Sunday, August 10

Peak Oil

The rapid increase in the oil price to US $150 a barrel and its decline to around $115 has caused me to ponder the peak oil theory.

Peak oil describes the point in time when oil production declines. Peak oil theory assumes demand will outstrip supply as future deposits become increasingly costly to extract, ensuring price escalation and an end to oil dependant economies with catastrophic results. Nobody can tell reliably when that will happen but a groundswell of current opinion suggests it is either already upon us or it is immanent. It is an undeniable fact that reduced oil use, particularly in agriculture and most types of transport require huge societal shifts to sustainable limited alternatives. Alternative technology is far from encouraging. Man made fuels such as ethanol, derived from plants or diesel from coal only partially cover the gap and are much more expensive. There is no viable alternative other than to drastically curtail our use of oil, with less dependence on transport requiring communities to become more self sufficient.

But is the peak oil theory creditable? Are we at the end of what was a brief period of time known as the oil age?

In the past we have encountered similar sharp price increases in the 1970’s when OPEC curtailed production, in 1981 when Iraq was at war with Iran, and in 1991 during the gulf war. This time proponents of the peak oil theory say it’s a different scenario because our reserves have been in decline and new fields will be increasingly costly.

We cannot change geology.

Oil and gas will become increasingly expensive to extract from dwindling reserves. It seems creditable enough to believe we have reached this point in the cycle where oil prices can only escalate rapidly.

Although the statistics available are notoriously unreliable there is however a consistent trend in aggregated world reserves to show a small net increase, cementing a continuing trend of the oil industry each year to find more oil then it produces. In other words the net effect of new discoveries of economically feasible oil fields and assessment of the life of existing reserves of what’s left in the ground showed an incremental increase over previous years, in line with a positive continuing trend. The proponents of the peak oil theory argue some countries like Saudi Arabia deliberately lie about their level of reserves, overstating the figures to justify pumping more oil. But their motivation for doing this is at odds with their investment plans, as they implement large scale infrastructure spending. Why spend vast sums of money to increase your capacity if your reserves are running out!!

Herein then lies the confusion, assuming there is a fudging of figures than the theory remains creditable, if not we have limited time to adjust. And if the latter be correct than the price of oil will actually fall back to somewhere at around $100 per barrel, or even below within a year, assuming countries don’t simply turn off the pump and also barring another War or a cataclysmic event.

What of the future? No one knows!

Maybe there is a window of opportunity over the next 30 years to finally make some headway in reducing our reliance on oil, time for consumers to adjust. Already the recent spike has given a boost towards a more sustainable pollutant free lifestyle.

17 comments:

Cart said...

I'm inclined to think climate change will eclipse the peak oil argument. Big oil will help this transition by gouging consumers.
Big oil love their profits and are already seeking to push returns to the max for the end run - even if that is a few more decades.
By linking increasing financial strain to oil based products consumers - voters - will find it easier to shift there concerns to alternative energy sources.

susan said...

It's been suspected that big oil has purchased the patents for less wasteful engine designs as well as those that would eliminate the need for petroleum based technologies in order to suppress them. I don't know but it is something I've heard and read over the course of many years.. an urban legend joke perhaps. Nevertheless, with the history we've seen acted out these past few decades nobody with any sense would put it past them. If oil prices did go down to $115 per barrel this past week I wonder why the gas station at the bottom of our hill had raised their price again yesterday?

arulba said...

Interesting! It supposedly went below $114.00 today and gas prices are higher at the pump today for us, too.

We have a friend who, many years ago, helped to develop a solar battery with a very long shelf life. I forget the specifics, but it was impressive. He said that his research and technology wasn't appreciated because the oil companies suppress all new technology that threatens gas usage. He was very matter-of-fact about it. I used to think that he was crazy but now I feel bad I doubted him.

Clifford J. Wirth said...

