Peak Oil has Likely Come and Gone - Now What?

[evnow]

The time argument is nonsense and it's brought into this world by the conventional power players.

It is not nonsense if you can't even give one supporting argument.

Nothing can be implemented faster then renewable energies.

Not everything has a solution - peak oil has no solutions - it is a predicament. Even if renewable energies are the fastest to implement - they may not be fast enough. Thermodynamics laws are not negotiable ;-)

 

[AndyH]

What's your plan, evnow? I agree with you absolutely 100% that we don't have 50 years to roll-out the next step. So - what's your plan?

Get an EV, try not to be dependent on things made far away, eat local. Be careful in investments. Try to travel and see as much of the world as I can before air travel gets too expensive (something I'm yet to put into practice !).

I don't think as individuals we can do too much about it - I don't believe in some mad-max apocalypse fantasy like some do.

I frankly don't believe we'll have a mad-max apocalypse either. Not because 'the middle path' is automatic - especially when one side of the challenge is heavily funded by folks that stand to profit from the status quo. In order to balance that extreme side, people will have to continue to become aware that options exist and choose other paths.

The fossil fuels industry can only keep prices down for a short time as supplies shrink and demand expands. Eventually we'll hit energy price points that will make alternatives more cost effective - and then businesses will jump on board. That'll be the easy part.

I think we're still in the 'flat part' of the growth chart. That's where urban farms appear, where people add a local food to the fridge, where folks build or buy an EV, where folks ask for SIPS walls or solar hot water when they spec their new home. A significant crisis can certainly light a fire under our collective posteriors, but it's more stressful and not necessary.

One thing I'm certain of - if we don't set a destination - a goal - we're not likely to get there. And that means we're much more easily influenced by someone else as they travel towards their goal...like a virus fuel company staying the course until the last profit can be squeezed from a rock...even if it destroys other economies or ways of life...you know, as a completely hypothetical example...

 

[KarenRei]

I'll go ahead and briefly chime in on this.

It's not an issue of "running out" of oil. Oil is merely chains of hydrogen and carbon. There a bunch of different chemical processes that can make it basically from scratch. The most widespread is the "Fischer-Tropsch" process, which involves a feedstock of carbon monoxide and hydrogen. Because burning pretty much any organic matter with insufficient oxygen will yield that (and if the hydrogen is insufficient, you can supplement that), you can make oil from pretty much any organic matter. The most widespread source of fuel for Fischer-Tropsch, historically, has been coal; during the Apartheid boycotts, South Africa made most of its oil from coal. Nazi Germany did the same during World War II. This tech has been around for a while. You can even use, say, wood or agricultural waste as the feedstock

The main reason it's not widely used is that it's more expensive than conventional oil. And there's the rub: it's not about how much oil there is, but how much it costs to produce. For every resource, there are virtually unlimited potential sources, and the cheapest ones to produce are an order of magnitude rarer than the next cheapest, and so forth. And with each potential source of that resource, costs drop over time as tech advances, but you slowly run out of the cheapest stuff and have to move onto the next. So in the long-term, prices fluctuate up and down based on whether running out is currently the dominant mode or whether tech advancement is currently the dominant mode. More often than not, the long-term trend is downward. But not always, and long term != short term.

The same holds true with oil; oil is the same price today as it was in 1870 when it still bubbled to the surface in Pennsylvania. You need not go as far as outright Fischer-Tropsch in most cases. Bitumen (tar sands), for example, mainly just needs heavy hydrocracking. Same with the Orinoco Belt ultra-heavy. In other cases, it's not a low quality fuel that's the problem, but the play -- for example, the Bakken has nice light sweet crude, but it's locked up in this incredibly narrow band with low porosity over a wide area, leaving a steep learning curve on the drilling process. With shale, it's mainly about the cheapest way to reliably not contaminate groundwater, the fuel itself isn't very expensive to produce in-situ at all. So coal liquefaction (and the slightly more expensive biomass liquefaction) are not the dominant syncrude techs at this point in time.

