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Peak Oil Thread


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#1 of 130 Don Solosan

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Posted June 14 2008 - 08:50 AM

Since the gas thread has attracted immense interest, I thought I'd start one on a related subject: Peak Oil. The basic tenets of Peak Oil are pretty simple. Being a finite substance, sooner or later production of oil will reach a peak, after which supply will never satisfy demand. The consequences of this peak are enormous, since civilization is based upon the cheap, plentiful bounty of fossil fuels.

A geologist, M. King Hubbert, predicted in the mid-1950s that US production would peak in the late 1960s/early 1970s. He was ridiculed for this announcement, but US production did, in fact, peak in 1970 and even the discoveries in Alaska were not been enough to stop the decline. On the worldwide scale, production of sweet, light crude (the good stuff) peaked in 2005.

Exacerbating the problem is the fact that all the easy to find and extract oil has already been produced, leaving the hard to get at and expensive to produce stuff.

Want to know what's really going on with the price of gas? Look into Peak Oil.

#2 of 130 Joseph DeMartino

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Posted June 14 2008 - 09:57 AM

Quote:
Want to know what's really going on with the price of gas? Look into Peak Oil.

Yeah, forget that "supply and demand" stuff, forget that China and India are industrial giants now, absorbing far more of the available oil than anyone could have predicted in the 50s - and forget the effect of speculation in the oil futures market. Forget the fact that the price of gasoline in particular, as opposed to crude oil itself, has much to do with internal infrastructure - refineries, transport systems, the distance the product has to travel to get to market. Finally forget the degree to which deliberate state action influences the price at the pump - special formulations and additives for different states to meet local envrionmental regulations, for instances, plus federal, state and local taxes which account for more of the price per gallon than oil company profits do. (Federal taxes are capped, but state and local taxes are simply tacked onto the sale price.)

And by all means ignore the huge untapped reservoirs of oil that weren't economically feasible to explore when oil was $20 a barrel, but which now are, and the potentially larger unexplored deposits recently discovered in places like the Gulf of Mexico.

No, blame it all on "Peak Oil." Because a simple and easy-to-understand theory is always to be preferred to complex, messy and difficult facts.

Speaking of which, did U.S. oil production "in fact" peak in the 1970s? If so, was it because because supplies were low?. I'd like to check to see if a) production actually peaked and b) if it didn't peak because all through the 1950s into the latey 60s it became cheaper to buy foreign oil than to extract our own, which resulted in a lot of domestic producers going out of business and shutting down fields. The price hiccups of the Arab Oil Embargo in the 70s didn't last long enough for new companies to go into the business or for anyone to reopen the closed fields.

Regards,

Joe

#3 of 130 ChristopherDAC

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Posted June 14 2008 - 10:43 AM

Quote:
Originally Posted by Joseph DeMartino
Yeah, forget that "supply and demand" stuff
I think that the peak of production can fairly be called a supply factor.

All of the other factors you mention have this in common, that they depend on the bulk production number. India and China are buying oil out of a supply which isn't increasing very rapidly at all. Oil-fields which wouldn't pay at lower prices are economical now because there's no more to be had at those low prices. Speculators are betting the price of oil up because the supply isn't increasing as the price rises, so they feel they have a sure thing.

"Peak Oil", in other words, is the context in which everything else is happening. If the USA had gone ahead & built the infrastructure in the 1970s & 1980s, instead of scrapping the Saturn Launch System & concentrating on the crippled Shuttle, we could be building solar power satellites today, & oil would be of considerably less economic importance. Unfortunately, we failed to make structural changes in the aftermath of the oil shocks, concentrating instead on economies in the existing system & attempts to expand production.

#4 of 130 Don Solosan

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Posted June 14 2008 - 11:38 AM

"Yeah, forget that "supply and demand" stuff,"

As Christopher said, supply and demand is very much at the heart of peak oil. Supply is not keeping up with demand because the world's oil fields are declining at a rate estimated to be between 4 and 8 percent a year. New production isn't coming on line fast enough or in enough volume to allow for growth.

"And by all means ignore the huge untapped reservoirs of oil that weren't economically feasible to explore when oil was $20 a barrel,"

Huge? There hasn't been a giant field discovered in decades. If you mean those puddles of 10 billion barrels, well, yeah, those will last the world four months at present rates of consumption, provided you can get it all out of the ground. And like I've mentioned in the gas thread, when the price of oil goes up, the price of everything else rises as well. Shell's costs getting at Canada's oil sands doubled. Nice surprise there.

What else is there? Oil in very deep water and drill rigs are in short supply. Heavy, sour crude? Iran has tankers full of the stuff, but no one's buying.