According to energy investment banker Matthew Simmons and most independent analysts, global oil production is now declining, from 74 million barrels per day to 60 million barrels per day by 2015. During the same time demand will increase 14%.

This is equivalent to a 33% drop in 7 years. No one can reverse this trend, nor can we conserve our way out of this catastrophe. Because the demand for oil is so high, it will always be higher than production; thus the depletion rate will continue until all recoverable oil is extracted.

Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment.

We are facing the collapse of the highways that depend on diesel trucks for maintenance of bridges, cleaning culverts to avoid road washouts, snow plowing, roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, transformers, steel for pylons, and high tension cables, all from far away. With the highways out, there will be no food coming in from "outside," and without the power grid virtually nothing works, including home heating, pumping of gasoline and diesel, airports, communications, and automated systems.

This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html

I used to live in NH-USA, but moved to a sustainable place. Anyone interested in relocating to a nice, pretty, sustainable area with a good climate and good soil? Email: clifford dot wirth at yahoo dot com or give me a phone call which operates here as my old USA-NH number 603-668-4207.

Zee said...

My outlook is not quite as "gray" as Clifford's, though I do acknowledge that his posted scenario can become real.
Some here posted notions, that the oil companies suppress alternatives. Sadly enough it is not a "urban myth". The bastards buy up any patent they can lay their hands on that what would promote diverse technology. The auto-industry, the lackey of the oil industry, is a good example. In their vaults they have designs and patents for super-efficient engines, but they will not build them until ... until the last drop of profit has been sucked out of the consumer.
How come, for example, that one of the three big car manufactures of the US has a plant in China, producing a car that gets 50 miles a gallon - and that this vehicle is NOT available in the US? How come that compact European cars (some of them also build by Ford) have 40 miles a gallon and are not available in the US??? How come that Peugeot (who designed a clean super efficient quiet diesel engine) is absent in the US market?
Well, I have a partial answer to that one. The diesel you buy on US pumps is "dirty", too much additional aggregates. The little Peugeot engine wouldn't "like" that...
But it is the agricultural production who consumes most wastefully. Starting with the irrigation pumps (water, an other hot topic) to the heating of green-houses, then to the transport of the product, often to destinations thousands of miles away. It's ridicules!
Why do I need to eat grapes from Guatemala in January and buy tomatoes from California in February, living on the opposite side of a continent?

Well, it is all about money and economics, isn't it? As long as the consumer is willing to buy stuff in supermarkets that would be locally "out of season", the companies will supply. If we would stop purchasing such goods, the overall consumption of oil would at least drop in half.
But only few are willing to do such life changes. So the culprits are two fold, the companies who drive the consumers like pimps, and the whores (the consumer) who breaks down each day and feeds "the master". This is the concept of "free-global-capitalistic-market-Darwinism".

But I have faith, the ingenuity of humans is plentiful. The oil resources will sure run out, it doesn't matter if we talk decades or millenniums - they will just cease to exist at one point in time. Basta!

It would just have been nice for people to be a bit more proactive now and act accordantly, instead of sailing into Armageddon empty handed.

Little oil or no oil - we will survive!!!

lindsaylobe said...

Hi Cart, Susan, Arulba, Clifford J Wirth & Zee.
Many thank for all of your insightful comments.
Cart-The market is such that those who own the resources reap the benefit of enormous prices. However it is also a reflection of the extraction of new reserves invariably from much deeper drilling which yield inferior purity.
Susan & Aruba - if we had acted upon and adapted to those alternatives we would be in much better shape today. There are indeed many viable alternatives abandoned in the past, including reliable steam powered vehicles which would have lessened our dependence on oil.
Clifford J Wirth ~Thanks for your visit and insightful comments/references. I agree that we do need to form more sustainable communities.
Zee Good points- The excuse given by Detroit was that USA consumers demanded big cars and trucks and were not interested in the smaller fuel efficient cars until very recently!
It’s Idiocy for many items to export our food all over the world, we will be forced to become more sustainable locally and consume only what is in season

Seraphine said...

as long as they dont do away with massage oil...
if everyone else took public transportation, the price of oil would come down and the streets wouldn't be so bloody crowded for me. (hint hint)
the price of oil is cyclical. it goes up and it goes down. alternative forms of energy become more cost-reasonable when the price of oil is up.
the best way to bring the price of oil down is to develop and use alternative forms of energy.

