Open thread
Posted by Yankee on October 15, 2005 - 3:45pm
But if you're in the mid-Atlantic, I expect you to be enjoying today's sun!
“It's difficult to get a man to understand something if his salary depends on him not understanding it.”
—Upton Sinclair
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Thermodynamics And Money
In his day M. King Hubbert was a great geologist who spent his life studying the planet's deposits of oil and gas. But as he got older, he simply lost it. His "peak oil" theory--which many people are citing these days--is a case study in junk economics.
Hubbert was born in 1903. By 1949 he had concluded that the fossil-fuel era was going to end, and quite soon. Global production would peak around 2000, he predicted, and would decline inexorably thereafter. By 1980 the aging Hubbert was certain that the impending crisis "was unique to both human and geologic history.... You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered." Indeed we would soon be forced to abandon our entire "monetary culture," replacing it with an accounting tied to "matter-energy" constraints. An editor of Geophysics magazine summarized Hubbert's views in 1983: "The science of matter-energy and the historic system of finance are incompatible."
Today this same nonsense is often dressed up with numbers in an analysis that's dubbed "energy return on energy invested" (Eroei). According to this theory it can never make sense to burn two units of energy in order to extract one unit of energy. The Eroei crowd concedes, for example, that the world has centuries' worth of junk oil in shale and tar sands--but they can also prove it's irrelevant. It takes more energy to cook this kind of oil out of the dirt, they argue, than you end up with in the recovered oil. And a negative Eroei can only mean energy bankruptcy. The more such energy investments we make, the faster things will grind to a halt.
Eroei calculations now litter the energy policy debate. Time and again they're wheeled out to explain why one form of energy just can't win--tar sands, shale, corn, wood, wind, you name it. Even quite serious journals--Science, for example--have published pieces along these lines. Energy-based books of account have just got to show a profit. In the real world, however, investors don't care a fig whether they earn positive Eroei. What they care about is dollar return on dollar invested. And the two aren't the same--nowhere close--because different forms of energy command wildly different prices. Invest ten units of 10-cent energy to capture one unit of $10 energy and you lose energy but gain dollars, and Wall Street will fund you from here to Alberta.
As it happens, the people extracting oil out of tar sands today use gas from the fields themselves to power their refineries. There's gas, too, under what has been called Alberta's "trillion- barrel tar pit," but it's cheap because there's no pipeline to deliver it to where it would be worth more. As an alternative to gas, Total S.A., the French oil giant, is thinking about building a nuclear power plant to supply heat to melt and crack the tar. But nuclear reactors extract only a minuscule fraction of the energy locked up in the nuclei of uranium atoms; all the rest gets discarded as "waste." On Eroei logic, uranium would never be used to generate either electricity or heat. But per unit of raw stored energy, uranium is a thousand times cheaper than oil.
Greens touting the virtues of biomass as a source of energy rarely note that almost all of it is used by lumber mills burning branches and sawdust on site. No one cares how much energy the sun "invested" to grow all that waste wood. And every electric power plant, whatever it's fueled with, runs a huge Eroei deficit, transforming five units of cheap, raw heat into two units of electrical energy. But it all works out because the market values the energy in electricity at about 30 times the energy in coal.
The economic value of energy just doesn't depend very strongly on raw energy content as conventionally measured in British thermal units. Instead it's determined mainly by the distance between the BTUs and where you need them, and how densely the BTUs are packed into pounds of stuff you've got to move, and by the quality of the technology at hand to move, concentrate, refine and burn those BTUs, and by how your neighbors feel about carbon, uranium and windmills. In this entropic universe we occupy, the production of one unit of high-grade energy always requires more than one unit of low-grade energy at the outset. There are no exceptions. Put another way, Eroei--a sophomoric form of thermodynamic accounting--is always negative and always irrelevant. "Matter-energy" constraints count for nothing. The "monetary culture" still rules.
Peter Huber is executive vice president of ICx Technologies, a fellow of the Manhattan Institute and coauthor of The Bottomless Well (Basic Books, January 2005). Visit his home page at www.forbes.com/huber.
(related articles from Peter Huber)Here's another example: the shift from hunting/gathering to agriculture. That was a step down in EROEI. You have to put in a lot more energy to get a calorie from farming than from hunting. Nevertheless, the shift to a lower EROEI food (energy) source led to a massive increase in food availability. A lower EROEI source can be better than a high EROEI source if the lower EROEI source is more plentiful and reliable.
Easter Island.
They ran out of trees (=fuel for fire).
They applied a match to what was left of the "woods", namely to the ashes. The ashes wouldn't catch fire. EROI of the lit match was less than unity. So production stopped. Most of the population died-off.
The End.
"It's progress that they are ridiculing us. That's one stage past ignoring us, right?"
Spot on.
I've actually read `The Bottomless Well" from cover to cover - and there's no mention of Hubbert in it whatsoever, no mention of Campbell, Laherrere, Deffeyes, Simmons or any of the big names of the `peak oil' community - although the book was published in late 2004. The sacrilegious term peak oil isn't used at all. Needless to say there is no mention either of Malthus, Hardin, Catton, Georgescu-Roegen or Daly - all apparently on the index librorum prohibitorum. The only treatment intellectual adversaries get in the book is what one might call `dynamic silence'. And the only section in TBW that addresses oil depletion at all is Chapter 11 on `Infinite Supply' - in a couple of paragraphs and one footnote (page 181). But as Stuart points out, al least the silent treatment of Huber 2004 has since been replaced by mockery, derision and calumniation of Huber 2005.
