The Oil Drum | The first weekend thread

173 comments on The first weekend thread

Comments can no longer be added to this story.

| Show without comments | PDF version

Don Sailorman on April 22, 2006 - 12:46pm

RR,
It really does not matter much which year will later be identified as "The" peak.

IMO, you're guestimate of depletion rates is too low, but I want to emphasize that in terms of what needs to be done, it matters diddly squat whether peak was last year--or will be in 2011.

Why does the exact peak matter? I can see that as an intellectual puzzle it is interesting question, but in terms of policy or our personal responses, what difference does it make? Any at all? Some? A very little bit?

Comments can no longer be added to this story.

Robert Rapier on April 22, 2006 - 1:12pm

Here is why I think it matters. If everyone calls for a peak this year, and production increases, what do you think the public is going to do the next time everyone calls for a peak? What I worry about is that premature calls of peak will cause the public to ignore it when it is very clear that a peak is imminent.

You are correct, in that it won't matter much if peak is 3 years from now and people are calling for a peak this year. But if the peak is really 10 years away, and this is apparent in 3 years, we have some time to start preparing. But if we start warning people in 3 years, it is going to be hard to get their attention when they say "Didn't you call for a peak in 2006?" That's already happening to Deffeyes and Campbell. A lot of people have stopped taking them seriously.

Comments can no longer be added to this story.

Don Sailorman on April 22, 2006 - 1:38pm

RR,
Good points!

However, I think we should not obsess on "The" peak (which in a post a couple months ago or more I pointed out was profoundly ambiguous) and instead focus on constructive responses, as both you and, for example, Alan do.

In other words, I do not like to see intellectual and emotional energy going into less important issues at the cost of very pressing practical issues.

For example, the question of whether biodiesel has much greater potential than ethanol (which you believe) is both urgent and important. You may be correct on this issue, you may not be correct--but clearly the development of alternative fuels from various sources is something we should focus on with great intensity. And what I have found is that when I focus on one problem at length (e.g. "When is the peak?"), then I have less time and motivation and urgency and resources to pursue other issues.

Comments can no longer be added to this story.

odograph on April 22, 2006 - 1:45pm

I know someone who left the oil business for the environmental business, and is now seeing their business pulled back toward biofuels. (Amusingly client execs are happy about their biofuel intiatives, even when they don't actually know which biofuel they are doing!)

I'd say there is some danger from a pendulum swing, but on the other hand, this is the "repsonse" we wanted. Things are moving.

Comments can no longer be added to this story.

peakearl on April 22, 2006 - 2:51pm

So far, the peak has been December 2005, I don't know that this will hold, but Deffeyes hasn't really been proven wrong yet.

Comments can no longer be added to this story.

Robert Rapier on April 22, 2006 - 2:56pm

But he has called it wrong in the past:

http://peakoildebunked.blogspot.com/2006/04/279-many-wrong-predictions-of-ken.html

The fact is that he has been lucky so far that 3 refineries were down in the first quarter and the Nigerian situation flared up, or his December prediction would already be toast.

Comments can no longer be added to this story.

smekhovo on April 22, 2006 - 4:15pm

So far, Angola, Brazil, the Caspian and the Canadian oil sands are coming through as planned. If that trend holds up, only geopolitical disaster will give us a peak within the next two years.
After that though, the numbers get worse and worse. Unless you're ready to bet the farm on Saudi promises.

Comments can no longer be added to this story.

peakearl on April 22, 2006 - 4:39pm

It's not just what comes on - it's what goes. Kuwait failed in increasing Burgan, Norway, Great Britain are seeing increasing losses, Russia seems to have gone flat, and North Slope production has resumed its decline. Exxon had it's endeavors come on about as planned - according to plans should be up 1mbpd from 2000, but oops- their net shows a production decline. I don't think the oil sands are coming as planned, my last read was that they had flattend out also due to a variety of problems such as natural gas availability.

Comments can no longer be added to this story.

peakearl on April 22, 2006 - 4:31pm

He and others like Campbell - I basically agree. That's why I believe in playing it safe. I do think that the paradigm is changing with the super-giants all entering decline about now - my personal opinion. I think those (including the above and people like Yergin) who make blatantly wrong predictions shoud frankly own up to this, then try to learn from their mistakes rather than moving ahead as though nothing had happend to challenge their model. There is also a precision issue - I would consider anyone who calls it within plus or minus 2 years as "spot on."

I understand that non-geological factors are reducing production now, but this is in fact all a piece of the equation that I am considering. I agree that Nigeria made a big difference. As I have stated before, it is only because of the persistence and growth of these factors in the face of increasing decline numbers that I think we could be at peak. As a corollary, if all suddenly became blue sky, I'm sure we'd see a production rise for awhile. I'm not so persuaded that the refinery situation changed the production figures that much.

Comments can no longer be added to this story.

GreyZone on April 22, 2006 - 6:07pm

A straightforward question then, Robert - what will it take for you personally to admit that peak has occurred? 5mbd drop? 30mbpd? TEOTWAWKI?

The IOCs have a horrid track record regarding peak around individual fields that have actually peaked. Why should global peak be better from them? Why should I now believe the same people who were wrong about the lower-48, the North Sea and other locations that turned out to have peaked and headed downward ever after?

