Peak Oil

[basilio]

Thanks for the feedback jono. I was stunned at this report this morning. The Peak Oil commentators have been discussing models which suggest a plateauing of oil supplies or a gentler decline. Disastrous but perhaps salvageable.

A 9% decline in production if remotely true is ...... very, very hard to get ones head around.

Possible solutions? Total international focus on conservation of current resources and urgent prioritization of development of renewable energy infrastructure. In the short term we can chase more coal and probably coal to oil projects but even these will fail in the foreseeable future. We simply have to restructure our society to live on the current energy sources rather than historic stocks.

Alternatively we just have a big party.

FYI I have attached a reference which sums up the issue excellently and directs the reader to some of the best material on the web.

http://www.energybulletin.net/primer

 

[awg]

viewed a very interesting doco on Peak Oil some time back. (ABC or SBS)

The most interesting point i took out of it was that oil is ONLY found in areas of very specific geological conditions.

cant remember exactly what they were, but there had to be ancient vegetation, then trapped within a basin of a certain geological type and certain depth.

basically without the prerequisite conditions, there is NO oil

which makes sense, because it is the same with any other mineral deposit, you dont find economic, mineable deposits of iron or uranium etc just anywhere.

Oil and Geology experts are well aware of this.

the various experts they trotted out said that it was highly unlikely that any further major oil discoveries will be made

 

[rederob]

A 9% decline in production if remotely true is ...... very, very hard to get ones head around.

It's unlikely to be true.
Jeffrey Brown's Export Land Model uses an average annual decline rate of 5% - based on some actual (representative) data - however considerable variations exist field to field.
Cantrell, for example, is a supergiant and has declined about 35% year on year.
What is evident is that pressurised extraction accelerates rates of decline.
The Saudis are pumping in millions of barrels of seawater into their fields, so when Ghawar peaks, the world will go into meltdown again.
Matt Simmons has many recent powerpoint presentations that graph dozens of oil fields and their rates of output: You will see from them that even the Hubbert "bell" is a simplistic representation of realities. Fields can have multiple peaks years apart. This is probably the case with Ghawar now. However, the charts suggest the multiple peaks are artificially induced, and rates of decline thereafter are likely to be quicker than average.

Changing tack a little, I was just reading a Saudi statement from 2005 suggesting they would be producing oil at 12.5 million barrels per day in 2009. Thus far the Saudis have not achieved 10mbpd, although they suggest excess capacity could give another 2mbpd.

Another recently opened thread stated that oil experts reckoned oil would not peak until 2030. "Real" oil experts reckon oil will peak before 2015. The IEA has had a 2030 target for at least 4 years that I can recall, and CERA once put 2035 into the picture.

Getting back to some basic facts: First, there is plenty of oil and it won't deplete for a long time to come. Secondly, there is overwhelming evidence that demand will outstrip supply very quickly after the present global malaise has ended. We experienced a brief bout of this shortfall in the months to July this year, and were ultimately saved by Wall Street's catastrophic spillover to global markets. Thirdly, demand destruction is apparent with prices over $140, suggesting that oil's peak could drag out for several years.

 

[ducati916]

rederob

Getting back to some basic facts: First, there is plenty of oil and it won't deplete for a long time to come. Secondly, there is overwhelming evidence that demand will outstrip supply very quickly after the present global malaise has ended. We experienced a brief bout of this shortfall in the months to July this year, and were ultimately saved by Wall Street's catastrophic spillover to global markets. Thirdly, demand destruction is apparent with prices over $140, suggesting that oil's peak could drag out for several years.

While I subscribe to "Peak Oil" and the evidence is strong that the process is already well underway. I do not necessarily agree with the highlighted statement.

Possibly, if "nothing" changed, which is certainly an option, as previous oil shocks certainly changed little. However, if DEMAND did in point of fact modify via;

*Increased [return] to nuclear fuels [French model]
*Electric cars become economically viable for the mass consumer
*Alternate energy becomes viable [solar, tidal, wind]
*Oil substitute [NZ has manufactured oil from sewage I believe]
*New technology as yet unidentified
*Other

Should demand thus fall away, then peak oil would become simply unimportant economically.

jog on
duc

 

[Aussiejeff]

rederob




While I subscribe to "Peak Oil" and the evidence is strong that the process is already well underway. I do not necessarily agree with the highlighted statement.

Possibly, if "nothing" changed, which is certainly an option, as previous oil shocks certainly changed little. However, if DEMAND did in point of fact modify via;

*Increased [return] to nuclear fuels [French model]
*Electric cars become economically viable for the mass consumer
*Alternate energy becomes viable [solar, tidal, wind]
*Oil substitute [NZ has manufactured oil from sewage I believe]
*New technology as yet unidentified
*Other

Should demand thus fall away, then peak oil would become simply unimportant economically.

jog on
duc

Hmmm. I have a couple of questions that might impact that last statement of yours, duc.

