Tensions generated by a widening conflict between Israel and Palestinian militants sent crude prices up sharply to above $40 a barrel Monday, with gasoline and heating oil also making sizable gains.

I wonder how much Iran is behind this.

Well... obviously Iran backs Hamas. What I'm really wondering is whether Iran intentionally sparked a conflict to boost oil prices with conflict where claims of OPEC production cuts had failed. They need prices to rise and can't afford to cut production much.

Iran is definitely in the "danger zone," regarding net oil exports, with 2007 consumption equal to about 43% of production. High consumption levels, relative to production, are associated with fast net export decline rates, e.g., Indonesia, the UK and Mexico. (Iran's net export decline rate in 2007 was -8%/year, relative to 2005, EIA.)

Our middle case is that through 2008 Iran has already (net) exported about 22% of their post-2005 cumulative net oil exports.

I really don't see where you gain anything by such analysis, because your assumptions determine 100% of your output. Variation between later-observed data doesn't cause you to adjust your assumptions, it causes you to think that the future is actually worse than before. I'm not sure what the point is.

As for Iran... any discussion of net exports in this environment can't assume that Iran's own economy will continue to increase their consumption (thus accelerating export declines).

What do we gain from your analysis? Any oil projection can't assume the current low prices will persist indefinitely. As prices rise, so will exporter (relative) affluence and internal consumption. It'll be a cyclical thing, of course, as economies shift and crumble, wars take their toll, etc.

So far, WT's modeling seems to be more accurate than any official projections, and his "assumptions" are simply refined views of production data driving all models. Your statement seems meaningless -- how can you have ANY projections without assumptions? A best-estimate based on stated assumptions has lots of value, even if we all know the situation is too complex to predict with accuracy.

I suspect that the primary problem that most Cornucopian types have with our assumptions is our key premise that a finite world has finite fossil fuel resources. The finite world model tends to be a difficult point to sell since most people's operating premise is that we can have an infinite rate of increase in our consumption of a finite fossil fuel resource base.

I suspect that the primary problem that most Cornucopian types have with our assumptions is our key premise that a finite world has finite fossil fuel resources

Not in the way you think, no. I have no problem assuming that it's a finite world with finite resources. The problem is that you seem to think that tells you anything.

If the global supply of recoverable crude is a thousand times as large as you think it is (and I'm not saying that it is), then the supply is still "finite". Saying that something is "finite" tells you exactly nothing about when production of that resource will peak.

The finite world model

There is no such animal.

most people's operating premise is that we can have an infinite rate of increase in our consumption of a finite fossil fuel resource base

Repeating a strawman argument doesn't give it any additional substance. It just makes your own position seem less defensible.

You are just being argumentative. You know the ELM isn't based solely on URR. Your point is ridiculous. To illustrate, if the resource is finite, you know or can guesstimate extraction/use rates even somewhat accurately (didn't Hubbert state that increasing URR by 50% - or was it 25%? - only changes peak by 5 years?), then you can definitely make a model.

Who peed in your Wheaties?

Cheers

Well heck... if all we have to do is beg the question... I guess we can prove anything.

I have no problem with the theory of ELM, it's really rather straightforward... it's the application that gets me.

To illustrate, if the resource is finite, you know or can guesstimate extraction/use rates even somewhat accurately

Except of course, you can't.

Here... I'll invent an imaginary oil field below your home. It's big... but I won't tell you HOW big. All you know is that it's "finite".

Now... give me your "guesstimates". :)

I should have written "...finite, but can be roughly estimated..."

But you know this. It is an essential part of what is discussed here.

And you keep speaking as if WT is making hard and fast predictions rather than setting up scenarios that change as the inputs change... as with any model.

Pee in your Wheaties, I said, and still say.

Cheers

I should have written "...finite, but can be roughly estimated..."

Which assumes that you can do that. How close is "roughly"?