"Speaking of which, did U.S. oil production "in fact" peak in the 1970s?"

By all means, go and check. Cheaper to buy foreign oil in the 70s? That would have been the perfect time for the American oil majors to kick up production, but no. Too many of our fields were in decline. Do you honestly think that oil producers walked away from a sweet bounty of petroleum here in the US of A? Last time I checked, we were still the third largest producer after Saudia Arabia and Russia. No, we're still churning the stuff out. It's just not at the record levels set around 1970.

But don't take my word for all this. See what those reactionaries at National Geographic are saying:

World Oil - National Geographic Magazine

#5 of 130 Bryan X

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Posted June 14 2008 - 12:23 PM

Perhaps the Federal ban on most oil exploration in the U.S. since 1981 has had something to do with U.S. producation falling off.

Quote:
Huge? There hasn't been a giant field discovered in decades. If you mean those puddles of 10 billion barrels...

If confirmed would 33 billion barrels be enough for you?

Dateline- April 14, 2008:

SAO PAULO, Brazil—A deep-water exploration area could contain as much as 33 billion barrels of oil, an amount that would nearly triple Brazil's reserves and make the offshore bloc the world's third-largest known oil reserve, a top energy official said Monday.

Either way, I'm not sure I'd call 10 billion "puddles" considering the current known U.S. reserves are only 21 billion.

Sure, we'll run out of oil eventually, but as was mentioned earlier, there is a big difference in what is considered "economically unfeasable" oil when a barrel cost $15 versus now when it is $135. I've seen many estimates putting the cost to produce shale oil at well under $50/barrel and I've read that coal gasification costs well under $50/barrel too. Add those two as resources for oil and we've just added a huge amount to the reserves in Canada and the U.S. It's just a matter of getting past those who have a vested interest in stopping such production.

#6 of 130 Brian Perry

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Posted June 14 2008 - 02:16 PM

Quote:
Do you honestly think that oil producers walked away from a sweet bounty of petroleum here in the US of A?

Well, if it costs you $50 to get the oil out of the ground and you can only sell it for $25, I don't think that's a smart business model. Once the price goes higher than your costs over a reasonable period of time, then you might consider drilling again.

#7 of 130 Don Solosan

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Posted June 14 2008 - 03:04 PM

"Perhaps the Federal ban on most oil exploration in the U.S. since 1981 has had something to do with U.S. producation falling off."

Like I said, production started falling off in 1970, and yet the US has remained one of the top producers in the world. So it clearly isn't for lack of trying.

"If confirmed would 33 billion barrels be enough for you?"

No. 33 billion barrels would fuel the world for just a year. Plus, that's an estimate for the entire region, not for one field, if you read the news updates. If existing fields are declining at anywhere near 8%, you have to find and put into production several new large fields every year just to maintain production. If you want the economy to grow, you have to find and put into production several more. Add to that it's in deep water, and oil rigs are in short supply... and it tells me that it won't turn around the decline.

"Sure, we'll run out of oil eventually, but as was mentioned earlier, there is a big difference in what is considered "economically unfeasable" oil when a barrel cost $15 versus now when it is $135."

The important thing isn't running out, it's running down. Our economy is based on the idea of limitless growth, fueled by cheap fossil fuel energy. Well, energy isn't so cheap anymore. That's a big part of the stranglehold the economy is in right now. Something like 7 airlines have gone under recently. Truckers and fishermen are protesting in Europe. Parts of the UK ran out of fuel today when Shell's truck drivers went on strike. And no matter how long you wait, gas is not going to go back down to 60 cents a gallon; hell, at $4 a gallon, it's still cheaper than water.

The oil sands project would be great (disregarding the fresh water and natural gas used), but right now they're only producing a little over a thousand barrels per day, with an estimate to be producing around 3000 barrels per day in several years. Meanwhile, the US is consuming 20 million barrels of oil per day. It won't save us.


Edit: for the oil sands figures given I used a table from The Oil Drum, but I must have misread. They are actually producing a million barrels a day. But to be fair, it is extremely energy intensive to get the stuff, and the environmental damage is extreme, for such a modest payoff.

#8 of 130 JeremyErwin

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Posted June 14 2008 - 04:36 PM

Quote:
hell, at $4 a gallon, it's still cheaper than water.

My water authority charges $2.65 per thousand gallons, peak.

#9 of 130 Don Solosan

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Posted June 14 2008 - 06:58 PM

"My water authority charges $2.65 per thousand gallons, peak."

That's bottled water, Jeremy.

#10 of 130 Bryan X

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Posted June 15 2008 - 12:13 AM

Specifiying bottled water is just an artificial way to make gasoline look cheap. Drinking water is drinking water.

