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DrumBeat: March 25, 2007
Posted by Leanan on March 25, 2007 - 9:19am
Topic: Miscellaneous
Barren and uninhabited, Hans Island is very hard to find on a map.Yet these days the Frisbee-shaped rock in the Arctic is much in demand — so much so that Canada and Denmark have both staked their claim to it with flags and warships.
The reason: an international race for oil, fish, diamonds and shipping routes, accelerated by the impact of global warming on Earth's frozen north.
Concern grows on refinery safety
Refineries in California and across the country are breaking down with unusual frequency this year, boosting prices at the pump and endangering workers and communities.The rash of oil plant problems may not be a coincidence. The breakdowns stem from the hard use of aging equipment, a shortage of trained workers, corporate cost cutting and ownership changes, refinery experts say.
T. Boone Pickens to discuss peak oil concerns with Midland audience
I'll talk about world oil peaking, yes. I believe that to be the case, that 85 million barrels a day is the best the world can do. I think we'll be tested in the fourth quarter of this year. Oil demand globally should be 86-87 million barrels a day. Now, that's if the global economy holds up. If the global economy declines any, oil demand should ease. If demand continues to strengthen, prices will move higher and could reach $70 a barrel.
IEA report shows oil demand is up, supplies are down
The IEA report says the Organization for Economic Cooperation and Development inventories decreased 8.6 million barrels in January. The data for February suggests stock piles may have fallen 65.7 million barrels in the OECD nations. This suggests industrialized countries are heading towards their largest decline in reserves (for the first quarter) in 10 years. The data is bullish on numerous fronts.
McFarlane: Renewable Energy Best Solution To Terror Threats
The United States should accelerate development of renewable energy sources because of increased risk from terrorist attacks that could cripple the economy, former national security adviser Robert McFarlane said Saturday.Speaking at a renewable energy summit organized by Sen. Ken Salazar, McFarlane, who was national security adviser for President Reagan, said an attack last year on a Saudi oil terminal was a warning of what could happen if terrorists carry out their threats to go after oil supplies.
He said a truck filled with explosives came within 100 yards of the oil terminal before it was stopped. Had the attack succeeded, it would have knocked out a terminal that supplies 6 million barrels of oil a day for a year, tripling the cost a barrel of oil to $150 a barrel overnight.
Inflation has jumped to 20 percent, imports are more expensive because the local currency's value is dropping and Chavez has moved to nationalize key sectors of the economy, vowing to make Venezuela a socialist country.
Yukos investor warns oil giants: 'We will sue you for billions'
The owners of Yukos have warned BP and other Western companies they face claims for billions of pounds in compensation if they participate in this week's auction of the former Russian oil giant's remaining assets.
Catastrophic Hypothesis: Could Global Warming Melt All Ice On Earth?
Our institute has prepared an atlas of the world's snow and ice resources, which describes all the ice on the earth and even offers a map of the world without ice. It is, however, a model, not a forecast. Yet there are forecasts warning that if the global warming seen at the end of the 20th century continues for several decades, a lot of ice in the Artic Ocean will melt.
China, Venezuela to cement ties with oil deals
Venezuela said on Saturday it was working on a raft of oil deals with China, giving impetus to President Hugo Chavez's attempts to break his country's dependence on oil exports to the United States.
India committed to Iran gas pipeline: oil minister
India is committed to a multi-billion dollar pipeline that will transport gas from energy-rich Iran through Pakistan despite reported objections from United States, Oil Minister Murli Deora said.
China starts drilling 'Asia's deepest' oil well
Energy-hungry China has started drilling what it says will be Asia's deepest oil and gas well, state media said Sunday.State-owned Sinopec plans for the Chuanke No. 1 Well in southwest Sichuan province to reach a depth of 8,875 metres (30,000 feet) -- more than the height of Mount Everest, Xinhua news agency reported.
Will anxious Arab states soon form a nuclear family?
From Libya to Egypt to fuel-strapped Jordan, Arab countries have signaled their desire to develop nuclear power, even amid a concerted attempt by the United States to tighten the noose around Iran lest it join the nuclear club. These new players are entering a nuclear race in an unstable zone, dominated by two regional powers, Iran and Israel.
Australian city aims for world first climate change blackout
Australia's largest city will be plunged into darkness for an hour on Saturday in an attempt at a world first blackout to raise awareness of global warming, organisers say.
