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Michael Lynch Defeats the Mainstream

Production

“Since at least 1989, Mr. Lynch has made a career of poo-pooing any concept that oil supplies might be finite and that we might find production capability dropping as demand continues to rise…. [Oil supply] not an issue?  Do you expect to be dead and gone in the next 4 to 8 years?”

– Charles Armentrout, “Lynch Poo-Poos Peak Oil,” , February 2, 2011.

It is entirely appropriate to recognize an intellectual victory, particularly when an intellectual mainstream was overcome. In the case of Peak Oil, the victor is Michael C. Lynch is president of Strategic Energy and Economic Research, a Massachusetts-based consultancy.

Lynch has held a number of research positions at M.I.T. and was chief energy economist at DRI-WEFA.  He currently blogs at forbes.com, and his publications have appeared in six languages, focusing on petroleum supply, energy forecasting, and energy policy. Praeger will publish his book The Peak Oil Scare and the Coming Oil Flood this summer (preorder here).  In addition to describing oil resources and economics, the book employs detailed analysis to demonstrate the mistakes made by many analysts, including peak oil advocates, and uses this to draw conclusions about the future of energy and appropriate policy.

I was reminded of Lynch’s victory when finding the article below (reproduced in its entirety). Written in 2011 by one Charles J. Armentrout, it ends with a veiled warning that Peak Oil will change things as we know them (‘life in this tender new century may become very interesting and very soon’).

Intellectual error often results from underestimating human ingenuity in market settings. The fixity-depletion notion is an engineering one and not a business-economic one. Michael Lynch, an economist, has done his discipline proud.

Lynch Poo-Poos Peak Oil (Posted on by )

Michael Lynch, a long term consultant to the oil industry and Hubbert Peak debunker for over two decades published another Op Ed piece in the New York Times on Friday, February 25, 2011.

Since at least 1989, Mr. Lynch has made a career of poo-pooing any concept that oil supplies might be finite and that we might find production capability dropping as demand continues to rise.  (This, in a nutshell,  is what the pat phrase “peak oil” means.)  References: In a 1998 articles he refers to his work in 1989. A search engine check yields many hits.

In the NYT article, above, his background idea is that discussing the end of easily obtainable oil is like screaming that the sky is falling.  His hidden subtext is: Such things are done by people who are foolish, or have a hidden agenda. His explicit points are:  There is a miscommunications in the size of Saudi reserves, or whether the estimates were for proven reserves or estimated reserves.  Or whether the Wikileak revelations some time ago was really new.

Everyone:  the 2011, or 2010 (or 2007) Wikileak documents were not all that new.  Information about Saudi capacity did not just pop up recently.  This information was available in 2007 in over-the-counter mags like Atlantic Monthly!  See my previous post for details.

In 2004, Matthew Simmons, founder of the Simmons & Company, International, issued an analysis (report by Institute for Analysis on Global Security on his analysis) that Saudi Arabia could not continue increasing oil production. Mr. Simmons’ concern about energy security dates back to the oil embargo crisis that entangled the US and Saudi Arabia in 1973.  Lynch and Simmons are old sparring opponents.

Hidden in Big Numbers. Let’s use Lynch’s numbers and put the 270 billion barrels of proven reserves, 600 billion in potential reserves,  into a usage perspective.  There is an unexpected trap right here before we start, because “billion” means U.S. billion (European thousand million, not the European billion).

“Billion” is a dumb unit because it is easy to misunderstand.  Use the ugly  “giga” prefix for 109 instead … as in 4 GB memory.  This is equally ugly in English, French, Spanish German, Russian, Chinese, etc.  No one feels slighted because all ears are offended.

Giga-barrels (Gbbl) sounds big, 600 Gbbl sounds impressive.  Here is how the issue is hidden – How can something so big ever be a problem?  Let’s calibrate our thinking:  humans use is about 85.5 M bbl each day, about 31.2 Gbbl each year.

