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And so it begins . .
Posted by Heading Out on May 23, 2005 - 6:36am
Yawn, a new day, and what with doing homework and all, we need some coffee and a sandwich to get our day started. And so we go back to our local sandwich shop, but there is a line at the door. And the proprietor is standing there, so you ask him if he is going to have enough coffee and sandwiches for everyone. "No problem," he says " I have a whole room of bread and fillings and coffee, just go on in and enjoy." And you look through the window and, sure enough, there are new ovens, the shelves are full of different breads, and so you go in.
But the problem is that there are only two people behind the counter, and although they are very nice, they can only serve so fast, and so the line grows longer, and you wait and wait. It sounds familiar, right, the number of times you have been in a restaurant and they have not had enough help. Well, in some ways it is the same way with the current oil problem. There is plentiful oil under the sands and seas of the Middle East, but it has to be served up first.
And the first thing that has to happen is that the oil has to be brought out of the ground, through a well. Kuwait has just announced that last year their 14 drilling rigs drilled 73 new wells over the course of the year, and their production costs remained at about $1 a barrel.
As we have commented before Saudi Arabia has only a few more than twice as many rigs as Kuwait, and thus the number of new wells it can drill in a year is also limited. It is the same story as with our sandwich shop owner, there is a plentiful supply, but there is not enough service between the kitchen and the counter to meet the growing need. And because it takes time to hire and train helpers (or to build drilling rigs) a lot of customers are going to start getting as angry as you do when service is bad at a restaurant. And in the case of Saudi Arabia the serving of the oil includes separating the water and gas from the oil, and again one starts to bump into current constraints on delivered production.
The other problem, of course, is that while our sandwich shop owner is showing off the bread coming from the new ovens he has just installed, he is not mentioning the loss of bread from ovens that he has had to take out because they are worn out. And the same is true of the world oil community. There is a lot of talk about the new production coming on line, but not nearly as much about the depleted reserves that are having to be replaced.
Consider, for example the North Sea, where UK production has dropped 14% since last year and where Norwegian production is also falling, to a net world loss of perhaps 500,000 bd this year. Where will they get the supplies to make this up, since they had customers for that oil? It appears that part of the, at least short term, answer is through the United States. As was pointed out in a Dow Jones newswire article on Friday (courtesy of Alaron) the US is now shipping diesel fuel from the Eastern seaboard in every increasing amounts to Europe.
And since the shortage of diesel is related to a growing shortage of world supply, then what we might be seeing is the first precursor in our arrival at Peak Oil. And because we live in a global economy, the shortages that will develop in other countries will also have an impact here, as the higher prices now begin to impact our domestic commerce, diesel being the fuel of choice for trucks (which bring us the coffee and the ingredients for the sandwiches).
Technorati Tags: peak oil, oil
But the problem is that there are only two people behind the counter, and although they are very nice, they can only serve so fast, and so the line grows longer, and you wait and wait. It sounds familiar, right, the number of times you have been in a restaurant and they have not had enough help. Well, in some ways it is the same way with the current oil problem. There is plentiful oil under the sands and seas of the Middle East, but it has to be served up first.
And the first thing that has to happen is that the oil has to be brought out of the ground, through a well. Kuwait has just announced that last year their 14 drilling rigs drilled 73 new wells over the course of the year, and their production costs remained at about $1 a barrel.
As we have commented before Saudi Arabia has only a few more than twice as many rigs as Kuwait, and thus the number of new wells it can drill in a year is also limited. It is the same story as with our sandwich shop owner, there is a plentiful supply, but there is not enough service between the kitchen and the counter to meet the growing need. And because it takes time to hire and train helpers (or to build drilling rigs) a lot of customers are going to start getting as angry as you do when service is bad at a restaurant. And in the case of Saudi Arabia the serving of the oil includes separating the water and gas from the oil, and again one starts to bump into current constraints on delivered production.
The other problem, of course, is that while our sandwich shop owner is showing off the bread coming from the new ovens he has just installed, he is not mentioning the loss of bread from ovens that he has had to take out because they are worn out. And the same is true of the world oil community. There is a lot of talk about the new production coming on line, but not nearly as much about the depleted reserves that are having to be replaced.
Consider, for example the North Sea, where UK production has dropped 14% since last year and where Norwegian production is also falling, to a net world loss of perhaps 500,000 bd this year. Where will they get the supplies to make this up, since they had customers for that oil? It appears that part of the, at least short term, answer is through the United States. As was pointed out in a Dow Jones newswire article on Friday (courtesy of Alaron) the US is now shipping diesel fuel from the Eastern seaboard in every increasing amounts to Europe.