Development in harmony with nature
O'Brien said those who squawk about the costs of going green are shortsighted."Between peak oil and climate change, energy is going to get very, very expensive," he said. "The dilemma of the dollar is that dollars don't measure social values. Global warming is the biggest, most colossal catastrophe that the human race has ever seen. You've got to start somewhere."
Renewable sources the key to energy crisis?
Biofuel and other renewable energy sources may hold the key to Africa's energy crisis. Without intervention, this crisis is set to grow. Southern African cities such as Lusaka in Zambia, Harare in Zimbabwe, Gaborone in Botswana and Dar-Es-Salaam in Tanzania will be affected.
Deep economy: Localism, innovation and knowing what's what
I have no faith that people in the United States or elsewhere will voluntarily reduce their standards of living: indeed, outside of a few statistical outliers, like the Amish, I know of no evidence that anyone ever has, at least for very long. The way forward is not by going back to some earlier model of living which we believe to have less impact on the Earth, because people won't accept it, and we need mass popular support for dramatic change if we are to avert catastrophe.So, we must ask ourselves, How can we deliver the prosperity billions of people expect, while reducing the ecological footprint it exacts?
Open skies deal will undo curbs on CO2, say Greens
Environmental groups warned yesterday that the open skies treaty to liberalise transatlantic flights could undermine efforts to combat climate change.
Five years to save the orangutan
A shocking UN report details how the booming palm oil industry is wiping out one of man's closest relatives as its forest habitat disappears.
Algae Biofuel Company to Grow Miscanthus as Biofuel Feedstock
AlgoDyne Ethanol Energy, the developers of a proprietary based process to continuously harvest algae biomass from photobioreactors to produce electricity and fuel, is acquiring 3,000 acres of agricultural land in Saskatchewan, Canada, to grow bioenergy crops, including Miscanthus.
How to boost Wind Power Development
The current study shows that the existing policy instruments intended to promote wind power are strong enough to make wind power projects competitive, but current legal rules for environmental permits and territorial planning, and public criticism at the local level, create substantial investment uncertainties.
Saudi Arabia not planning oil market crash
The reports that Saudi Arabia is about to engineer oil market collapse so as to contain its over-zealous neighbour, kept echoing in Zurich and London, over the last week or so, as people in the energy fraternity seemed deeply interested in finding out the truth on the issue on the sidelines of an industry conference.
BHP chief's doubts over clean coal technology
The former head of BHP has punctured the optimism of the Howard Government about clean-coal technology by saying the long-term storage of the carbon waste may be as difficult as dealing with nuclear waste.
Clean coal would cost billions
It could cost $4 billion annually to eliminate the carbon dioxide generated by power plants in the Carolinas.The immense cost for cleaning up coal would be equivalent to building two nuclear power plants every year.
The number 1 slot ;-). How about a discussion on the why's of HL? This is an update of a post I made last week.
Robert Rapier is right to question HL in my view. The production curve on the way up could have taken any shape because it's a economic curve, specifically GDP/(GDP/bbl). Any number of things could have changed it - WW III, bird flu, asteroid strike - you choose. The fact that geology, investment and technology allowed supply to rise to 85mbd is a completely unrelated event. People who think demand creates supply are called economists not engineers.
HL is a theory without a hypothesis. OK, oil production is never a square wave and it rises then falls, and the area under the curve will equal URR at the limit but so what!
There must be some similar process or behavior at work in order for HL to produce similar outcomes in different oil provinces if that is what it is doing. We need an explanation of what HL is measuring. Is it below ground or above ground factors or one driving the other? Here, at least is a hypothesis:
The infrastructure put in place for an oil field closely correlates with the initial estimate of URR. URR(E) determines the size of the investment and thus the rate of extraction. This correlation will tend to produce similar production histories for different oil provinces and similar HL plots.
Is that why HL works? It maybe. Think about Prudoe Bay. What inputs set the size of the pipeline that carries the oil away? It's the kind of investment decision that would attract a huge amount of analysis. Did they take the rate at which the fields could produce and the URR(E) and came up with a flow rate which sized the pipe? No one would put in a big pipe for a small field or visa versa. This stable relationship of geology driving investment size provides a [possible] explanation for the repeatability of HL plots. Colin Campbell has stated that BP's internal URR(E) for Prudoe Bay was spot on but they under reported at the start. Reserves rose as more was moved into proved as per SEC rules.
I for one would like to know what I'm being asked to believe about HL.