Gary said...

Interesting, as always, Lindsay.

We're already seeing a huge decline in miles driven and car sales in the US, especially gas guzzlers. All because of the price of oil at the pump.

Looks like it's a good thing and once again, the stick may be more effective in the beginning than the carrot (we need both).

Progressive Traditionalist said...

Hello, Lindsay.
I remember clearly from a few years ago reading about the oil sands in Alberta. The fellow was saying that large-scale production would not be feasible unless the price of oil went over $50/bbl.
I believe it was sitting somewhere around the low 30's then.

Since that time, there has been another largest unknown oil field discovered, this one on the ocean floor off the coast of Brazil.

I suppose it's how the world's biggest oilfield keeps being discovered every three or four years that prevents me from attributing any real effect to peak oil theory.

Seraphine said...

really, there is no such thing as a pollutant-free lifestyle. bodily wastes, for instance, are a necessary component of living. then there's noise pollution, internet pop-ups and bottled water, all which contains no relief from pollution, but which generally seems tolerated by the populace. oil-free is a contradiction too, for however would we keep our shavers and air conditioners lubricated, much less our automobiles and wind farms.
the only real issue is the price we are able to pay for our sins. it's proven, when it costs 25 cents to use the restroom, people hold the door open for one another. with oil at $150, people drive less.
if comcast wishes to regulate the internet, let them start with charging advertisers a hefty pop-up charge. slap a nice recycling tax on bottled water, and tap water will suddenly be the belle of the ball again.
oil companies may like their profits, but so do the common people. i'm a believer in sin taxes.
unless they apply to me, of course.

Ingrid said...

Lindsay, I just posted on a book that addresses it and one of the things mentioned about oil extraction is that it will take more energy and/or be difficult to extract something that is much lower than the original 'reserves'..
part of me agrees with Cart and I think that climate change will wreak havoc perhaps more quickly than the noticable lack of oil..
however, I'm not quite all there yet..
In the meantime, oil energy wars will still be played out, most importantly by the US but since China is going to need more and more, who knows what they might end up doing if the US fights for their biggest slice of the pie..

I am going to buy well, try to find the book by James Lovelock called, Gaias Revenge or is it the revenge of Gaia.. He coined the term gaia theory but he himself believes the direction we're headed is irreversible and should've been pursued 30 or more years ago..he also changed his position on nuclear energy as he believes that all the 'energy' saving things that the ordinary joe does around the house means absolutely squat in the grand scheme of things.
Now there are also people who believe that regardless, we are 'due' for a climate change..

still, it is all very unnerving and perplexing at times to contemplate that mankind, and most importantly, the 'kind'that is in power, needs to really rethink their attitudes and belief systems if we are to save any bit of humanity at all. The planet, as always will survice. Have you seen the film WallE yet? I think you'd like it, the movie kinda makes that point as well but..no spoilers from me!!

hugs

Ingrid

Zee said...

Thanks again for the private e-mails you send me, elaborating about SS in the US. Don't worry, I will get to the essence... eventually.

I just wanted to say, that I got a billing proposal today from my local gas and oil supplier. If I buy now, or make a payment plan arrangement now, my fuel cost would ONLY be $4700! (fourthousand and sevenhundred) for the next season.
And mind you, I own a small house, 1700 square feet or so...

So what do I do, I can't afford this???!!! Well, I take out my chain saw and cut up all the dead trees around, and some that are not so dead, install my new woodstove, catalytic converter included, and fire it up when the time comes.