According to the most recent EIA export figures, U.S. exports were running at a normal rate of about 100,000 barrels a day in January and February. But in March and April, as European supplies remained tight, traders reported an unusually large number of cargoes of diesel and other distillate fuels to Latin America and Europe from the U.S. Gulf Coast and New York harbor.Diesel demand is growing much faster than ordinary gas, and is the major fuel for truck transport and rail, so the fact that demand is already starting to match supply means that prices will likely not come down.
Sunoco Inc. (SUN) said May 5 that it exported diesel in April for the first time ever.
And since the shortage of diesel is related to a growing shortage of world supply, then what we might be seeing is the first precursor in our arrival at Peak Oil. And because we live in a global economy, the shortages that will develop in other countries will also have an impact here, as the higher prices now begin to impact our domestic commerce, diesel being the fuel of choice for trucks (which bring us the coffee and the ingredients for the sandwiches).
Technorati Tags: peak oil, oil
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The diesel story is interesting but logical since the Europeans make highly efficient diesel cars that get up to 50% better mileage than my Prius. I would think it's a refinery issue, but the declining North Sea production certainly plays a role. As for price, I think it amusing that the EnergyBulletin has two items that say the exact opposite regarding price, just as we recently saw the same from different OPEC officials regarding the abilty of production to satisfy demand. (Both items and more are at http://www.energybulletin.net/6210.html)
In a related yet unrelated item http://www.commondreams.org/views05/0522-20.htm (yes, it is an Orwellian maxim) we have this small observation: "Brand logos for all sorts of crap now turn up on nursery blankets, crib toys and mobiles.... Think about the associations formed in infants' minds by these things. Think about the mentality that sees nothing wrong in marketing them." If you watch TV, then you'll have seen the recent desperation ads run by GM to salvage its bottom line and perhaps noticed the very heavy reliance of logo recognition and conditioned psychology. I had a philosophy professor who firmly maintained that the corporate and political goal in the USA was to reduce people to doing no more than "work, drive and consume;" post-modern "prols" he called us.
Well, June's almost here. I wonder if Scott Ritter will be proved right about Bush and Iran.
karlof -
While I agree with Spurlock about a lot of things he says, I have to go along with the McDonalds in Texas Childrens Hospital. My oldest son had cancer, and spent most of his first 3 years of life in and out of that hospital. When he was on chemo, it was hard to even get him to eat, much less eat healthy all the time. But even when he was at his sickest, he wanted to go to that McDonalds, there in the hospital, and try to eat. So I will let those in hospitals slide - many patients need the calories, no matter where they are coming from.
But as for the rest of the world - the only way we have been able to fight the media monster is constantly educating our children contrary to MSM, and getting them involved in food production and planning. Every one of my children knows how much a "gram" of sugar really is - most of the world does not. And they all have their own "private garden patch" out back - they grow their favorites.
I have found that simply asking my kids why they want things has a dramatic effect on what they view as necessary. And having the entire family involved in sports (swimming, running, etc.) seems to reduce their want for other things dramatically. Idle time allows empty minds to be filled with the incessant "buy-consume-buy-consume" TV mantra. Instead, they have much more fun going canoeing, exploring on their bikes or camping than they do playing video games. But it requires a family push for this.
You can fight the system, but it takes a concerted effort and a lot of leading questions asked and lots of leading by example. And most of all, a united front from the parental units.
Diesel - at least the hoarding has yet to begin. When the military begins earmarking production from specific refineries - that will tell a story.
But we have a while until the really hard times hit - time enough to change if we can get people on-board with the issue. Time enough for a softer landing, if we can ever get the government to admit the issue is critical. I would take the 55 MPH limit restored as an admission.
Yet while I drove in to work this morning cruising at 60, I was honked at and flipped off by a HumVee with the Texas vanity plate "GR8 XS"...
Heading out,
You do a great service by illustrating technical reality using ordinary situations most all can understand.
You need a broader audience. I suggest you find some way to team up with Robert Krulwich and his people over at ABC.
http://abcnews.go.com/WNT/story?id=127128
---
HO -
The company I currently work for functions within the oil industry as a "gleaner". That is, we buy mature properties which have become poor performers for the major international oil companies, and through extreme cost-consciousness and application of select high-tech methods, we extract the remaining oil from these mature fields.
We are a "first tier" gleaner. We buy from the majors. There are "second tier" gleaners as well, who buy properties from us, further reducing overhead and costs, and pulling the final bits of oil or gas from the ground.
This process is usually a 3-5 year one, where new wells are drilled, old ones plugged, and the majority of the remaining production brought to surface. Some fields, by virtue of their volume or their unique location, will last us 10 years at reduced rates. But each of the fields we purchase has become uneconomical for a BP or a Shell or other multi-national.
The "second tier" gleaners usually shut down the fields as production declines to uneconomical levels. It is their largest expense, and is a considerable part of ours.
We have basically run out of large, domestic prospects, having bought everything brought to market in recent years.
We made our first purchase in the North Sea last year.