This is what Huber had to say in TBW on how technology will save us:
"[T]he day is not far off when 6-inch diameter pulsed beams produced by advanced high-power lasers will replace rotary mechanical drills. Bundles of optical fiber will channel the energy down the 5-mile borehole, with lenses at the end to focus the laser light on the rock face. The intense heat will melt the rock, extend the borehole, and then sheath it in colid ceramic, eliminating the need for a steel casing. The power of the photon will pursue and retrieve fuel created a hundred million years ago by the power of the sun. [...] The logic of fuel-retrieving machines has advanced much faster than the fuels have retreated - we keep getting closer to the receding horizon. [...] Energy supplies are - for all practical purposes - infinite.*"
Cornucopian, futuristic, exuberant fantasies about salvation through laser? Sounds like a fairy tale to me.
To the above paragraphs Huber adds the following footnote:
" *In May 2004, with $40 dollar-per-barrel oil generating daily headlines, Science published a piece arguing that periodic panics about imminent exhaustion are almost as old as oil production itself, and are invariably followed by new bonanzas of production. "The world is not running out of oil"; there will be "abundant supplies for years to come." Leonardo Maugeri, "Oil, Never Cry Wolf - Why the Petroleum Age is Far from Over," Science 304, no 5674 (21 May 2004): 1114-1115."
And basically that's all a book about the `bottomless well' has to say about the `bottomless well'. Actually apart from that the book contains a lot of fascinating tidbits on laser technology, fuel cells and the environmental impact of fuel consumption. It's just that it doesn't really address the subject-matter of its full title: `The Bottomless Well - The Twilight of Fuel, the Virtue of Waste, and Why We will Never Run out of Energy."
It is time for those of us who understand science to go to war against the alchemists of our modern times, namely, "Economists", "Wall Street Moguls" and "Candyman Politicians".
But to fight these manipulative marauders, we must first come to understand the power and pull of their hypnotic psycho-babble. Rather than succumbing to their language, their enchanting "framing" of the issues, we must develop our own language. We need new words.
There is no such thing as an "oil producer".
There are only "oil depleters".
These are the people who stick their straws in Our Earth, make claim of "ownership" over the endowment that Mother Nature has amassed over millions of years --long before Adam Smith was born--. These phony-named "producers" suck out the energy necter as if it belonged only exclusively to them. They use "advertising" to brainwash the clueless masses into burning the extracted hydrocarbons off into the atmosphere under a glowing cloud of self-engrandizement they call "progress" and "growth". They are "destroyers of worlds" (ours) and not builders of civilization.
WillYouJoinTheFight ?
Geez... Do you plan to outlaw economics? Is economics going to be banned as an occupational category, like salesmen were banned in the USSR?
The only way economics can survive and help us solve our problems is to clear itself from the politically induced dogmas. Don't outlaw it just make it a true science not a religion.
I concur.
Economics "could" become more of a science if the alchemists who practice it were to come clean and admit (confess) that much of what they preached thus far is contradicted by observed "facts".
For example, at the microeconomic modeling level, economists tell us that we have "rational" human beings negotiating over the "fair" valuation (a.k.a. "price") of a given transaction (i.e., the purchase of a Pet Rock circa 1980). Easily available observations of Madison Avenue behavior indicates that we are not dealing with "rational" creatures but rather with highly emotional beings who are easily manipulated by advertisements and other forms of persuation. If economists admitted to this indisputable "fact", they would go a long way towards moving their area of study from the realm of alchemy/religion and towards the realm of a properly measured science.
What does this have to do with Peak Oil?
Everything.
There are certain factions of our society that have a clear "conflict of interest" in being truthful about what the actual situation is regarding our "energy situation".
Do we have to start listing "them"?
O.K.
- Automobile companies,
- Construction companies that build highways and suburbia,
- Petrochemical companies,
- Politicians who receive campaign money (a.k.a. "bribes") from factions 1-3 (&5-8 below),
- Military-Industrial complex needed to maintain factions 1-4,
- Accountants who keep the "books" for Enron and friends in factions 1-5, where the accountants had better arrive at good numbers if they want to remain in the good graces of factions 1-5,
- Financial wizards who used the cooked books of faction 6 to predict what is coming our way next,
- Economists who are paid by factions 1-7 to write "scholarly" papers supporting the infrastructure created by factions 1-7, ...
I'm sure I must have still missed a couple of biggies. It's hard to keep it all in one's head. Anyone want to add to the list? ... Oh yeh, number 9) Airline industry, 10) ???Lay people are convinced that "price" is a good "signal" of what is going on in our world. They are wrong ... and they are the ones who are going to be dead because they're wrong.
When a gun is being pointed at your head, what good is "price" as a measure of what is going on? When you have to pay for gasoline or else you cannot survive, because you can't get to work, what information does the "price" of gas give us? When the infrastucture is built to make alternatives too pricey (unsubsidized), what valid information does the "price signal" give us?
Can we do away with money?
Of course not. We need a medium of exchange. We do need to be able to value things and prioritize among them.
But we also need to do away with the lies and deception.
I am absolutely positive that this is done on purpose and you pointed out some of the reasons why. Yes price is a signal - and people will react. But how come that each reaction transforms into a successful adjastment? The economy does not question this assumption - it just says that's what it is. This is the core of the Western view of man embodied in economics - and it is that a mankind can do anything if he wants. He can find new forms of energy, spoil the nature, than fix the nature and so on and so on... This is our new religion and economics is just a function of it, but the problem is mainly in our heads - we have forgotten where we came from and we even don't know what we are.
I did not want to explain about vacuum-tube black & white TV's or crystal set radio. It may be too much to absorb for the new generation.