"Essentially all that can be found has been found" and "essentially all that will be recoverable (economically) in the future can be economically recovered now" (and the like) are also assumptions

And you keep speaking as if WT is making hard and fast predictions rather than setting up scenarios that change as the inputs change... as with any model

I'm sure I've missed a high percentage of his posts... but that fits what I've read, yes. When one nation (Mexico?) exported above his estimates for the last two years, instead of changing his assumptions he said that they had drained 75-80% (just going from memory here) of what was left to export. The clear implication was that the assumed net export value was unchanged, so the future decline would be even more pronounced.

Positive-Phototaxis has to go beyond rhetorical flourishes and propose a quantitative argument at least as well thought out as the ELM.

Actually his arguments are interesting in the sense of why they are wrong.

I'm fairly confident at least in my work on trying to understand complex systems for which we have incomplete or worse incorrect data that the time evolution is one of the hardest aspects of the system to estimate. Its the variable that has the most error.

The reason is I feel intrinsic in complex systems themselves they can change dramatically to alter the time outline.

However just because time is difficult to determine does not result in the outcome proposed by Positive_Phototaxis that these
countries will continue to export oil in large quantities. In fact its obvious he does not understand either the problem with timing nor the intrinsic nature of complex systems.

Whats funny is there actually exists a example of country thats to some sense operating counter to export land and that Nigeria.
By any reasonable estimate if they cared to support their local population in a decent lifestyle then Nigerian exports would be
falling rapidly given the population. Instead they are relatively high and the population for the most part is mired in deep poverty.
However the result is extensive guerrilla warfare with exports regularly interrupted and collapse effectively always probable.

So and excellent counter point to ELM exists and it shows that anti-ELM policies are not that successful of course given the current political strife in Nigeria one would assume that when Nigerian production begins to obviously decay that the probability of all out war completely interrupting production is high. In fact I'd not be surprised in the least to see total Nigerian exports actually result in the same outcome as the ELM which is a little more then 50% or so of overall production. Its a fairly safe assumption that Nigeria will export very little of its last 25% of reserves and exports will probably fall dramatically in the second 50% either because of collapse or because of a takeover by groups that actually support the local population.

We will see but this is this sort of conjecture you get from complex systems and the greater ELM model using this approach says that in general no country exports much more then 50% of its natural resources that can be used internally.

Indeed although WT does not mention it the US itself went through ELM ceasing oil exports back in the 1950's or 1960's I don't have the exact date. This 50% concept is quite general and broad obviously countries like Kuwait with large resources and a small population or Norway are exceptions but in general if you look I think you will find that internalization of resource usage is very common when it becomes clear the production is in decline regardless of the post peak production policies. It will be interesting to watch Nigeria and even Norway over the next several years to see if the broader ELM concept is as intrinsic as I suspect.

If Positive-Phototaxis had something more then rhetoric to support his claims then he would have been able to at least expand the concept of ELM and maybe potentially show that other viable non ELM outcomes are possible. My opinion is the broader concept of ELM which is really simply a variant of resource nationalism at its largest scale indicate that exports become increasingly problematic as its clear that a particular resource is in decline.

Whats even more interesting if you really think about it the silver bullet or technology will save us group is really a sort of anti-ELM concept. But because they are really just suggestions of alternative evolution models vs ELM then they need to develop their thesis from ELM itself instead of embracing the range of outcomes and debating the probability or requirements to not fall into the two general result either steady resource nationalism or abrupt post peak changes needs a lot of work.

Instead in general from what I've seen most people who reject the problems we face simply take the tactic that timing problems or the natural ability of complex systems to evolve in surprising ways as sufficient to reject the basic model. In my opinion A does not equal B. Fairly small short term timeshifts or reversals are to be expected simply because the system is complex obvious and real changes that indicate the system is evolving on a different path however seem in my opinion to require readily measurable and obvious trends supporting alternative outcomes.

