New one about Peak Oil

[Almo]

Hi!

I'm on Hubbert's side on Peak Oil, I just think he missed the world peak by N years, which will be small enough not to matter. But that's neither here nor there for this thread. I just wanted to point out another example of CT thinking.

But I just heard a funny one. A friend of mine who leans toward conspiracy theories said, "world peak oil is behind us. the oil companies just can't let us know about it."

 

[MRC_Hans]

Hi!

I'm on Hubbert's side on Peak Oil, I just think he missed the world peak by N years, which will be small enough not to matter. But that's neither here nor there for this thread. I just wanted to point out another example of CT thinking.

But I just heard a funny one. A friend of mine who leans toward conspiracy theories said, "world peak oil is behind us. the oil companies just can't let us know about it."

That is extremely funny. He simply doesn't have the slightest idea what it is about.



Hans

 

[Dymanic]

It's certainly possible. There is no real controversy among oil industry analysts as to whether a global peak will occur; the debate centers around when it will occur. Some analysts believe that we are at or past the peak, but only time will tell. The nature of the thing is that you can only see the peak by looking backwards.

It's not hard to see why oil producing nations or oil companies might have strong political and/or economic motives for fiddling with estimates of the size of remaining reserves, and I wouldn't be too quick to dismiss as conspiracy theory any speculation about that.

 

[lomiller]

I’m of the opinion that for practical purposes we are pretty close to the peak but TBH a more relevant discussion would probably be what the peak will look like.

The classic Hubbert peak is based on the pattern seen in individual countries when their production peaked then dropped fairly rapidly. This is likely to be fundamentally different for a global peak because that rapid drop isn’t caused by the resource itself, but by the rapid exit of investment dollars to lower cost alternative sites.

Globally this could only happen with a rapid exit of investment dollars to other cheaper forms of energy, something that isn’t likely to happen soon on it’s own. Short of a strategic government arranged move away from oil, it’s likely to have a cost advantage over it’s competitors for decades to come.

To me this suggests a long plateau rather then rise and rapid fall, and it isn’t inconceivable that we have already reached this production plateau.

 

[The Central Scrutinizer]

Whether we are at "peak" or not, we will still be pumping oil 100 years from now.

 

[dudalb]

I understand that Hubbert has made it clear he does not like all the crackpots who have grabbed peak oil as a vehicle for thier nuttiness.

 

[Doghouse Reilly]

I understand that Hubbert has made it clear he does not like all the crackpots who have grabbed peak oil as a vehicle for thier nuttiness.

Well, he died in 1989 and peak oil wasn't really a much discussed issue at the time so that seems unlikely. He was concerned that people were not giving the issue enough attention.
Any source for this claim?

 

[Dymanic]

Whether we are at "peak" or not, we will still be pumping oil 100 years from now.

Without a doubt. Equally certain, though, is that we won't be pumping enough to support twenty-million-barrel-a-day habits.

 

[rjh01]

All I know is that the price of oil was going up until a year ago. The thing that stopped it was the recession in most countries that used a lot of oil. Now it is going back up because there are far fewer rigs than there were a year ago. We probably will see $100+ a barrel by the end of the year. The only reason I will be wrong is that something changes. Either they start drilling again or the economy collapses.

Ref: http://www.wtrg.com/rotaryrigs.html
http://www.wtrg.com/daily/crudeoilprice.html

 

[drkitten]

The classic Hubbert peak is based on the pattern seen in individual countries when their production peaked then dropped fairly rapidly. This is likely to be fundamentally different for a global peak because that rapid drop isn’t caused by the resource itself, but by the rapid exit of investment dollars to lower cost alternative sites.

Huh? Are we discussing the same Hubbert Peak? It's symmetric; the drop is just as fast as the rise -- and it appears whether you're looking at individual countries or at global production. (At least, that's the experience with other commodities such as whale oil or codfish.)

And it's not caused by drop in investment dollars; it's caused by depletion of resources. Investment tends to involve lots of fixed costs; once you've built a whaling fleet (or an oil derrick) it can continue to produce at relatively low price for a number of years. The problem is that it will produce less and less (as it becomes harder to find whales or oil).

As production per ship (or production per derrick) goes down, it becomes harder to justify buying yet another ship, since you can't get the same ROI. Production costs are going up, sales are going down. Every time a ship (or derrick) is retired, you will get a slight increase in the price as supply drops, but not enough to offset the overall increased costs -- and not enough to justify buying a replacement ship. The result is that you get a gradual decrease in the number and productivity of producers, just as you got a gradual increase in the number and productivity on the other side of the peak.

 

[lomiller]

Whale oil or cod are not good analogies because they can decline due to over utilization. In theory proper management would have allowed it to produce at the same rate indefinitely.

Finite resources are a different story, those almost always decline due to competition from a cheaper alternative long before the resource itself is exhausted. There isn’t a single finite resource that has ever been completely exhausted on a global scale. Even on a local scale few mines are ever completely exhausted, they simply become uncompetitive and are shut down. With sufficient increase in prices or technology some are even brought back online at a later time.

 

[maddog]

I thought Peak was a brand of anti-freeze, not oil. Personally, I use Castrol Oil for my car but I haven't really done any research into if there's any difference between the brands. I guess I just bought into what they say on the commercials.

 

[drkitten]

Whale oil or cod are not good analogies because they can decline due to over utilization.

Yes, but they didn't, which is exactly what makes them such marvelous analogies. And they fit the Hubbert's theoretical model extremely well.

There isn’t a single finite resource that has ever been completely exhausted on a global scale.