#11 of 130 Joseph DeMartino

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Posted June 15 2008 - 12:50 AM

Quote:
Originally Posted by Bryan X
Specifiying bottled water is just an artificial way to make gasoline look cheap. Drinking water is drinking water.

Obviously drinking water isn't drinking water or some people would not be willing to pay a huge premium to drink the bottled stuff. Gasoline to bottled water is a perfectly reasonable analogy because it points out - once again - that price is a fuction of factors beside scarcity. To say "drinking water is drinking water" is to ignore the reality that we see all around us because whatever we happen to believe, millions of our fellow beings disagree.

"Economics is the study of the allocation of scarce resources that have alernative uses." (Thomas Sowell, Basic Economics.) Most resources are "scarce" less because of actual, physical supply than because of political or other barriers to extraction, all resources are at least finite, and all have more than one possible use. Price is one of the mechanisms, in a free market, that is used to allocate these resources.

"Peak Oil" assumes two things - 1) the trends we are observing at the moment are going to continue forever. 2) that we actually know about how much oil is still out there waiting to be discovered. Because if you don't know (2) you have no basis for declaring when the peak has actually been passed.

And the fact is, we don't know (2). By definition. It is a big planet. When the original peak oil prediction was made for U.S. production there were no satellites, much less natural resource mapping satellites, and the technology for locating and extracting oil was much crude.

And historical experience has (or should have) taught us the dangers of assuming (1). Trends change all the time because people are not robots and they react to changing circumstances. Any predictive model that assumes that every variable will remain unchanged except the one being studied is doomed to failure because it has nothing in common with the real world. Any predictive model that attempts to take into account all possible changes in other variables is doomed to failure because there are too many to account for and the range of possible variation is too large. Posted Image

Quote:
Our economy is based on the idea of limitless growth, fueled by cheap fossil fuel energy. Well, energy isn't so cheap anymore. That's a big part of the stranglehold the economy is in right now. Something like 7 airlines have gone under recently.

Our economy isn't "based" on any such thing. Much of the growth of the U.S. economy in the past few decades has been based on what amounts to intellectual property and services, which have a fraction of the energy requirements of manufacturing. This notion is yet another relic of the 50s and 60s economic theory (it wasn't especially true, even then) that people insist on applying to a 21stt century economy its authors could scarcely have imagined. And the airline failures have a lot more to do with systemic problems in the airline industry than with fuel prices, although they certainly haven't helped. Airlines have historically existed on the very of bankruptcy, because their profit-margins are so thin and because they are so vulnerable to things like the post-9/11 travel drought and even minor economic shocks (travel being one of the first luxuries people give up.)

Regards,

Joe

#12 of 130 Bryan X

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Posted June 15 2008 - 03:17 AM

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Obviously drinking water isn't drinking water or some people would not be willing to pay a huge premium to drink the bottled stuff. Gasoline to bottled water is a perfectly reasonable analogy because it points out - once again - that price is a fuction of factors beside scarcity. To say "drinking water is drinking water" is to ignore the reality that we see all around us because whatever we happen to believe, millions of our fellow beings disagree.

Bottled water to gasoline is a disingenuous analogy. I drink bottled water for convenience, however, I consume at most 1 gallon of bottled water a week. Over 99% of my water use is from the tap at a grossly cheaper cost.

I consume probably 20 gallons of gas per week. And there is not another option to purchase my gasonline cheaper.

If I were to consume as much bottled water as I do gasoline, you can be sure I would switch to tap water. There's no other option to switch to with gasoline. See the difference? At the price bottled water is, consumers decide how much they are willing to consume at that price and the rest they consume from the tap at a significantly reduced cost (or even FREE at many places). Try to find similar options with gasonline.

So no, bottled water is not a good analogy. You're artificially putting a restriction on water-- that it must be bottled-- and ignoring the fact that consumers have other options.

#13 of 130 JeremyErwin

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Posted June 15 2008 - 04:18 AM

A pipeline is the most efficient means of transporting liquid-- be it oil, diesel fuel, or water. If you don't trust your municipalities water distribution network,, you can pay someone to truck it in for you. Naturally, diesel fuel is expensive, so the cost is likely to go up. A good opportunity for economists to price "trust."

Interestingly, the US is switching over to ultra low sulfur diesel fuel. Unfortunately, the pipelines already have sulfur in them, so refineries are having to reduce the sulfur content even further to account for pipeline contamination.

#14 of 130 Don Solosan

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Posted June 15 2008 - 06:07 AM

""Peak Oil" assumes two things - 1) the trends we are observing at the moment are going to continue forever. 2) that we actually know about how much oil is still out there waiting to be discovered. Because if you don't know (2) you have no basis for declaring when the peak has actually been passed."