This alone is what makes anti-ELM arguments difficult to accept one would expect that to counter ELM would require some fairly strong trends to become established to overcome the ELM effect in almost all cases either the Silver Bullet argument or the economic one require decades of work to put into place. Thus the real failure is not even in the arguments it seems to lie in the fact that these arguments require a dramatic long term trend reversal over a short period of time and worse in general they need to happen without causing instability. Both the transition of a exporting country to one that limits or reduces internal consumption and the other alternative that alternative energy sources replace net exports without serious economic hardship are difficult to execute over a short time period without side-effects overwhelming the attempt to change the trend.

On the other hand model like peak oil and ELM have relentless and simple models supporting their outcomes and the end result is very robust against short term timing changes in fact reversals lasting years or even decades and a variety of economic models seem unable to stop the the system from following the models.

And finally at the end of the day humans face a massive population collapse in the near future maybe we will find a silver bullet and delay it for a few decades or even a few centuries all this will do is increase the amount of destruction we will do to our planet before we almost certainly see a massive collapse. We as a species need to change and limit ourselves and live within the constrains of our ecosystem and most of all begin the long task of humanely reducing both our population and per-capita ecological footprint.
We still in my opinion have both a chance and a choice to avert what looks like certain doom simply be fundamentally changing the way we live. Real answers show how we solve these problems. WT ELP simply by virtue of the design ensure that local populations become constrained eventually resulting in a constrained world population I've not seen a single proposal from what I call the cornucopian's that actually addresses our real underlying population problem thus not only do they generally dismiss the resource constrain models they repeatedly fail to address the core population issue. Show me how a PV panel or electric car solves the world population problem and I'll take a second look. While ELM and peak oil itself are actually underpinned by the real population growth problem they are secondary results of and ever growing population.

a positively uplifting post from an apparent doomer like you, memmel.

"As prices rise, so will exporter (relative) affluence and internal consumption."

Not if:

A) The producer's economy relies heavily on export profits and

B) Production is in decline.

In that case you should expect the exporters economy (and thus internal demand) to decline rapidly.

your statement seems meaningless -- how can you have ANY projections without assumptions?

Without some assumptions, sure. But when the entire fabric is assumptions? If you take an assumed production decline rate and add on an assumed internal consumption growth rate, you obviously get a curve. The area under this curve gives you a total amount of crude left to be exported in the future. That's fine as far as it goes (which isn't far) as long as you say that the conclusion is little more than an assumption itself. Where things then go even farther afield is when you now take this area under the curve as fact which informs your next set of assumptions. If, for instance, a nation's exports over the first two years dramatically excede expectations, the model doesn't accept that the earlier assumptions were likely wrong, it goes on to say "they've now exported 75% of their remaining net exports" and therefore the future decline will be even more extreme.

Another way to look at is that wt's assumptions are just the parameters of one scenario.

Personally, although I'm keenly interested in his scenario, I recognize that there are other possible scenarios.

Why don't you create another scenario and put forward your predictions? Then we'll compare and perhaps both models will be refined by the discussion that follows.

The point is, in the real world it's the 'net-exports' that take the full post peak decline, there is no shortage of domestic oil until the exports go to zero - there are already many examples of this behavior, such as the UK (or Indonesia for an OPEC country).

In the case of a country like the UK with ~50% exports the time from peak-exports to no-exports was around six years!

Iran has a similar export and decline profile to the historical UK!

In the case of a country like the UK with ~50% exports the time from peak-exports to no-exports was around six years!

AND in about Year 7 they become a Net Importer. Then you have more of an increased demand on the continuously decreasing pool of available exported oil. So they not only stop contributing to oil available for countries dependent on imports, the now start competing with those countries for what is left. My analysis indicates that this is not a good situation.

there is no shortage of domestic oil until the exports go to zero

Not in a nation where the bulk of GDP comes from oil exports. Iran's government is 80%+ paid for by exports and their overall economy is heavily government-dependent. Cut exports by 50% and even if prices weren't this low, their internal demand would collapse, taking them off of any curve that relied on internal demand growth.

