[Pops]

So I thought we should have a thread about ROCKs POD. I keep seeing it mentioned but I can't figure out what it is and doggone it I feel left out!

how much oil the world is producing today and will in the future isn’t nearly as important as how much it will cost and who will control it.

This is what I can't figure out, cost and control is a concern because the long production plateau and other indicators signal a near term peak. Without near term peak, oil is just a another commodity market, an important one, but one simply experiencing the typical ongoing booms and busts that all commodities do.


Near term peak makes it a wholly different matter.


I think it is becoming increasingly obvious the production plateau is simply the peak up close.

If oil production these last 8 years had continued at the historical 2-3 percent growth rate instead of flatlining, I'd hazard that the price of oil would likely be much less than it is today, exports would still be increasing, and China would not be trying to corner the market. IOW, take PO out of the POD and you have a non-event.


I'm sure there is something I missing?

[dolanbaker]

If countries like China ring-fence much of the potential future oil supplies for themselves, then the decline of available oil to western countries could be much faster than anticipated forcing people to make potentially life changing decisions.

I suppose the short answer is, it depends on how much of your income you are prepared to spend on oil as the amount you have left has a major affect on your spending habits in the greater economy.

If you currently live in a low "personal energy" part of the world, your income may rise enough for you to be able to afford to buy and run a car, but unless the wage increase is substantial, you'll never use the car for long distance daily commuting.
But, if you live in a part of the world that was built to exploit cheap oil, then as the costs increases you'll be forced to make decisions that could either reduce your energy use or curtail your other activities.

[Pops]

Thanks Dolan.

So china locking up future production is the POD? If production had continued to grow would that still be a problem?

No, the problem is extraction is not growing or only slowly, we're on a plateau - possibly the manifestation of nearby peak oil.

The problem is not China's consumption growth and struggle to secure supply but the fact that supply is struggling to simply stay flat. Flat growth has made consumption growth a zero sum game; their addition is someone else's subtraction. Chinese imports have risen what, 4-5mmb/d since 2005? But global production has hardly budged. Had production increased 2-3% per year as has been the norm since the '80s, we'd have 8-10mmb/d more crude sloshing around. Plenty for China, India and Happy Motoring in the Good Old USofA!

The root of the problem isn't China's growth or deal making, the problem is flat production, precursor to peak oil.

.

[dolanbaker]

Pops, the point I'm trying to make is that China appears to be protecting its future supply of oil by ensuring that it gets exclusive rights to resources in various sources around the globe.

If these future supplies are withheld from the open market then there is a risk that the decline in available oil for consumption in the west would decline quicker as other suppliers go past peak production as westtexas has stated in his ELM theory.

The POD is simply the fact that that life (as we know it) is to a certain extent, is determined by the availability & relative cost of oil.

[SeaGypsy]

The sought continuation of supply growth resulting in the plateau would not have happened without under supply and subsequent price hike supporting harder to get extraction. Peak 'conventional' oil quickly lead to rapid expansion of 'unconventional'. It's a dynamic simply because 'oils aint oils'. From bucket & spade to deepwater to shale, the progression towards converting gas & coal to oil en-masse, perhaps to nuclear driven 'oil from air'- is obvious. So yeah, it's still peak oil, but this is a dynamic equation not a straightforward one.

[Plantagenet]

...this is a dynamic equation not a straightforward one.

Exactly right. Thats why the concept of the POD is so useful.


It was pretty easy to visualize "peak oil" before the world hit the production plateau in 2005----We'd hit the peak and then everything would change---some predicted an Olduvai cliff and mass dieoffs and some predicted cycles of economic downsizing and some predicted gas prices would go up so we'd quickly shift to electric cars but otherwise it would be business as usual, but the predictions all presupposed a cause-and-effect resulting from peak oil.

But once we hit the oil production plateau in 2005, the cause-and-effect connection to consequences is more difficult to see.

