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206 comments on DrumBeat: May 20, 2006

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westexas on May 20, 2006 - 9:33am Permalink | Subthread | Parent | Comments top
(So what happens if--I think when--Russian oil production starts rapidly declining?)

http://www.voanews.com/english/2006-05-19-voa62.cfm

Experts Say Despite Problems, Russia Plays Constructive Role in Global Energy Market
By Barry Wood
Washington
19 May 2006

A leading Washington research organization, the American Enterprise Institute, Friday held a forum on Russia and the world energy market. VOA's Barry Wood reports that analysts believe Russia must make considerable new investments just to maintain current levels of oil and gas production.

Excerpt:

Cliff Gaddy, the Russian economy expert at Washington's Brookings Institution, worries that Russia's oil production will decline in coming years. Massive new investment, he said, is required to meet Russia's goal of maintaining and then boosting production. After Saudi Arabia, Russia is the world's biggest oil exporter. Gaddy said the world needs Russian oil.

"Just ask yourself, where would world oil prices be without these three million extra barrels a day of oil that Russia has contributed since 1999? I mean, that is a real counter-factual and a lot of other things might have happened. Maybe China wouldn't have grown as much without that oil, maybe the whole world would be in a depression, but maybe oil prices would be not $70 to $80 a barrel, but $120 a barrel, or $150 a barrel, or $200 a barrel," he said.

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celticoil on May 20, 2006 - 10:53am Permalink | Subthread | Parent | Comments top
It seems like the national attitude is this (and I understand this wasn't westexas' point in this post): we have to find more sources of oil so we can continue to use it up as fast as possible. While I don't wish for $120 to $200 a barrel oil (I'm retired, on a fixed income, and drive a paid-for Voyager), it seems that higher prices for oil (to a level that would result in say $6.00 US for a gallon of gas) is the only way people will get off the stick and start driving smaller cars, driving less, conserving energy, and (in the macro) developing different energy sources. Around my area (the Pacific Northwest), people are still buying huge tricked out pickups and SUVs, V-8 thisis and thatis, and Hummers. In short they've already adjusted to $3+ gas prices! We need innovation and political leadership, and it would be nice if that would start now and not under the extreme pressure of an economic collapse brought about by disastrously high energy prices.
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westexas on May 20, 2006 - 11:11am Permalink | Subthread | Parent | Comments top
"we have to find more sources of oil so we can continue to use it up as fast as possible."

That's my point about "moving to the endpoints of the fossil fuel continuum," i.e., gas to liquids (GTL) and coal to liquids (CTL).  We are simply talking about accelerating our rate of consumption of finite energy sources.  

My continuing recommendation:  abolish the Payroll (Social Secuirty + Medicare) Tax and replace it with an Energy Consumption Tax.

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Don in Colorado on May 20, 2006 - 1:13pm Permalink | Subthread | Parent | Comments top
Westexas, I always tell my hardcore retired Republican buddies that we should put a $10-per-gallon tax on gasoline to help pay for the Iraq War.
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westexas on May 20, 2006 - 3:26pm Permalink | Subthread | Parent | Comments top
Confession:  I was a volunteer in the 1996 and (to a lesser extent) 2000 Steve Forbes for President campaigns (I liked his tax policies).  Ironically, I now disagree vehemently with Steve regarding Peak Oil, but it was an interesting experience.  I got to meet lots of people way above my pay scale.  

In any case, I had dinner last night with a senior member of the Forbes campaign (who had been a member of the Reagan Administration).   She was largely Peak Oil unaware, but I pitched the Energy Tax/Abolish the Payroll Tax idea, and I think I sold her on the idea.  

She said that lots of Republicans are now lamenting their choice for president and telling her that she was correct when she tried to warn them about Bush.  I asked her if she could imagine George W. Bush giving Reagan's "Tear Down This Wall" Speech."  She said that "George Bush probably can't spell Berlin Wall."  

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skylar on May 20, 2006 - 3:56pm Permalink | Subthread | Parent | Comments top
Thomas Friedman and Sen Richard Lugar were on C-span this afternoon discussing energy and foreign policy. After much hedging they both endorsed an increased gas tax and a lowering of the payroll tax:

http://inside.c-spanarchives.org:8080/cspan/cspan.csp?command=dprogram&record=161283941

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DelusionaL on May 20, 2006 - 10:00pm Permalink | Subthread | Parent | Comments top
Funny or not so funny we bought a ford explorer afew years ago- before I became fully aware of peak oil- yes we one of those hated SUV owners.  Our family is all tall-6'+ and small cars don't fit our family worth a crap.  We looked at fuel miliage compared to other vechiles and found that none of them were very impressive. Mini vans including toyota didn't deliver alot more.  The old MG had leg room like no other car has today.  We were driving today with three poeple in our car surrounded by several cars that only carried 1 person. Better gas milage per person?  Does this count? How much of our true traffic is still one person per car?  I bet if you filmed a highway for any lenght of time and counted people per car it would be interesting.
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GreyZone on May 21, 2006 - 12:55am Permalink | Subthread | Parent | Comments top
Vans, minivans, and SUVs are not horrible vehicles if you drive them with a full or nearly full passenger load all the time. But that's the problem - most people drive these monsters solo, with no one else in the entire vehicle.

