New one about Peak Oil

[BenBurch]

You need to talk to some people in the oil industry then.

Because they are refusing to invest in new refinery capacity.

And the reason they give is because oil production is expected to decline.

 

[lomiller]

A lack of new refining capacity isn’t at odds with oil production staying near current levels.

 

[BenBurch]

I'm just saying what I have been told. Industry people expect a declining production curve.

 

[Hindmost]

It doesn’t follow that just because subsequent production is harder that overall production will drop. Each generation of semiconductor process technology is more difficult and more expensive then the last, but they have continued on the exact same trajectory for 50 years.

For oil production to drop one of two things has to happen, either supply has to disappear, or demand has to disappear. Since there is plenty of oil left in the ground the peak oil can’t be a supply based phenomenon, this leaves us with demand. Higher prices may moderate demand but oil is relatively price insensitive so barring a complete collapse of civilization the only way for oil use to drop quickly is for it to be replaced.

There is very little evidence of there being plenty of oil in the ground. If that were true, we wouldn't be drilling in 5000 feet of water in the Gulf of Mexico. Of the recoverable oil on the planet, the evidence indicates that we have used up close to half of it. The energy return on drilling continues to drop and increased prices isn't going to change that.

To reach a production of one million barrels per day, a field of about 10 billion barrels must be discovered. The world is not discovering oil in thes range of 30-40 billion barrels a year needed to replace what we are using. Current consumption levels are projected to increase, but the assumptions for production are optimistic. Too many assume the Saudis will open up the spigots and there will be no problem.

http://www.eia.doe.gov/oiaf/forecasting.html

http://www.eia.doe.gov/oiaf/ieo/index.html

Much of oil use in not discretionary and there is a minimum demand just to keep the world economy going. The real question is whether alternative fuels can replace over 400 quads of petroleum/natural gas energy use per year over the next 30 years.

glenn

 

[Dymanic]

We might find ourselves in a similar situation with respect to oil; oil costs more energy to pump than it yields, but people are still willing to buy it for the convenience of being able to use it "off-grid."

Not sure I follow. I don't see how it matters if people are willing to pay even exorbitant amounts of money for the convenience if it's a net energy sink. Unless you're suggesting that at some point we'd use an alternative energy source to drive the well pumps?

ETA: In other words, it's true batteries are manufactured with a net energy loss, but battery power isn't the source of the energy used in making the, whereas oil is the energy source used to extract oil.

 

[drkitten]

ETA: In other words, it's true batteries are manufactured with a net energy loss, but battery power isn't the source of the energy used in making the, whereas oil is the energy source used to extract oil.

Doesn't need to be. Use electrical power to drive the oil extraction machinery, with power generated at a stationary plant (nuke?) and transmitted via wire to the (stationary) wellhead.

Then sell the oil to drive small engines that cannot be conveniently connected to the grid.

 

[lomiller]

There is very little evidence of there being plenty of oil in the ground.

Oil sands in Canada and Venezuela have some 4 trillion barrels of oil. Of that ~10% of the Athabasca tar sands, approximately 170 billion barrels is currently considered “reserves” but that number is considerably higher for oil at > $100 per barrel.

 

[Dymanic]

Doesn't need to be. Use electrical power to drive the oil extraction machinery, with power generated at a stationary plant (nuke?) and transmitted via wire to the (stationary) wellhead.

Then sell the oil to drive small engines that cannot be conveniently connected to the grid.

If you wanted to design a system for maximum inefficiency, that sounds like a good start. You'd get losses at both ends and every place in between.

 

[BenBurch]

Oil sands in Canada and Venezuela have some 4 trillion barrels of oil. Of that ~10% of the Athabasca tar sands, approximately 170 billion barrels is currently considered “reserves” but that number is considerably higher for oil at > $100 per barrel.

Um, why don't you look at the quality of the "oil", the cost in energy and money to extract it, and what sorts of uses it allows itself to be put to?

It's bitumen. GREAT if what you want to do is make roads!

But you have to dry it, filter it, crack in a catalytic process and then hydrogenate it by driving off much of the carbon as CO2.

Process uses an amazing amount of water. Fresh water. And it can't be contaminated or the process has problems. And you know, that is getting to be in short supply in many places.

The resulting material pretty much has to be shipped by rail as it won't pump, and in winter is a solid.

THEN when you have done all that and gotten it to the refinery you purpose-built for this sort of poor oil, you can refine it into lighter products with the same sort of expensive process you apply now to heavy sweet crude oil.

I read it costs $40/bbl on average to process the crude to the point where it is ready for the refineries.

 

[lomiller]

Um, why don't you look at the quality of the "oil", the cost in energy and money to extract it, and what sorts of uses it allows itself to be put to?

While energy in vs energy out isn’t as high a most conventional oil it’s still significantly in positive territory. Perhaps you are thinking of oil shale which often does not give a positive return on the energy put in?

The resulting material pretty much has to be shipped by rail as it won't pump, and in winter is a solid.

