[Pops]

I dump 1000 BTUs of natural gas (costing $1/1000BTUs) into extracting 100 BTUs of tar sand oil (sold at $10 per 100 BTUs) I make money hand over fist while suffering an EROEI < 1.

Exactly. I believe that if EROEI were important we'd have long replaced fossil ICE vehicles with something else. They are only about 25% efficient well to wheel even before we started scraping tar sand yet we can't get enough.

The benefit of oil is not so much its free energy quotient, but its energy density and transportability, It is so valuable as an energy carrier we've always wasted at least 80% of it's energy in IC engines, yet built a world with it.

The utility is far more important than the erei. An accessible example is bucking and splitting firewood. By hand it is lots of work but with a gallon of gasoline for a chainsaw and splitter it is hardly enough work to break a sweat. I would pay $20 gal or more for oil produced at an energy deficit using LP, coal, windmils or donkeys, plus many hundreds for the equipment, because the utility is so high.

Utility is the key to peak oil, not eroei. As geology slows production flow, the oil price will be bid higher and higher. The market will eliminate demand through price rationing, the winner will always be the use with the highest utility.

[AdamB]

I dump 1000 BTUs of natural gas (costing $1/1000BTUs) into extracting 100 BTUs of tar sand oil (sold at $10 per 100 BTUs) I make money hand over fist while suffering an EROEI < 1.

Exactly. I believe that if EROEI were important we'd have long replaced fossil ICE vehicles with something else. The utility is far more important than the erei.

A fact that EROEI modelers do their best to avoid, because the spectrum of utility is determined by price of the energy form.

Utility is the key to peak oil, not eroei. As geology slows production flow, the oil price will be bid higher and higher. The market will eliminate demand through price rationing, the winner will always be the use with the highest utility.

Now finish the concept Pops. One more step. Higher prices fire up conservation first, sure. That is the demand reaction. AND THEN WHAT ELSE? What happens with previously sub-marginal resources that just became economic? What happens with increased investment in drilling and exploration? What happened to reserve growth in known discrete accumulations? What happens when all react unidirectionally to increased price at the same time? Sounds sort of like world oil prices after the Great Recession, with an average annual oil price near $100?

Gee..I wonder what happened to world oil volumes next?

Every peak oil estimate you are familiar with except one in the public domain is fatally flawed because of the inability of their creators to handle both the effect you mention, AND the one I did.

[Pops]

I knew peak demand was wrong back before the plague but somehow the one month drop in demand of 15% and year of single digits below the previous peak somehow convinced headline writers that we'd quit oil.

Peak demand was always lefty click-bait and we're about to find out just how wrong it was. Gonna be hard to know whether we've past peak geology or peak investment. But the KSA minister points out that Net Zero fossil investment without Net Zero alternatives investment will end badly.

Here's the whole thing from Bloomberg via WaPo

This won’t win me any friends among the green lobby, but Saudi Arabia’s Oil Minister Abdulaziz bin Salman is right to warn of a potential energy crisis resulting from falling investment in fossil fuels. Here’s why.

The prince warned that worldwide oil production could fall by 30 million barrels a day by the end of the decade because there is not enough being spent on the exploration for and development of new resources. That implies production of less than 70 million barrels a day.

Of course, he is talking his own book. The kingdom holds vast reserves of oil beneath its sands and under the shallow waters of the Persian Gulf — and it wants to see a healthy market for that oil for years to come.

But his warning isn’t entirely self-serving. Saudi Arabia’s oil riches aren’t open to foreign investors, so his call for more spending is actually aimed at encouraging competition with the kingdom.
This serves as a recognition of two things: First, the world’s need for affordable oil isn’t going to disappear anytime soon; and second, despite its oil reserves, Saudi Arabia can’t supply it all by itself.

Even the International Energy Agency, which has been incorrectly cited as calling for an end to new oil developments, sees oil demand remaining near pre-pandemic levels by 2030.

Even with the environmental policies that had been announced prior to the United Nations COP26 Climate Change Conference in November, the agency saw 2030 oil demand at 500,000 barrels a day — just 0.5% below its pre-pandemic level. In its “Sustainable Development” scenario — which sees advanced economies reach net zero emissions by 2050, China around 2060, and all other countries by 2070 at the latest — the drop by the end of the current decade is estimated to be just 9 million barrels a day, or 9%. That would still leave the world needing about 90 million barrels a day of oil by 2030, a supply shortfall of 21 million barrels a day — more oil than was consumed by the U.S. in 2019 — according to the Saudi minister.