The hypothesis is that bell shaped production functions have a linear-like behaviour on a P/Q vs Q graph. It works for Gaussian and time differentiated Logistic functions. But for Gaussian production distributions the linear regime will overestimate the URR since linearity fails as P --> 0 as the P/Q vs Q function curves down towards the Q axis. I think that for large production regions and the world the Gaussian distribution is a better fit. So the whole debate is missing the mark. The URR will be lower than we can predict around the time of the peak. Underpredicting the URR is not the problem.
Here, at least is a hypothesis: The infrastructure put in place for an oil field closely correlates with the initial estimate of URR...
I think there's something to that. Otherwise, in the Prudhoe Bay example, the pipeline capacity (if too small) would have forced a "mesa shape" to the curve.
But suppose that too-small a pipe had been built. If later the URR was seen to be big enough, another pipe would have been proposed. The reason is that when people see an opportunity for profit, they usually pursue it.
In my view the basic assumption behind the Hubbert method is exactly that. Humans are a "weedy" species, that tend to exploit all resources they can. The method expects such growth, which is indeed driven by economics. It does not depend on a specific rate of growth of production (in the initial, exponential, stage). The same math works for any constant rate of growth. In reality the growth rate fluctuates due to non-geologic factors, but in the long run (and the method applies to decades-long periods) there is usually a roughly exponential development, which slowly and eventually becomes affected by depletion (the growth rate slows down) - the first signs of below-ground factors.
I don't believe the downslope will mirror the upslope though, because I can't think of any underlying reason for that.
Thanks for your reply, vtpeaknik. Human economics definitely have a lot to do with it. I agree with you on the downslope not mirroring the upslope. They are separate curves to me - unconstrained human/economic up followed by geology constraint on the way down.
As an aside, I think T. Boone Pickens' prediction above rings true to me. Peak oil is never late for the party. I can't tell you how many times I've heard my own government (UK) say that North Sea is declining 'faster than expected'. How many times do they have to say it before realizing their whole forecasting methodology is wrong? What is more, tax on North Sea production was increased last year. Costs are typically $25/bbl for new production. Add 50% tax and North Sea oil at $50/bbl is marginal. We don't have ANY kind of localization option here with our population density.
I've got to go now. Regards,
Alan
I like the "weedy" species analogy. The Oil Shock Model uses that to the maximum effect. It makes the assumption that extraction will be proportional to the amount available, no matter how small or how large the reservoir. I have previously called this a "greedy" analysis. The inbred greed of humans is the basic premise.
BTW, I don't buy an exponential increase. An exponential increase is often mimiced by a series of damped exponentials that get convolved together.
No more tempests in teapots.
You know, I really do agree with you here, although I have to admit that in part the purpose of this blog is to debate the minutiae of things like this....
HL is a theory without a hypothesis. OK, oil production is never a square wave and it rises then falls, and the area under the curve will equal URR at the limit but so what!
OK, let's see.. I think you have sort of answered your own question there, Alan. The hypothesis goes something like this: many natural phenomena follow a bell-shaped curve. I think there's a formal statement of this in the discipline of statistics.
So, what Hubbert was saying, is that oil production will follow this trend regardless of political / economic / etc. issues. Basically we're gonna pump it out and use it as fast as we can in the end. Some of the TOD filk will superciliously say it's a "logistic curve", but they're both just blobs on a graph, near as I can tell. It looks to me like the bell is just the first derivative of the logistic WRT time.
I was trying to explain this in a recent thread, and was duly corrected: Hubbert did not originate "Linearization"; it had been my impression that he did. Anyhoo, the linearization is a clever way of graphing the production curve so that the points (theoretically) fall along a straight line. Furthermore, as time passes and production continues, the estimate gets better (because there is more history [larger Q] in the later points on the graph).
The beauty of linearization is that it allows you to place a ruler on the graph, strike a line, and get an estimate of the URR for the stuff you're trying to predict.
But in the end, it's all just statistics and the actual URR will only be known in hindsight. Many of us have looked at the graphs put together by SS, Khebab, westexas, and others and concluded that peak is probably about now. Since it is a century-long bell curve, there may be as much as 5 - 10 years of uncertainty as to the actual location of the peak — check back in 2025 and we'll know for sure.
The hypothesis goes something like this: many natural phenomena follow a bell-shaped curve. I think there's a formal statement of this in the discipline of statistics.
It's hard to get a Normal distribution (i.e. Gaussian/Bell-shaped) from temporal causal phenomena such as oil discovery and production. Bell-shaped curves extend to infinity in both directions, and our minus infinity is not very long ago. I wish we could, but you can't really hand-wave this stuff away unless you consider the problem from first principles.