It can be refined on site, but right now it’s typically upgraded to synthetic crude which is directly comparable to light sweet crude which can be refined anywhere, and then sent via pipeline to refineries elsewhere.

I read it costs $40/bbl on average to process the crude to the point where it is ready for the refineries.

$40 is typically where a lot of money becomes very interested, but Syncrude and Suncor have sustained profitable operation at much lower prices. A few years ago Suncor was touting they were in the $15-$20 CDN dollar break even point but that was mostly marginal cost since they have been in operation for several decades. That’s gone up as labor costs and natural gas prices increased.

 

[BenBurch]

And what happens to production costs when natural gas gets scarce (as it will before oil does?)

And no, its not like light, sweet crude at all after processing. Its extremely heavy and cannot be pumped unless warmed. The output from oil shale is a much nicer product.

And $40/bbl COST is really unattractive when there are still wells that can produce for a fraction of that.

Its a net energy source, but a really poor one, and there will absolutely be problems scaling it up, especially fresh water and natural gas supply. Which will raise the cost considerably.

Just not a big win, and not likely to ever be able to take up the slack from the decline in true petroleum production.

And add to that the fact that its CO2 input to the atmosphere judged by energy delivered to the end user is about twice that of real petroleum.

But its still really good for building roads and railroad roadbeds.

 

[corplinx]

The real problem isn't peak oil production, its peak oil pricing. When the price of oil gets too high, it causes recession and drops demand, and the price gets low, which helps recovery, then price gets high, and......

We're at 70. At 80 the transportation companies will stop purchasing capital again to pay for fuel. At 90, they start looking at layoffs again. Consumers stop going to movies and stop driving where they don't need to. I think we could have another dip in this recession due to oil pricing.

Hate to sound really pessimistic here, but working for a fortune 500 transportation company and seeing those hard decisions being made has really opened my eyes. I'm really disappointed that this president seemed to have cruised through the past summer without learning a thing. He really seems to be asleep at the wheel on oil production. Even the token female with the deer in headlights look grokked the need for stable oil pricing. Obama seems to be looking 20 years down the road, but forgetting that we need to prosper in the years in between. His solutions are all on the conservation side.

Its too late to do anything about pricing this summer. We had a lame duck Bush with a an uninterested congress and now a president who is blind to the issue.

I really fear an economy that basically keeps going stop/go on oil prices. I have a feeling the administation will be reactionary and try windfall taxes and other political scapegoating instead of using the pressure to do something productive.

I guess you could say I have been thinking about this problem lately (since my line of work is the first to be affected by it before the economy at large).

Could someone just whack the people on CNBC on the heads every time they pump oil prices? Could someone tell JP Morgan to fricken quit it? Beam me up Mr. Speaker.

 

[BenBurch]

corplinx, exactly right.

 

[GreyICE]

Oil sands in Canada and Venezuela have some 4 trillion barrels of oil. Of that ~10% of the Athabasca tar sands, approximately 170 billion barrels is currently considered “reserves” but that number is considerably higher for oil at > $100 per barrel.

Basic economics. If price goes up, demand goes where and supply does what?

 

[GreyICE]

The real problem isn't peak oil production, its peak oil pricing. When the price of oil gets too high, it causes recession and drops demand, and the price gets low, which helps recovery, then price gets high, and......

We're at 70. At 80 the transportation companies will stop purchasing capital again to pay for fuel. At 90, they start looking at layoffs again. Consumers stop going to movies and stop driving where they don't need to. I think we could have another dip in this recession due to oil pricing.

Hate to sound really pessimistic here, but working for a fortune 500 transportation company and seeing those hard decisions being made has really opened my eyes. I'm really disappointed that this president seemed to have cruised through the past summer without learning a thing. He really seems to be asleep at the wheel on oil production. Even the token female with the deer in headlights look grokked the need for stable oil pricing. Obama seems to be looking 20 years down the road, but forgetting that we need to prosper in the years in between. His solutions are all on the conservation side.

Its too late to do anything about pricing this summer. We had a lame duck Bush with a an uninterested congress and now a president who is blind to the issue.

I really fear an economy that basically keeps going stop/go on oil prices. I have a feeling the administation will be reactionary and try windfall taxes and other political scapegoating instead of using the pressure to do something productive.

I guess you could say I have been thinking about this problem lately (since my line of work is the first to be affected by it before the economy at large).

Could someone just whack the people on CNBC on the heads every time they pump oil prices? Could someone tell JP Morgan to fricken quit it? Beam me up Mr. Speaker.

Corplinx, we can't do anything about the pricing. Presidents can intervene to smooth over temporary hiccups in the economy, Congress can alter tarriffs and trade.

But peak oil is peak oil. At some point it will just not be economically feasible to sell oil for a certain price, which makes certain industries economically non-viable. Since oil will NEVER be cheaper once peak oil is passed, barring amazing technological innovation that is on no one's horizon (oil from bacteria or somesuch), then those industries will NEVER be viable.