So if he’s right, we’re in for a tough time. But is he right? Have potential investors been so bullied, or so scared, by environmental campaigners that they are unwilling to sink capital in new oil production?

The kingdom — holder of the world’s largest oil reserves — is investing to boost its own output, but only planning to add another 1 million barrels a day in the next few years. Other countries in the Middle East, such as the United Arab Emirates, Kuwait and Iraq, are investing to boost their capacity, too. Russia has big plans for its Arctic wilderness, but that’s a remote, hostile place, one of the worst imaginable from an environmental perspective to invest in oil extraction.

There are big projects in the works in other areas like Kazakhstan, Azerbaijan and Brazil, which will also add to supply before the end of the decade. But with output from all the fields currently in production declining, at an average rate of anywhere from 4% to 8% a year depending whose estimates you take, you need a lot of investment just to stand still.

Meanwhile, production in the U.S., once seen as the spoiler of OPEC’s future output growth, is rising slowly. By the end of next year, it is still expected to be some 760,000 barrels a day below its pre-pandemic peak. The heady days of the first and second shale booms have passed.

Global expenditure on oil and gas projects slumped 30% to $309 billion in 2020 and has only recovered slightly this year. It needs to get back to near pre-pandemic levels of $525 billion a year for the rest of the decade to meet demand growth, according to Riyadh-based think tank the International Energy Forum and consultants IHS Markit.

The Western oil majors — companies like Royal Dutch Shell Plc, BP Plc, TotalEnergies SE — are increasingly focusing their investment on natural gas and renewables at the expense of oil. BP, for example, is expected to pump more oil in 2022 than it will this year, but production is still expected to be 6.5% below its 2017 peak.

These are the companies that can most effectively be held to environmental obligations. If they are not going to step into the gap between rising demand and falling production, then other firms, whose environmental performance is harder to police, will likely do so. I’d rather see Shell invest in the Cambo oil field in the North Sea, for instance, than Rosneft PJSC despoil the tundra of Russia’s Taymyr Peninsula. The former is easier to hold accountable.

Prince Abdulaziz is not alone in his warning. The International Energy Agency said something very similar, though without numbers, in its World Energy Outlook published in October:

“The fact that no new oil and natural gas fields are required in the NZE (Net Zero Emissions by 2050 scenario) does not mean that limiting investment in new fields will lead to the energy transition outcomes in this scenario. If demand remains at higher levels, this would result in tight supply in the years ahead, raising the risks of higher and more volatile prices.”

We ignore those warnings at our peril. A 30-million barrel a day drop in oil supply might seem like a victory to the most short-sighted of environmental campaigners, but without an accompanying fall in oil demand, it will come with a price tag none of us can afford — oil prices at levels never before imagined

[Pops]

And the EIA STEO just popped into my mailbox, this is the first predicting 2023, and they think everything is just fine.

[Doly]

Exactly. I believe that if EROEI were important we'd have long replaced fossil ICE vehicles with something else.

EROEI is important because the second law of thermodynamics is important. Sure, people are quite capable of not giving importance to things that are, in fact, important for their survival. Plenty of wars and fallen empires prove that point.

I don't think economics ignore EROEI, because my modelling suggested pretty strongly otherwise. But if I'm wrong in thinking that, the problem is far bigger than me being wrong. The problem is that then, we have to seriously contemplate the possibility that humanity is capable of grinding industry to a literal halt because our economy is capable of ignoring the laws of physics.

[AdamB]

I knew peak demand was wrong back before the plague but somehow the one month drop in demand of 15% and year of single digits below the previous peak somehow convinced headline writers that we'd quit oil.

By definition, peak supply and demand will be proximal in time. There is no "wrong" about the basic economic principles at play here, you appear to be objecting to one being the independent variable. "Demand can't be causal to the peak in oil production" would be a better way to put it.

Peak demand was always lefty click-bait and we're about to find out just how wrong it was.

The science of economics and the ideas of supply/demand basics is agnostic to politics.

While citing the current brand of talking heads (including Saudi ministers of any stripe) as though they have LEARNED something from their predecessors screwing the pooch the first 5 peak oils claimed this century only reinforces the idea that imitating a broken clock is the only way they'll ever get anything right.

[AdamB]

And the EIA STEO just popped into my mailbox, this is the first predicting 2023, and they think everything is just fine.

I guess they don't read Peak Oil Barrel. You know, Ron has only declared 2 peak oils this century, will he be more discredited when the 2nd one goes down the tubes and declare a 3rd do you think? Like the McPeaksters need any more broken-clock blockheads reminding everyone of their contributions to this conversation.