(1) Don't the Filthy Rich Gulf States own half the planet through their cursed luck in squatting over the world's largest oil reserves?

(2) If demand for oil declines as you suggest, won't the Once Filthy Rich Gulf States effectively go broke?

(3) If the Once Filthy Rich Gulf States that saved our a$$e$ during this recent World Financial Crisis go broke, won't that affect the World Economy? Surely the planet owes the canny Sheiks a few $USTrillion if THEY in turn start to go down the gurgler, cap in hand?

(4) Given the possibility of the above 3 points, then, wouldn't that be an IMPORTANT global economic impact?

Hmmmm.....



aj

 

[rederob]

Should demand thus fall away, then peak oil would become simply unimportant economically.

ducati
I am close to agreeing, but for one likely issue.
The increase in demand combined with the decrease in oil output is unlikely to match the rate of substitution after oil has peaked.
I think that many years after peak oil the race to substitution will win over and then agree that peak oil will no longer pose a major economic problem.
In the meantime, don't forget that almost everywhere you look you are seeing something that requires oil to make it or move it - in whole or part.

 

[ducati916]

ducati
I am close to agreeing, but for one likely issue.
The increase in demand combined with the decrease in oil output is unlikely to match the rate of substitution after oil has peaked.
I think that many years after peak oil the race to substitution will win over and then agree that peak oil will no longer pose a major economic problem.
In the meantime, don't forget that almost everywhere you look you are seeing something that requires oil to make it or move it - in whole or part.

The timefactor, I agree will be the critical variable in the substitution factor. This is where the "price" of oil should balance the transition.

Should "demand" growth outstrip the ability to produce without accelerating the declines, then price should rise, thus moderating demand. The data support that Saudi Arabia & Russia pretty much produced at peak levels, there is no more slack in the system.

This does rather pre-suppose that governments allow price elasticity without attempting gross manipulation. By this I mean the huge levels of subsidy that many countries paid to maintain 'demand."

As we have seen, at a certain price, consumer demand collapses, which should see us through to a period where substitution becomes viable.

jog on
duc

 

[Aussiejeff]

The timefactor, I agree will be the critical variable in the substitution factor. This is where the "price" of oil should balance the transition.

Should "demand" growth outstrip the ability to produce without accelerating the declines, then price should rise, thus moderating demand. The data support that Saudi Arabia & Russia pretty much produced at peak levels, there is no more slack in the system.

This does rather pre-suppose that governments allow price elasticity without attempting gross manipulation. By this I mean the huge levels of subsidy that many countries paid to maintain 'demand."

As we have seen, at a certain price, consumer demand collapses, which should see us through to a period where substitution becomes viable.

jog on
duc

..of course, Guv-Mint$ never grossly interfered or manipulated the world's "free markets" during the recent World Financial Crisis did they?

Unlike some uber-optimists (and having experienced the pathetic shenanigans of an endless stream of incompetent politicians from all sides of politics for the last 39 years of my voting life), I have ABSOLUTELY ZERO faith that so-called "free market economics" will EVER return to this planet.

Now that Guv-Mint$ (some might even call the collective term "Big Brother") have been able to "flex their muscles" as it were and buy up huge chunks of the world's "free" markets (using hapless voter's debt), they will NEVER relinquish their new-found control. Of that, I AM certain.



aj

 

[ducati916]

AJ,

It is precisely due to their interventions in the recent financial crisis that government may well be unwilling, or unable, to further "influence" price elasticity.

jog on
duc

 

[rederob]

As we have seen, at a certain price, consumer demand collapses, which should see us through to a period where substitution becomes viable.

It's not just the matter of being "viable", it's important that it be time-credible.
For example, imagine the time, effort and resources involved in electrifying all forms of transportation. Or if it's not electrification, what alternative fuel would otherwise drive the half billion (and more) vehicles on the road, let alone ships and planes!
I actually envisage the end of cheap oil as the greatest opportunity for global advancement this century. It will mean wholesale changes to how we all go about our daily business, and I suspect will involve "renewables" to an extent that brings smiles to all greenies.
From an "industrial" perspective it might dawn a new age.

 

[nick2fish]

From an "industrial" perspective it might dawn a new age.

Exactly...but its not going to happen with oil @$60 a barrel caused by a dysfunctional commodity trading market. Oil is a finite resource and with the average strike taking 2-3 years to come on line we are running up a very slippery slope

 

[jonojpsg]

rederob




While I subscribe to "Peak Oil" and the evidence is strong that the process is already well underway. I do not necessarily agree with the highlighted statement.