Just for some perspective within the non-OPEC world...
It seems to me like a bottleneck on the production end is a good thing (at least a small one). If we don't have all of the cheap oil we could possibly want now, then we'll be able to develop better habits now to prepare us for later when the relatively small number of drilling rigs is compounded by a dwindling amount of extractable oil.
Why should we want to get as much out as easily as possible now? Shouldn't we be practicing conservation even today?
Thanks J for the info, I will bear it in mind. I also heard though, that some of the new developments in the North Sea are now small enough that they will only be in major production for a couple of years.
And for ianqui - part of the problem is that as resources get more in demand, folk resort to more brutal methods to get the oil out faster, and what this does is reduce the overall amounts that can be obtained from that well because of the damage they do to the rock, and the fact that they isolate regions of oil in the rock that cannot be later recovered. Unfortunately for many the short term economics over-ride longer term considerations.
J, regarding the Hummer and speed limit laws, I've toyed with the idea of producing a bumber sticker that says: "Be a culture jammer: Obey the speed limit!"
This may seem esoteric, but I've put some thought into what I see as a connection between the ubiquitous lawlessness of the masses regarding speed limits and government behavior. Your encounter would seem to prove my hypothesis. One of the great hurdles our culture faces is learning how to slow down. Remember the "59th Street Bridge Song (Feelin' Groovy)" from the '60s? http://www.paulsimon.com/lyrics/59st_bridge_song.html
karlof -
Dude, I'm 47 years old. I have wanted to "slow down" my entire life, but kids precluded that. Now that they are getting older, I am slowing myself as well as kids down too. And we are ALL better for it.
I definitely need a bumper sticker or two, but I'm waiting until I get the electric bug up and going. THEN I got major bragging rights - LOL!
Jam them all - Drive 55...
Yeah, I confess to life-in-the-fastlane living until about 1992 for reasons similar to yours. On another topic, I just finished digesting the first 70 of a 100 page report on bitumin http://www.peakoil.net/uhdsg/OilSandCanada.pdf that's greatly interesting and provides a needed adjunct to the Globe&Mail series. The section about NG usage and future supplies was very sobering.
karlof -
1 mcf/bbl - depressing, right?
Trading clean energy for dirty, and we're not even factoring cracking or other operations. For this to work is just like hydrogen powered cars - you really need to have a free energy source to make hydrolysis economical. And Canada has a sunshine issue - no heliostat farms expected up that way. Not to mention that if they decide to go for it, the NG will likely be redirected from the US export pipelines...
There are usually valid reasons when an abundant resource is passed by, because every landowner wants to be the next J. Paul Getty.
Here's another item who's statistics become of greater interest when viewed through the lens of fossil fuel depletion, http://www.commondreams.org/views05/0520-22.htm
IMO, it's this age group that will be impacted the most because their assumed future opportunities will be greatly curtailed in just 5 years.
karlof -
Which is why, though it was extremely difficult to do, I forced each and every one of my children to buy their first car. The only jobs they are qualified for are at the bottom, and they should experience that. I did, as did my brothers, and there is simply no substitute for reality when it comes to kids. When we find that first job, we have a choice of taking pride in it and doing well or becoming bitter, performing badly and then getting fired. BOTH are very critical to real-world education. And handled correctly, both provide a handle for parents to instill a good work ethic.
The family garden plot and required chores allow further teaching along other lines. Supporting your children through buying their every want is incredibly destructive to them long term. It teaches them the "entitlement" mind-set. It gives them no source of pride or accomplishment with respect to work.
And guess what? When their friends come over, they actually help with chores so they can all get free to play...and then my kids help them as well...
Funny how that just sort of evolves, and very hopeful it makes me for their future (Yoda-speak)
J, I commend your parenting; unfortunately, it's all too rare.
Thanks, but not as rare as one might think. I am very hopeful of what they will do, given the opportunity.
In the end, karlof, our children are the only legacy that truly lasts.
Life after death is represented by the immortality of the geneome. This one very salient fact is venerated in Asia and Africa and ignored in Europe and its colonial extensions to our woe. There's more to this, but I'm very happy you presented me the opportunity to finally state it on line.
I missed some parts of my kids growing up when I was travelling the world. I regret that at times, but then again, it drastically altered my perspective on my country and other countries. It made me realize what really is important, and what really matters in ones life.
In the western countries, we have totally forgotten our pasts, and we respect nothing. Our beliefs are cosmic jokes from beyond the grave (scientology) or intolerant 'fundamentalism' (whose fundamentals?? because they are not of Jesus). The only way we negotiate is by manipulating the outcome by threat of force or the appearance of it.
Those are the reasons that I think we will be outmaneuvered and out-negotiared in the coming resource competition.
I feel that this country needs an enema, badly. And the insertion point is the District of Columbia...