Peak Oil is You
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Page added on September 17, 2014
The Peak Oil Crisis: It‘s All Around Us
Ten years ago peak oil was assumed to be a rather straight forward, transparent process. What was then thought of as “oil” production was going to stop growing around the middle of the last decade. Shortages were going to occur; prices were going to rise; demand was going to drop; economies would falter; and eventually a major economic depression was going to occur. Fortunately or not, depending on your point of view, the last ten years have turned out to a lot more complicated than expected. Production of what is now known as “conventional” oil did indeed peak back around 2005, and many of the phenomena that were expected to result did occur and continue to this day.
Oil prices have climbed several-fold from where they were in the early years of the last decade – surging upwards from $20 a barrel to circa $100. This rapid jump in energy costs did slow many nations’ economies, cut oil consumption, and with some other factors set off a “great” recession. Real economic hardships have not yet occurred.
Much of this is due to the reaction that set in from high oil prices and increased government intervention into the economy. In the case of the U.S., Washington turned on the modern day equivalent of the printing presses and began handing out money that was used to develop expensive sources of oil and gas. The high selling price per barrel, coupled with cheap money led to a boom in U.S. oil production where fortuitous geological conditions in North Dakota and South Texas allowed the production of shale oil at money-making prices provided oil prices stay high.
U.S. unconventional oil production soared by some 3.3 million barrels a day (b/d) in the last four years, and, if the US Energy Information Administration is correct, is due to climb by another million b/d or so in 2015. While this jump in production was unexpected by most, it was just another phenomenon resulting from unprecedentedly high oil prices, which in turn resulted from the lack of adequate “conventional” oil production. As is well known, economic development can have major reactions and feedbacks.
What is so interesting about all this is that a temporary surge in what was heretofore a little known source of oil in the U.S. is masking the larger story of what is taking place in the global oil situation. The simple answer is that except for the U.S. shale oil surge almost no increase in oil production is taking place around the world. No other country as yet has gotten significant amounts of shale oil or gas into production. Russia’s conventional oil production seems to be peaking at present, and its Arctic oil production is still many years, or perhaps even decades, away. Brazilian production is going nowhere at the minute, deepwater production in the Gulf of Mexico is stagnating and the Middle East is busy killing itself. On top of all this, global demand for oil continues to increase by some million b/d each year – most of which is going to Asia.
If we step back and acknowledge that the shale oil phenomenon will be over in a couple of years and that oil production is dropping in the rest of the world, then we have to expect that the remainder of the peak oil story will play out shortly. The impact of shrinking global oil production, which is been on hold for nearly a decade, will appear. Prices will go much higher, this time with lowered expectations that more oil will be produced as prices go higher. The great recession, which has never really gone away for most, will return with renewed vigor and all that it implies.
An additional factor which has grown considerably worse in the last ten years is climate change, largely brought about by the combustion of fossil fuels. We are already seeing global weather anomalies with record high and low temperatures and record floods as well as droughts. This too will take its toll on economic development as mitigating this change will soon become enormously expensive. We are already seeing migrations of restive peoples. Thousands are dying in efforts to get from the Middle East and Africa into the EU. Millions are already homeless across the Middle East and recent developments foretell hundreds of thousands if not millions more being added to ranks of refugees as decades and even centuries-old political arrangements collapse.
All this is telling us that the peak oil crisis we have been watching for the last ten years has not gone away, but is turning out to be a more prolonged event than previous believed. Many do not believe that peak oil is really happening as they read daily of surging oil production and falling oil prices. Rarely do they hear that another shoe has yet to drop and that much worse in terms of oil shortages, higher prices and interrupted economic growth is just ahead.
We are sitting in the eye of the peak oil crisis and few recognize it. Five years from now, it should be apparent to all.
25 Comments on "The Peak Oil Crisis: It‘s All Around Us"
rockman on Wed, 17th Sep 2014 9:54 pm
“Many do not believe that peak oil is really happening as they read daily of surging oil production and falling oil prices.”. Which was the unfortunate result of the efforts of so many folks tying to get peoples’ attention on the developing energy crisis by focusing on PO dates and oil production rates. So now with the current production rate of liquid hydrocarbons the definition of peak “oil” has become a distracting issue.
But finally some are giving up arguments over such relatively minor factors and are turning the discussion towards the theme of this article: it’s not about a date, stupid. It’s about the POD…the Peak Oil Dynamic. LOL. Some don’t like the POD because it’s so all inclusive. Well boys and girls, turns out life is also all inclusive. One cannot just focus on cherry picked aspects of the POD (or life) and develop a complete and meaningful story line.