If you look at what different oil companies think, it's almost universally "no foreseeable peak" or "a demand peak". Total SA is probably the most pessimistic, predicting a sort of hybrid supply/demand peak starting in the next decade or so. Your typical oil executive -- and I know a thing or two about oil company executives -- is not necessarily a person who hates the environment. They may not even think that oil is really the best solution out there, and may look forward to the economy transitioning off of it. But they'll defend tooth and nail the importance of their industry to our current way of life. The reality is that transitioning off of oil will take a *long* time, as much as we might like it to happen sooner.

My father is the CEO of one of the US's largest refiners, and has served in all sorts of other roles within the industry prior to this position. He has no delusions of us being about to enter a Mad Max-style energy-free wasteland. His concerns are about prices and what it will do to the global economy (and thus way of life). Their challenge isn't so much maintaining production levels; it's trying to meet the ever-growing demands of countries like China and India. This alone will keep oil prices high in the coming years. Things like oil spills leading to bans on offshore drilling just compound the problem.

The more expensive oil is -- or more accurately, the more confident investors can feel about oil prices being sustained at a given level over a long period of time -- the more syncrude will be produced. And there's basically no practical limit to syncrude (see para #2). But it all comes down to price. And the pressure imposed by India and China (and the rest of the develping world) will not only cause the potential of price increases. Investors are generally a cautious bunch. Their nightmare is putting a bunch of money into new projects (say, syncrude or deepwater), and then having the price of oil collapse because everyone else did it too and losing their shirts. So their predictions on long-term oil futures prices tend to track low, which limits what projects companies will put money into. So what you tend to get are these boom and bust swings when demand outstrips capacity.

Me personally? I'd be glad to accept a bit of gradual pushback on the global economy, because high fuel costs means a transition to alternatives at a dramatically accelerated rate. And a transition to alternatives is not just a boon to the environment -- technological paradigm shifts often have ripple effects that lead to breakthroughs in other areas as well, often unanticipated, improving our quality of life by leaps and bounds. The key is that the increased fuel prices must be sustained and reliably predictable; market and regulatory uncertainty ruins everything.

That's my two cents.

 

[sjfotos]

That, Karen, is the most lucid and concise description of the current State of Oil I have seen. Bravo.

The issue, as you state so well, is the price. It is not an insignificant issue because the price of oil has a very direct effect on the global economy.

According to the IMF, a $5 increase per barrel in oil prices has a negative 0.2% effect on US GDP. That adds up very quickly! Don't forget that we need something in the order of 3-5% growth per year to maintain our standard of living.

If you want to get into the variables, here is a link:

http://www.imf.org/external/pubs/ft/oil/2000/#III_A

 

[evnow]

Here are 3 slides that George Mobus Associate Professor of Computing and Software Systems at the University of Washington, Tacoma presented at Institute for the Future's Ten-Year Forecast retreat - and linked in TOD.

While various dirty alternatives to conventional oil like tar sands & coal gasification exist, it is not clear we have the build out time to compensate the depletion rates. Even if we completely ignore the environmental costs - which we shouldn't.

 

[garygid]

The hard part to deal with is the long-term difficulty in maintaining the "growth".
3% per year over 100 or 1000 years?
I think another solution is required.

Many of those who want to ignore this difficulty often believe that "technology" will find a way (like good water from seawater) ... but that usually requires even more energy.

 

[AndyH]

Nice job, Karen. I want to look at the 'no foreseeable peak' comment...

Synthesized hydrocarbons go back to 1877 so it's certainly not new. But when it's about business it comes down to price. There have been plenty of wells drilled all over Texas, for example, that were capped until the price rose high enough to make them commercially viable.

I think it's also clear that we have a very well defined peak - as in "we haven't pulled as much oil out of the ground in the US since 1970".

It could still come down to price - maybe we have reserves that we want to keep in the ground instead of pumping and selling - but looking at the graph of production VS. imports suggests to me that IF we had the oil, we've missed out on plenty of profits as oil prices rose between 1970 and now.

