Where's the end-of-the-year $56/barrel oil?

Wishful thinking?



Drug abuse? Propaganda?

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Reality:


UPDATE: Chopped out NYMEX CL chart since EIA is only WTI too.

If we had any sense of reality in our congress, there would be five bills readied before year's end to add a per gallon tax of at least $3.00 to put things into some semblence of rationality.

Of course, the crooks would just steal the money, instead of putting it to work rebuilding infrastructure, a rail system that makes sense, and legitimate alternative energy development.

This buck-forty a gallon shit is ridiculous, and SUV sales are even starting to take off. Amazing that TPTB are able to manipulate this so much. Anyone really believe we've had the kind of "demand destruction" that would bring on this kind of price collapse?? If so, I have some bridges to sell you. This is manipulation, pure and simple, with likely geopolitical economic warfare as its primary cause (think Russia).

Your only sorry if you dump it in fear or stupidity. USO is the lowest its been since its inception as an ETF. I'm sure with a little patience there is plenty of money to be made with this investment. Volatility is the key. Oil prices wont be crashing over the long haul. If you horizon is at least a few years, the upside is there. There is just going to be too much pressure pushing it back up over the long haul.

Good, then things are going according to my story

nate over at tod just made a claim that all new oil in aggregate has an EROEI of one--that is no net energy is being produced. Does anyone have a way to confirm or refute such a claim? shortonoil?

Sounds like he's trying to apply the Law of the Conservation of Energy to this. But this law doesn't exactly apply very well to human energy supplies, practically speaking.

And a perfectly balanced equation of this sort would net zero, not one.

dohboi,

That's what I thought he said also. All I can imagine he meant was that overall we are at/near zero net energy gain from new exploration efforts. But I'm not sure what parameters he used to get that outcome. There are hundreds of new wells being drilled every day right now. In addition to the fuel costs to drill those wells there are the other expenses: drilling rig rental, leases, pipelines/storage tanks, overhead and don't forget the profit margins of all the service provides involved.

I can tell you that the fuel usage for most wells is less than 15% of the total cost. Perhaps he is estimating the energy component of all the equipment utilized (really undoable IMHO). Perhaps he is including the energy component of all the failed efforts...a fair component IMO. But at the end of the day companies are still drilling even at $40 oil so it's difficult to imagine in what context his statement might be true. The oil patch would not exist very long if they consistently spent more money then they made selling oil/NG. And the energy component is only a small portion of that expense.

dohboi said:




dohboi I didn't pick up that comment by nate. Could you post a link so I can take a look at it. 1:1 at the well head doesn't make any sense. You couldn't even get the product to the refinery with that kind of return!

Yes, sorry, here it is:

link

It's the first comment after the main post, in the third item listed.

I was working from murky memory when I wrote the above. He says "approaching" EROI of one. I guess you could be quite a ways from it and still be said to be approaching it. Still, it would be nice if he had elaborated a bit. Otherwise, I thought is a quite insightful post.

Here's the comment in context:

"I think EROI functions more like a 'blunt instrument' as opposed to something with laser-like precision. In an upcoming paper titled "The Limitations of EROI for Energy Policy", my co-authors and I point out 5 shortcomings of EROI (but also discuss how important the concept of (declining) energy surplus is for civilization):

1)The EROI definition can be misleading in situations when chaining is involved. E.g. Brazilian ethanol double counts the bagasse and therefore overestimates true EROI

2)EROI does not account for non-energy limiting inputs (water, soil, GHGs, etc.)

3)There is a major difference between fixed and marginal EROI - one that is right now of critical importance. If EROI for global oil is 16:1 (ish), but most of this is due to the bootstrapping of former built capital, then what we really care about is EROI of NEW oil (which in aggregate I would estimate is approaching energy break even - same goes for North American natural gas). So the timing of the energy inputs/outputs is also important.

4) EROI doesn't account for quality. (e.g. liquid fuels vs electricity vs animate coverters like horses)

5) EROI doesn't inherently account for scale. (E.g. potatoes have 30:1 EROI but we can't run society on potatoes). EROI x Flow Rate = Power ==> which is what we really are trying to measure.

The list of why biophysical perspective is essential is however, much longer than those exceptions above -one hopes that our new Secretary of Energy and other energy policymakers understand this. I look forward to yours and Charlies help in sussing out these and other issues on TOD:EROI.
I'm sure you would agree one of the most relevant questions is what is societies aggregate quality adjusted energy gain, and how much room does that leave us?"


He's responding to an interesting initiative over there on what they call simply EROI.

Thanks dohboi



I think this is the comment that you are referring to? Of course this has nothing to do with price. It depends on the ERoEI of the energy used to subsidize the extraction of the break even production. This is an interesting example of how neoclassical economics fails when applied to energy.


It is unfortunate that Nate does not address the problem of oil's accelerating energy contribution decline. My reply to Doly here explains the dilemma we are rapidly getting into. As the ERoEI of oil products for the consumer approaches 1:1, the yearly fractional loss becomes increasingly greater.

With the ERoEI at the consumer for oil presently at about 6:1, and the decline rate 0.5 per year, the energy supply to the general economy is declining at 8% per year. This will accelerate to 12.5% in just four years, and will soon collapse the monetary system. We are presently experiencing this in the credit crisis. For a debt based currency system, a credit crisis is a monetary crisis.

Thanks, short. I noticed that, in the thread you linked, you say it will be 17 years before we hit a real energy wall, yet above on this thread you make it sound like it will be ten years or so (if I'm understanding your math).

Is there a discrepency here, or has your thinking changed, or (the most likely posibility) am I misunderstanding something?

By the way, you, nate, and the folks at the SUNY institute mentioned in the thread I linked all seem like astonishingly bright people working along similar lines. Have you considered communicating with any of them and sharing notes?

Also, do you have any thoughts on applying the concepts developed for ERoEI on the procuction side to projects on the conservation side? For example, if insulation is used on X homes that now use Y energy in heating/cooling that would then be saved, and if the energy required to produce and install the insulation is Z, everything else being equal, could we not in principle plug those into a formula and get something like the ERoEI for that effort?

Sorry for all the questions. Great to have you posting regularly again on the forum.

dohboi said:





No real discrepancy. The 17 years refers to a calculation coming from the graph. It represents the point when we will have extracted 95% of the Available Energy from the world's petroleum reserves.

The statement above is an example to show how the percentage of energy that we use from the remaining pool is being exhausted at a geometric rate. In actually, the decline rate in oil's ERoEI is now 0.47 and declining very slowly toward 0.0.

The economic impact on the monetary system, and other above ground factors, probably mean that the present system will not last for another 17 years. At the present rate of wealth destruction (US Household Net Worth dropped $7.7 trillion in 2008), it may be much less that.

OK, sorry, you lost me again.

I assume your decline rate of .47 does not mean that we lose forty seven percent of ERoEI every year, but I can't figure out what it does mean then.

dohboi said:



The 0.47 refers to the yearly decline in the ERoEI of oil. As an example, if the ERoEI at the well head is 20:1 this year, it will be 19.53:1 next year. Why this is important is because 0.47 is a larger percentage of 19.53 than it is 20. As the ERoEI declines to single digits, the yearly change becomes huge.