Of the things wrong with the HL/Gaussian approach, the fact that it erroneously predicts that the Romans would have used 1.5 molecules of hydrocarbon is the least of its problems :-)
1858 is the start as far as I am concerned. Up to that point, there was little active progress in oil exploration.
http://en.wikipedia.org/wiki/Petroleum#History
It kinda suprised me.
Perhaps surprising history but oil (and NG) didn't become a displacing technology until later in the 19th century. Until then whale oil was used predominately for commercial use,
Yes, and I'm surprised there has been so little discussion of this so far on this site. On poster on the HL debate left a clue: creaming curves.
It appears from the empirical evidence that the sizes of oil fields in any oil province are distributed so that there are very few large fields and increasing numbers of increasingly smaller fields. Geologists can't demonstrate from physical laws why this must be so, nor can they give you a formula to predict the distribution, but still that's what the creaming curves tell us.
Given this fact, it is easy to see that simple economics will, in part, govern the history of oil production. All other things being equal (and I know they are not), production from a large field should be more profitable than a smaller field because the costs of exploration and development of a field can be amortized over more barrels of oil. That being the case, larger fields will tend to be developed before smaller fields.
Over time, as fields deplete and production declines, that decline must be offset by the development of an ever larger number of smaller fields, which decline more quickly and must be replaced at an increasing rate if production is to be expanded or even just maintained. At some point, the capacity, financial and technical, of the oil industry to add new production will fail to keep up with the required rate of development and production will peak and go into decline.
There is a hypothesis for you all to chew on.
Would there be any signifigant predictive signalling to be gleaned from the already known drastic reduction in EROEI of pumping Petroleum now as opposed to 60 years ago? It may well still be profitable at an 8:1 EnergyROI, but just the fact that it was not too long ago 100:1 or so seems to be a clear indicator that it takes a vast amount more labor and material than it ever did then to get the same product to our tanks, even WITH these much heralded improvements in technology, EOR, etc.. just better spatulas for scraping the bottom of the barrel.
Of course this continued profitability is not about the supply's continued VIABILITY, but the consumer's addiction/dependency such that he has to pay the ferryman to get over that brook every day.
One more bit on that..
Anyone know what the petrol EROEI was gauged at during the 70's oil crisis?
and above, "Clear Indicator" should have been 'Good reminder' or something..
I always seem to post when I'm exhausted.
to paraphrase Luis de Sousa " 1-Q/Qt is the fraction of the total oil left to produce, meaning that the capacity we have to produce oil at a given moment in time is linearly dependent on the amount of oil still available to produce"
or in other words oil production is analogous to radioactive decay. there is your hypothesis
For Prudhoe Bay look at this analysis:
http://mobjectivist.blogspot.com/2006/12/alaska-peak.html
Everything was put in place, and then they turned on the switch. That's what explains the deferred sudden increase that occurred a few years after discovery.
BACK TO THE FUTURE AND THE END OF THE GAME-BETTING ON SAUDI PEAK, OR AMERICAN SERVITUDE. WHICH WOULD YOU PREFER?
nrgyman2000 says,
"This would make abovground factors like economics “kick in” for expensive off shore production, tar sands (and possible some others), thus accelerating declines in production (reducing supply), leaving cheaper production (like within OPEC) economical, thus further shifting the supply power to the producers with low OPEX."
Good move, nrgyman2000! That exactly has been the crux of my argument for months here, and for 2 years previous to my discovering TOD. Discussion here at TOD and in other places (including Matthew Simmons excellent book, "Twilight In the Desert" have further convinced me that we must be VERY alert to an inverse effect, very close to the one you mention....It goes something like this:
In the massive price rise caused by the 1970's oil shocks, the Saudi's and Americans, through their ownership at the time in Aramco, had the money to go exploring, and in fact, were able to go producing, when in 1982, the bottom fell out of the oil price, due to a combination of recession/demand destruction, and an influx of non-OPEC oil from the North Sea, the Gulf of Mexico, Latin America (including Mexico), Africa and Canada (among others). Aramco was now completely owned by Saudi Arabia, who gained 100% of the company in 1980. It is fascinating that so many of the changes and confusions we are still discussing today center around 1980. In fact, a timeline of Aramco development, as seen on WIki, is of great interest, fascinating stuff, just in it's raw outlines:
http://en.wikipedia.org/wiki/Saudi_Aramco
Only 2 years after Saudi government purchase of Aramco, the Saudi's open EXPEC, The Exploration and Petroleum Engineering Center in Dhahran City, Saudi Arabia. As astounding as this may seem today, this was the first real attempt to train Saudi Arabians as technicians and engineers for the Saudi oil industry. Until 1980, the American owners really preferred to know more about Saudi Arabian oil than the Saudi's did. As we know, that has since changed.