[Pops]

The problem is that then, we have to seriously contemplate the possibility that humanity is capable of grinding industry to a literal halt because our economy is capable of ignoring the laws of physics.

To this point it hasn't been EROI that powered industry. If it was there would be no big problem quantifying EROI, estimates of which are all over the board as you know better than me.

We got here not because of high EROI but the virtually unlimited supply of cheap energy—virtually free compared to the prior source, muscle.

Any time the economy demanded more energy, it was available either immediately or soon after a period of slightly higher price signaled increased demand. 100 million barrels a day! That is just crazy.

It isn't that physics doesn't apply, it's that economics hasn't been applied YET.

The true value of fossils is always lost. Before coal there were some wood fired boilers and steam engines but most work was done with cheap, human and animal labor. Some guess there are 23,200 hours of human labor in a barrel of oil, which currently goes for about $75/bbl— or about 2½ hours at current average wages.

I'll leave it to you to figure out what the going wage will be if muscles are needed to replace oil to power industry.

There is no doubt in my mind that industry would grind to a halt at 100:1 ERI if depletion reduced supply and increased cost to a fraction of its human equivalent.

Societal EROI (EROISOC): Societal EROI is the overall EROI that might be derived for all of a nation's or society's fuels by summing all gains from fuels and all costs of obtaining them.

Virtually everything relies on fuels and oil specifically. So to use Halls' "Societal EROI" the energy cost of oil is everything we have: 1:1

[AdamB]

Exactly. I believe that if EROEI were important we'd have long replaced fossil ICE vehicles with something else.

EROEI is important because the second law of thermodynamics is important.

Has someone said it isn't? And while I agree with you, can you explain how it takes precedence over the systems that run the world of human behavior, rather than just being one of the rules governing systems trending towards disorder?

Sure, people are quite capable of not giving importance to things that are, in fact, important for their survival. Plenty of wars and fallen empires prove that point.

And perhaps claiming that thermodynamics is more important than economics when it comes to human behavior?

I don't think economics ignore EROEI, because my modelling suggested pretty strongly otherwise.

Economics CANNOT ignore EROEI (or the 2nd Law). I can list examples without even trying hard. Why would modeing be required? The problem with EROEI is that it is NOT the driver of economic activity, as BTUs are not enough. But the utility, and VALUE of those BTUs, well now, THAT matters.

But if I'm wrong in thinking that, the problem is far bigger than me being wrong. The problem is that then, we have to seriously contemplate the possibility that humanity is capable of grinding industry to a literal halt because our economy is capable of ignoring the laws of physics.

Please. Non sequitur much?

[Pops]

OPEC+ hikes December oil output, but falls well short of quotas again: Platts survey

... Gains by Venezuela, Kazakhstan, Saudi Arabia, Iraq and Angola far outstripped losses by Libya and Nigeria, making December the 10th straight month that OPEC+ output increased.

However, 14 out of the 18 members with quotas fell short of their targets, including even its largest producer Russia, whose compliance rose above 100% for the first time since February, when severe winter temperatures shut in wells and reduced pipeline flows.

Total OPEC+ quota compliance climbed to 116.5%, the highest since the alliance instituted record output cuts in spring 2020, the survey found, with the 19 members subject to production targets pumping some 620,000 b/d below their combined caps.

The bloc has been hiking its quotas by a collective 400,000 b/d each month, which would put it on pace to restore production to pre-pandemic levels by late 2022.

But many countries are already maxing out their output levels or are close to it, lifting trader sentiment that was once quite bearish for the first quarter in anticipation of a major supply glut.

Platts Analytics still expects the market to be oversupplied in the first quarter but estimates OPEC+ sustainable spare production capacity will shrink to 800,000 b/d by June if it maintains its monthly quota rises, creating "an uncomfortably thin market buffer in the second half of the year."

More

It really surprises me how much trouble producers are having getting back up to speed. Not that I have any insight, I suppose it is largely about the pandemic, supply chains etc.

Still, it will be interesting to see if the predicted glut develops this year.. One would think with omi raging consumption would slow but apparently not.

[AdamB]

It really surprises me how much trouble producers are having getting back up to speed. Not that I have any insight, I suppose it is largely about the pandemic, supply chains etc.

My favorite new word combination is "upstream strategy". It is completely applicable to the issue you mention. In the US, it was more recently referred to as "capital constraint", which you might notice is different than "capital restraint". Originally, "constraint" was all the rage, but with time it has become obvious that "restraint" is the more appropriate modifier.