Even if you really are relying on internal corporate documents, why should they be any more correct than Exxon's past mistakes which were clearly far too optimistic? Stuart did a bangup job showing how decline was wrecking ExxonMobil's planned increases in production over the last 6 years. Why should I believe they (or your company) are doing any better handling declines now?

In short, why should I believe your sources given the past history of the IOCs, which is arguably even worse than Campbell and Deffeyes?

Comments can no longer be added to this story.

Robert Rapier on April 22, 2006 - 6:37pm

A straightforward question then, Robert - what will it take for you personally to admit that peak has occurred? 5mbd drop? 30mbpd? TEOTWAWKI?

Well, right now all we have is a bit of a plateau, that wouldn't even be a plateau if you added Nigeria and the GOM back in. We have even seen flat production for a solid year before it spiked up again.

I have made my case before. I don't think we are at peak, because there is oil available that is not being sold. There is shut-in production. There is a lot of heavy oil still available. Oil inventories are at 8 year highs, and until last week had been increasing week after week. These things are not indicative of a production peak. What I see is a recent plateau, and very good reasons that explain it.

What it will take to convince me that we peaked is a couple of years of clearly declining production. If you look at production graphs from previous years, we have seen a year on year production decline before. So far, we don't even have a single year of declining production in the current case.

Comments can no longer be added to this story.

Freyr on April 22, 2006 - 9:07pm

Yes RR, as the production vs price graph that you posted showed, the previous declines in production were only AFTER a decline in price. This time the decline is during a enormous rise in price.

Comments can no longer be added to this story.

Freyr on April 22, 2006 - 9:09pm

Current plateau (not yet decline)

Comments can no longer be added to this story.

Robert Rapier on April 22, 2006 - 10:14pm

The other side of the coin, which I have also mentioned, is that production is brought online to meet demand. Producers don't want to have too much excess production brought online at one time or it will depress prices. When these projects were being planned, the price of oil was not forecast to be $75. Now that it is, they can't turn production up on a dime.

That is a key to my argument. A combination of factors explain the plateau. If not for those factors, production would have continued to grow, along with demand, and new production would continue to be brought online as needed. Producers miscalculated their economics, and certainly didn't foresee the geopolitical factors and the hurricane doing so much damage. So they don't have the production ready to go yet, to take advantage of prices. It will come online soon enough. You will see new production records set this year, barring severe demand destruction or war with Iran.

Comments can no longer be added to this story.

expat on April 23, 2006 - 2:49am

'You will see new production records set this year, barring severe demand destruction or war with Iran.'

I could add 3 or 4 additional things which could prevent new production records (any charismatic leader of a major oil producing economy dying in spectacular fashion, more hurricanes/typhoons/monsoons in production regions, any group of terrorists with global reach hitting major facilities - Chechens in Russia, for example, etc.). At this point, the knife edge has been reached - that is also a definition of peak. Everything has to work out perfectly to maintain balance. The planning has to essentially remove equally likely bad results, such as a depletion rate of 7%, not 5%? - the disclaimer 'previous results in oil production do predict future results' is likely more accurate than saying the past results have nothing to do with future results. This is what makes peak so fascinating - reality finally intrudes on all our dearly held concepts and beliefs.

Personally, this is what makes Carter so fascinating a figure to me - first, he attempted to convey a reality out of sync with the political system he was in, and then seeing that he was unable to change it, he turned his back on moral solutions and returned to a policy (guns for oil - Iraq War I was Carter's planning, not Bush's) which America had no problem following. I also suspect, he knew that his failure would lead to long tem disaster, which also tends to motivates his seemingly sincere Christian life. Sort of like Begin, post-Lebanon invasion - sometimes, leaders actually know they have failed morally. Luckily, American is currently in the hands of people who never make mistakes, least of all in their own eyes, so we don't have to worry about their atonement at all.

Comments can no longer be added to this story.

Will on April 22, 2006 - 5:05pm

Perhaps the trick is to declare peak consumption. (something Carter considered). We pick a number and say not more.

Then find the courage to defend it with intelligent tax and industrial policy. The drama of peak production is lessened. So is the economic impact.

Comments can no longer be added to this story.

Leanan on April 22, 2006 - 7:22pm

What I worry about is that premature calls of peak will cause the public to ignore it when it is very clear that a peak is imminent.

I don't think a peak will ever be clearly imminent. I suspect Hirsch is right: we won't see it coming. We'll be years past peak before it's "very clear" that that was indeed the peak.

At first it looks like a temporary drop. Nothing to worry about; just labor problems, bad weather, technical difficulties. We'll be back on track next year. Only they aren't. Nor the next year, or the year after. Then they start to realize.

Even if the peak is this year, I don't expect it to be widely admitted until 2010 or later. For several years, we'll hope that new production will come online, political hotspots will calm, hurricane damage will be repaired. Until it becomes clear that even if it happens, it won't be enough to offset the declines of the aging giants.

Comments can no longer be added to this story.

BaSE on April 23, 2006 - 3:08am

When we see a shortfall of gasoline like we have for the last few week where gasoline supplies have dropped 5Mb/wk is this a reflection of the MTBE shortage or are these numbers for gasoline without the additives?

Comments can no longer be added to this story.