In many ways I am very fortunate, because oil, other than transportation, doesn't affect me.
What I worry about, is the economic impact on people with no wood and/or chainsaws at hand - now that oil prices peaked, and perhaps also the reserves you were talking about.

gfid said...

i'm with cart on this... we'll destroy the planet before we run out of petroleum. the tar sands so near and dear to us in Alberta take up nearly half the province, and almost as much of the neighboring province of saskatchewan. deposits in shale, once thought impossible to exploit, are now a marketable asset. the oil companies are not worried about running out of product to sell. it's just getting more expensive for them to produce it. no problem - they'll just pass the costs on to the consumers. have you noticed that their profits are not going down? add to that the mushrooming market for gas guzzlers in asian countries, and we have a runaway. affluent people's solution to global warming is to turn up the air conditioner and buy a big boat. the little things Ordinary Joe does around the house may make diddly squat in difference on the surface, but if all the O.J. consumers made choices not to buy the fruit from Africa, the SUV's, monster energy guzzling homes, and all the other products that keep the global treadmill running at high speed, the difference would NOT be small, and producers of those products would adjust to the market or die. and i don't buy the argument that north american trade feeds the world. the world is capable of feeding itself, given half a chance, and not exploited. the land that grows those globe trotting grapes could be growing food for the people who live on it. the change is coming, whether we make it voluntarily, with as much dignity as we can muster, or fight it kicking and screaming till it's forced on us.

Seraphine said...

i wonder why there is so much oil/tar sand in saskatchewan. did all the remaining dinosaurs in the world congregate there for their last stand against global cooling?
did a flying saucer crash?
what if it's a prehistoric sacred buriel ground?
or maybe the eskimos stored all their food there, in a natural storage freezer, and the earth lost power and thawed, spoiling the meat.
oil comes from dinosaurs, right?

eProf2 said...

Lindsay:

I got your email, thanks.

I'm neither a geologist nor economist so I'm here to learn from some of the "experts." I did notice oil went up $6 a barrel today after two weeks of lower prices. Other than speculation, what environmental conditions would cause wild swings in prices? Certainly, one of the oil fields didn't dry up over night, did it?

It seems to me that when the first major oil field does, indeed, dry up the world will then take notice.

Cart said...

Western Canada’s oil sands excitement continues to be little more than castles in the air. Sure there is activity, site development, contracts and investment, Thee is talk of pipelines across northern BC and major port development. But the fact remains, extraction is costly, complex and environmentally deleterious.
Last I heard extraction was $5 + a barrel, way over normal alternatives, but worse; requires as much energy to release the oil as the final product produces. That last, by the way, is a little reported fact with bio fuel production.
In my humble opinion oil sands and bio fuels will continue to sucker investors and waste resources which should be directed to real solutions.

lindsaylobe said...

Hi Sera, Gary, PT, Ingrid, Zee. Grid, prof2 & Cart

Thanks for all of your contributions.

Sera & Gary

The difficulty arises in the use of oil in agriculture and the dietary changes of the developing world to one of high protein. If the developing world is more than offsetting those gains with increased oil and energy to produce higher protein food we have may still have a net overall increase.

PT & Ingrid

That’s the rub, we are never going to run out of oil but its extraction cost may become prohibitive. I haven’t seen that film. I think we are all going to eventually need to make major lifestyle changes.

Zee

Wood burned correctly is the answer, non pollutant and preferably from sustainable plantations or forests.

Gfid

I notice also there is still an eager market for those gas guzzling monsters. Within a100K radius for most or food in the future is the way to go and I notice China is at least trying to achieve this as part of their planning going forward.

E Prof 2

I think the geopolitical position with Russia / Georgia is influencing the current upwards pressure. But if there were also real supply threats the political influence would send the price up much more. So I think the long term (barring wars or the continuation of the current confrontation or other catastrophes or disruptions) is slightly down.

Cart- Thanks for the info- I think oil prices are maybe on their way down in the medium term. Best wishes