I think it's also clear that at least some of our presidents were concerned enough about oil flow to run disaster planning sessions - like the Reagan-era scenarios where terrorist attacks in the Persian Gulf impaired the Saudi oil flow. Robert Baer reports in "Sleeping with the Devil" that after the Reagan-era exercises concluded: "The assessments by the disaster planners were downplayed, for fear of rocking global oil markets, but you can bet they are not the only people to have calculated how much damage could be done to the Saudi petroleum chain - or the global money chain - by an expedient as relatively simple as blowing one of the Abqaiq's stabilizing towers, or Ras Tanura's Platform Four, or the East-West pipeline's Pump Station One to smithereens. (Or, of course, all three.) A single jumbo jet with a suicide bomber at the controls, hijacked during takeoff from Dubai and crashed into the heart of Ras Tanura, would be enough to bring the world's oil-addicted economies to their knees, America's along with them. Indeed, such an attack would be more economically damaging than a dirty nuclear bomb set off in midtown Manhattan or across from the White House in Lafayette Square."

In spite of the constantly increasing demand, world production appears to have been pretty flat since 2005 and decreased as the recession hit, according to US EIA numbers. IF peak production hasn't come and gone, IF oil companies really can produce more than they are, then why didn't they get more on the market after 2004 when prices climbed thru $30 a barrel on the way to ~$75 a barrel in mid-2006 and then the climb to nearly $150 a barrel in mid 2008? After all - corporations exist to make money for the company and shareholders - can you imagine a large corporation briefing a shareholders meeting that in spite of increasing market prices that they've decided to keep their inventory in the warehouse?!

Sorry...I don't buy it...wait. Foreseeable. Future, right? As in "I look ahead and don't see a peak," right? Then the comment is likely 100% accurate! The peak isn't 'foreseeable' because it's already happened. :roll:

 

[LTLFTcomposite]

The invisible hand will wave magic over all of this and make it go away. I just hope I can still get a couple gallons a year for my lawn mower and leaf blower.

 

[AndyH]

Here are 3 slides that George Mobus Associate Professor of Computing and Software Systems at the University of Washington, Tacoma presented at Institute for the Future's Ten-Year Forecast retreat - and linked in TOD...

Thanks for these. I found Professor Mobus' site and blog. Also looked back at TOD. I remember now why I didn't like reading TOD - they appear to be 'looking back' and lamenting the end of cheap energy and planning for the 'inevitable' decline to come.

The future may be different (hopefully!) but it'll only be in decline if we let it.

What can we learn from a portable gps/map gizmo? The device has a computer brain, a geographic database, and is ready to get us where we want to go. The device knows where we are now thanks to the satellites. Once we tell it where we want to go, it can sift thru the database and present a course to travel. If we don't tell the unit where we want to end up, the device cannot plot a course.

Instead of letting others decide for me, I prefer to set my destination. The folks that believe in decline will get their wish and they'll live their decline. I don't choose that destination.

Andy

 

[KarenRei]

LTLFTcomposite:

Get an electric. We have one of each (and an electric tiller) and we absolutely love them. A bit quieter, a bit lighter, absolutely no effort to stop it and restart, no mixing oil and gasoline, no getting oil residue over your yard or garden, no breathing in unscrubbed exhaust, etc. I'll never buy a gasoline yard tool again.

AndyH:

A lot of people like to focus on specific countries. But that makes no sense in the concept of a fungible commodity. People are going to produce it wherever it's cheapest at the time. Again, this varies with technology, but also sociopolitical issues. Just because it's no longer produced in one country doesn't mean that that country is "out of oil" -- only that there's better places to produce it elsewhere.

Now, as tech changes and sociopolitical situations change, the optimal location to produce can change as well. For example, Canada peaked in the early 1970s and was in decline... until bitumen tech advanced, and all of the sudden it started a huge second upswing much bigger than its first peak:

This sort of thing won't change in the future. Whether it's conventional crude, deepwater crude, atypical reservoirs, arctic crude, coal liquefaction, bitumen, shale oil, ultra-heavy, ultra-sour, etc, it will always be produced wherever it is most cost-effective. Oil knows no border.

The assessments by the disaster planners were downplayed, for fear of rocking global oil markets, but you can bet they are not the only people to have calculated how much damage could be done to the Saudi petroleum chain - or the global money chain - by an expedient as relatively simple as blowing one of the Abqaiq's stabilizing towers, or Ras Tanura's Platform Four, or the East-West pipeline's Pump Station One to smithereens.

