to the informations and reasonings from the different analysts. By the look of it he will go through the same stages as most of us, after he did some more research.

But what I think I can conclude myself so far from all the facts on the table is that the supply side is pretty much transparent and quite foreseeable, it's only logical that extraction first increases, reaches a pinnacle, and then declines. It's pure physics, geology and statistics, and even if it turns out that we reach peak 40 years later than we think now, it changes nothing about the original problem.

Demand is a total different kettle of fish, I think we know as good as nothing about it. Most here assume that demand will continue to grow indefinitely. But what if we repeat history and, like in the seventies, after going through a massive oil shock demand rapidly shrinks and buys us a couple of decades of time? Some assume that demand of fossil fuels is inflexible because it's so vital, for example in agriculture, sure, but what about all the energy that is wasted on non-vital things? Yes I know Jevons paradox, but nevertheless I think a massive depression would take care of a lot of demand, at the cost of lot's of suffering, but not necessarily starving half of mankind.

My only fear is, that after the ppb plummets to, let's say 20$ again, people will just say: "I told you so, the market will take care of it" and continue to ignore the underlying fundamental energy problem and do business as usual, postponing the catastrophy. But this rollercoaster could go on for quite a long time...

[Jaymax]

Those (mostly western) countries that have peaked have capitalist governments

HUH?

Romaina, Indonesia, Egypt, India, Syria, Malaysia, Argentina, Columbia, Equador, Oman?

Actually, is a remarkably random list...

http://www.odac-info.org/assessments/do ... -10-12.pdf

--J

[Free]

It's true that sometimes all this is reminiscent of a doomsday cult. But only because there are doomsday cults does that mean there is no doomsday? To assume that would be as silly as being the member of a cult.

Let's say there is a man who is cries "the end is nigh" and is very upset, and he tells you that god is gonna punish us all because of our sins, and that it's written in the holy book, well, you think your part.

And if there is another man who is just as upset and also cries "the end is nigh", and he tells you that an asteroid is gonna hit the planet, wouldn't you at least ask him to show his evidence?

[Whitecrab]

First of all, that was a really good first post. Well reasoned skepticism.

There exists a vast world out there with many different mindsets to the one we are all used to. Most OPEC countries have a single oil producer- the government, or more accurately the governemnt owned oil company. As I'm sure the free marketeers will attest, governments are generally bad at running efficient for-profit businesses, and often have very different motives, for example sustainability/conservation, local development and particularly staying in power.

This may lead to deliberate underinvestment in oil production- why should a government strip-mine their resources when they can leave some for future generations. I believe this is the reason that Iraq has only a few thousand wells that have been drilled, while Texas has over a million.

...Geo-political factors. Many oil producers have much more riding on oil than just a change in lifestyle. The west basically keeps half the mid east at peace- the luxury existence of the princes Saudi are legendary. Most of these countries and their rulers are supported militarily by the west, so long as the oil keeps flowing. However, if and when it stops flowing, the people will probably rise up in an Iranian-style revolution. Therefore it would be in the interests of these rulers to keep production tight and underinvest.

There is also the truth that many OPEC countries are corrupt, dictatorial regimes that survive by buying off a population with oil wealth. I believe I read that many OPEC nations derive about 60% of their GDP wholly from oil sales. In regimes challenged by insurgents and a bored, uneducated, and exploding population (say...Saudia Arabia) rulers would be pressed to keep the oil flowing to buy their people's happiness and provide services despite lacking a real economy.

Also, since OPEC has been seen to post spurious reserve revisions (see http://wolf.readinglitho.co.uk/mainpages/reserves.html) that seem designed to allow themselves to pump MORE under their quota system. If they would "cook the books" to let themselves pump more, that suggests they are desperate to pump as much as possible.

So although it may be in their better long-term interests to sit on oil, in part scared of their own people, and in part scared of the west playing the efficiency/substitution card, it seems most of OPEC has been pumping briskly.

3) Other economic factors make peak oil less likely. It may have escaped many, but the value of the US dollar is very low, it has been effectively devalued heavily against many other world currencies and commodities. The price of gold, for example, has increased roughly the same percentage amount as oil. See the graphs below.

This is true, and for awhile the price in oil was climing in US$ but staying constant in Euros. However, the extreme volatility of today is undoubtedly due to the razor thin spare capacity, and low spare capacity is a sign the peak may be here.