Unfortunately, a quick Google search doesn't reveal that "Eroei calculations now litter the energy policy debate". Also, bear in mind when you read statements likethat this illustrates a fundamental error about what EROEI actually is. Coal-fired plants are inefficient (below 40%) at converting the energy the coal contains into electricity; this is what Huber is talking about. The EROEI actually involves the energy costs of mining the coal, transporting it, converting it to electricity, etc. You could not run such a plant if these energy costs exceeded what you could get for the electricity generated. See here for some rough numbers. EROEI is not negative as Huber asserts. The energy stored in the coal itself, of course, came from the Sun and was put into a useable form by Nature. So, it is provided to us free of charge ;)
If the EROEI involves converting it to electricity, then the EROEI is already negative, and adding in all that other stuff will only make it more negative.
You could not run such a plant if these energy costs exceeded what you could get for the electricity generated.
The term "energy costs" is ambiguous and should be qualified if you want to be clear. It could mean: a) the price of the energy in $, or b) the amount of energy in btus.
You can't run an energy production/conversion operation where the energy costs ($) exceed the energy return ($). You CAN run an energy production/conversion operation where the energy costs (btus) exceed the energy return (btus). We do it all the time, just like Haber says, converting cheap, dirty, inconvenient energy into expensive, clean, convenient energy.
For a very energetically inexpensive resource, EROEI. As resources begin to take more energy to be recovered, EROEI falls. When EROEI gets down to 1, it takes a much energy to acquire the resource as the resource is worth. At that point the resource is no longer an energy source.
It is not a question of EROEI going negative. That would mean that the product you have spent energy to produce is actually an energy sink, that it sucks up energy rather than producing it.
So Huber is wrong to talk about EROEI going negative, he means that log(EROEI) goes negative, i.e. that EROEI is less than one.
My lay-brain thanks you.
Also: he makes the claim
I have a feeling this is patently false, that he's leaving something out.Anyone know what that is?
This is simple. Imagine that we had only one primary energy source in the world - for instance oil. Producing oil needs energy - for instance for pumping. The is no other energy than oil so oil is pumped with oil. Now, if the pumping consumes more oil than the pumps bring up the oil production would soon cease. There is no difference if we used electricity generated with natural gas.
Primary energy producing with negative or very low positive Eroei is mainly transforming energy. It makes sense to produce oil from coal to keep planes flying if there is no other oil sources.
Just to be clear, since I think this is a bit confusing, the physics of the transformation that TI refers to (eg. coal to electricity) is necessarily inefficient because energy must be lost in the conversion. I would not refer to this as EROEI, however. Instead, as you suggest, I would restrict the term EROEI to the production ratio of energy returned that we can consume over energy invested to get that energy, and this must, of course, be positive as you say. Huber conflates the two senses of the term -- and this is obviously a source of confusion for him and perhaps others.
The technical term for the efficiency of an energy conversion is "thermal efficiency". If the amount of electricity produced (in btus) is x, and the amount of energy in the coal burned (in btus) is y, then x/y is called the thermal efficiency. Thermal efficiency is always negative. You can clear up the confusion by using the proper terminology.
Nevertheless, Huber makes a good point. According to EROEI theory, it is irrational to do any energy conversions because energy coming out is less than energy going in. But that's absurd.
A classic example is the tar sands. If you build a nuclear reactor to melt the oil out, you can waste massive amounts of uranium producing oil. But who cares? Uranium is cheaper and more plentiful than oil. Having an EROEI<1 is not a problem if the input energy is plentiful and cheaper than the output energy.
If EROIE is this difficult to understand, I'll just leave it alone.
For simplicity, let's assume that the only energy source in the world is oil. Some oil leaks into a farmer fields in the 1800's and he stores it (ok, this might be a free lunch, but remember some farmland was ruined). Drake comes along, realizes the find, and buys the oil, and uses that oil to drill for and find more oil. Back in the first finds of oil, oil was sometimes free (farmers hated finding oil oozing up onto their property), and otherwise quite cheap. One would drill a shallow hole and it would come squirting up out of the ground. Forever 1 unit of oil, one could find 100 units of oil.
Because one is finding 100 for every 1 unit spent the amount of oil increases greatly. However, the easy stuff to find is no longer around and it one only gets about 30 units of oil for every one spent. Also, keep in mind that there are other uses for oil, so while we have some stored up oil, we don't have humoungous stores. But it's ok, becase we still find more oil per oil spent.
A few more decades pass and it gets harder and harder to find and extract oil. Part of it is more drilling, but of it is pumping water to the field and then into the ground to force the oil out of the deep holes. All told, we're only getting 3 units of oil for every one unit spent. At this point things are beginning to look dire. However, the optimists point out that we're still getting more than we're putting into the system.
However, as soon as oil is so hard to find/extract that we're getting less than one unit of oil per unit spent, it's only a matter of how big the stocks are until one runs out of oil. For example, suppose you have a stock of 10 oil units. You spend one to get 0.5 unites. You now have 9.5 units. That's not commercially smart.
The tricky part is that our world has many sources of energy. The vast majority of it comes from oil, natural gas, coal (fossil fuels), and nuclear fission. However, one gets energy from these sources via a 1-time process. You can't reuse oil, or start a reaction which just keeps giving energy. This is only partially true for nuclear fission. I don't know enough about breeder reactors to get into the specifics about just how reusable uranium is.
Some of our energy comes from sources which continually keep giving. Solar power, wind power, hydro power. So, in theory even if EROEI for oil was less than one, so long as one had abundant other energy sources, there's no actual problem (well, there is a question of capacity, but we'll ignore that for the sake of utopians). However, as stated the bulk of our energy right now comes from finite sources. In North America, natural gas and oil are both declining (we find less each year) and coal is horrible to the environment.
Currently I believe most of the world's oil EROEI are between 3-20 (3 for tar sands, 5-10 for US oil, 20 for OPEC). So this means that for the oil that we keep looking for, not only is it harder to find and there's a danger of us not being able to meet "expected" capacty, but it is taking increasingly more energy to get out of the ground.