Granted the POD doesn’t lend itself well to bumper sticker slogans or 30 second PSA’s on TV. But neither does life. LOL.
Northwest Resident on Wed, 17th Sep 2014 11:06 pm
Very good article IMO. Unfortunately for most people in this world including this country, they won’t ever realize the truth of what this article is highlighting. They’ll never understand the POD that rockman speaks of. A good percent of them are just not analytical or intelligent enough to understand, another large percent are just too distracted by other matters and still another large percent has psychological barriers built up to the kind of information this article presents — they don’t WANT to believe it, therefore they won’t. But reality is a bitch and this article does a great job of describing how close that grim reality is to manifesting itself — in fact we’re feeling it now, but the fun is just beginning. Those that can’t or won’t recognize the truth of what this article talks about are going to have to wake up sooner or later, but when they do, they probably still won’t understand why their goose is cooked. Great article!
Plantagenet on Wed, 17th Sep 2014 11:53 pm
The prediction that the “shale oil phenomena will be over in a couple of years” seems unlikely to me. The Permian basin in Texas, for instance, contains an estimated 70 billon bbls of tight oil. At 3 million bbls per day, it will take about 70 years to use up the Permian basin oil. And shale oil is just starting to spread overseas from the US. For instance, the Vaca Muerte shale basin in Argentina is gearing up fast.
We’ll probably still hit peak oil in a few years, but thanks to shale oil the production decline on the other side of the peak will be much slower then would otherwise be the case.
MSN fanboy on Thu, 18th Sep 2014 3:48 am
Plant, i agree, we will hit peak oil in a few years … well peak total liquids.
However whilst Shale oil has given us some breathing room between the present and the future, your idea of a slow production decline on the other downward slope is simpily put. WRONG.
You must understand the decline rates!
You read the same graphs!
MSN fanboy on Thu, 18th Sep 2014 3:51 am
I have a feeling you will not allow yourself to understand.
“psychological barriers built up to the kind of information this article presents — they don’t WANT to believe it, therefore they won’t”
You have the analytical and intelligence clearly. You arent distracted. Its those damn psychological barriers. Right Plant.
rockman on Thu, 18th Sep 2014 6:25 am
Plant – “…shale oil phenomena will be over in a couple of years”. Exactly the type of prediction that hurts the message IMHO. The shales will keep adding production as long as prices stay high enough to support the effort. Or until most of the locations are drilled…which could be quite a while.
But the shales aren’t having much of a positive effect on the POD given the necessity of one of the more critical aspects of it: high oil prices. Joe6pack is more confused then ever: there’s an oil boom going on in the US as we stumble towards energy independence” and but oil hasn’t dropped back down to $35/bbl where it was before the boom. Obviously to him someone must be lying/cheating.
Probably those damn speculators and millionaire BP executives.
Davy on Thu, 18th Sep 2014 6:49 am
I am not the resident PO expert here but as a PO plebe it is telling to me to see the drop in aggregate world production. Then you look at long term conflict in the ME repressing production increases especially out of Iraq. Russia conventional is unstable possibly peaking with a trade and finance war sure to affect the new harder to get and expensive sources. Then, finally, we see a shale boom in the US that is not solid and appears not sustainable long term without a favorable economic background. We know the global world economic picture is scary. We know the ROI of capex is compressing for shale drillers and oil firms globally. The shale boom phenomenon is not going global yet and may never. We know this shale oil supply is not good transport fuel feedstock. You see all these oil production dynamics then you see the Asian demand increases and you have to scratch your head. Asia was accommodated largely by the shale boom and US/Europe consumption declines. The declines in US/Europe consumption cannot continue that accommodations from declines without affecting Asian export industry. US shale is not likely to grow like it has in the new “risk off” environment especially with some of the financial results coming out of many of the shale drilling operations. This is a hornet’s nest of negatives. I cannot see how the cornucopians can keep preaching “happy days are here again” and “all we have to fear is fear itself”.
Aire on Thu, 18th Sep 2014 8:03 am
All the future production of world shale may happen but I predict at a very much slower rate. Once the boom fails to keep business going as usual, it’ll dwindle to a near halt and may eventually pick-up somewhat – only for the elite of the world. In other words, the future “warlords” of post crash if we survive it of course. Then I figure nature will do us in due to lack of maintainer to nuclear facilities and the continuation of using other lesser hydrocarbons such as coal. I believe there is a tipping point in the planet weather causing a series of disasters.