Constant use, CU: The constant use lifetime for the reservoir is the time interval where the petroleum is removed from the reservoir at a steady rate.  The proven Saudi reserve, 270 Gbbl, would last YP = 270/31.2 = 8.6 CU years. The total estimated reserve of 600 Gbbl would last only 10.6 years longer (YE = 19.2 CU yr).  And this is if oil is used at the same bbl/day value each and every day until we hear that straw make its empty-bottle sucking sound.

Constant rate, CR: The constant-rate time happens when the demand forces production to grow at a constant rate of increase.  We tend to think in terms of the CU time frame, but data show that resources are withdrawn from the reservoir through  the CR mode for as long as technically possible.  This is another way to say that the growth is exponential.

The CR time formula was discussed in my previous peak oil post.  Anyone with a calculator can use it:  T = ln(1 + r*Y*f)/r.  Here, r is the average annual growth rate, Y is the CU time for the reservoir, f is the fraction of the reservoir used (f = 1 means  completely used up), and r is the rate (0.04 would mean 4%/year).

Good to the very last drop. If the Saudi’s were the only petroleum producer for the world, and the rate of increase in consumption is 4% annually, then for its proven reserve,  Y = 8.6, r = 0.04, and the entire reservoir (f = 1) would last TP1 = ln(1+0.04*8.6*1)/0.04  …about 7.4 CR years.  The estimated recoverable reserve would be drained in TE1 = ln(1+0.04*19.2*1)/0.04  …about 14¼ CR years.

Half full or half empty? A constant growth rate of supply cannot be sustained right up to the last drop in the reservoir.  Usually, the end of CR growth is considered as the time to the half empty point (f = 0.5).  By the standard Hubbert model, after that, growth flattens out;  after painful and expensive efforts to resist, it begins to fall.  This is the Peak Time, T1/2.  For Saudi proven reserves (as only world supplier)   TP1/2 = ln(1+0.04*8.6*0.5)/0.04  … about 4 CR years.  For Saudi estimated reserves (as sole world supplier) TE1/2 = ln(1+0.04*19.2*0.5)/0.04  … about 8 CR years.

Not an issue?  Do you expect to be dead and gone in the next 4 to 8 years?

Not really a fair question because our exponential growth model values assume that Saudi Arabia is the only petroleum provider in the world.  Not fair also, because we did not start our calculations from an untapped field, but from the Saudi resource base of about 2006. The reserve is far from virgin and the true question is whether or not it has reached the half empty point.

This is not a discussion of 40% errors.  Such are trivial concerns, representing mere months of world demand, a year or two at most.   Exponential growth of the demand curve means the Saudi fields must be capable of relentless expansion of their product.  Are they?

The Saudi leaks and interviews indicate that they might not be capable of exponential growth in production.  If not, then they have already reached their peak value.  From here on out, petroleum extraction will be more technically sophisticated, more difficult, more expensive. The question “Has Saudi oil peaked?” is more meaningfully phrased “Can Saudi fields supply oil with a relentless growth in production of 3-5 % each year?”

Key Question: Can Saudi production demonstrate exponential growth over the next several years to supply US, China Europe, India and all other locations?

1. Yes.  Then they are not yet at Peak production, they will continue to play a major role in world politics as it has unfolded for more than a century.

2. No.  Then they have hit the peak production.  Gbbl/yr will be constant in the near term, provided huge monies are spent,  but ultimately must slowly decrease.

Answer 1. the world will continue on as it has, with US slipping while industrial leaders continue to ship manufacturing and research capabilities abroad;  former “third world” countries enter into their own strength.

Answer 2. the world is on the cusp of a massive transition from the one paradigm for living into another based on some unpredictable political and social order.  “Paradigm shift” is one of the ways of describing the chaotic jump in complexity theory from one strong attractor to a different one.

I have been taught that the Chinese have a curse:  May you live in interesting times.  Such a curse may not actually exits, but depending on which answer is correct, life in this tender new century may become very interesting and very soon.

master resource



10 Comments on "Michael Lynch Defeats the Mainstream"

  1. Davy on Thu, 28th Apr 2016 6:31 am 

    “Michael Lynch, a long term consultant to the oil industry”
    That says enough right there. They should have included directly or indirectly paid PR guy. These lobbyist guys are paid to preach. They are paid to push and agenda and in that respect they are nothing more than extremist that do not seek the truth. They are not interested in balance because that waters down the message and when you have a message as dire as peak oil it must be debunked.