Was the 2008 global economic collapse triggered by peak oil?
Is peak oil the reason the US economy is growing so slowly?
Is peak oil the reason China is slowing?
Is peak oil the reason the US has intervened in wars in Libya and Syria?
Is peak oil the reason shale oil has been developed?
Is peak oil the reason gold prices went up from 2008-2012?
Is peak the reason gold prices are going down in 2013?

Who knows? --- But we can honestly say all these things were affected by the gestalt of the POD.


The world is being affected by the gestalt of the POD

[John_A]

Rockmans POD appears to describe basic supply/demand economics, with little geopolitical kickers thrown in. It encompasses the idea that shale oil and gas is a result of POD through price (and price through scarcity of cheaper stuff) which is basically the concept of the marginal barrel setting the price.

In a world driven only by a cost/supply curve we would get every ounce of oil from the cheapest place first, say Ghawar, at the rate of 75 mbd until it was gone, and then move smoothly on to the next cheapest place, and so on and so forth until in another 100 years the oil shale in Colorado would be all that was left, and the price for it would be $500/bbl or some such.

In between the $2/bbl of the Saudi's and the $500/bbl of the Colorado oil shale exists the rest of the world, and approximately 8 trillion barrels of stuff to turn into oil. But because we can't deplete the cheapest first because reservoir dynamics don't work at linear rates, we have to take some cheap, and some less cheap, and progressively less cheap until most everyone who really wants the stuff can have it. And the price is determined by where that LAST barrel comes from, not the cheap, or less cheap, but the most expensive barrel. That is how the marginal barrel sets the price, and why we produce really expensive oil from the Canadian tar sands and really cheap oil from Saudi Arabia and the Saudis get the same $$ as the Canadians (close enough considering the geopolitical and refinery differences and cost of seaborne).

POD says that as the marginal price increases, other resources can be brought on line from different places which weren't affordable before. Shale oil and gas in the US for example. Tar sands. If the price goes down, those reserves dry up and the price drifts downwards to the next less expensive. Until there isn't enough, and then the price goes up and more supply gets turned back on line and we start this entire porpoising around until some new equilibrium is found. Examples of POD going back to the 70's on several occasions as the US could no longer function as swing producer. Other examples of POD would be when the Saudi's decided to defend market share in 1986 and use surplus capacity to punish everyone, the demand crash in the late 90's leading to a price crash and the runup in prices since then as growing economies drove up demand.

POD is a great idea because it rolls several demonstrable concepts of economics with a little bit-o oil field flavor thrown in, into one. POD cares about rate relative to consumption, not absolute volumes. If the world only wants 40 mbd of oil, but the world can only produce 38, the one sure thing is that price will be higher than if the rate if 80 mbd and the world is demanding 75. The absolutes don't matter in this case, only the relative, and that relative then dictates how deep in the resource pyramid companies can reach.

The bad news being, the deeper you reach into the pyramid, the more resource becomes available. Higher cost, sure, but the IEA has already determined that the upper end of that price for the next 6-8 trillion barrels of fuel in real terms is less than $140/bbl.

[Pops]

But once we hit the oil production plateau in 2005, the cause-and-effect connection to consequences is more difficult to see.

Was the 2008 global economic collapse triggered by peak oil?
Is peak oil the reason the US economy is growing so slowly?
Is peak oil the reason China is slowing?
Is peak oil the reason the US has intervened in wars in Libya and Syria?
Is peak oil the reason shale oil has been developed?
Is peak oil the reason gold prices went up from 2008-2012?
Is peak the reason gold prices are going down in 2013?

Who knows? --- But we can honestly say all these things were affected by the gestalt of the POD.

Ah, that makes sense. The whole idea is to eliminate any objective measurement, kind of a faith based argument.

One can point to each of those things – or any other thing I guess - and say "Ah-ha! POD!" and be technically right since there isn't any pesky objective definition or measurement of POD to quibble over.

.

[SeaGypsy]

Ah, that makes sense. The whole idea is to eliminate any objective measurement, kind of a faith based argument.