However, until electric cars are viable, I wouldn't find it hard to believe that society would invest in oil programs with EROEI's less than one. Because, as the author of the article points out, it is (and likely will be) economically viable. However, a thinking person might wonder about the wisdom of our current actions and the likely future that we're walking into. Picture the Fool card from a tarrot deck (A vagabond walking with his eyes up in the air a few steps from walking over a cliff). Hopefully breaking it up a lot might have helped.
But what about JD's argument that your scenario is only true IF there is only one source of energy, AND that there is no historical examples of an energy extraction enterprise being abandoned when EROEI was less than 1?
What happens, primary net energy production or conversion depends on EROEI. If it is smaller than 1 then there is only conversion - even if seems to be energy production. If we need more energy to get oil than we can get from the oil it is only conversion.
EROEI comparisons are important. If we produce oil from tar sands and EROEI is 1.1, ie. we get 10% more energy than we put in this is net energy production. It is also energy conversion. If EROEI is 0.9 we lose 10% of the energy and this makes it a conversion process - oil from nuclear. This may be rational if we have no better way to get oil. If we have an energy crisis this should not be done because the we lose energy in the process. The prices have nothing to do here. Here we measure energy only. To use free energy to produce expensive energy with EROEI considerably less than 1 has no sense from energy viewpoint - we should use the free energy directly and get more total energy that way.
You don't actually lose energy. You just get less than you would if you used the primary source without the conversion. The process still adds net energy to the total.
This is a curious way of thinking when you apply it (for example) to coal liquefaction. According to the approach you are describing, it's better to directly burn coal than to liquefy it into a cleaner fuel for reasons of pollution control and convenience.
Converting coal to electricity "loses" a huge amount of the original energy. Does this mean people should clean their houses with vacuum sweepers powered directly by coal?
"Price" is a fictional number invented by human beings.
The price number indicates what you, the individual customer "thinks" is best for you --and of course, I use the word "think" with a need for adding a truckload of salt to it.
Let's say YOU want a hot bath.
You could take out a heavy bag of coal, haul it under your bathtub, light it on fire, wait for the coals to catch (maybe you'll do some bellowing while you're waiting), and eventually, some of the heat energy from the smelly black fuming coal will cause the water in your bath tub to become warm. Finally, after waiting all that time, and doing all that hard hard work yourself, you can settle in for a nice warm bath (and get the soot out of your hair). Ahhh.
On the other hand, if you had one of those "instant on" electric heaters in your pipes, you can flick a switch, and wallah, hot water pours into your bath tub instantly. What "price" are you willing to pay for this convenience?
I bet way, way more than option A (the do-it-yourself, coal heated bathtub method).
Would it surprise you to learn that in terms of EROIE, option A is many times more efficient?
Why?
First, ignoring cost of transporting coal to your local electric plant, conversion efficiencies at a coal-fired electric plant is about 33%. Roughly 67% of the heat energy goes up as pure (polluting) smoke.
Then, the electricity has to be transmitted through lossy electrical transmission lines to your home. Losses could be as high as another 10%.
Then, that in-pipe electric heater in your house has to convert electricity into heat, so as to heat your water before it pours into the bathtub. There is some inefficiency in that heat transfer process as well (the water cools as it pours into your bathtub). You probably threw out roughly 80% of the heat energy that the burning coal originally provided before you start recapturing some of the many-times converted energy into your hot bath water.
Yet you will be willing to pay many more sawbucks for option B. And guess what? You offloaded the cost of pollution to the general commons rather than having to deal with that stinking coal soot in your own house.
This is great!!
This is "economics".
For more information, download Amory Lovin's Scientific Amercan article from the top of this web site:
http://www.altenergyaction.org/mambo/index.php?option=com_content&task=view&id=82&Itemid =27
Check out the efficiency diagram on page 76.
So thanks for your contribution to the Peak Oil case, Mr. Huber!
Storms hit US oil production - Hit by the effects of the devastating hurricanes in the Gulf of Mexico, US monthly crude oil production dropped in September to its lowest level since World War II, official figures show.
Hurricanes Katrina and Rita drastically slowed oil output in the Gulf to an average of 4.197 million bpd (barrels per day) last month, Reuters reports.
The US Energy Information Administration (EIA) has revealed that September's average was the lowest crude production level since July 1943 and the first time monthly output dropped below five million bpd since 1950. http://www.met-office.gov.uk/cgi-bin/newsid?article=15066917&epoch=1129334400
Huber is a "case" study in manipulative neuro linguistics.
First, he comes to praise Hubbert, not to bury him.
Your guard comes down without realization.
Then he convinces you that "old people" naturally become crazy, insane, off balance, untrustable, people.
With the mental ward "case" of poor old feeble Hubbert now firmly programmed into your mind, you are suddenly urged to entertain the "case" of Peak Oil. It is only "sound" logic to conclude that if Old-lost-it Hubbert is a nut "case", then his Peak Oil "theory" is also a fruitnut "case".
And of course, there are two kinds of "Economics", the junk kind and the true kind. Or are there?
Besides, What's Love (of Money) Got to do with Thermodynamics?
The Big Wheel Keeps on Rolling. The Mental Manipulators keep on Toiling.
Be on guard.
Always on guard.
This is not parinoia.
They are coming after your mind.
I can't speak to EROIE - need to to give it more thought. But consider something as simple as "will the oil run out"? Some like Huber will state (or strongly imply) that oil running out is so far in the future that we can continue to ignore it for now (the status quo till recently). Others state "it will run out soon and chaos will follow." But the economist is correct that the oil will never run out. As demand outsrips supply, prices will rise so that the last supply will never be purchased. There may be only 6 barrels left spread between museums of technology and agriculture and racing, but there will always be some oil left.