[Doly]

And while I agree with you, can you explain how it takes precedence over the systems that run the world of human behavior, rather than just being one of the rules governing systems trending towards disorder?

At the very least, the second law of thermodynamics takes precedence in the sense that if we completely ignore it, we'll be in some serious trouble.

If your question is: How do you change human behavior in order to avoid clashing against the second law of thermodynamics? My answer is: I have no idea. I used to assume that if you explained the problem, the relevant people would try to avoid a possible clash scenario. I'm no longer sure about that. Like Socrates, I only know I don't know.

And perhaps claiming that thermodynamics is more important than economics when it comes to human behavior?

I'm not even sure what you are asking there, especially since you say afterwards that you think economics does follow the second law of thermodynamics.

The problem with EROEI is that it is NOT the driver of economic activity, as BTUs are not enough. But the utility, and VALUE of those BTUs, well now, THAT matters.

Value? What is value? Not the same thing as price, for sure. Diamonds are more expensive than water, and water is far more useful.

So what makes some kind of BTUs more valuable than others? Just that for some applications it's more convenient to use a solid, for others a liquid, and for others a gas as a fuel. But since the chemistry to convert hydrocarbons of one type to other types is well understood, the only reason to use a low EROEI fossil fuel source is sunk capital, and/or the EROEI difference is not very high so the conversion isn't worth it. My model assumed that low EROEI sources would be gradually abandoned, and the reason I chose that assumption is because it was the theory with the greatest power to explain the existing history of hydrocarbon exploitation.

Please. Non sequitur much?

Pops had no trouble with the logic. Cyborg much?

[Baduila]

@Doly

AdamB, OS and others are not the right persons to discuss oil and the 2nd law. They have not a trace of an idea of the 2nd law and its implications.

If you want to discuss seriously, first get a copy of Moran/Shapiro: Fundamentals of Engineering Thermodynamics.

Then, read this thread: mid-year-etp-map-update-pt-2-t77607.html#p1435394

[Doly]

AdamB, OS and others are not the right persons to discuss oil and the 2nd law. They have not a trace of an idea of the 2nd law and its implications.

Thanks for the heads-up. But I sort of like talking to walls. It helps me clarify my thinking about what's going on in other ways. Or maybe it muddies it up. But in any case, I consider talking to AdamB a research exercise.

[AdamB]

And while I agree with you, can you explain how it takes precedence over the systems that run the world of human behavior, rather than just being one of the rules governing systems trending towards disorder?

At the very least, the second law of thermodynamics takes precedence in the sense that if we completely ignore it, we'll be in some serious trouble.

I agree. Fortunately, economics doesn't ignore the 2nd Law any more than any other physical process can.

And perhaps claiming that thermodynamics is more important than economics when it comes to human behavior?

I'm not even sure what you are asking there, especially since you say afterwards that you think economics does follow the second law of thermodynamics.

I insist that the 2nd law be followed. I know for an absolute fact that activities are done based on things like the value of BTUs and their utility, as Pops has named it. Are you familiar with economic modeling at all? Or, as I have asked previously, resource cost curves?

The problem with EROEI is that it is NOT the driver of economic activity, as BTUs are not enough. But the utility, and VALUE of those BTUs, well now, THAT matters.

Value? What is value? Not the same thing as price, for sure. Diamonds are more expensive than water, and water is far more useful.

If you wish to discuss economics, we could open up an entire thread dedicated to it, and define the terms in such a way that we agree on the terminology, and go from there. Because if you aren't familiar with the differences between things like price and the cost of supply, or how marginal priced commodities function, we can work those out.

My model assumed that low EROEI sources would be gradually abandoned, and the reason I chose that assumption is because it was the theory with the greatest power to explain the existing history of hydrocarbon exploitation.

Well, then you need to have assumed that low EROEI is also high cost resources for that assumption to function. As just one example of how difficult this problem is, as opposed to finding out the costs of things, do you have a study or information on the EROEI of a single well? Perhaps we could start with your information at that level and scale it up?

Please. Non sequitur much?

Pops had no trouble with the logic. Cyborg much?

You know what you did in the comment I referenced. And Pops doesn't confuse the value of his opinion, calculated or otherwise, of being of higher value than the laws of physics or value of economics within basic human activities.

[AdamB]

If you want to discuss seriously, first get a copy of Moran/Shapiro: Fundamentals of Engineering Thermodynamics.

Then, read this thread: mid-year-etp-map-update-pt-2-t77607.html#p1435394

I agree that the thread referenced is the perfect example of how those using the 2nd Law to predict oil production (and price as the ETP model has) have failed.