Economics always includes elements of faith, from micro business to macro economics; without necessarily being inclined towards 'eliminating objective measurement'.

[ROCKMAN]

Pops - First, mucho thanks for the thread. You may not be aware but I get a royalty of 1/10 cent every time someone uses “POD”. I’ve been saving it up and any day now I’ll have enough for a trip to Starbucks.

The great thing about the POD it’s like an ink blot test: what you think you see isn’t really there…what you see is what’s in your mind. Which is probably why ever ink blot I’ve ever seen looks like the same thing…enough said. LOL. The POD is the max rate of oil production for some. It’s the increased unemployment due to higher energy costs for some. It’s the increase in Bakken production for some. It’s China spending $1 billion to restore a defunct refinery in Costa Rica, a country that produces now oil, for some. It’s the environmentalist urging the POTUS to not approve the Keystone permit for some. Etc.

As I mentioned before the POD was in effect when I started in the oil patch 38 years ago. Again, we didn’t call it PO or POD but the reserve replacement problem. The oil panic in the late 70’s was an obvious manifestation of the POD IMHO. And the increase in US oil production today is another obvious manifestation of the POD IMHO.

As I’ve pointed out nearly every conversation on this site resolves around the POD. All I did was throw out a short hand tag. The best outcome of slinging it around would be getting folks away from making the energy situation a single issue event.

[C8]

FWIW- I do not think Peak Oil Dynamic is the best term for all of this.

1. it spells POD which is easily mixed up with the far more used term "Peak Oil Demand" (this even happens here in PO.com in the Saudi America thread where a poster mixes up the idea)

2. the word "dynamic" doesn't really convey anything specific. The best acronyms stand on their own well- such as PO or GW- you know what they imply immediately

My suggestion is Peak Oil Control or POC- this seems to convey the idea better, but there may even be better suggestions out there

just my 2 cents

[ROCKMAN]

C8 - Valid point. But when I see "PO" I see the post office and "GW" reminds me of a recent POTUS. Just more ink blots. LOL

But I do think "dynamic" does a good job of acknowledging the ebb and flow of the situation. It’s certain not some static phenomenon. “Control”…OK. Then what’s controlling the price of energy today? Is it that the US reached PO 40 years ago? Is it that there’s a drilling boom going on in the shales? Is it the Chinese locking up future oil reserves all around the world? Is it the POTUS not approving the Keystone permit?

Maybe it’s all those factors and a lot more. And the DYNAMIC way they interact with each other. OTOH I don’t really care what acronym we use as long as we stop obsessing when the date that PO has or will be. That was my simple goal. The rest of the discussion is just lagniappe IMHO.

[Pops]

ROCK, I'm giving you a ration, buddy. There was a time I took this site pretty seriously, I thought there was a message to be shouted from the rooftops. I'm more sanguine now because I've realized that folks will do what they want as long as they can get away with it, then they'll do something different. I did and I'm pretty sure that others will.

Having said that, my complaint about POD is exactly it's non-specificity, the fact you can point to whatever ink blot and attribute it to POD, after a while the entire concept becomes meaningless. To me that's like Preston pointing out Nazis around every corner, all it does is make "Nazis" less scary. IMO, PO and long term decline should remain scary for the folks that might want to do something in preparation for actual decline, which I'm pretty sure you'll agree won't look anything like this.


Sure, the '70s US peak is part of the POD. OK. A few years in the West in the 70's may be like global peak - but global peak will not be like the '70's. The '70's ended. The US peak wasn't global peak, there as lots of easy oil left and OPEC's embargoes were entirely political - nothing to do with physical peak. By 1980 OPEC got carried away and caused a 20 year buyers market. That by definition isn't going to happen after global peak. Mashing the two together reduces the implied impact of global peak, at least to me it does.

See what I'm saying? Everything in the pre-peak world can somehow be related to the POD but after the decline sets in, nothing in the past will compare, IMO anyway. ELM & GNE and the current flatline are but a taste,

the plateau is the peak, but it's merely prelude, the story begins with decline

.