Comparing Iran to the UK is just silly. Their economies are in no way similar. The US ceased net exports decades ago, but oil was an input to the economy... not the essence of it.

Also, IIRC, the UK doesn't fit ELM anyway. Their internal demand didn't really change. Their export declines (and now import growth) fairly closely matched their production declines. Norway is similar.

The nation's that fit it best are the ones that subsidize internal oil prices and have other substantial economic engines. Iran's departure from ELM will likely be on both counts. They won't be able to afford to subsidize internal demand without external sales... AND those exports are the bulk of their economy.

Their internal demand didn't really change

Correct ... domestic demand does not need to fall away, but it doesn't matter if it does, it's still the exports that take the hit first - the oil under their lands is their's not somebody elses.

Two things to bear in mind:

1. The marginal cost of production from an already producing well is very low, just the lifting costs + overheads (even in Iran) so domestic fuel is very cheap to produce even if there is a large decline rate.

2. The marginal cost of production from new wells is relatively high, so this is the bit that will fail if (as looks likely) the Iranian Government doesn't have enough income to invest in an adequate number of new wells. The lack of adequate investment in new wells is what causes peak oil supply and declining net exports if the wells are in an exporting country.

"The US ceased net exports decades ago, but oil was an input to the economy... not the essence of it."

Since the decline of net exports in the US we have grown the economy a bunch. Think S and L, Enron, dotcom, subprime, tech, retail, investment banking, the big three, 17 trillion dollars in debt and Bernie

Real growth loves an energy surplus, we can be innovative around it for awhile but basically it's not nice to fool mother nature

Also, IIRC, the UK doesn't fit ELM anyway. Their internal demand didn't really change. Their export declines (and now import growth) fairly closely matched their production declines. Norway is similar.

The crux of the ELM argument is that production declines in exporting countries tend to result in long term accelerating net export decline rates. Once an exporting country peaks, the resulting net export decline rate is a function of consumption as a percentage of production at final peak, the rate of change in consumption and the rate of change in production.

Export Land falls between the UK and Indonesia in terms of rate of change in both consumption and production, but all three were consuming about half of production at final peaks. And the graph of the post-peak year over year changes in net exports is quite similar for all three:

http://www.energybulletin.net/image/uploads/38948/image005.png

Perhaps you could show us some examples of post-peak exporting countries that contradict the examples I have shown?

Perhaps you could show us some examples of post-peak exporting countries that contradict the examples I have shown?

If you can expand the definition to include the examples, what's the point? I'd say that the UK and Norway are excelent examples but now you're including them despite no internal demand growth. The rest is simply playing games with math. A 10,000 bpd decline is tiny, but you can make it look massive if you say it's a 50% decline from the former 20kbpd export rate. It adds nothing new to the discussion.

I always find it interesting when people accuse me of misusing a simple little mathematical model that I developed and named. As I have noted several times, a zero rate of increase in consumption in Export Land only postpones the point at which they hit zero net oil exports from 9 years to 14 years. And in our paper on the top five net oil exporters, we used the UK as an example, even before we showed the ELM.

In any case, consider the zero rate of increase in consumption scenario for Export Land, i.e., consumption = 50% of production at final peak, production decline rate of -5%/year, no increase in consumption. The initial net export decline rate would be -10.5%/year for year one. The net export decline rate for year 13 would be -80%/year. In both cases, the production decline rate was -5%/year. This is the point that I have been trying to make. Production declines in exporting countries magnify the net export decline rate and generally result in a long term accelerating net export decline rate.

In regard to my question, I take it that the answer is no?

LOL!

I'm not accusing you of "misusing" it... I'm saying that if you stretch it that far there's nothing left to call a "model". What could possibly be left to debate? ANY nation fits the "model" because all it says is that a decline in production means a decline in exports. Then you can magically cause it to appear more severere by taking a set numerical decline and measuring it against the subset (exports) and voila! you get a larger percentage.