Possibly, if "nothing" changed, which is certainly an option, as previous oil shocks certainly changed little. However, if DEMAND did in point of fact modify via;

*Increased [return] to nuclear fuels [French model]
*Electric cars become economically viable for the mass consumer
*Alternate energy becomes viable [solar, tidal, wind]
*Oil substitute [NZ has manufactured oil from sewage I believe]
*New technology as yet unidentified
*Other

Should demand thus fall away, then peak oil would become simply unimportant economically.

jog on
duc

ALternate energy in the form solar, wind, nuclear, can't replace oil. The incredible advantage of oil is it's liquid form, making it easily transportable from the oil rich nations to the oil poor nations.

If you think that the hundreds of millions of cars on the road at the moment are suddenly going to be ditched because electric cars become economically viable for the mass consumer methinks you are kidding yourself. The average consumer is going to pay a lot more for petrol before they pay $30k to replace their perfectly useable vehicle. Look at the differences in how much people are willing to pay across the world at the moment - US $1 per litre, Oz $1.50 per litre, Europe $2-$3 per litre.

Let's say you use 2500l a week. To make economic sense to replace a $10k vehicle with one that costs $30k, one would have to anticipate a savings of $20k over some reasonable time span, eg 5 years say. Which is $4k per year.

Even if petrol doubled to $2 per litre in the US (biggest market) you would still only be saving $2500 per year, and that's assuming using your electric car cost nothing.

As far as peak production is concerned, which is the basic premise of this thread and the concept of peak oil, if you look at EIA data for world crude production, peak rates have already been reached early in 2007. There may be some tinkering around the edges and sure the big oil organisations are going to make bold statements about 2035, but for mine, I think we're there and have to think seriously about what to do about it.

 

[ducati916]

jono

ALternate energy in the form solar, wind, nuclear, can't replace oil. The incredible advantage of oil is it's liquid form, making it easily transportable from the oil rich nations to the oil poor nations.

Agreed if we include the function of oil in the manufacture of plastics and 101 other applications.

However, as far as energy generation goes, incorrect. France has already done precisely this.

If you think that the hundreds of millions of cars on the road at the moment are suddenly going to be ditched because electric cars become economically viable for the mass consumer methinks you are kidding yourself. The average consumer is going to pay a lot more for petrol before they pay $30k to replace their perfectly useable vehicle. Look at the differences in how much people are willing to pay across the world at the moment - US $1 per litre, Oz $1.50 per litre, Europe $2-$3 per litre.

You seem to have totally ignored the highlighted concept. If electric cars become economically viable for the mass consumer, then of course they will replace combustion based vehicles.

The correct questions are rather;

*Can electric cars become economically viable?
*In what timeframe?

As far as peak production is concerned, which is the basic premise of this thread and the concept of peak oil, if you look at EIA data for world crude production, peak rates have already been reached early in 2007.

Which is what I postulated.

jog on
duc

 

[aleckara]

jono



Agreed if we include the function of oil in the manufacture of plastics and 101 other applications.

However, as far as energy generation goes, incorrect. France has already done precisely this.




You seem to have totally ignored the highlighted concept. If electric cars become economically viable for the mass consumer, then of course they will replace combustion based vehicles.

The correct questions are rather;

*Can electric cars become economically viable?
*In what timeframe?



Which is what I postulated.

jog on
duc

The real issue with electric cars is not whether they are viable or not. With the limited research into battery tech compared to the amounts invested in the engine I'm still seeing real progress made here.

No the real problem is whether the car makers have left it too late which I suspect they have. They have done it when they have been forced to do so and the trend of oil is becoming obvious - CEO's of major oil companies and oil companies are realising how hard it is to find oil and how OPEC has an increasingly major share in it.

While oil is getting to our hip pocket in terms of consumption and inflation people are less likely to replace their cars. They will make old assets last longer even if they are falling apart. People with money will buy them as an image statement but until the average person can afford them I don't see them making inroads into replacing the current vehicle fleet. And until they do I don't see them making a dent on oil.

Besides electric cars will only replace the petrol component of oil - leaving a glut of petrol on the market. Since all the other byproducts of oil will still be needed (same amount refined) the price of petrol would come down making petrol cars more competitive.

 

[basilio]

I recently posted an article which highlighted a far more rapid decline in oil production ( 9% a year) than has ever been suggested by most peak oil theorists.

There is reason for "terror" if this is even close to reality.

Up until the last few years oil supplies have always exceeded demand. The oil companies and OPEC have basically kept the price at agreed levels by controlling supply. In particular Saudi Arabia saw itself as the swing producer who could add extra supplies relatively easily and also take them off the market.

There have been a few events over the last few years however that have caused many observers to wonder if the system as we knew it was still working.

1) A rapidly increasing demand for oil from China and India which has caused world demand to climb even more rapidly than expected

2) A noted rapid decline in large non OPEC oil supplies. In particular Norway, the North Sea oilfields and now the Mexican Cantrell field have been showing major declines in production.