So, picture the Saudi situation circa 1980: flush with money from the 1970's massive price spike in oil, but now facing decreasing revenue due to the rapidly collapsing oil price, and with a brand new educational facility and new knowledge about their own oil industry, and control of it, they could do one of two things:
(a) Turn on the taps and develop oil like crazy, at a cost of billions, and then essentially give it away, as they, the British, the Mexicans, and the other players undersold each other to the point of creating a collapse in the oil market price to idiotically low levels (it was already sliding in price further faster than in any period in known history), or,
(b) Out wait the competition, bide their time, let the Brits and Mexicans and others give their oil away, but turn down the taps on the greatest known oil reserves in the world, and spend their time learning, for the day when the oil would be needed....a "swing market" strategy, in which they could play the nice guys, the reliable supplier, smart, and respecting the world's need for "price and supply stability". But don't over deliver, don't undercut the price. The North Sea would hold the price down. Saudi Arabia could afford to wait for the greatest of all prizes. Does all of this sound familiar?
So what changed? Why the sudden price shocks, the run-up, the concern? What happened to the "nice guy" steady as she goes strategy?
Simple: The competitors started to peak: The big thorn in the Saudi side for years had been North Sea oil. Now, North Sea was peaking. The Brits and Norwegians could no longer flood the market when they chose, and undercut the Saudi's oil power. And now, Mexico. If the Mexicans cannot soon demonstrate that they are not at peak, the Saudi's can operate a type of de facto force majeure on the world. They essentially will have no serious competitors.
What they will have is the most well developed, well controlled, well disciplined oil and gas industry in the world. It is a staggering achievement. Look again at the Wiki article timeline for Aramco:
--1993 Saudi Aramco takes charge of Kingdom's domestic refining, marketing, distribution and joint-venture refining interests.
--1994 Maximum sustained crude-oil production capacity is returned to 10 million barrels (1,600,000 m³) per day. Company acquires a 40% equity interest in Petron, largest refiner in the Philippines.
--1995 Company completes a program to build 15 very large crude carriers. Saudi Aramco President and CEO Ali I. Al-Naimi is named the Kingdom's Minister of Petroleum and Mineral Resources, and Chairman of Saudi Aramco. Abdallah S. Jum'ah is named the CEO, President, and Director of Saudi Aramco.
--1998 Saudi Aramco, Texaco and Shell establish Motiva Enterprises LLC, a major refining and marketing joint venture in the southern and eastern United States. (the former "colony" buying the property of the colonizer!)
--1999 HRH Crown Prince 'Abd Allah inaugurates the Shaybah field in the Rub' al-Khali desert, one of the largest projects of its kind in the world goes on stream. The Dhahran-Riyadh-Qasim multi-product pipeline and the Ras Tanura Upgrade project are completed. The second Saudi Aramco-Mobil lubricating oil refinery (Luberef II) in Yanbu' commences operations.
--2005 Saudi Aramco and Sumitomo Chemical Co., Ltd. sign a joint venture agreement for the development of a large, integrated refining and petrochemical complex in the Red Sea town of Rabigh, on Saudi Arabia's west coast.
12 years of the most well orchastrated oil development in history. Now, Saudi offshore development continues unabated, and the Saudi's are returning to Khurais at a cost of hundred (s) of billions of dollars.
------
Return now to the quote from nrgyman2000's post at the opening of this post. The concern is that in a recession/depression, oil demand, and thus price could fall so fast it would drop the price of oil, destroying the demand for tar sand oil, deep offshore oil and possibly others, and "leaving cheaper production (like within OPEC) economical, thus further shifting the supply power to the producers with low OPEX."
The OPEC nations, and Saudi Arabia in particular, are COUNTING ON IT.
As the North Sea, Mexico and other competitors decline, the Saudi's are assuring us they can fill the gap. What if they can't? Well, that our problem, not theirs. The price goes up, they make huge amounts of money, and retain more and more control of the liquid fuel trade.
But, what if they can fill in the gap, and more? What if we make what would seem to be the most sensable assumption: The Saudi's know more about their oil system now, after 27 years of being able to manage it, to study it, building a complete petroleum university (EXPEC), and training their own technicians in the use of the best technology, than anyone in the world could possibly know about it. They have been able to play a waiting game. They know what they can produce, but MOST IMPORTANTLY, when it will benefit them most to produce it.