You better believe it. Saudi Arabia was unusually blessed with light, sweet, shallow, massive reservoirs. To the point that they have an entire relatively shallow light sweet crude *supergiant* that they haven't even bothered to *start* tapping until just recently. They can produce it for just a couple bucks per barrel. So you can see why investors can worry about funding projects that cost $50 a barrel, $60 a barrel, $70 a barrel, or more.

In spite of the constantly increasing demand, world production appears to have been pretty flat since 2005 and decreased as the recession hit

World oil prices tend to track within OPEC's target price bands... unless OPEC loses control of the situation. This latter case happened in the oil superspike of 2008, when OPEC ran out of surplus capacity. Likewise, after the superspike, prices fell below OPEC's target pricing. We're back in it right now -- they've announced intent to keep oil at about $80 a barrel. This is much higher than their previous target of $20-$30 a barrel. Why they raised it isn't clear, but it's most likely due to less fear of demand erosion (the superspike showed that the modern economy is surprisingly resistant to erosion of demand as the price rises). Also, there's always changes in leadership. Venezuela's been lobbying for a higher price for a long time; Orinoco crude is only economical at higher prices. With Orinoco included, Venezuela's reserves are comparable to Saudi Arabia.

One thing that was a *huge* mistake was deregulating the commodities market. The last thing we need is amplification of the natural instabilities in the system.

Another thing people often don't pay much attention to that affects gas prices is refining margins, due to crack spreads. They were high from 2005-2007. They've been really low recently. Only two major refiners in the US made money in 2009, and in Q1 of this year, everyone lost money. Spreads are finally back at a reasonable level this quarter.

 

[AndyH]

The invisible hand will wave magic over all of this and make it go away. I just hope I can still get a couple gallons a year for my lawn mower and leaf blower.

I see. Check back in mid-week and we'll start you on a custom 12-step process. :lol:

The lithium pack is on it's second season. The mower lost 30 pounds and can handle thicker grass with a 10Ah lithium pack compared with the 20Ah sealed lead acid pack it used to have.

What if you could mow and breathe at the same time?

 

[KarenRei]

A good example with the problem of Hubbert curves. In order of production:

Iran, below:

EU -- ???

You'll note that the Hubbert Curve is actually a rather poor approximation of how oil production works. People defending it usually selectively pick countries that provide a good match (such as Norway -- even the US doesn't fit the curve that great due to the shallow decline, although the US is better than most, and even Norway could equally end up looking like any of these other countries). But that's not the main point. The main issue is that oil production is fungible and will move to wherever it's cheapest at the moment.

 

[evnow]

The invisible hand will wave magic over all of this and make it go away. I just hope I can still get a couple gallons a year for my lawn mower and leaf blower.

Get rid off your lawn. That is becoming quite popular. I got rid off my backyard lawn (sort of) and put veggie beds in the place. Front yard is postage stamp size and so doesn't matter much. But I won't water it - will just move it when needed with an electric lawnmover.

 

[AndyH]

The assessments by the disaster planners were downplayed, for fear of rocking global oil markets, but you can bet they are not the only people to have calculated how much damage could be done to the Saudi petroleum chain - or the global money chain - by an expedient as relatively simple as blowing one of the Abqaiq's stabilizing towers, or Ras Tanura's Platform Four, or the East-West pipeline's Pump Station One to smithereens.

You better believe it.

I do! It's hard to get 21 years of intelligence analysis out of one's blood...

Saudi Arabia was unusually blessed with light, sweet, shallow, massive reservoirs. To the point that they have an entire relatively shallow light sweet crude *supergiant* that they haven't even bothered to *start* tapping until just recently. They can produce it for just a couple bucks per barrel. So you can see why investors can worry about funding projects that cost $50 a barrel, $60 a barrel, $70 a barrel, or more.

In spite of the constantly increasing demand, world production appears to have been pretty flat since 2005 and decreased as the recession hit

World oil prices tend to track within OPEC's target price bands... unless OPEC loses control of the situation. This latter case happened in the oil superspike of 2008, when OPEC ran out of surplus capacity. Likewise, after the superspike, prices fell below OPEC's target pricing. We're back in it right now -- they've announced intent to keep oil at about $80 a barrel. This is much higher than their previous target of $20-$30 a barrel. Why they raised it isn't clear, but it's most likely due to less fear of demand erosion (the superspike showed that the modern economy is surprisingly resistant to erosion of demand as the price rises).