The other economic factor that I question is the behviour of markets. Some seem to think that markets would discover a peak of oil and crash and never come up, just kind of give up. I dont think this will happen, simply because markets are so short-term in their thinking. Certainly the world may be due for a recession or depression anyway, but I doubt high oil prices would suddenly discourage vast hedge funds from trying to make a quick buck. Investments in alternative energy will soar- they already are- and another "manhatten project" for fusion could be a realistic scenario.

No doubt we will try, but be sure to read more about how difficult it is. People have crunched the numbers. Even super-optimistic treatments of renewable or nuclear power show them still making just a small part of our energy supply for decades to come. http://www.oilcrisis.com/youngquist/chapter27.htm and http://www.physicstoday.org/vol-57/iss-7/p47.html are good places to start.

I do also think the peak oil theory is a bit of a doomsday cult. Why couldnt we also have an oil consumption peak? It happened in the 1970s- people ditched their old fuel inefficient cars, conserved energy and bought local. This could easily happen again- get rid of $10 airfares, 3000 mile farm produce and SUVs and you would probably reduce oil consumption by a significant amount.

Most of the peak oil "community" is advocating these very things, and that they get started right now. It's debateable whether we will reach http://www.oilendgame.com or just another depression-lead crash in energy use. Remember that rolling out more efficient products and reworking civic designs and economic relationships all takes energy and money.

You are right, a lot of how it plays out depends on how quick the "shock" is.

You also imply the market will recover. Nothing has the energy profit and convience of oil and natural gas. Once they are into terminal decline, it may be impossible to have a growth in energy, which will make a growth in the economy next-to-impossible as well. And in a debt-driven currency system (read: that of every nation but two islands), a lack of ecnomic growth renders the system inherently disfunctional.

[Jaymax]

Nothing has the energy profit and convenience of oil and natural gas.

Nothing available today

Fusion and hydrogen have the potential to offer much better 'energy profit and convience' if we can get the bugs worked out - and we're making strides...

In the long term, I get worried the other way - look what humanity has done to the planet since we've had bucketloads of cheap energy available - think what we're might do it if we do get there.

--J

[bart]

It's good to see someone wrestling with PO ideas.

Several good points, SHiFTY, although when you add them up they don't amount to a refutation of Peak Oil, more a wrinkle or two to the main ideas.

why should a government strip-mine their resources when they can leave some for future generations.

You're right that many governments of countries with oil reserves have non-economic motivations. This does not mean, however, that they are any more far-sighted than capitalist enterprises. The short-term motivation to stay in power may cause them to set oil fields afire, as Saddam did, or to use techniques which damage the fields, as Matthew Simmons claims.

I don't know of anyone else making the claim that there are billions of barrels hidden beneath the ground, purposely kept unknown.

With oil supplies tight, and possible nukes, they [Iran] know they have the west by the balls.

Here you are on to something. It's not just Iran, but all countries that have energy resources -- Venezuela, Bolivia, Ecuador, Iraq, Africa. One of the emerging themes of our era is the struggle of local populations to gain control of energy reserves. They know they have something valuable and are wondering how to make the most of it. Sometimes this may lead them to overstate reserves and other times to under-state. A recent article says that Chavez of Venezuela is trying to demonstrate that it has the largest reserves in the world -- hardly a case of understatement!

Venezuela has the largest proven oil deposits outside the Middle East, but President Hugo Chavez believes his country has the largest reserves in the world and he plans to prove it.
http://www.peakoil.com/article5301.html

Why couldn't we also have an oil consumption peak?

We will, we will! Drastically reducing oil and energy usage is key to coping with Peak Oil. The challenge is how to do it as painlessly as possible. Commentators talk about "demand destruction" as if it were a bloodless, neutral economic event. It's not. It can mean recessions (if we're lucky), depressions, political upheavals, wars, starvation. Think 1930s Europe.

[Petro]

oh gawd, yawn perhaps you will adopt all these things you espouse and show us how it is done? Jamax, those like you that do not walk the walk should not tell tell others.... are you self suffieiernt? are you poised for the technological revolution on this horizon? if you are share with the rest of us.

[Tyler_JC]

Nothing has the energy profit and convenience of oil and natural gas.

Nothing available today

Fusion and hydrogen have the potential to offer much better 'energy profit and convience' if we can get the bugs worked out - and we're making strides...

In the long term, I get worried the other way - look what humanity has done to the planet since we've had bucketloads of cheap energy available - think what we're might do it if we do get there.