What I don't get is how this is supposed to be news?

Your statement was "High consumption levels, relative to production, are associated with fast net export decline rates, e.g., Indonesia, the UK and Mexico." which pretty clearly ties internal demand to the model. In reality (in the UK anyhow) there was no change in internal demand (worth debating). The percentage of production taken up by internal demande just changes the size of the denominator, it doesn't add anything to the analysis. If the UK consumed 80% of their own production at peak, then any decline would be measured against a far smaller export fraction and would appear (artificially) larger. If they consumed only 30% of production at peak then the decline would be divided by a larger figure and the impact of the same production decline would appear smaller.

The point is that that's just playing games with the numbers, it doesn't impact reality in the slightest.

In regard to my question, I take it that the answer is no?

I thought I made it pretty clear? You've gotten to the point of non-falsifiability. I can't think of even a hypothetical that wouldn't fit in that case.

I can't think of even a hypothetical that wouldn't fit in that case.

Then, what are we arguing about? My original point, way up the thread, was that Iran is a prime candidate for a fast net export decline rate because its consumption, at 43% of production in 2007, is high--just like Indonesia, the UK, Export Land and Mexico.

Then, what are we arguing about? My original point, way up the thread, was that Iran is a prime candidate for a fast net export decline rate because its consumption, at 43% of production in 2007, is high--just like Indonesia, the UK, Export Land and Mexico.

Lol... you've moved from taking a model that fits almost any forseable situation to drawing a conclusion on what will happen in a specific situation. ANY nation that EVER sees a production decline is a "candidate for a fast net export decline" by that standard. That's the difference between a "model" and what we're debating.

A model should tell you something new. Right now it's just a way of saying "exports are always the difference between production and internal consumption. As production falls, the annual percentage decline in exports will of course be larger than the overall production decline." You didn't need a model to tell you that.

Then you take it farther and say "here's the assumed rate of production decline and the assumed rate of internal demand growth... that gives us an estimate of how much crude they have left to export" and go farther to say "they have now exported 80% of what I estimated they would have left... so they'll be done even faster".

You didn't need a model to tell you that.

Nothing is truly needed. The better question is what is missing that if added to the conversation would help people understand what's going on? Jeffrey's model is doing exactly that. And having a name for it is very handy in discussions because a common vocabulary makes conversation more efficient and effective.

In contrast, my understanding of the last CERA report from others (I do not have a copy) is that it contains nothing about net exports. Nor are net exports a common conversation anywhere I go. People are still trying to get their head around the possibility that oil production is going to decline.

From that perspective, I think Jeffrey is moving the conversation forward, while all it seems to me that you are doing is throwing up obstacles that are only marginally adding to the conversation, at best.

The problem that Positive-Phototaxis is having is that he doesn't understand the cleverness of the ELM when you consider the lack of good data. It does quite a bit with inferring trends. WT understands the zero-sum aspects, but you have to work with data that you have. Oil companies are not universally laying it down on our doorstep.

I really developed the ELM to help me understand net export dynamics. I was literally stunned when I did the math and realized how dramatic post-peak export declines could be.

The next step was to compare the ELM to real world case histories. I thought that the UK and Indonesia were perfect. Like Export Land, they were consuming about half of production at final peak, and Export Land's production decline rate was more than Indonesia, but less than the UK. Export Land's rate of increase in consumption was more than the UK, but less than Indonesia. Also, the UK was a high per capita income country, with energy consumption taxes, while Indonesia was a low per capita income country, with energy subsidies. The post-peak year over year net export percentage decline curves were very similar:

http://www.energybulletin.net/image/uploads/38948/image005.png

My next missive is going to be on post-2005 cumualtive net exports. The cumulative numbers are even scarier than the production numbers, and it highlights the difference between the depletion rate and decline rate. As you know, depletion marches on, regardless of whether the production rate is increasing or decreasing.