I’m afraid humankind won’t be able to handle the one-two punch – knockout
rockman on Thu, 18th Sep 2014 8:46 am
Aire – “All the future production of world shale may happen but I predict at a very much slower rate.” Much slower then what…zero? LOL. From a practical standpoint there is virtually no significant shale development going on anywhere in the world outside the US. Lots of talk about huge potential for overseas shale formations but as of yet there isn’t a single oil drilling boom going on except for two shale trends in the US.
So foreign shale production has to begin significantly before one can speculate how fast it might slow up.
Don on Thu, 18th Sep 2014 10:22 am
The way I see it the global economy is similar to a person. Oil would be the blood in this analogy. As the amount of blood in the system begins to fall this person starts to show the signs. But a person doesn’t die when they have lost every drop of blood, it is much closer to 80% or so. While I think Plant is right to a point the downhill slope will be gradual at first, but eventually we will hit a Seneca cliff when we no longer have enough energy to function.
Kenz300 on Thu, 18th Sep 2014 11:38 am
The cost of fossil fuel production will continue to drive oil prices higher…………….
Alternative energy sources keep getting cheaper every year.
It is time to end the oil monopoly on transportation fuels.
Nony on Thu, 18th Sep 2014 2:40 pm
There were a lot of predictions of 200-500+ oil from the doomsters. Particlarly when we were at 150 in 2008. A 5 year stretch at 100 sucks, compared to 30. But it’s not the dire straights that the Chicken Littles predicted. Heck some of these people predicted collapse of civilization!
BAU…going STRONG!!
P.s. TOD is dead, dead, dead. And so are Rupert and Simmons. And Savinar is an astrologist! And Deffeyes and Campbell hide from confronting their bad predictions.
Davy on Thu, 18th Sep 2014 2:53 pm
NOO MOO
Texas Engineer on Thu, 18th Sep 2014 3:02 pm
Plant
You say: “The Permian basin in Texas, for instance, contains an estimated 70 billon bbls of tight oil. At 3 million bbls per day, it will take about 70 years to use up the Permian basin oil.”
In all of these discussions I often see two estimates of reserves. One is often huge and comes from the operators in that area who have a vested interest in getting your investment money because that is the only way to afford these “plays”. The other is from the US geologic surveys (USGS). I would like to think that these USGS surveys are by competent geologists who do not have agenda (maybe I am wrong).
So I Googled Permain Basin USGS and got their latest assessment and extracted this from the summary.
“The mean USGS estimate is that an additional 2.68 BBO could be added to reserves in the 18 fields evaluated. There is little chance that reserve additions could be more than 4.5 BBO or less than 1.05 BBO. These volumes may not be currently economic to recover and will require a significantly greater supply of CO2 for injection than is presently available.”
What was your information source for 70 billion?
shortonoil on Thu, 18th Sep 2014 3:33 pm
Petroleum must be able to drive enough economic activity to allow the consumer to acquire it. Consumers with no money don’t buy oil – or anything else. If one assumes that oil is an essential component of the economy (that is, you don’t have one without it) it therefore follows that there must be a point where the economy can no longer support the price of oil. That is, there is a the point where the consumer lacks the funds to buy additional oil.
What that maximum price is has been speculated about by a plethora of analysts. To add to the ongoing calliope in the oil “guesstimation” process we have turned our analytic techniques of petroleum’s energy dynamics to the task. Once that maximum sustainable price level is reached there will be no further demand for increased production, and oil will have Peaked.
Our results to date (subject to change if new information presents itself) is that the maximum price for oil that the economy can support is $117/barrel, and that will occur in late 2016. As production costs are increasing, and will continue to do so, and the economy is constrained by a maximum oil price, production will begin to decline as more producers hit the price barrier. The present highest cost producers are ultra deep water, shale, bitumen, and high sulfur extra heavy crude. This analysis has a plus – minus 4.5% margin of error.
http://www.thehillsgroup.org/
ghung on Thu, 18th Sep 2014 3:45 pm
Nony: ” it’s not the dire straights that the Chicken Littles predicted….
Gosh, Nony, in October, 2005 the national debt was $7.933 trillion and GDP was $13.205 trillion.
Eight years later (October, 2013) the debt was $16.738 trillion and GDP had only risen to $16.872 trillion. Like the debt, the price of oil has roughly doubled since early 2005 while GDP has increased about 25%. Do you think these things aren’t related? Current national debt is $17.775 trillion; seems to be the new BAU, “going strong”.
