Tanada wrote:Generally held? I don't think that is an accurate assessment. Many of us pointed out that such a rapid rise in price to that level was neither likely nor sustainable. Nobody would be buying oil at those prices other than what was absolutely essential, which would cause a massive recession, destroy demand and lower prices to a more sustainable level.
The cadre of members who were advocates of that fast crash scenario of instant doom from unrestrained price rises were never a majority here. After oil peaked at $147/bbl in 2008 and then crashed along with demand through spring 2009 most of them either moderated their views or just dropped out of the website to pursue their disproven beliefs elsewhere.
As a point of fact I just did a search. You have been banging the drum of your thermodynamic misunderstanding of oil production since all the way back in 2007. Possibly longer. When the world civilization refused to collapse from the 2008 excursion to $147/bbl you went quiet for a while trying to come up with some way of explaining away the real world based on your thermodynamic beliefs.
Eventually you came up with ETP and started hyping that theory, with its shiny new bells and whistles. As it so happens you started hyping it right about the time the world oil supply was exceeding world oil demand for $90/bbl oil. To the casual observer it appeared you had predicted the price collapse because of your deeply flawed Thermodynamic theory of economics.
The only thing that has been driving oil prices is the same supply/demand dynamic that has always driven oil prices. Your obsession with your misunderstanding of thermodynamics aside only your hard core acolytes have any faith in your theory.
You have been told for years around here that economists, oil companies, geologists, banks and average people with common sense use the classic concept of supply and demand to make their decisions about investing in or consumption of petroleum. You have insisted that everyone who does not buy into your thermodynamic theory of 'real' oil production and consumption dynamics is ignorant, uneducated or just plain unable to understand. You usually throw in some childish insults about the intelligence of those who disagree with you along side your other disclaimers.
EROEI or ERoEI aka thermodynamics influence price because they influence the cost of production. When your EROEI is 250:1 vs 25:1 clearly your cost per unit of production is very different so you have some validity up to that point. Nobody, as has been pointed out to you endlessly, uses that EROEI to make decisions about producing the next well or building the next refinery. Thermodynamics says one thing about oil production, you have to invest energy to get energy back out of the system. It does not say that anyone's return of energy in the form of refined products consumers demand is dependent on the type of energy put into the process. You can quite easily take Methane from Natural Gas, run it through a modern Fischer–Tropsch chemical plant and produce Diesel Fuel, Kerosene, Gasoline and other longer chain hydrocarbons. People instantly proclaim this is EROEI negative because the process requires energy to run and from the thermodynamic viewpoint this is 100 percent correct.
It is also 100 percent irrelevant to the economic equation driving the decision to put methane through the Fischer–Tropsch process. The economic decision is based on the cost of the Fischer–Tropsch plant to build and maintain, the cost of the Methane raw material, and the value of the product stream that comes out of the process. By the same token a modern Petroleum refinery is not an EROEI positive process either. Crude oil goes into the refinery and frequently methane also goes in to supply hydrogen for the cracking unit of the refinery. Refined products come out the other end along with a lot of waste heat. Thermodynamically the equation balances, X calories of Petroleum and Natural Gas and often Electricity go into the refinery. X-(refining energy loss as waste heat) of refined products come out the other end of the process. Some of those refined products, like Asphalt for example, are converted from a burnable portion of crude oil into a road matrix binding material and are disbursed in such a way that their caloric value is irrelevant. The same is true of rubber and plastic products that ultimately end up in a landfill somewhere. In other words a very important percentage of the Energy in the Crude Petroleum when it enters the refinery is lost into products that are not used for energy purposes. The EROEI of a Crude oil refinery is terrible!
So why do we refine oil and lose all that energy? It is entirely possible to build diesel engines tuned to burn crude oil, that would let us get the most energy out of the petroleum possible. So why do we waste all that energy refining crude oil? Economics. Economically, the value to the consumer of the refinery products is much higher than the value of the crude oil burned directly in a diesel engine. That difference in value allows the refining companies to buy crude oil and methane and electricity, operate and maintain their refinery as well as paying hundreds or thousands of employees, and still return a profit to their shareholders.
(The ETP model,Total Production Energy) The model is derived from the fundamental physical properties of petroleum, First and Second Law statements, and the cumulative production history of petroleum.
This concept is flawed because you can not know the actual values of the variables you model is based upon. Petroleum is not one physical product with one set of properties, it is thousands of different molecular weight hydrocarbons. Those hydrocarbons are arranged in chains, rings, helixes and every variation on those themes you can imagine. Those varied organic compounds are contaminated with different co-produced non organic compounds ranging from but not limited to sulfur, iodine, vanadium, selenium, cobalt, manganese, iron oxides, and a great many more. Not only are no two fields chemically identical, often a well is not identical to the one nearby in the same field.
You also have a problem understanding the laws of Thermodynamics.