It's like being a typewriter salesman as the personal computer started to hit. You can subsidize the typewriter as much as you want, and prop it up, and bail out the salesmen, but they just don't have an economic reason to exist anymore.

The really funny part is we saw this coming ages ago. We could have stopped it. Mid 1980s? Perfect time. United States, world leader in technology. Reagan could have invested in alternative energy sources, and started research decades ahead of today. Nothing. Bush I? Nothing. Clinton? Nothing. Bush II? Nothing.

Well here we are now. Entertain us. What shall we do at this stage? Our ability to soften the market impact is zero. What we NEEDED to do was prepare for peak oil 10 years ago so the technologies we need would be rolling out today. Instead environmentalists have been called crazy, insane, nuts, foolish, shortsighted, etc. (look at the dumb tar sands argument, above, for details). At this point we need technologies that take 10 years to develop - today.

 

[corplinx]

Nothing. Clinton? Nothing. Bush II? Nothing

I believe both of those gentlemen spent on alternatives. It even increased under Bush2 as strange as that seems. However, we cannot predict innovation. The cons to most forms of personal transport alternative powering are well known.

Along with alternative energy development, we needed comprehensive plans to take care of supply pricing stability to ride things out until we're all driving Chevy Volts and Fiskers. This part was tried for and shot down with arguements like "this won't even work for years". Guess what, its years later. We're the grasshoppers and not the ants.

 

[Hindmost]

Oil sands in Canada and Venezuela have some 4 trillion barrels of oil. Of that ~10% of the Athabasca tar sands, approximately 170 billion barrels is currently considered “reserves” but that number is considerably higher for oil at > $100 per barrel.

Actually, the recoverable amount of oil in sands is not proved--anything below about 200 feet of depth is energy negative. The process to make the oil refinable is intense and requires a waste gas well or naptha to boost the hydrogen content. The energy balance for sands just isn't that good, the refining infrastructure does not exist and the process is environmentally nasty. Oil sands are not going to solve this issue.

glenn

 

[The Central Scrutinizer]

The real problem isn't peak oil production, its peak oil pricing. When the price of oil gets too high, it causes recession and drops demand, and the price gets low, which helps recovery, then price gets high, and......

We're at 70. At 80 the transportation companies will stop purchasing capital again to pay for fuel. At 90, they start looking at layoffs again. Consumers stop going to movies and stop driving where they don't need to. I think we could have another dip in this recession due to oil pricing.

Hate to sound really pessimistic here, but working for a fortune 500 transportation company and seeing those hard decisions being made has really opened my eyes. I'm really disappointed that this president seemed to have cruised through the past summer without learning a thing. He really seems to be asleep at the wheel on oil production. Even the token female with the deer in headlights look grokked the need for stable oil pricing. Obama seems to be looking 20 years down the road, but forgetting that we need to prosper in the years in between. His solutions are all on the conservation side.

Its too late to do anything about pricing this summer. We had a lame duck Bush with a an uninterested congress and now a president who is blind to the issue.

I really fear an economy that basically keeps going stop/go on oil prices. I have a feeling the administation will be reactionary and try windfall taxes and other political scapegoating instead of using the pressure to do something productive.

I guess you could say I have been thinking about this problem lately (since my line of work is the first to be affected by it before the economy at large).

Could someone just whack the people on CNBC on the heads every time they pump oil prices? Could someone tell JP Morgan to fricken quit it? Beam me up Mr. Speaker.

So you want the president to control oil prices? Gas prices are already too low.

 

[drkitten]

If you wanted to design a system for maximum inefficiency, that sounds like a good start. You'd get losses at both ends and every place in between.

Not relevant, I'm afraid. (And, no, it's nowhere near where I'd start if I were designing for maximum ineffeciency.) Even with the (in)efficiency losses, if the price of oil-based power were high enough, it could still be cheaper than using oil power to pull oil out of the ground.

... and there would still be a demand for oil-based power for convenience and power/weight density.

Container ships, for example, can't really afford to be powered on anything BUT oil. They're not really large enough to lug nuclear plants around like the large nuclear warships, and they can't typically afford the crew to run a nuke plant; this may change as nuclear power improves. They can't use batteries as they don't make port often enough to recharge. Solar is too unreliable, they can't be connected to the power grid, and coal or alcohol doesn't have the energy density.

 

[Dymanic]

Even with the (in)efficiency losses, if the price of oil-based power were high enough, it could still be cheaper than using oil power to pull oil out of the ground.

Thinking only in terms of what's "cheaper" is missing something important: at some point, the reason for not using oil power to pull oil out of the ground isn't that it costs too much money; it's that you end up with less oil than you started out with (or roughly the same amount -- or more, but not enough to make it worth the effort).

Container ships, for example, can't really afford to be powered on anything BUT oil.

That's a nice example. The same surely applies to many other things; harvesters, ore trucks, you name it. I don't see it as a question of how we will manage to continue to provide an affordable supply of petroleum fuel for those machines that can only run on petroleum fuel, but how we will manage to sustain our economy once we are past the point where we are able to do that.