Picture it: just as the world petroleum demand goes down due to price, and alternatives such as ethanol, bio-Diesel, butanol, hybrid electric cars begin to really start to catch on, even though they cost more, and investment is finally made in deep sea oil, tar sands in a big way, expensive but needed coal to liquid or gas to liquid facilities.......Saudia Arabia starts to deliver bigtime. The price of oil, already set back due to recession created demand destruction, begins to drop further, and faster.
The government, as they are doing now with ethanol, tries to subsidize the alt fuel industries, gives tax breaks to the oil drillers, but, no help. The industries continue to cost more and more, trying to sell a product that is competing agains oil, which now costs less and less. Private investors begin to bail out of alt energy industries, alt fuels are seen as boondoggle. The Business press blares, "Green, Clean, and Broke: Does The End Of The Peak Scare Mean The End Of The Alt Fuel Bubble?"
The more ethanol, the more subsidized alternative fuel sold, the faster the governement loses money. Financially, it begins to bleed us to death. But, how can we cut loose industries which now provide a portion of America's fuel needs, even if more expensively than the flood of crude oil competition? If the alt fuels die, it gives absolute and full control of the liquid fuel industry to Saudi Arabia and a few other smaller players.
WE will have to decide, one way or the other. We will be trapped. And we will know that if we kill the alt fuels yet again, the prospect of ever getting them off the ground again will next to impossible. We will have shot our last shot, spent our last bullet. With a nation of aging people relient on others (family or professional medical and nursing assistance), we would not be able to change if we wanted to at this late point in the game. The Saudi's of course, would go on a buying spree. American land, farms, hotels, condos, would go into Saudi hands., They would diversify, own property, companies, whole luxury developments.
Somewhere around 2030, Saudi Arabia really begins to peak for the last time. They will still have at least 30 or 40 more years of good production left, but, this time, they will never be able to hurl tens of millions of barrels of oil at the market on short notice. They will not be able to act as "swing" procucer, but by then, no one will. But, it won't matter. The advances in high speed trains, hybrid and electric cars and hydrogen from solar will provide the birth of the new post carbon era, and possibly even nuclear fusion will be ready, filling our cities with light. Spacecraft will be working the moon and asteroids for minerals for fuel cells and batteries.
But, for the Americans, IT REALLY WON'T MATTER. We will have long ago sold our destiny and our future for the last of the oil fix. The Europeans, Japanese, and Chinese will be selling the solar panels and the fuel cells, the Germans and Dutch will be selling well developed solar to hydrogen systems, the ones we said could never be built, all over the world. As an influential power in the world, the United States will be called by many the Austro-Hungarian Empire of the new world.
The mosques will be being built in all the major cities. Our daughters-granddaughters will be learning the new dress code at school, and we will not protest, because for now, they are still being allowed to go to school. Our TV and radio will begin to grow more conservative. We will see more and more photos of Grenada and Seville, showing that a "correct and moral mix" of cultures can hold astounding beauty. The old men and women will smile softly....we recall that message, or one very much like it.....but it was so much easier to give than to recieve....
And as we leave this world, unsure about the fate of our offsprng, we will know that history moves very fast, and defeat deals with those who move slow.....we can only pray for a humane defeat for those who will think of themselves as culturally "American", in the century to come, and who knows, may be allowed to call themselves that, even in public, for many years. Why beat up on the beaten, surely, our new owners will feel that such a little allowence for pride sake is not so dangerous?
(Postscript: Am I saying it will go this way? No. But I am saying that we could be very, very surprised by what developes over the next 20 years.
And if Ghawar and Saudi Arabia have another 20 or 30 years of high output, I challenge someone to tell me how that is "good" news for America?
I am having serious and deep misgivings, and trying to decide:
Would America be better off if Saudi Arabia and the world were peaked, than to be lowered to serf status over decades by our thirst for oil, and our being bled to death by a flood of cheap Arabian oil? You decide. For me, I no longer care how much oil is in the world, or how cheap it can be. If Saudi Arabia will sell it for a dime a barrel, we should be looking for, developing, incorporating non oil methods that do not rely on a day to day government susidy)
Roger Conner
Remember, we are only one cubic mile from freedom
Naaa, the Saudi's are F*****D. They are drilling like bitches in heat already. Anyway give me that cubic mile or i'll whip you.
Marco.
Actually Roger I did quite enjoy readingyou post, and the link. very interesting. You always appear to hold much faith in Aramco and what they could achieve.