We can agree that oil will never fully run out. But we can point out that as demand outstrips supply, the price will go up and up, and we will not all be able to afford the amount we do now. In fact, the things we do with oil are so necessary (food, pharmaceuticals) and so much fun (travel) that it will continue to be in very high demand, and those who can afford it will drive up the prices very, very high. And all the goods and services that rely on oil will become more expensive. And there's no alternative energy that can come close to substituting for all we do with oil (that point needs some backup). And hydrogen is not a fuel that can be mined, it must be manufactured, using more energy (or making more energy unavailable) than the hydrogen you end up with. So we will be forced, globally, to scale back.
I agree, environ attorney, that we shouldn't get upset by (or focused) on this. We need to understand it, but if we can get simple arguments across we will gain ground.
The issue never was about "oil running out."
It is about Our Way of Life coming to an END because there are no more cheap, liquidy, hydrocarbons available to deplete easily from onshore vaults.
It is about the end of our Liquid-Oil-Assets.
It is about our Energy Balance Sheet going into the Red.
Do not give "them" who are clever with words the freedom to re-frame the issues. Call them out every time they play their manipulative games.
Have you ever seen COAL flow through a pipeline?
I'm not being facetious.
Oil is a "liquid" mixture of hydrocarbons. Coal is a solid mixture of hydrocarbons and many heavy impurities.
Oil can be refined fairly easily by distillation. Coal cannot. Oil can be transported easily by pumping it through pipeleines. Solid coal cannot.
These are not trivial issues. All fossil fuels are not the same. It is why the end of cheap oil is big BIG problem.
Assume it is going to be a very long cold winter. You have the last 100ga of heating oil (=diesel), and an oil fired heating system. You can burn that oil and heat your home for a time OR you could:
Use it for fuel and fertilizer to grow soybeans for biodiesel (and the heat required for the conversion).
Use it to run a diesel generator to generate electricity and run an electric space heater.
Use it to run the equipment to mine and transport coal and burn that.
But what ever you do, it better return more energy than you would have gotten by just using the oil, or you will have lost some of the energy you had. Of course if you had more heating oil than you needed, you could indeed sell some for a tidy profit in addition to heating your house.
Oh, and the Huber solution: Sell it at a very high price and freeze to death a very rich man. After all, it's all about economics, not physics.
Never misunderestimate the enemy.
He is clever.
He is dangerous.
He is not interested in convincing YOU.
You are unimportant.
Only about 2% of the American populace is well educated in science.
The other 98% are --well not stupid-- just ignorant.
It is their vote that counts, not yours.
He knows how to connect with "them".
http://news.yahoo.com/s/ap/20051015/ap_on_bi_ge/spain_chavez_oil
By CIARAN GILES, Associated Press Writer
SALAMANCA, Spain - Venezuelan President Hugo Chavez said Saturday that the world faces an energy crisis but there is little chance of his country and other OPEC members increasing production because they are already pumping near "their capacity."
"The world will have to get used to a barrel price, I think, of above $50, and energy will have to be saved," he told reporters as leaders from Spanish- and Portuguese-speaking countries met in this central Spanish town.
After soaring in August, crude oil prices have been between $60 and $70 a barrel for more than a month.
"We're at the doorway of major energy crisis worldwide," Chavez said. "We'll have to develop other resources such as wind, solar and nuclear energy -- naturally for peaceful purposes." He said Venezuela was in talks with Argentina and Brazil regarding nuclear power.
"Prices will continue to rise but oil is running out," he said.
For additional reasons to devote brand-name loyalty to Citgo, see Alexander Cockburn's piece at http://www.counterpunch.com/cockburn10152005.html
[Unfortunately, this piece also contains a subsection entitled "The Virtues of Gas Guzzling: Why I Don't Believe in "Peak Oil."" This is significant because Cockburn represents one of the leading voices of the traditional American New Left. I posted about this earlier at the very end of the thread devoted to surveying the blogosphere.)
There's goes my ounce of respect for Cockburn.
I guess his lack of knowledge about peak oil is showing..
The onion lately has been predicting reality with about a 6-18 month lead time (I remember the fond days when it was merely satire which never came true). If this keeps up, soon we're be questioning gravity.
Probably the most significant figure on the New Left is Noam Chomsky, and he DOES accept the validity of Peak Oil. I will try to find the relevant blog entry on www.zmag.com ....
Unfortunately, Chomsky is an a priori dogmatist when it comes to any sort of unconventional conspiracy theorizing -something that I actually find rather surprising.
Were this piece not by Cockburn and lauding Hugo Chavez, I'd have to assume it was written by someone angling for an opening in the White House.
And finally, if mere economics can fix the problem then why, when crude has been doing well for years, long enough for some of those investments to be paying off today, is the 2-5 year time frame forecast for supply/demand remaining so tight? If merely economics were an issue, there'd be more supply in the forecasts.
Different topic: Canada using oil as a lever, even if they say they are not.
Canada to Increase Oil Exports to China, Minister McCallum Says
Oct. 15 (Bloomberg) -- Canada, the biggest supplier of oil to the U.S., may export as many as 450,000 barrels of oil a day to China within six years, Canadian Energy Minister John McCallum said.
China is interested in making ``substantial investments leading to substantial exports'' in Canada's oil sands, McCallum told reporters in a conference call from China where he spoke with China's resource minister and attended a conference of Group of 20 finance ministers.
Canada's Prime Minister Paul Martin has said the nation may seek new customers for its oil after the U.S. ignored a North American Free Trade Act ruling ordering it to change duties on softwood lumber. Alberta's oil sands, where crude-encrusted sand is strip-mined or flushed out of wells, hold the biggest oil reserves outside of Saudi Arabia.