Dunno. I think the spike was the primary trigger for the collapse of our house of cards and the subsequent domino effect. I strongly suspect the focus on speculators or the housing bubble is misplaced and serves to draw attention away from the real problem.

I'll bet the new set point is more related to demand. Saudi Arabia could pump enough to break an earlier embargo, but I think they're under 10% of the flow now. OPEC knows it's got a good hand and enough junkies ready to do just about anything to keep the oil flowing...

Also, there's always changes in leadership. Venezuela's been lobbying for a higher price for a long time; Orinoco crude is only economical at higher prices. With Orinoco included, Venezuela's reserves are comparable to Saudi Arabia.

One thing that was a *huge* mistake was deregulating the commodities market. The last thing we need is amplification of the natural instabilities in the system.

I think that our efforts in the Middle East is an unintended consequence of the path we started walking when we set up Saudi Aramco in the '50s. It made sense to have a secure supply of oil when we were in a cold-war environment, but now the cash flowing to our 'dealer' is supporting the spread of fundamentalist teaching that's negatively impacting much of the world.

From Baer again: "That's why the disaster scenarios created during the Reagan years still matter. That's why we in the West - Washington, D.C., in particular - have to face up to our part in cultivating the virus that has infected Saudi Arabia. And that is why we must consider putting to sleep the host, the House of Sa'ud, if it can't or won't cure itself. At the very least, we will have to consider seizing the oil fields."

"For a quarter of a century, I've been trying to understand the root causes of violence in the Middle East. I didn't begin this search after September 11, and I certainly didn't undertake it with an eye to Saudi Arabia and its crude oil. I wanted to know more about the Muslim Brothers: who they were, how they operated, why the U.S. had made common cause with the Brothers in such far-flung places as Yemen and Afghanistan. The harder I looked and the closer I got to answers, the more I realized that my search was leading me down two roads - to Riyadh and to Washington - and to the oil that connects them."

What a tangled web we weave...

All right - it's decided. Getting LTLFTcomposite to dump his gas-guzzling mower and weed wacker will be the straw that breaks OPEC's back. We'll notify the group when the PayPal account is set up. :lol:

Andy

 

[evnow]

If you look at what different oil companies think, it's almost universally "no foreseeable peak" or "a demand peak".

Shouldn't be surprising at all. Afterall their share prices depend on their reserves. But what the company PR folk say and what the engineers know is quite different. BTW, you should checkout the latest statements by many of them - quite pessimistic.

 

[Matthijs]

The time argument is nonsense and it's brought into this world by the conventional power players. Nothing can be implemented faster then renewable energies.

I envy you, Matthijs - I really wish we could import a heavy dose of the European view of energy and environmental stewardship - the US could really use some of that.

Well it took me a while before I even got to these insights. That is quite scary actually because I realize most people do not even think about this. They just pay the prize at the pump and pay the prize for all the other energy and are even willing to make lifestyle changes because of it. Because of high taxes on our electricity and gas prizes (the highest in the world) we are forced to look at alternatives. In some EU countries renewables are already on par with power from the utilities. Most of my views come from this man: (I posted another video from him in the forum)

[youtube]http://www.youtube.com/watch?v=wEpZpuUP6vc[/youtube]

I uploaded this series to youtube.

I know this is not a good way to look at things because for me it's also for a part emotional. For some reason this future look gives me hope. Karen's (realistic) scenario sent shivers down my spine. To know that we will go from this stage to even worse. Even more destructive ways only to get energy that is given to us for free by nature.

But what I do not understand is what people have against renewable energy. Because I have seen that it will work. When I look at Germany you can see it works. Almost everywhere you go you see solar panels. You see (old) technologies being used in new ways to power your home with more energy than you will use. (This for example http://www.bio-solar-house.com) When I see such a house I see freedom! Energy independence. And no drastic needs for lifestyle changes. (Well get rid of gas powered devices of course)

That brings me to lawnmowers, here it is hard to get a gas mower. They are all electric here. My father had a gas mower once and a hated those. They were smelly and noisy and needed grease and gas. While an electric one just needs a powercord.