Marco said,
"You always appear to hold much faith in Aramco and what they could achieve."
It is closer to the point to say that I have a great deal of respect for Aramco....but it's the kind of respect you have for an alert lion...I am very, very leery of what might be thier next move....:-)
(my real point was, however, were it to be so, how is a huge amount of Saudi oil good for America, in the long view? Our problem is we keep hoping against odds that we can stay on oil forever, all we have to do is find more....and we may find more, who knows.....I think we should start hoping and working like crazy to get off oil, not see it with dread ("oil's too high, shiit, I guess we have to try to find something else."), but instead as our only chance at real freedom ("if we can get off oil, we have our real chance at freedom, from the OPEC crowd, from the oil companies, from global warming, it can't be that hard, let's do it, and if oil gets cheap, let's do it just as a hobby, we waste money on everything else, why not on getting free from oil?")
Roger Conner Jr.
Rememember, we are only one cubic mile from freedom
We are up against the iron traingle and the most powerful lobby groups that have possibly ever existed who will go to great lengths to disinform the public.
My opinion is that the only way to achieve what you are suggesting [is not through continual grinding of our word] is a government coup started by a 'respected' media outlet that is willing to spill the beans. Bringing down the currnet regime and it's stranglehold on our society, IMO, is the only way it is going to happen.
Big brother will fight tooth and nail.
Marco.
A temporary flooding of the market with cheap oil is not that hard to control, tax it. In USA you could pour the money into your budget deficit and post peak oil investments.
This were the response to falling oil prices in Sweden and manny european countries. But I dont think it were post peak oil planning, I suspect it were simple fiscal greed.
But the US govt won't do that. They would just put the money in the pockets of their cronies. Our govt is way too big for effectiveness and way to corrupt for meaningful change.
Hi Cheryl,
Thanks for your response. To back up your second sentence, there's a new book out- have you seen/heard of) it?
Blackwater: The Rise of the World's Most Powerful Mercenary Army by Jeremy Scahill. I believe he's been interviewed on "Democracy Now" www.democracynow.org, and "Connect the Dots" (KPFK 98.7FM). (but if I try to look it up, I'll lose my place.) Jeremy says the number of Blackwater persons in Iraq is equal to the number of US military persons, if I recall correctly. And then there's the proposals for Blackwater to operate in the US. All scary stuff.
re: "corrupt". Well, all 300 + million of us can't be too corrupt, can we? There are a lot of people trying very hard to make meaningful change. Very hard. Some succeed.
That article reflects the level to which debunkers of peak oil are going. Try to get people to fear the exact opposite of what's happening. It's like a "Hey, look over there", and ripping you off while you look. Saudi Arabia is in pretty dramatic production decline. Period. They are not magically storing huge amounts of oil to flood the market. Anybody that would even think this hasn't a clue.
Hello Magnus, you wrote
A temporary flooding of the market with cheap oil is not that hard to control, tax it. In USA you could pour the money into your budget deficit and post peak oil investments.
Taxation would (in theory) reduce consumption within oil importing countries. This in turn would lower demand, thus further putting a downward pressure on oil prices, assuming a situation with supply surpluses.
I think it is important to be aware of that as of 2005 approximately 64 % of the global net oil exports capacity was controlled by OPEC, and its share is set to increase in the future.
Taxation would drive down demand which could drive down oil prices and brings forward in time the point where expensive production (like deep water, tar sands, GTL etc.) oil production outside of OPEC becomes uneconomical, which reduces supply and reintroduces an upward pressure on oil prices as demand and supplies approaches an equilibrium.
This could result in that a larger portion of the global net oil exports became controlled by OPEC.
Is this a situation that should be desired?
I think high oil prices is a good thing, as it also gives incentives for important diversification of supply sources.
I understand ThatsItImout, that the point he strives to make is that even if developments in SA production and the true size of SA remaining recoverable reserves are important and useful to know and continue to keep an eye on, Peak Oil marks a milestone which hands BIG producers, like SA, a new set of opportunities which can be hard to predict the outcome from. In such a context a decline in SA production of 1 Mb/d is not what is to be feared most, but rather that SA (assuming they are aware of Peak Oil) looks upon this as an opportunity which they patiently have waited for a long time.
NGM2
Consumers dont care what part of the price is tax or producer revenue. If you were right and taxation during falling prices would make the producers price fall even more then raise the tax even more. The objective is to avoid expansion of oil use and support oil replacement industries, its not about being nice to the oil producers flooding the market.