For example, I put the final production peak for Indonesia in 1996. In 1998, when they showed a year over year increase in net exports, they exported 22% of their post-1996 cumulative net exports. One fifth gone, in one year--when they showed an increase in net oil exports.

"Comparing Iran to the UK is just silly"

Aha, and comparing the UK to Indonesia ist just not so "silly"?

You seem to be quite well in the art of philosophize... But here we are talking about OIL.

Cheers

Aha, and comparing the UK to Indonesia ist just not so "silly"?

Sure it is... which is why I didn't do that.

But here we are talking about OIL.

And since OIL is relatively similar around the world, all the nations that produce or consumer it do so in the same fashion?

Positive_Phototaxis,

I can see that you don't agree with WT, but besides saying that WT's model has faults, what is your point? I say this in all curiousity. The only negative thing I can say about the ELM model is that it is very generalized and isn't too specific. You seem to assume that it has some more detail to it than I can see in it.

I can see that you don't agree with WT, but besides saying that WT's model has faults, what is your point?

What possible other point is needed? "I disagree and here's why" seems like a very valuable conversation to have when debating "where do we go from here?"

You don't agree? Then why post? ;-)

PP...you need to listen more and talk less. 20 posts in a 100 comment thread is too much.

Ig,

You see, P_P is a troll, interested only in attacking other people's ideas and whipping up arguments. There is a well known way of handling trolls. It's very effective, though sometimes a bit difficult in the application, I know...

Ignore them.

If I didn't know any better....and the writing styles are similar....I'd think P_P is our old friend Hrothgar.

:-) You know, you may have a point! But in any case, you gave me a good laugh!

More likely that Iran is using Hamas to distract Israel and reduce the near-term chance of an Israeli strike against Iranian nuclear facilities. Oil isn't going to jump much because of Palestinian-Israeli in-fighting.

"More likely that Iran is using Hamas to distract Israel and reduce the near-term chance of an Israeli strike against Iranian nuclear facilities."

I wouldn't think so in this environment. A number of analysts have said that lower oil prices have done more to stunt Iran's nuclear ambitions than years of so-called "diplomacy" have accomplished.

Iran's nuclear program was funded with large surpluses from oil exports. Now that money is needed elsewhere.

IOW... Israel was far more likely to attack at $150/bbl than it is today.

If anything, the conflict makes an attack on Iran more likely.

Hamas and Israel. At least as far as US is concerned, most of us are woefully uninformed. Some better links here. Down the road, if legitimacy does start to evaporate, we'll all be happy to have and support our own local versions of Hamas.

"Hamas and Israel. At least as far as US is concerned..."

I think there is a "use by" date on all those munitions we sold/gave to Israel.

And this gentleman is a good example of how uninformed people are.

Hamas just introduced crucifixion as punishment for an array of offenses in Gaza.
They are part of the Muslim Brotherhood movement, in other words, nothing but murderous thugs, and we'd have to be pretty damned desperate to be happy to have our own.

According to the last CIA security assessment, there is no Iranian nuclear weapons program, and there hasn't been one since 2003. Looks like they may be telling the truth and simply doing civilian nuclear for power generation purposes.

  • http://www.nytimes.com/2007/12/03/world/middleeast/03cnd-iran.html
  • I wonder how much Iran is behind this.

    Iran mainly backs Hezbollah, who shares the Shia religion. Shia Islam feels strongly oppressed (by fellow muslims), and in general supports groups they feel are fighting oppression. This includes Hamas as well, even though Hamas is of the rival Sunni sect. I doubt they have much to do with the timing of the conflict, although the new round of violence might deflect attention from the economic crisis at home.

    It sounds a lot like the timing has to do with influencing local elections. Hamas would like to radicalize the west bank prior to upcoming elections. Israel's Kadima party, wants to show its militant side before the upcoming elections. And, yes even in Iran, elections are only a few months away, and nastiness between Israel/Hamas helps the fundamantalists.