[ROCKMAN]

Pops - "...my complaint about POD is exactly it's non-specificity". All in the eye of the beholder I suppose. I see it as very specific: it's all those factors relating to energy that affect our lives. Just imagine if the American people and the govt had understood the true nature of the POD 40 years or so ago. Maybe we wouldn't be sliding into the current sh*t hole developing.

And again lets not forget my sole purpose of throwing out the POD in ghe first place: to stop the endless debate on the PO date and its significance. When was the last time you saw a heated debate on that subject here? I had made pretty good inroads on TOD on that front when I was there. My work is done.

[ralfy]

Here's another way of looking at the issue:

"Our Oil-Constrained Future"

http://www.motherjones.com/kevin-drum/2 ... ned-future

[Pops]

Pops - "...my complaint about POD is exactly it's non-specificity". All in the eye of the beholder I suppose. I see it as very specific: it's all those factors relating to energy that affect our lives. Just imagine if the American people and the govt had understood the true nature of the POD 40 years or so ago. Maybe we wouldn't be sliding into the current sh*t hole developing.

And again lets not forget my sole purpose of throwing out the POD in ghe first place: to stop the endless debate on the PO date and its significance. When was the last time you saw a heated debate on that subject here? I had made pretty good inroads on TOD on that front when I was there. My work is done.

Do tell, LOL.

Anyway, thanks for that, we've been wondering how to keep people from the endless debates about peak oil here at peakoil.com

[ROCKMAN]

Pops - You're welcome. LOL. It is interesting that, in the hands of others, the POD has turned into an ink blot test of sorts. As you pointed out folks are all over the place with what the non-specific POD is specifying. Which, IMHO, is rather good to see those dynamics expressed and condemned/defended. Adds a lot to the context.

But same can be said for "economy", "government", "global warming" et al. All non-specifics that folks readily paint with their own specific attributes.

[ROCKMAN]

Under the POD “Dome”

Just saw an interesting interview with Stephen King regarding his new TV series “Under the Dome”. About a small town that is completed isolated from the rest of the world by an invisible dome. No material flow in or out. The only communication with the rest of society is done through written messages viewed through the invisible shield. King said he wrote the story with the specific concept of future limited resources in mind. Maybe we should drop the boy a line and make sure he knows we’re here. Great minds and all. LOL.

One interesting and yet unexplained aspect: the town's leaders had been bringing in large propane deliveries just before the Dome appeared to replenish their unexplained low levels. Some hint that this dynamic involved some unpublicized if not illegal doings. SPR: Strategic Propane Reserve? Maybe the SCR comes up next: Strategic Cow Reserve. Lots of milk cows also trapped under the dome. Lots of farm land also and the sun has no trouble penetrating the Dome. Maybe a professor around like the one they had on Gilligan's Island who could whip together a few solar panels. And maybe a rich Chinese guy trying to buy up resources just like ole Thurston would. Maybe a gun nut trying to control resources. Maybe that's why the show isn't set in Texas...everyone is armed. Maybe a good looking chick like Ginger using her "assets" to obtain other assets.

Damn! I think peakoil.com and TOD already wrote this story and King is just plagiarizing us. Let’s think about suing that bastard! LOL.

[agramante]

I think the POD is inherently a vaguer, more multidimensional concept that peak oil is. Peak oil has a very specific definition: maximum global production of crude oil within a given time period. Identifying when peak oil occurs is a conundrum, given the complexity and opacity of global production systems.

The peak oil dynamic, as I've understood it so far (and it's your concept, Rock, so I'm not trying to hijack it--river to your people though you may be), concerns the many different effects of the process of oil production peaking and then declining. There's a limitless number of these effects, from macroecnomic, to geopolitical, to environmental, so socioeconomic, to emotional, and many more. Hell--what will the peak oil dynamic mean to my cat? It likely might mean in the next few years he'll have to step up his haul of mice, and get off welfare, as my uncle put it.