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146 comments on The Net Hubbert Curve: What Does It Mean?
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146 comments on The Net Hubbert Curve: What Does It Mean?
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I agree that the work is simplistic. The main point of this post is to stress the fact that NET and GROSS energy are vastly different, but not necessarily that one is "X" more than the other.
David -- At this point I think simplistic is a good way to go. As other have pointed out the actual calculation of EROEI is complex and, more important IMO, very subject to how you choose to model the set up. I also don’t think such a calculation based upon energy quantities is the key. The economics that determine drilling operations isn’t based upon energy volumes. The process is evaluated strictly on $’s vs. $’s out. Not that there’s a complete disconnect between energy content and $’s. But the actual FF energy used to drill a well is generally a rather small portion of the total operation. An extreme example: Time A prime rate = 16% and Time B prime rate = 6%. Same prospect…same EROEI 5:1... same oil price. But during Time A the well won’t be drilled because the cost of financing drives the return to less then 0. And then there’s Prospect X with an EROEI of 1 but a spike in oil prices pushes the economics to a 20% rate of return so it gets drilled.
This isn’t an argument against EROEI and its implications. But the oil industry has never based decisions upon EROEI and never will IMO. That adds another reducing/addition factor to your net model. Today many potentially viable NG projects are not being drilled even though their EROEI might be attractive. Current low NG prices won’t allow drilling. In that sense low commodity prices generate what one might call an artificially low “effective” EROEI. Similarly, high oil prices last year almost certainly caused a number of potentially very low EROEI oil projects to be drilled.
Will we ever drill projects with EROEI’s less then 1? Low or even negative EROEI is possible when look at the net process. It’s possible when you factor in the energy component from UNSUCCESSFUL projects. That’s the nature of oil exploration: high prices spur drilling but the success rates falls quickly as the greed factor generates a large percentage of poor prospects. The price spike of the late 70’s led to 4600 rigs drilling…twice the number drilling when oil prices peaked last summer. I can promise you half those rigs were drilling crap and generated no reserve gains. But they burned up a lot of $’s and energy in the process.
I wouldn’t try to model the economic effect on the Hubbert Curve. Too many Y’s in the road. But it would probably be good to keep in mind that the tail of the curve will be determined by more then just the physical presence of a certain volume of oil. Your curve does an good job of that IMO. As you imply it’s not meant to be a quantitative prediction but does offer a qualification to Hubbert’s original projection.
And for the comment regarding Hubbert’s blindness to future new oil trends bear in mind that he had no clue to the huge potential we developed in the US offshore shallow water plays let alone the Deep Water plays currently being developed. But his very old curve for the US still works fairly well.
All economic activity is about $s and making a profit and consumers affording the required price, oil is no exception.
It's the inability to afford the price that will eventually deter consumers from using the oil for energy use, as we have already seen in the last few months - the price is all they need to make their decision.
The expected shape of Hubberts peak due to geology, EROEI and ELM just allows us to predict that the price has to become completely unaffordable for energy use much more quickly than most people suppose.
From reading his paper I think Hubbert was correct about the peaking phenomenon, got lucky about the timimg of the US peak and was completely wrong about the volume at peak because, as you say, his knowlege of actual reserves, their flow rates and their affordability was unknown to him, just as they are to us.
I am inclined to at least partly agree with this. Part of the reason the US peaked is because there was easier (cheaper) to extract oil elsewhere (ME). Had there been no alternative I don't see why they could not have kept production increasing for several more years. I say this because almost 40 years after peak there is still significant production. There is no reason production could not have been kept increasing, albeit at the expense of a later and steeper decline.
BTW I think this is in general true. I.e. later fields are experiencing accelerated production (i.e. above what Hubbert's symmetrical curve would predict) because later fields are increasing capital intensive to produce. Therefore accelerated production is required to get the needed IRR, i.e. recapture investment and profit quickly enough to attain the IRR. Another reason Hubbert's bell is skewed (and us too, with an 'r').
Also, on the theme of declining EROEI, it is important to remember that not all the E(in) will be from oil. Much of it will be from gas, coal, nuclear etc. Of course each of these are also facing declining EROEI values in the same time frame, but not all. The EROEI for hydro is probably fairly constant, for renewables it is probably rising with improving technology, and even with nuclear, it might not be falling.
However, coal, oil and gas represent over 80% of primary energy supply worldwide, and their EROEI are (probably) all falling. Certainly coal is.
It should not be too difficult to combine crude figures (sorry for the pun) from each energy source to give a better estimate of what I call 'peak net energy' from all main energy sources. I suspect it will not be more tha a decade or two in the future.
Also he couldn't anticipate the Yom Kippur War and the Iranian revolution...I would say that it was rather a pretty nice shot.
Many times a good way.
The rata of EROEI decline cannot be a simple interpolation IMO, see my post below. I think a better approach is to take a look at the increase of E(in) over the decades to get the samo amount of E(out).
EROEI is not 'real'. It is a direct result of the proportion between E(out) and E(in). So while I titally agree with your basic idea, I'd use E(in) instead of EROEI. In other words: I do agree with you that E(net) declines a lot faster than E(out), but I don't think it wil be as steep as your graph shows.
More details below.
According to the EIA we've drilled 3164170 dry holes in the US since 1949, if you want another data point.
Quite the energy sink.