Did you read that National Geographic article I linked? There are people in the petroleum business who believe this is happening -- and they know a lot more than you or I. If you need more of that, Google up The Oil Drum. It's a site where a lot of geologists and people in the business are discussing this.

M. King Hubbert proved that you don't need to know exactly how much oil exists before you can make an educated guess about when production will go into decline. And besides, if there's so much oil out there, why aren't they finding it? With the runup in prices, exploration has gone into overdrive, but they're not finding enough oil to replace what we're using. And what they are finding is in hard-to-reach places, so it's going to take a long time to get at it, and it's going to be expensive.

"Our economy isn't "based" on any such thing. Much of the growth of the U.S. economy in the past few decades has been based on what amounts to intellectual property and services"

One hundred years of automobiles, airplanes, the Internet, always-on electrical appliances, suburban sprawl, insane commutes, box stores selling plastic stuff from 10 thousand miles away, restaurants selling food from thousands of miles away... there is only one thing that has made this all possible: cheap energy. Cheap energy makes possible "intellectual property" and a service economy. And what has higher fuel costs brought us? Restaurants feeling the pinch as their customers eat at home or at cheaper places. Yes, airlines operating at the edge of profitability is normal. Seven airlines going under in a few months is not. An article on the Baltimore Sun website for today cites a study that says "All of the major airlines could be in bankruptcy by early next year if oil prices stay where they are..." Do you consider that normal?

#15 of 130 Don Solosan

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Posted June 15 2008 - 06:10 AM

"So no, bottled water is not a good analogy."

All it shows is that people are willing to spend a great deal of money for something they can get for nearly free -- and yet they complain about the price of gas, which compared to the rest of the world, is relatively cheap.

#16 of 130 Don Solosan

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Posted June 15 2008 - 06:15 AM

Bulgaria: High Fuel Prices Drive up Donkey Prices in Turkey

"The prices of donkeys in the Yozgat District in Central Turkey have increased sevenfold as many local people are giving up the use of tractors over the high fuel prices, and substitute them with the beasts of draught."

#17 of 130 Philip Hamm

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Posted June 16 2008 - 06:42 AM

Peak Oil is real. The "Peak Oil" doomsday cult is not. We will have to deal with it. The airline industry as a form of mass transportation is doomed IMO. Enjoy flying now while you can. Electricity can do a lot of things, but it can't run airplanes.

Interesting blog
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#18 of 130 ChristopherDAC

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Posted June 16 2008 - 07:01 AM

It bears mentioning that Leik Myrabo has been pushing for years a method of running airliners via gigawatt orbital lasers. It would work — small-scale tests are very encouraging — but the whole "death ray" angle kind of kills it.

Of course, with space solar power or large-scale nuclear (closed fuel cycle), we could spare the petrofuels for applications which require them. High-speed rail can substitute for air in most intracontinental applications, & hydrogen-fuelled suborbital rockets would fill some of the gaps. Ships can be run by sodium-sulphur batteries or electricity via orbital microwave relay (much lower than death-ray intensity), or even to schedule under sail with modern weather-forecasting techniques. There are alternatives to road transportation, & electric cars are practical for many applications.

The truth is, the measures we will need to take do not have to mean a decrease in quality of life, merely a change in patterns of living. That's not to say we won't find some way to screw things seriously up, since humanity is good at that, but we have the opportunity to seize the inevitable change to work our benefit.

#19 of 130 Philip Hamm

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Posted June 16 2008 - 08:36 AM

Wow Christopher you read a lot of Sci-Fi, huh? I suspect most of the technologies you discuss far-fetched to say the least. I agree that our living standard will change in ways most people don't really expect.
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#20 of 130 DaveF

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Posted June 16 2008 - 09:51 AM

Quote:
Originally Posted by ChristopherDAC
It bears mentioning that Leik Myrabo has been pushing for years a method of running airliners via gigawatt orbital lasers. It would work — small-scale tests are very encouraging — but the whole "death ray" angle kind of kills it.
Assuming lasers in low earth orbit, about 380 miles aimed at a 10ft patch on a plane, you need about 5 µR (micro-radian) aiming accuracy. With the plane flying at 600 mph, you need a slew rate of about 500 µR/s. You'll also have to trade off powering satellites as they move in and out of visibility of the plane. That's not impossible -- dust off Pres. Reagan's Star Wars / SDI research -- but it would be a heck of a system to make work. What are the "tricks"? Periodic pulses to charge batteries, so the plane is under its own power for minutes to hours at a time? Large beams to make the tracking possible at low power to not cook the fish in the sea below?

Seems like building a Mr. Fusion would be easier Posted Image


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