``We are moving forward with great vigor to make this strategic partnership a reality,'' McCallum said when asked if the Nafta dispute has a bearing on the nation's overtures to China. ``Canada is entirely serious about using every means at our disposal'' to make sure the U.S. respects Nafta.
http://quote.bloomberg.com/apps/news?pid=10000080&sid=aguAtMPgK3Vw
No he's not. He's saying that he is dragging his feet and producing less than he can so he can get top dollar for every barrel.
Chavez said Saturday that the world faces an energy crisis but there is little chance of his country and other OPEC members increasing production because they are already pumping near "their capacity."
Venezuela has massive heavy oil deposits which could be ramped up just like Canadian tar sands. The statement that Venezuela can't produce more is obviously incorrect. Chavez is saying he won't produce more.
In short, he's just jumping on the peak oil bandwagon like the banks and the other oil hoarders. It's a good cover story for restricting production and raiding the wallets of oil consumers.
Not that that's a bad thing, of course! I support Chavez's approach because it leaves oil in the ground. Nevertheless, it's important to note that Venezuela's production is not stagnant for geological reasons.
And the worst part is that when this becomes common knowledge, it will deal a blow to the "believibility" of geologic peak oil because it will just be another "political" shortage.
This applies for the time after the second oil crisis, from 1988. The oil prices movement has generally followed the movements (up or down) of world coal production quite closely but with greater swings. It seems also that that the real energy swing producers in the world are the coal producers, not OPEC. The cahanges in world energy supply after 1985 have come mainly from coal.
How could we explain the connection with coal production and oil prices? Coal is a substitute for oil and rising oil prices induce an increase in coal production. Coal mining is different from oil or natural gas extraction by nature and can react easier to demand. Another explanation could be other way round: increasing coal production is connected to economic growth and the economic growth increases the demand of oil and causes oil prices rising.
The energy statistics show that the latter explanation is probably true. Oil production (as energy equivalent) changes doesn't tell about much substitution. Coal is mostly used for generating electricity and making steel and other energy-intensive products of heavy industry. This means investments and investments mean economic growth. Growth means more transports and driving and more oil demand. The share of oil in the world energy supply has been diminishing from the '80s and the changes in the oil supply have not been as decisive as before for the total global energy supply and hence for the economic development.
What does this mean? We could predict that the oil prices would rise even if the supply can still increase as long as the Asian (primarily Chinese) coal production can keep its present pace. If oil supply stagnates the oil prices will rise really high. But if the world coal production stagnates or decreases the oil prices could drop in any supply situation. This would mean an economic recession or depression. At present it seems that the coal production can increase for a while and so we could see rising oil prices.
It is not only the oil. It is also coal, gas and the others.
Well, in the most important case, CTL (Coal-to-liquids) is a substitute for oil -- ie. you can't stoke coal into your car's engine to run it ;)
A leading indicator for oil! How strong is that coal/oil correlation? How would you control for fiat money price inflation clouding the relationship? If coal production stagnates, oil prices decline, even while oil production falls... seems counter-intuitive in a finite world, until as you indicate demand would be at depression levels.
Have you looked at uranium/oil or natural gas/coal?
Could be a handy predictive model you got there.
I really think the explanation lies in the investments. Investment levels vary more than consumption during economic cycles. Coal is used for steel and concrete - that means investments. Coal is still very important energy source and its share has been growing again. We could simplify and say that oil moves things but coal makes them.
In 2001 and 2002 we saw a situation where oil prices went down while oil production decreased. Last year oil prices went up while the production grew considerably. The demand component is important.
What is so terribly difficult about the concept that in a finite world there are finite resourse? If the energy isn't there, no amount of wishing ore economic machinations is going to cause it to come into being. Does this guy know anything about geology other than that it vaguely has to do with rocks?
There is a certain mindset or philosophical orientation that is seems to be structurally incapable of realizing that there are limits on physical 'stuff'. Money can cause non-existant things to come into being.
Here's another little thought exercise: Put Bill Gates, Warren Buffet, Sam Walton, and some urban gang-banger in an empty room with one chocolate bar between them. Time goes on and they are all getting hungry. Finally, Bill Gates pipes up and says, "If you all will agree, I will pay each of you one million dollars so that I can eat that chocolate bar." Then Warren Buffet chimes in and says, " I will pay each of you two million dollars for that chocolate bar." Sam Walton soon raises the ante to three million. Then the gang-banger pulls out a gun, picks up the chocolate bar and eats it, saying "Thanks for the offer, but I happen to be real hungry now."
That, I fear, is the way our global energy problems are going to be resolved: not by economics but by force.
Such "resolution" will not unfold according to anyone's plan. No one will be gloating and saying "All is going just as I have foreseen."
Huber offers economist's hubris in bucketloads.
Reading Huber is like reading Thomas Freidman -- the world is flat, globalisation is all good, someone is minding the store, and we have plenty of oil so none of the rich white people in the "developed" world will ever suffer or sacrifice.
My guess is that within 5-10 years we'll have no Medicare, Medicaid, or Social Security. In addition, most pension plans and funds will be worth less than half of what they are now.
Even if we persuade most people to make significant changes now, many people will experience suffering due to the impact of peak oil. Because most planners in this country brush "peak oil" aside as foolishness the suffering will be far worse.
Huber's work is good pablum for most Americans who believe that they don't need to care enough to know or know enough to care -- our way of life is unassailable and will continue largely intact into the indefinite future.
By the time reality "trickles down" to the so-called "free market" there won't be much of a market anymore. Will anyone buy Huber's reasoning -- let alone his books -- in 20 years? (Or any other books for that matter...)
Has anyone tried to model this?