Er, Dodos? Passenger pigeons? Sea minks?

I think you're misunderstanding the claims of the peak oil analysts. If you look at Hubbert's model, it doesn't predict that oil -- or any other commodity subject to the model -- will ever be completely exhausted on a global scale. Or on a local scale, for that matter. The function predicts an exponential decline, so production is halved every [period of time]. When you get to the point where you would expect to harvest half of a sea mink, they are completely exhausted.

So the fact that resources have seldom if ever been completely exhausted is actually an argument for Hubbart's peak, not against it.

 

[lomiller]

Renewable resources may the theory well, but they still differ significantly from non-renewable resources.

Only 5%-10% of known oil deposits (not reserves) have been used. Being that we are so dependant on it it's certain that we will continue to use it until it's replaced by some cheaper alternative. Increasing prices will flatten demand, but without a complete collapse of either the supply or demand how can there be any significant drop in production?

 

[drkitten]

Renewable resources may the theory well, but they still differ significantly from non-renewable resources.

Er, not so.

Only 5%-10% of known oil deposits (not reserves) have been used.

True, but not relevant.

More importantly, we've largely used the cheapest 5-10%; using the rest will require much more infrastructure to harvest, therefore reducing the ROI for the investors and increasing the price at the well-head or the pump.

Being that we are so dependant on it it's certain that we will continue to use it until it's replaced by some cheaper alternative.

And the options for cheaper alternatives at the moment include simply not using oil as well as coal-fired electricity. Both of which have shown dramatic increases recently as the cost of oil increases.

Increasing prices will flatten demand, but without a complete collapse of either the supply or demand how can there be any significant drop in production?

Because the increased costs move the supply curve to the left (less oil can be produced at a given fixed price), resulting in a decrease in production/supply even as all else remains equal. .

 

[RecoveringYuppy]

Whale oil or cod are not good analogies because they can decline due to over utilization. In theory proper management would have allowed it to produce at the same rate indefinitely.

They make good analogies since we overwhelmed their ability to replenish. Presumably there is also some, very low, rate at which we can pump oil without depleting it.

 

[Holler Hoojer]

There's a game one can play to see how this all works out. Imagine a table (at Uncle HH's casino, of course) on which there were many bundled stacks of pink index cards. Each stack has 100 cards in it. Only the top card is visible. There were numbers - 0, 1, 2, 5, 10, 20, 50, 100, or 500 - printed on each card and we call those numbers "points". Here are the rules:

You may buy the right to use any stack for $20.

Each time you remove a card from the top of a purchased stack, you must pay $5. Only then can you see what card is next.

Each card is either equal to, or less than, the card above.

When you decide to stop, you may exchange the removed cards for money, each point being worth $1.

Oh, all the stacks which had 500, 100, or 50 on top are gone. The early customers took those.

So, which stacks would you be willing to buy? How far down would you be willing to examine? Which stacks would you buy and hold onto, to see if the exchange rate changes?

 

[drkitten]

They make good analogies since we overwhelmed their ability to replenish. Presumably there is also some, very low, rate at which we can pump oil without depleting it.

That's not clear; some geologists believe that the conditions for formation of oil were specific to earlier stages of the planet and that oil can no longer be produced. But in broad terms, you're right. If it took a billion years to make the world's current total supply of oil, which has been estimated at about 6000 billion barrels of oil, then we could use 6000 barrels a year without depleting it.

Which is a pretty good approximation of "not using any oil at all."

If you want to assume that this estimate is off by a hundredfold, then we could use as much as 600,000 barrels a year without depleting it.

Which is still a pretty good approximation of "not using any oil at all."

 

[Dymanic]

Even on a local scale few mines are ever completely exhausted, they simply become uncompetitive and are shut down.

It's an important point. For those first on scene following the discovery of gold at Sutter's mill, gold mining was nearly as straightforward a matter as wading up a creek and plucking nuggets off the bottom. Once those were gone (as in: later that afternoon), panning became the preferred method, then panning augmented with sluices and rockers and whatnot. But before long, this "placer" gold played out, the small-timers left, and the big outfits took over, transforming entire landscapes using water cannons, running huge dredges up every waterway, and riddling the hillsides with tunnels and shafts.

As time passed, the amount of gold returned for a ton of ore processed began to decline, and, one by one, those outfits also folded. But it is estimated that in the entire region, only about 20% of the gold within 50 feet of the surface was ever recovered. It's about diminishing returns. But it isn't just the size of the resource driving that; if the price of gold ever goes high enough to make it profitable, mining operations will resume on a large scale.

With oil, it's different, because you have two economies; a monetary economy and an energy economy. If the amount of energy required to extract a quantity of oil is greater than the amount of energy available from that oil once it is transported and processed, then it's a losing proposition no matter how high the price is (unless, as is the case with gold, it has some greater value for a purpose other than as a source of energy).

 

[drkitten]

With oil, it's different, because you have two economies; a monetary economy and an energy economy. If the amount of energy required to extract a quantity of oil is greater than the amount of energy available from that oil once it is transported and processed, then it's a losing proposition no matter how high the price is (unless, as is the case with gold, it has some greater value for a purpose other than as a source of energy).

I don't think this is true. It takes more energy to make and transport a (non-rechargeable) battery than that battery will ever return, which is why you don't see anyone trying to heat their house using AA batteries. Measured in cents per kilowatt-hours, batteries are terribly inefficient and expensive sources of energy.

But they're dreadfully convenient. I can't imagine using a gasoline engine to power my hearing aid, let alone an extension cord.

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."