--J

Every single time this civilization picked a new energy source, we picked a better one. Wood is good, but coal is so much better. Oil is cleaner and more useful than coal. It also has the perk of being more energy dense and has a very high EROEI. (JohnDenver/DriveElectric stay out of this!)

In order for the Capitalists to grow the money supply and maintain the current economy, we must find a new energy source that is, in every way, better than oil. We need something that is energy denser, more abundant, cheaper, easy to store, easy to transport, useful for making plastics/pesticides/paint, and one that is, hopefully, not under the control of an unstable dictator.

If you find me an energy source that is better than oil, you have found a solution for peak oil. That does NOT mean that peak oil won't happen or that we won't have an oil crisis. It simply means that we have a direction to go in.

We still must grow the economy, feed the world, replace the current car fleet, replace the jobs of the oil era, and redesign our entire world to run on this new source. This is a daunting challenge and one that will not be completed overnight.

Hundreds of millions of people will suffer terribly during the transition. If we find a new magic energy source, we still must deal with the oil age losers. What becomes of the SUV salesman? The farmer with an oil-based farm? What happens to the tire industry? The airlines? What do we do with the suburban population? How will they be transported to their new jobs? What kind of new skills must they learn to survive in this brave new world?

Great, we have fusion. How do I turn electricity into a useful transport fuel that is better than gasoline?

Regardless of what new technologies we may discover, we still must deal with an oil crisis. I don't believe that we have the ability to maintain the current level of technological progress. Others may disagree. The coming years will tell us what will happen in the rest of the century. If you bump into me in 2015, I could probably tell you the dominant energy source of the later half of the 21st Century. Currently my money's on animal/human effort and biomass (wood).

[Jaymax]

oh gawd, yawn perhaps you will adopt all these things you espouse and show us how it is done? Jamax, those like you that do not walk the walk should not tell tell others.... are you self suffieiernt? are you poised for the technological revolution on this horizon? if you are share with the rest of us.

I have absolutly no idea what you're on about.

In terms of walking the walk, a lot of my time is spent preparing for peak oil effects over the next few years, and trying to get at least a few more people aware of it so they perhaps start to do the same.

So, stop being a hypocrite and telling others what they should or shouldn't do, and maybe start thinking about a few broader scenarios.

Sheesh.

--J

[gt1370a]

This post is SOOOO 2004.... does anyone still care whether the Gaussian curve is a better fit than a log-normal, or if reserves are 2 trillion barrels or 2.2, or if it's a peak or a plateau, or what the actual date is +/- 5 years, or whatever? Just look at what is going on in the world. I vote we follow the lead of lifeaftertheoilcrash.net and focus on solutions to problems. Basic transportation, getting out of debt, hedging against inflation, gardening, community and government approaches. If people don't get it by now, it's their problem.... all the information for both sides is already out there, nothing new will be said anyway.

[Jaymax]

If you find me an energy source that is better than oil, you have found a solution for peak oil. That does NOT mean that peak oil won't happen or that we won't have an oil crisis.

Okay, just to be explicit - I saw a false statement, and challenged it. I totally agree with Tyler_JC's statement above. But I do have greater expectations from science and technology in the longer term.

--J

[gego]

My take is that SHiFTY is lost in the details, and is wishfully thinking, not wanting to be part of the dieoff.

The US oil production panned out, more or less as predicted, following a Gaussian curve.

The world oil production curve should follow such a curve simply because that is the way oil production works.

Food production and human population is dependent on that curve, and in fact should follow that curve.

Human population is far above three standard deviations above its mean value of approximately 1 to 2 billion which can be sustained for only 2 1/2% of the time.

The logical conclusion is that humans are in for a dieoff of gargantuan proportions that should overshoot the long trend.

The strange part to me is that I can today ride down highways full of oblivious people, and the breaking point, the beginning of the dieoff, is so, so close.

My take is that 20% will survive by the end of 50-75 years after peak. Good luck.

[Bandidoz]

SHiFTY I suggest you take a look at a series of ASPO newsletters - from them you will be able to see how the peak discovery - to - peak production pattern repeats (PDF format):

http://www.peakoil.ie/downloads/newsletters/

Also bear in mind that "non-capitalist" countries have been exporting to "capitalist" countries; although their domestic consumption may not be guzzling they are probably selling most of it as the "capitalist" countries guzzle as much as necessary to meet demand.