Miles per gallon is not the only measure we should observe. We need to observe passenger miles per gallon. Yes, vehicles can and should get better mileage overall, but one SUV carrying 6 people and getting 12 miles per gallon is more energy efficient than 6 Camrys getting 40 miles per gallon being driven solo. Take a sample trip of 20 miles. The SUV will expend 1.67 gallons while the 6 Camries will expend 6 * 0.5 = 3.0 gallons for covering the same distance. This is precisely why mass transit is more energy efficient than solo drivers in cars. Even though something like a train gets far lower raw MPG, it carries far more passengers and/or cargo so the total energy expended is less per passenger or cargo pound moved.

If you drive your SUV with a full or nearly full load most of the time, then you are actually helping conserve energy. It's all those solo drivers, even in their hybrid Priuses that are wasting energy.

So carpool. It's a good way to start conserving energy. It's not the ultimate solution but it's a good place to start.

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Twilight on May 21, 2006 - 7:00am Permalink | Subthread | Parent | Comments top
I've been thinking about this lately, I've concluded that the only real measure is fuel used per unit time.  It does not matter HOW you achieve it, the goal should be to reduce the number of gallons you use, say, in a month.  If that be from a higher mpg car, or combining trips, or car pooling, or walking, or taking the train, whatever.
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louGrinzo on May 21, 2006 - 10:16am Permalink | Subthread | Parent | Comments top
Bingo!  We have a winnah!

This is the point I keep making to people in person--don't get caught up in the minutiae of the situation, just look for ways to minimize your monthly energy expenses.  Use less (turn off lights in unused rooms, batch errands together, car pool), and use energy more efficiently (use CFL's, drive with a lighter foot), and you can save a healthy percentage of your energy bill, beginning right now, without making a major investment or change in your lifestyle.

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Substrate on May 21, 2006 - 11:48am Permalink | Subthread | Parent | Comments top
Ah, but here's the tricky part of people miles per gallon:

Take an average four passenger Civic getting 32 miles per  gallon.  4people X 32mpg = 128pmpg

And a large 7 passenger SUV getting 15 mpg.  7people X 15 mpg = 105pmpg

(For giggles you might also want to consider 5 people riding
in an Echo: 5people X 38mpg = 190pmpg)

First of all, with the (theoretical) vehicles at full
capacity the civic still beats out the SUV in people miles
per gallon.  That could obviously flip if the SUV got better
mpg in this case, but it'd still be a close call.

Now the real problem...what's the likelyhood that you can
find 7 people all going in the same direction at the same
time?  Pretty slim.  How about four people going in the same
direction?  Less slim, but still pretty slim I'd say.  I'd
say that two people going in the same direction at the same
time is a lot more likely.  So back to the math:

Civic: 2 people X 32mpg = 64pmpg
SUV: 2 people X 15mpg = 30pmpg

You somehow need to find twice as many people going in the
same direction to make the SUV match or exceed the efficiency of the smaller, better mileage car, and once you reach two people in the car (meaning four in the SUV) your likelyhood that all people are heading in the same direction at the same time decreases greatly.

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dissident on May 20, 2006 - 11:49am Permalink | Subthread | Parent | Comments top
Russia doesn't need to maintain or increase its oil production since it exports two thirds and the oil revenue just drives up inflation.   But others need Russia's oil.  So do those arrogant others who lecture Russia incessantly on the flimsiests of pretexts expect Russia to just do this out of the goodness of its heart?  Get real.  

As the article says, the price of oil could have been much higher without the extra Russian output since 1999.  So Russia is actually hurting its own interests pumping the volumes it does.  Let the Saudis try an play the game they did in the 80s and 90s.

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westexas on May 20, 2006 - 12:45pm Permalink | Subthread | Parent | Comments top
For newcomers, Khebab and I have done some Hubbert Linearization (HL) work that suggests that net export capacity is going to fall much, much faster than world oil production declines.

IMO, Russia is on the verge of a catastrophic decline in oil production.  

I found it interesting that Marathon is selling their Western Siberian production.  

The Russian Energy Minister has warnd that, without a crash driling program in frontier areas, Russia faces the possibility of a "real collapase in oil production."

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dissident on May 20, 2006 - 1:13pm Permalink | Subthread | Parent | Comments top
Following the pattern of the US this decline will not be all that catastrophic, in contrast to under-sea provinces such as the North Sea.  If Russia's output falls by 2.5 million barrels per day by 2010 that is not bad for Russia.  But pumping hundreds of billions of dollars into oil exploration and development on some forced program to please the west is bad for Russia.

Russia's current oil consumption is about 2.5 million barrels per day.  A decline in production is actually good for the country since it will prevent it from copying the US car culture deathtrap.

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westexas on May 20, 2006 - 1:32pm Permalink | Subthread | Parent | Comments top
"But pumping hundreds of billions of dollars into oil exploration and development on some forced program to please the west is bad for Russia."