I find Prechter's work very interesting. Whether or not you accept the application of fibonacci and fractals to markets, his analysis in plain English is usually well worth reading. He has a background in psychology and has devoted his career to understanding the herd instinct and how it leads to swings of positive feedback in financial markets (as opposed to the negative feedback inherent in the standard economic model). An economist would point out that if price increases, demand decreases, but in finance the opposite is true. Investors chase momentum and become more anxious to buy as the price increases - witness the dotcom boom where investors threw staggering amounts of money at vastly overpriced dross.
The reason I say this is because I believe demand destruction will occur from the bottom up. That is, it will be the poor people/regions/countries whose demand will destruct first. The wealthy ones will carry on using the bulk of the oil (just as the US does now).
Also, I would say that in general people will not pro-actively abandon the use of oil because they think it will run out or might become too expensive in the future. They are more likely to stop using oil because they can no longer afford to buy it now. Because of that there would be a certain amount of 'smoothing' involved with demand destruction.
IMHO, it's this price inelasticity which means that any demand destruction will be virtually permanent. Consider the guy who has to drive to work because he lives in a suburb that is not near any public transport. He can't choose not to go to work. When he can no longer afford the petrol to go to work, he'll lose his job. His boss won't re-instate him if the price of petrol drops a few cents again.
No, I think any demand destruction will only slow the rise of the barrel price, I can't see it reversing for any extended period.
In my view, a strong market decline (and perhaps a crash) is imminent and would be followed by a global deflationary depression. Demand destruction would not be of the pro-active kind, which I agree with you would be unlikely. Instead it would be involuntary and rapid, leading to a relative surplus of available oil for a while and potentially lower prices with it, although even at lower prices it may be less affordable as people's purchasing power may have fallen even more quickly.
However, there is a difference between oil being theoretically available because global demand has fallen off a cliff, and oil and its derivative products being actually available for use when and where needed. Economic collapse is almost certain to disrupt distribution and political upheaval or terrorism in producing regions (especially likely in Saudi Arabia) may significantly impair production.
The net result would be oil left in the ground to fuel some kind of growth at a lower level and a later date - growth which would again bump up against a lower production ceiling eventually. We could end up stair-stepping lower under conditions of extreme volatility for a long period of time. Price in the meantime could have been all over the map depending on whether or not oil was actually available and in what quantitity relative to demand and purchasing power.
Instability is, of course, not conducive to investment in production infrastructure as the risk associated with long term investments goes through the roof. That, in combination with a shortage of capital resulting from a liquidity crunch and potential resource conflicts along the way, would severely curtail investment, again leaving oil in the ground for later. Our current living standards in industrial society would be an obvious casualty of this scenario.
This will mean continuing economic cycles, some recoveries, deeper and milder recessions. Prices will be volatile.
For what it is worth his investigation concluded that anything under an 80% increase in the price of oil in any 12 month period would not throw the economy into recession, but a greater increase for sure.
The oil production increased in 2003-2004 and so no recession in spite of high prices. I think that the main effect of oil crises is not through the price mechanism but through supply volumes. The prices only allocate the resources.
A recent study showed that the cost of "transporting" milk via trucks and making the "plastic" containers would severly cut profit margins in the milk industry:
http://www.news.com.au/story/0,10117,16792540-421,00.html
I don't think they yet "accounted" for the cost of growing the fertilized feed that goes into the cows, or heating the barns, or ....
Does anyone have any insight on this, is this credible?
"Demand for refined petroleum and natural gas products is projected to continue to grow. However, these refined products are going to get more expensive due to environmental regulations. Robert Bryce at World Energy Monthly is forecasting that $5 diesel fuel is coming soon. "The surging cost of diesel over the next 12 to 18 months will be caused by new regulations, capacity constraints throughout the midstream and downstream, and soaring demand."[5] According to Bryce beginning next June, American refiners will have to reduce the amount of sulfur in their diesel from 500 parts per million (ppm) to 15 ppm. In addition beginning in January of next year refiners must also reduce sulfur in gasoline from 90 ppm to 30 ppm.[6] This is the biggest change to motor-fuels since leaded gasoline was phased out three decades ago."
http://www.financialsense.com/stormwatch/2005/1014.html
A tax shall be levied on all means of transportation fuel deriving half or more of their energy from fossil fuels in a target price manner. On the first day of each month, the tax shall be adjusted so that the lowest retail fuel price shall meet the target rate. In 2010, that target rate shall be four (4) dollars, and shall increase twenty (20) cents every year thereafter. All revenues collected shall be divided equally and given to the citizenry on a yearly basis.
I want to do an emissions tax as well, as in a certain amount per ton produced. What emissions should be taxed, and how much? Any other ideas anyone has?
If pressed, Peter Huber will admit that conventional oil production will eventually peak and decline, and that therefore, by extension, every finite energy source will peak and decline--of course, on a cosmic time scale even the Sun falls into that category.
However, Huber's contention is that aggregate energy use will ALWAYS increase, which is the theme of his book, "The Bottomless Well."
What I find fascinating about Huber's position is the obvious contradiction, i.e., while he admits that individual energy sources will peak and decline, aggregate energy output--which is after all the sum of individual energy sources--will never decline; it will increase forever.
This is exactly analogous to admitting that while individual oil wells in a field will peak and decline, the total oil production from the field--which is of course the sum of the production from individual wells--will never peak and decline.
The real harm done by Huber, Yergin, et al is to the poor suckers that are going into debt trying support their suburban lifestyle--based on an assumption that high energy prices are a short term anomaly.
Your point is only valid if you restrict energy sources to those available on the earth. If space solar energy can be tapped and beamed to earth, then aggregate energy can continue to grow despite depletion of all terrestrial sources. Most of the sun's energy is radiated into space and wasted. That is an energy source which can be harvested by humans using space mirrors and power beaming etc. Granted, this isn't going to help us immediately, but we don't need it immediately. Conservation, the remaining oil, unconventional oil, NG, coal, nuclear and renewables should be enough of a stopgap to get us to a point in the future where space energy is viable.