    American mainstream media and academics are corrupted to the core by the evil nexus of corporate political control that is based on power and wealth transfer. This is a system in a circular vortex of increasing corruption. This system of government is self-perpetuating by the revolving door of the corporate, the political, and the administrative. The founding father set up a government that had division of power and duties for a reason. This new system has sidestepped this though a slow process of moral hazard and disregard for the rule of law. The rule of law issue is the thousands of prick that is killing the legal and administrative system. It is the attitude that the ends justify the means and that attitude has taken over by a position that our security depends on it.

    We now have complete corruption and a deadly combination of control by political, corporate and military complex. The reason Trump is appealing to the masses is people don’t know what exactly is wrong but they know the system is broke. Is all lost? Maybe other than the status quo is flying apart so in crisis there is change. When these groups and this system is put to the test in crisis they will have choices. Suppress the people to maintain the status quo around their gated castle of power and parasitic wealth transfer or take the necessary steps to protect the people. We will find that answer soon because the brick wall is just ahead.

  2. Davy on Thu, 28th Apr 2016 6:32 am 

    Sorry, double post error previously.

  3. rockman on Thu, 28th Apr 2016 6:32 am 

    “Do you expect to be dead and gone in the next 4 to 8 years?” It’s so easy to appear to be correct if one ignores reality. Yes: thousands of Americans (our military) and hundreds of thousands of civilians are dead because of the Peak Oil Dynamic. Though not dead millions of Americans suffered financially from recessions induced at least in part by the POD. And $trillions in tax payer $’s have been pissed away trying to stabilize oil producing regions in the Middle East…an effort that has brought about even more instability. And now a new segment of the American economy is bleeding profusely as a result of lower oil prices brought on by the damage high oil prices visited upon the global economy.

    Yes indeed: as long as one ignores the realities just highlighted as well as others everything appears to be going just great. LOL. I mean, after all, doesn’t everyone feel really good about how things have gone over the last 8 years?

  4. James Tipper on Thu, 28th Apr 2016 11:11 am 

    What do these people think, that the mainstream is “pro-peak oil”? Hardly, all I ever hear from the mainstream is how we all doom and gloom, and how we should trust industry shills over anyone else. Genius.

  5. GregT on Thu, 28th Apr 2016 11:35 am 

    Peak Oil is dead. Long live Peak Oil.

  6. HARM on Thu, 28th Apr 2016 6:40 pm 

    “Since at least 1989, Mr. Lynch has made a career of poo-pooing any concept that oil supplies might be finite…”

    Got that doomers?!? Peak Oil is officially OVER. Scarcity and finiteness officially DEBUNKED. you LOSE. Do not pass go or collect $200. Abiotic Cornucopians have won the day.

    Now it’s time to turn off the lights and shut this site DOWN –just like The Oil Drum. You can all go back to whining and hand-wringing about something else, which is what you so called “reality based” bleeding heart leftists do, isn’t it?

  7. HARM on Thu, 28th Apr 2016 6:41 pm 

    🙂 So… how was my trolling?

  8. Rob Bradley on Fri, 29th Apr 2016 4:41 pm 

    Why all the ad hominem? Lynch is not a ‘shill’ but a scholar who believes what he believes. So do I

    Energy is the master resource, and carbon-based energy is dense energy for a better world compared to dilute, intermittent, consumer-rejected, taxpayer-unfriendly, crony energies.

  9. GregT on Fri, 29th Apr 2016 5:30 pm 

    “and carbon-based energy is dense energy for a better world”

    And you have the audacity to ask “Why all the ad hominem?”

    What a fucking moron.

  10. Mike Lynch on Sun, 21st Aug 2016 8:57 am 

    I find it interesting that Simmons’ book is referenced, without noting that his claim over a decade ago that Saudi production was on the verge of collapse is ignored.

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