The first law, also known as Law of Conservation of Energy, states that energy cannot be created or destroyed in an isolated system. Energy can not be created or destroyed in an isolated system. To put it as plainly as possible, the energy in an atom of matter stays exactly the same unless some outside source adds to or subtracts energy from it. For an atom of any material to cool it has to lose energy through radiation or conduction. For an atom of any material to gain energy it has to be impinged upon by radiant energy from outside, or have energy added through conduction i.e. physical contact.
Entropy, commonly called the second law. I presume the model uses the weakly defined version of Entropy meaning the remaining energy in the system is no longer available to do "useful work".
By that definition all the waste heat that comes out of your refinery in my earlier example is "entropy". The problem with using this definition is pretty simple, it assumes that because the energy is being rejected as waste heat its potential has been tapped to the greatest extent possible. This is clearly not the case due to the physics involved. What I mean is, it is entirely feasible to design and install a heat exchanger to the refinery to collect and concentrate that waste heat, use it to create a pressure differential in some fluid and spin a turbine to produce mechanical work or generate electricity. So why don't they do that? There are millions of watts of thermal energy being just dumped into the environment instead of being put to useful work! Economics. Oh rats that ugly word again? Yes, it is cheaper for the refinery to expel all that waste heat than it is to convert it into useful work because they have access to outside sources of electricity. It is even cheaper in most places to just vent it instead of using it for district heating systems like they use in Scandinavia to make use of otherwise 'waste' heat energy. IOW the 'entropy' of the refinery in this example is not a lack of useful potential, it is simply a matter of convenience for the refiner. It is easier and cheaper to hook up to an outside electricity supplier and only use that connection as a supply input than it would be to build an on site heat exchanger and generator that would feed excess power into the grid for sale to the utility companies. This is not 'real' entropy, this is just wasteful use of energy. IOW this is not the inability to retrieve useful work, it is unwillingness due to economics.
When you can not know the exact conditions of each well in each field you can not calculate the 'useful work' you can get from the oil produced by that field or well. Even worse there is no scientific definition of 'useful' work to fall back upon. The closest you can come is the law of diminishing returns, the closer you get to 100 percent efficiency the harder it is to make a useful increase in efficiency. In the 1976 a common natural gas burning furnace for a home was about 60 percent efficient. That is to say 60 percent of the total energy in the fuel before burning was turned into 'useful' heat in the home the furnace was warming. Today home Natural Gas furnaces are all at least 80 percent efficient and most new furnaces are 90 percent efficient or more. The cost difference to go from a 1956 furnace that was 50 percent efficient to a 1976 furnace that was 60 percent efficient was a trivial cost. To go from 60 percent in 1976 to the 80 percent standard of 1986 was a little more expensive to build and maintain, but the fuel savings paid back the cost fairly rapidly. Going to the modern 90 percent efficiency was a bigger cost, and only worthwhile when natural gas costs were high. You can go all the way to certified 98.5 percent efficient furnaces today if you so desire, but the increased cost and complexity is substantial and the maintenance costs are significant.
This is the law of diminishing returns and it applies to everything including oil wells. The example that is commonly used is, the higher the water cut the less total energy return from the well for the energy put in pumping. This is true so far as it goes, but does that make a difference in if the well is produced or not? Not directly. Say your well has a 50 percent water cut. That means you are using energy in to produce 2 barrels of mixed liquid, one of water and one of oil. Depending on what country you are in and the environmental laws you have to do something with that produced water and it can range from dumping it in the local drainage ditch to paying someone a fairly significant sum to haul it away and inject it into another well. This range of options makes it impossible to know how much additional energy is required besides the simple pumping to get the mixed fluid to the surface. The higher the water cut the more energy used on the Energy In side of the equation. But does the oil producer care? No, what the oil producer cares about is the cost to produce the oil, along with the ancillary expenses like disposal of produced water, and the price they get for the produced oil at time of sale. Even worse wells are not all produced by the same method. Some have natural drive that forces the fluids up the well pipe. Some use internal combustion engine powered pumps burning natural gas or crude oil produced by the well to pump the well. Some have artificial drive where water or CO2 or Nitrogen are pumped into the field not too far away from the extraction well. Some use electric motors supplied by generators or off site utility hook ups. There are probably other options beyond those five I am not overly familiar with.
It boils down to this, if the producer can sell the oil and make a profit they will, if the well or field is losing money they evaluate the prospects of future profits and either shut in or cap the wells they do not see a future profit coming from.
Understanding is easy, if the Producer can earn a living pulling oil out of a well they will. If they lose too much money pulling oil out of their wells they will go bankrupt and stop doing so. If the energy to produce that oil is cheap electricity or cheap natural gas they will be able to produce that oil even if the sale price is much lower than they want it to be. If they need to use 2 calories of cheap methane for every 1 calorie of crude oil they sell but the methane is cheap and the oil is highly priced then they will do so, despite the fact that the well has a negative energy return on energy invested. Producers go into the oil production business to make money. If they can make money with solar powered well pumps or wind powered pumps like farmers used in the 1920's despite the fact that they have to invest 2, or 4 or 8 times as much energy into the barrel of oil they produce than the consumer gets out of it then they will smile and count their profits.