[youtube]http://www.youtube.com/watch?v=3H3lRTQSJxY[/youtube]

 

[LTLFTcomposite]

I can tell none of you live in Florida. Only manned space flight requires a greater energy density than keeping a St Augustine lawn at bay during the growing season. Besides, converting to an electric mower and replacing the batteries every couple years would require more energy (manufacturing and shipping) than the two gallons a year I am using now.

Eliminating the lawn isn't an option. Some parts of the property are already in a semi-natural state and there are over 30 trees on what most would call a postage stamp sized lot. But letting it all go to pot would look like hell, not to mention the HOA would be all over me.

We haven't even talked about the 5kw honda generator sitting in the garage for hurricane season. Can I convert that to electric too? Plug the charger into itself and create a perpetual motion machine?

 

[Matthijs]

I can tell none of you live in Florida. Only manned space flight requires a greater energy density than keeping a St Augustine lawn at bay during the growing season. Besides, converting to an electric mower and replacing the batteries every couple years would require more energy (manufacturing and shipping) than the two gallons a year I am using now.

Eliminating the lawn isn't an option. Some parts of the property are already in a semi-natural state and there are over 30 trees on what most would call a postage stamp sized lot. But letting it all go to pot would look like hell, not to mention the HOA would be all over me.

We haven't even talked about the 5kw honda generator sitting in the garage for hurricane season. Can I convert that to electric too? Plug the charger into itself and create a perpetual motion machine?

How about a Sunmachine? It's a Sterling engine that can create heat and electricity from wood pallets. They also have a natural gas version. A solar and Kryo version are in development. Because of the German EEG feed-in tariff law this machine also benefits from it. You can get more money from making electricity and heat yourself than it's costs to get the pallets. So you basically make money by running this machine. Now it is still expensive. ($40k) But pricing will go down with mass production and EEG stimulation. I would love to have such a device to heat and power my home. http://sunmachine.com/english/index.htm

 

[sjfotos]

LTLFTcomposite. Yup, I'd rather mow steel wool, than the stuff that grows in Florida!

 

[KarenRei]

I can tell none of you live in Florida. Only manned space flight requires a greater energy density than keeping a St Augustine lawn at bay during the growing season. Besides, converting to an electric mower and replacing the batteries every couple years would require more energy (manufacturing and shipping) than the two gallons a year I am using now.

Who said anything about batteries? All of mine are corded; it's no more of a hassle than vacuuming with a cord is. Less, IMHO, as you have a lot more room to maneuver. And my Iowa lot is probably bigger than your Florida lot Also, how on Earth are you only using two gallons of gas a year on a lawn in Florida? In Houston, lawns had to be mowed weekly in the summer, and I imagine Florida is just as bad (up here in Iowa, it's closer to every two weeks) -- probably ~30 mowings a year. Two gallons of gas is, what, 2-4 hours of mowing? Lastly, you'll find that studies on almost any device that consumes energy find that the embodied energy is notably less than the energy consumed during its lifetime. For cars, for example, the average I've seen is usually around 3/4ths of the energy consumed and 1/4th embodied -- of which you can get a fair chunk back through recycling at end-of-life.

Honestly, with mowers, the big problem environmentally isn't so much the oil consumption or CO2 emissions -- it's the pollution. Lawnmower engines are appallingly dirty. This page quotes an EPA study stating, "One old gas powered lawn mower running for an hour emits as much pollution as driving 650 miles in a 1992 model automobile". And you're walking behind it breathing this stuff in! And any non-photocatalytically destroyed VOCs, PM, unburnt oil, etc is settling on your plants and soil.

All issues of pollution and oil consumption aside, I'd never go back to gasoline yard tools simply because electric is so darned convenient. No yanking on start cords, stop at a moment's notice to chat with someone and then start at a moment's notice again, lighter, quieter, and dare I even say, usually more powerful. That and I don't like coating my yard, garden, and lungs with toxic stuff, of course.

We haven't even talked about the 5kw honda generator sitting in the garage for hurricane season. Can I convert that to electric too?

No, but kudos to you for being better prepared for hurricanes than most people in the Gulf that I know. I assume you also take the time to trim all of your trees of potentially dangerous branches before hurricane season starts every year? So few people do that, and it can cost you a roof.