3) There has been no increase in Saudi Arabian production for 2 plus years

Think about the last statement carefully...Saudi Arabia is supposed to be the giant world oil producer. Whenever energy experts talk about where the new oil supplies will come from to fuel American, European , Asian energy demands they say the saudis will increase production.

And yet as oil prices have doubled and trebled in the last couple of of years there has been no increase in production. Why? If you believe Matt Simmons, and oil energy expert, who has been examining world wide oil supplies closely its because there is no further productive capacity available. There goes the life blood of the west and the east...

The really nasty part however is in this report that has been leaked. Everyone in the industry is aware that oil fields rise peak and then decline. Everyone has recognised that most of the worlds oil fields are mature and probably ready to decline. But I believe that until now very few people have realised how rapidly these fields are collapsing

Is there any other evidence for this suggestion? Consider the production levels and profits of the major oil companies in the last quarter. Exxon reported an 8% drop in production, Chevron a 5.7% drop. And these were during times of peak prices.

There is another critical factor in the rapid decline of oil production which will amplify the impact on most countries. When oil supplies start to collapse the countries producing the oil will supply the domestic market first.. So when Mexico, Norway, et al start to see a 10% and 20% reduction in production it means the exported oil will reduce by many times that figure.

China for example was actually an oil exporter in the mid nineties. A decade later - HUGE industrialization and depletion of the oil fields has seen Chinese oil demand skyrocket and China become an large buyer of international oil.

Now thinking about developing alternatives. Sure its possible but these require immense new industrial infrastructures all of which require oil for the mining of raw materials, production of plant and establishment of infrastructure. Think of scores of new solar thermal power stations, wind farms, electric car plants...

And all this at a time when the the amount of oil able to be produced next year could be 9% less than now.

http://www.energybulletin.net/node/45935 (Matt Simmons link)

http://blogs.wsj.com/environmentalcapital/2008/10/31/peak-oil-are-oil-prices-destined-to-rise-again/

 

[Aussiejeff]

The RBA's own updated September 2008 research bulletin on Australian oil production and useage makes for a very interesting (and somewhat concerning) read.

http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_sep08/oil_prices_aus_economy.html

 

[Aussiejeff]

Another thought provoking link.....

http://anz.theoildrum.com/node/3657

I find it rather interesting that in 2007, 28% of our imported oil came from VIETNAM! 14% came from PNG and 13% from MALAYSIA. Only a tiny fraction (4.0%) came from SINGAPORE. Seems odd, then, that we base our prices on the Singapore crude benchmark!

aj

 

[steve80]

Oil priced did peak and we should see comfortable landing around the $40.00

 

[basilio]

Hi AussieJeff,

Thanks for the Oil Drum reference. It pulls together all the threads of this discussion and in particular

1) The rapid depletion of oil from most of the worlds oil suppliers and in particular the ones exporting oil to Australia.
2) The effect this will have on the oil exports from these countries to Australia.

It is very grim reading. I suggest forum members who (blithely) suggest everything will be alright take the trouble to read the analysis and reconsider. The facts are we are facing a diabolical situation and unless the government wakes up to it quickly and acts with authoritarian decisiveness we are completely stuffed. But to take this action it needs informed community opinion leaders who also recognize the situation and support such actions.

I suggest this website, this community and this forum and should be amongst those leaders



We all have a right to our opinion but not our own facts.

http://anz.theoildrum.com/node/3657

 

[Smurf1976]

However, as far as energy generation goes, incorrect. France has already done precisely this.

Not as far as I'm aware they haven't.

France has about 80% nuclear electricity (10% hydro, 10% fossil fuels) but they are still cooking with gas, running cars on petrol / diesel, aircraft on kerosene and so on. All they've done is replace most of their fossil fuel power generation, and France did have a lot of oil-fired generation in the past, with nuclear power.

Closer to home, much the same in Tasmania. But I'll let you in on a little secret - even the Hydro's cars, trucks and planes are fuelled by oil. There's a reason for that and it's the same reason the French are still using plenty of oil.

Practically all alternative energy sources are viable as a replacement for oil on a large scale ONLY if (1) the energy consumption takes place in the form of electricity (2) production and consumption are connected to a grid with centralised dispatch controlling the majority of generation. Without BOTH of those criteria being met, anything on a scale big enough to make a real difference falls in a heap technically, environmentally and/or financially.

Hence those with business to lose from alternative energy are perfectly happy, and will even encourage, all manner of "feel good" systems that produce small amounts of power at a cost too high and in a manner technically incapable of supplying the vast majority of system load. Such ideas make consumers feel good but arguably harm the environment and long term energy supply by diverting resources from far more productive approaches to the problem.