…and I know of no one taken seriously that predicted 200-500 dollar oil. Most of us knew that economies couldn’t support those levels. Now go collect your 50 cents for my reply.
steve on Thu, 18th Sep 2014 8:47 pm
Why is it that liberals will swallow climate change but when it comes to peak oil they just think you are nuts when you talk to them….I saw an article in the Guardian that said by 2100 population would be over 11 billion…and very few comments on whether or not we have the resources for that?!?!!!
Don on Fri, 19th Sep 2014 8:56 am
Well Steve, I feel that I am fully qualified to answer that question. You see global warming / climate change requires only faith that someone else is smarter than you and can add numbers better than you. Then deciding to put all of your trust in that person or in that small group of people. On the other hand the peak oil dynamic takes only a small amount of modus ponens logic and voila it makes sense. With a small amount of research and graph reading comprehension you can quickly develop a working understanding of the dynamics at play.
Now, taking what you know about liberals and the requirements for belief of both GW and PO, is the answer clear?
Davy on Fri, 19th Sep 2014 9:33 am
Yea Don, cool!
In Classical Logic, this is known as the argument form modus ponendo ponens, which means “the way that affirms by affirming”. It is one of the simplest forms of many argument forms in Classical Logic.
It seems ridiculous. It seems like a waste of time. It embodies the proverb “All Work and No Play Makes Jack a Dull Boy”. In the past, I felt nothing but distain for these argument equations; I harbored resentment toward their seemingly lofty, impractical structure. And yet, like any good student, I forced my mind to open. As it turned out, openness was the seed, patience was the tree, and understanding was the fruit when faced with the challenge of classical logic.
I write about modus ponens because I believe in firm, practical logic. Logic offers us a relatively objective challenger to our subjective world views. Questioning yourself and your world is, in my opinion, one of the humblest pursuits. As the French-Cuban author Anaïs Nin has written, “Life is a process of becoming, a combination of states we have to go through. Where people fail is that they wish to elect a state and remain in it.”
If you have a point to make but have trouble making it, modus ponens is here to help. Learn to weave a web of premises and facts; thus, articulating an inescapable truth.Voila.
http://www.kaluyala.com/community/the-creation-of-a-culture/the-art-of-persuasion-modus-ponens/
JuanP on Fri, 19th Sep 2014 10:17 am
This is an absolutely excellent article. I am in total agreement with everything the writer, Tom Whipple over at FCNP, said. Tom is someone I have learned much from through the years and whose analyses and opinions I greatly value and consider. Sometimes I disagree with him, but, IMO, Tom really hit the nail on the head with this one.
Northwest Resident on Fri, 19th Sep 2014 10:42 am
Davy, JuanP — Yep. This article nails it. All of the major bullet points condensed nicely into one straight-forward essay on how screwed we are, and why. I love a dose of cold hard reality in the morning!
JuanP on Fri, 19th Sep 2014 10:42 am
Great comments!
I studied Logic as a teenager and I loved it. I loved syllogisms and the syllogistic process. It changed the way my mind processed information since then. I put all the knowledge I had through the rules of Logic and found it to be mostly false, one sided, or distorted. I have reeducated myself since by researching, mostly online, the subjects I am interested in. Once I learned how to think in a logical way, for me there was no going back.
Davy on Fri, 19th Sep 2014 10:49 am
Juan, if I just would have used that logic with women I would be light years ahead.
JuanP on Fri, 19th Sep 2014 11:20 am
Davy, I don’t pretend to understand women for one minute. A couple of weeks back, I asked my wife if there was anything she wanted to do before TEOTWAWKI, and out of the blue, for the first time ever, she said she wanted to go to the Caribbean on a cruise. I had no idea and was unpleasantly surprised, though I kept it to myself. During the following days, I applied my logic skills to convince her she wanted to make it a mother and sister thing. 😉
So now, my wife, her mother, and her sister are going on a cruise next month, and I was spared such a horrifying experience. Remember that I am an introverted, antisocial, depressed, PTSDd misanthropic hermit. The only thing worse for me would be a sub, like Ghung, or the ISS.
Women are a mistery, I gave up on understanding them awhile back.
Davy on Fri, 19th Sep 2014 11:49 am
Yea Juan my mom wanted me to go with her and my 7yr olds on a Disney cruise. I was quietly horrified. I politely told here I was so busy on the farm there was no way to get away. I would be one of those that jump overboard and never find again or I would start drinkin whiskey again. Lol good point