If this postpones oil production into the future we will get a peak closer in time with a slower decline.
I can add that high oil taxation while crude prices are low propably give a feeling of invoulnerability to higher oil prices. This is true for an idividual consumer if taxes are lowered as prices get higher. But the total situation is worse since the taxation in reality is a way to move economical power to the state, it can still use the money for other projects minus the usual inefficiency in a state bueraucracy. If crude prices get higher this economical margin disappears and can neither be use by the state or individuals. In the peak oil times with real competition between the producers these resources go to expansion of the oil extraction and refining industries as it gets harder to get the oil out of the ground and refine it.
Taxation is not a solution to peak oil but it is a somewhat brutal way to rearrange a societies priorities. Myself I am happy about having had high fuel taxes for about two decades, two years ago I hated it.
Magnus
Let us try to agree on the principle that increased prices tend to lower demand (consumption) for a product, independent of the reason for the price increase. I am aware that oil demand in industrialized economies is inelastic within a range of prices.
People care about energy prices, and you are probably aware that in Norway gas is sold at what amounts to approximately $7,00 /gallon. If gas prices increases with $0,50 /gallon in Norway it generates a public outcry and the debates (in Norway) then focuses on the levels of taxation.
My point, any government trying to increase taxation on fuel, regardless of present price level, will generate a lot of public heat.
My other point (although not clearly stated) is that we are close to (or may even have passed) peak. Solutions that were effective on the way up to the peak, may not be effective on the way down. In other words we really don’t know how the game will play out post peak as we have no previous experience. I am not convinced that by extrapolating the pre peak solutions to a post peak environment is the way to mitigate peak oil.
I am not convinced to resorting to a solution that now intuitively may seem right. You need to do a “causes and effects” analysis before introducing mitigating solutions.
I also question the wisdom of increased taxation in a post peak environment as this also would affect alternative supply sources and could give a group of countries (a cartel) increased control of supplies.
There was a reason for me to show that OPEC in 2005 controlled 64 % of the global net oil export capacities, and their share grows (with Angola recently becoming a member) and will grow into the future.
Magnus, please reread my post, and I will for your convenience repeat my question subject increased control of the worlds oil flow to a cartel;
Is this a situation that should be desired?
Rgds
NGM2
Regarding oil cartels we are already sensitive to such and most countries need to bow towards Russia and Saudi Arabia with neighbours. But depending on local resources and efficiency in turning raw materials into valuble things and services not everybody need to bow as deep.
The given scenario were Saudi Arabia having enough unused spare capacity to flood the market for a few years with the intent of killing investments in efficiency and competing fossil and renewable fuel production.
In such a scenario fuel prices will be falling and taxation can be introduced that absorbes the fall in fuel prices. You can call it am enviromental or CO2 tax to get some public approval. Or the falling fuel prices can fuel an economical boom in car use, car services and car adapted infrastructure wich taken to its extreme makes the running of a society very dependant on cheap fuel.
Another idea is that this has already happened.
The important part is probably how a society build its infrastructure. If it builds flexibility to live with small ammounts of car transportation and with high energy efficiency or not. This kind of investments takes decades and if a sudden crisis happens you have to do the best with what you already got.
This makes me optimistic about my own country and European neighbours and it seems to make manny US citizens on the oil drum pessimistic. I think you are too pesimistic since you have a vast civil construction industry that could do enourmous ammounts of work within a few years and your population is much more accustomed to move around to get jobs. You have the physical ability to do a lot, you only have to, well, do it.
The desired situation is to have most of your countries population in beutiful towns where bicycling, car traffic and public transportation works in parallell and use the best or good technology in all sectors of society. Then it is very good to have local biomass, hydro and so on. Those who dont have that will be even more dependant on efficiency and high tech such as nuclear power to make themselves into attractive trading partners.
I think we are halfway there where I live, another two decades of investments and most will be built and updated to at least todays state of the art. I find this much more important then worrying about cartel creation that I anyway cant influence and my country have no jurisdiction about it, even EU cant do much about it. Investments that are significant for me and my neighbours can be initiated on municipiality level and even more can be done by large corporations and by the state while we cant do anything about the cartles on any level.
I would rather try to figure out if we can get the cartels to invest locally. The Swedish located refineries that are foreign owned by these dreaded corporations are being reoriented from the local market to the export market as mostly the heating oil market disappears. Wonder if there is anything we can do to support such investments since it is nice to have this industry here creating jobs, constructive international relations and supply security.