No argument from me.  I think that it is ultimately bad for the West too.  

However, we have seen three major regions peak and decline:  

Texas/Lower 48/Total US in the Seventies;

Russia in the Eighties;

North Sea in the Nineties.  

Based on the HL method, all peaked between about 49% and 58% of Qt.   None have shown production higher than what they showed in the vicinity of 50% of Qt.  Based on the HL method, Russia's rebound in production is just making up for what was not produced after the collapse of the Soviet Union.  

The kicker?  Based on currently producing basins (I admit that frontier basins in Russia are huge unknowns, for better or worse), the HL model indicates the US has more recoverable reserves than Russia.   This implies an extremely sharp decline.  How sharp can declines be?  Look at what the internal reports are suggesting for Cantarell (up to 40% per year).  

I continue to find it very interesting that Marathon sold their Russian production.

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RussianCrude on May 20, 2006 - 2:06pm Permalink | Subthread | Parent | Comments top
It's ok, the Russians have a plan B

http://www.mosnews.com/news/2006/05/18/heliummoon.shtml

No need to worry.

(sarcasm)

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dissident on May 20, 2006 - 7:55pm Permalink | Subthread | Parent | Comments top
I agree with the HL method but I doubt that Russia's oil production will collapse by 15%-20% per year from now on.  There is also a big difference between the history of oil exploitation in Russia compared to the US.  The US has had many entrepreneurs getting at ever scrap of oil while in Russia it has been a few big enterprises before and after the fall of communism.

Marathon Oil could have been harassed out of Russia.  Treatment of foreign investors in the natural resource sector in that country has been attrocious.

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Essex Land Rover Man on May 20, 2006 - 11:23pm Permalink | Subthread | Parent | Comments top
Marathon Oil could have been harassed out of Russia.  Treatment of foreign investors in the natural resource sector in that country has been attrocious.

But deliberate and planned?

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totoneila on May 20, 2006 - 2:05pm Permalink | Subthread | Parent | Comments top
Hello Dissident,

I am assuming you are in Russia, please correct me if I am wrong.  I sincerely hope that Russia does have the wisdom to avoid the car culture deathtrap, but please inform us if this is, in fact, official Russian policy.  As I understand it now: motor vehicle sales are booming:

http://english.pravda.ru/main/18/89/357/16308_cars.html

Do the Russian media and the general public discuss Peakoil ramifications, or are most in ignorance and denial like here in the US?

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?

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smekhovo on May 20, 2006 - 2:14pm Permalink | Subthread | Parent | Comments top
So far, very few Russians have heard of the global PO case, and even fewer are worried.
Because up to now, it's been party time.
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totoneila on May 20, 2006 - 3:44pm Permalink | Subthread | Parent | Comments top
Hello Smekhovo,

Can you give us an assessment of the average Russian's response to Putin's proposed new birth benefits: are the people excited to pump out the newborns, or would they rather have fewer children?  Thxs.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

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smekhovo on May 21, 2006 - 12:42am Permalink | Subthread | Parent | Comments top
People are certainly talking about it on the street.
I think there will be some short-term increase in the fertility rate, but - if the experience of all the other countries that have tried similar measures is any guide - not nearly enough.
And the other part of the demographic problem - the appallingly low male life expectancy - goes unaddressed.
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RussFag on May 20, 2006 - 5:52pm Permalink | Subthread | Parent | Comments top
A week ago there was an informal discussion about Peak Oil concept in the Russian Ministry of Energy. The consensus was that the World Peak will be somewhere in the middle of the next decade.
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Charles Mackay on May 20, 2006 - 8:44pm Permalink | Subthread | Parent | Comments top
I'm no expert on Russia, but I've read everything I could get my hands on concering their new oil plans.

It seems that the concept of PO and depletion has indeed come up in Russia.  It was not clear at what level of production they were talking about - but the Russian energy minstry specifically stated they believe Mideast oil will last about 13 more years at roughly the same rate before it depletes, but Russia's supplies will last roughly 28 years.  

What was supposed to happen after 13 or 28 years was not made clear.  Russia was just preparing for the day when its financial windfall would run out by shifting its surpluses into Euros, gold, and even specific worldwide investments.

 

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dissident on May 20, 2006 - 8:07pm Permalink | Subthread | Parent | Comments top
I moved out of Russia 30 years ago.  

Unfortunately Russian policy is still dominated by monetarist dogma imposed by Yeltsin.  So the car culture is growing out of control and streets in Moscow and elsewhere are becoming clogged with traffic.  For a country were public transit was very, very good (e.g. you could hop on a train to go camping in the backwoods) this is idiotic.  So a swift kick upside the head for this trend would be very beneficial.

A significant fall in oil production has numerous benefits. It will force the economic development away from dependence on fossil fuel extraction and sale abroad, which is seriously distorting the economy.  It will force the development to make use of existing rail and public transit infrastructure and prevent all of these assets from being scrapped in the name of "progress".

As other posters have said already, awareness of peak oil is lacking since the same BS was spewed during Soviet times about vast oil resources.  East and west people have been brainwashed by endless repitition of the technology will overcome nature mantra.

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