154 comments on An Economist response, or is it a techie Sunday?
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This is exactly the point I have been trying to hammer home. I honestly believe we are not yet at a peak in production, but for all practical purposes it doesn't matter since demand will increase as fast as new supply can be brought online. We are opening up a serious supply/demand imbalance. Call it "Peak Lite" if you will. It will have practically the same effects as a true production peak, without the same level of panic that will accompany a production peak.
RR
Right now, the press and public are trying to figure out who to blame for high prices. We hear "Iran and Nigeria", or "The Big Oil Companies". If it become well known that China, Japan, and Europe are trying to outbid us for the worlds oil production, and there's not enough to go around, that would sink pretty quick to almost everybody' head. Once they get that concept, soon to be decreasing production would be a much smaller step.
PH
This is the exact argument that worked with my father, an old timer in the patch. "As long as China is willing to pay more than we are, prices will continue to explode. It has nothing (little) to do with speculators or Big Oil." And then the warning: "And oil hasn't even peaked yet!"
Ok, in the meantime it probably has.
I've assumed for a couple of years now that "peak oil" would be an economic, rather than geologic, phenomenon.
There's still be lots of oil, even when it costs $200 a barrel.
What we're really dealing with is peak culture.
I think we need a TOD lexicon and I wish to propose that what RR describes above may better be called a Logistics Peak to distinguish it from the actual Physical Peak
I don't know who first introduced the term Logistics Peak; I do know it was not me and therefore someone else should get the credit. I do think it would help the clarity of our discussions if we distinguish between these two peak events.
Rick
Mariano Marzo, geologist and Spanish member of ASPO, talks about an iceberg. The part above water is the technical or logistical peak, plus geopolitics, that is the part every informed observer must acknolewdge is very real. The bigger part of the iceberg, hidden from view, is peak oil, the physical, geological peak. We know it exists, but unfortunately we can calculate (as with real icebergs) its size (ie: when and at what rate).
Sorry, no English mothertongue and such...
This is a 29 year difference, with considerably better technology in the North Sea, but the North Sea peaked at almost exactly the same HL point as the Lower 48. The P/Q intercept on the North Sea plot does accurately suggest its greater decline rate, but as I have suggested before this is roughly analogous to the rate at which you pour water out of a bottle.
The rate at which you pour water out of a bottle does not affect the volume of water in the bottle. Within limits, this is roughly true for oil fields, as long as you do not produce the field at a high enough rate to damage the reservoir. I think that a lot of people are mistaking a "higher pour rate" for a higher recovery via better technology.
The 1999 Economist cover story ("$5 Oil"), just as the North Sea started declining, marked the beginning of the oil price increase from $10 to $75.
I expect that the current cover will mark the beginning of a price increase from $75 to something a lot higher, as the world crosses over the 50% of Qt mark (just like the North Sea in 1999). Who knows what the price will be? Matt Simmons estimate of $200, in 2010, in constant 2005 dollars is as good as any. (Unless we have a severe recession/depression or a bird flu outbreak.)
Either I'm wrong, or it never occurred to the MSM to even question export capacity.
When the Energy Bulletin posted the article that Khebab and I did, "M. King Hubbert's Lower 48 Prediciton Revisted," (in which we explicitly warned aobut declining net export capacity), if you did a Google News Search under Declining Russian Oil Production, you also got that article as #1 for a couple of weeks. Since we did that article, the Russian Energy Minister has warned about the possibility of a "real collapse in oil production," and the IEA has started warning about Russian oil production problems.
We will see if a similar pattern regarding exports pops up. But it's kind of lonely out there for Khebab and me. Is that weird or what that no media groups appear to be addressing the net export question? They talk about produciton problems, but nary a mention of the possibility of actual declines in net exports.
I think you are doing a lot of excellent work, which, in a another world should be given frontpage space in the mainstream media. Unfortunatley, we're stuck with the world with got. I also think we're going to see 'logistical' or 'bottleneck' problems arising way before 'geological' peak. I just don't see how 'supply' can keep up with 'demand' in the furure, especially given the enormous growth we are seeing in China and India. Something has got to give somewhere.
Whilst we are less familiar with concepts like logistical peak, surely the idea of 'bottlenecks' in the economy is far more easily understood and studied? I know it doesn't sound as 'fancy' as some other terminology, but isn't it what we are really talking about? The oil is still in the ground, but for a variety of reasons, we just can't get it out of the ground in sufficient quantities to supply growing demand.
The peak in lower US without Alaska production about 35 years ago arose from an inability to get new wells to replace fully the depleting old wells. The biggest, easiest fields are pumped out first; as they deplete, the industry drills more, less productive wells,...
Alaska overwhelmed that depletion when it came on, but now it's depleteing rapidly, too. BTW, it seems to me that the early (pre-peak) tail of the Alaska production shifted the 1971 peak in total US production a little later than Hubbert's original prediction, as well as introducing a smaller, secondary peak on the down-slope. I think Deffeyes' more recent books show a slightly different version than Hubberts original paper, but I don't have the numbers to check this hypothesis.
When near the all-time peak in production (let's use the word "peak" ONLY for the maximum of some identified mathematical function unless we're talking about mountain ranges), the capacity to bring new production on line is limited, so spot shortages and price volatility reign. And we won't be sure this was the all-time maximum production until years later, when we're well below it and can no longer hope to return to it.
I think that there has been some confusion regarding logistics, as in getting wells drilled completed, producing and getting the oil to market--versus the mathematical term.
In regard to the Lower 48 versus Total US, IMO you need to define what you want. If you want a model for the world, you should use Lower 48. If you want a reserve estimate for the US, you should use total production.
Actual post-1970 Lower 48 cumulative production was 99% of what the HL model predicted, using only production data through 1970. I don't think that it is a coincidence that we are seeing record high nominal oil prices and falling total US petroleum imports on the downside of the 50% of Qt mark worldwide.
http://economist.com/displaystory.cfm?story_id=188181
Economists are the most difficult breed to convince about energy issues that we are facing today.
Though it might be seen as some kind of 'economic' or 'market' oil peak a little reflection will indicate it is likely to be mild rehearsal for the effects of the real, physical, production peak.
Current data seem to suggest we are not at this "Big Rollover" yet. Prices over the last 3 years have been on a reasonably constant +0.3 slope ( = increasing 30% annually). One might expect a period of parabolic increase when it does happen as prices and speculation increase rapidly to the point where oil becomes almost unaffordable to virtually everyone and significant demand destruction begins. I would expect oil prices to exceed $250 / bbl at that time, possibly briefly reach $1000. The big rollover could happen before or after the date of peak oil as defined by maximum physical production, best hope it is before since that gives more time for adjustment and a lesser supply shortfall - for a brief time, at least.
Here are three recent articles that discuss aspects of oil economics and markets from different perspectives, I think they are all worth a read:
http://www.morganstanley.com/GEFdata/digests/20060424-mon.html#anchor3
http://www.financialsense.com/editorials/gue/2006/0324.html
http://www.safehaven.com/article-5008.htm