See:
http://peakoildebunked.blogspot.com/2005/10/131-update-on-lunar-space-power.html
However, beyond that, as you must surely be aware, is the infrastructure problem. The total capital necessary to invest and the time needed to bring to fruition alternative power systems such as you propose is going to be measured in hundreds of billions of dollars and decades of time.
So your concept works only if we start far enough in advance of peak oil to allow us to finish the project. If we start too late we run into a number of potential problems, increasingly worse the later we start.
We should have been permanently based on the moon by now with large solar power stations in geosynchronous orbit. Heppenheimer discussed that this was all doable clear back in the 1970s, yet we didn't do it then. And now, in a world growing less stable due to energy pressures and with an economy that may implode due to energy prices coupled with bad fiscal management, we may not be in a position to pursue what you mention.
If we could, certainly the amount of energy available would be huge. But the question is whether we possess the time, resources, and will to do it.
We have even after peak-oil a wealthy culture although full with dissatisfied and hurting people. I find it wise to invest a few percent of that wealth in researching manny ideas and technologies, there is little hope for improvements if that isent done. Making it possible for our best and brightest to do something about our problems is extremely important. Those who are unable to help with the technical parts can for instance help with getting people to find joy in a life with less energy use and mora "local" habits.
The problem is not research projects using lots of resources but energy intensive habits and lifestyles multiplied with millions of people.
Building solar power satelites makes sence if solar power on the ground becomes competitive, space technology is develop enough to get far lower costs and the cost for space based continous power is lower then daylight capacity plus storage on the ground. This might happen if we run out of raw materials for building accumulators.
As I would say in my youth, WTF?
A few thoughts: First, recycling the petro$$$ back into USA economy would primarily enrich corporations, not ordinary "debt-engorged" & over-extended American consumers, if spent on high-ticket items like military arms, fleets of limos, drilling equipment...
Second, the article seems to assume that $50-60 (+) oil is temporary, like past price surges. But if permanent (while supplies remain) due to Peak Oil, that throws a different wrench into equations. What would that mean?
At least NYT & I agree that American consumers are screwed... ;-)
I don't think the oil producing countries are recycling their oil dollars back to the US. At least not as much as they used to do.
When King Fahd died a few months ago, the Sauodi's announced that they would bring back 350 b US$. That is a polite way of saying: reinvest it in Euro's / Yens. They have about 1 trillion US$ invested in the US. Everybody knows the twin deficit is unsustainable. But Joe sixpack does not understand what that really means. Unsustainable means: It will not last. A banker does understand that. It means: move out before the shit hits the fan.
Remember that the US government was making such a fuzz about the deficit with China? That's a very dumb & costly mistake. The Chinese now hook their Yuan to a basket of currencies, incluyding the Won, the Euro and the Yen. They will go to a 43% weight for the US$. So they won't be buying dollars for a long time. Why do you think the Euro is 1.20 US$? The Euro economy is not doing great at all. Basically a 1-2% growth, or less. US politicians focus on the 160+ b US$ surplus with the US, but they forget that the Chinese have a deficit with the Japanese, Koreans, Taiwanese and about everybody else. So they can talk all they want, but there is not that much pressure on the Yuan.
At the same time, the Chinese tried to buy a US oil company and the US administration basically blocked that. That is also very dumb. So the Chinese buy US treasury bonds, but when push comes to shove, their money is no good? I don't think they will stick to the US$, they won't take this one sitting down, especially when their suppliers also diversify away.
For years and years there has been a silent agreement between Asian central banks and the US government. The Asians buy the treasuries and that allows them to keep exporting to the US. That doesn't hold anymore. The Japanese don't buy any US bonds anymore (have not done so for 2 years), China is the biggest trading partner for Japan (larger than the US), the US does not allow the Chinese to spend their dollars. And most of all: everybody knows the US is spending too much.
The oil money is where the leak is.
This will generate imports - but not necessarily from the US.
His point that an electrical power plant has a 'negative' EROEI (he's wrong here too, as he should really be saying 'less than unity', but I will let that go for now) is totally pointless. Due to real-world thermodynamic constraints, ALL energy conversion processes have a ratio of output/input less than unity. So what? Anybody who ever took high school science should know that.
No, the term EROEI should only be applied to the production of fuels and not to anything downstream from that point on.
Furthermore, the example of burning many BTUs of low-value coal to produce a a lesser number of BTUs in the form of gasoline is not energy 'production' at all. Rather it is merely an energy conversion process to increase the 'form-value' of a fuel, i.e., coal have a low form-value and gasoline having a high form-value. It is merely buying a BTU in the form of gasoline with a greater number of BTUs in the form of coal. In the process no net energy has been 'produced'.
This is the main problem that business as usual people are missing. Peak oil works on differing scales - there is an individual and a global scale. Of course individuals can make investments that are energy losers but money makers - but globally in aggregate if the EROI is less than one, this practice will be fleeting - it will work for the individual but for society it will not. Same reason why Shell is investing billions in oil shale in Colorado - THEY might be able to make money at it, but they are using a finite amt of crude oil (and other things) to do it. (upshot is Shell has created a bit more energy and made a few dollars but the planets net stocks of energy quality have likely decreased)
Two other brief points. Energy Returned on Energy Invested is a RATIO => ER/EI - therefore it cannot be negative.
We continue to talk about an 'energy crisis' - given amts of coal, solar, hydro, etc (primarily coal) we do NOT have an energy crisis but a liqued fuels crisis-transportation and infrastructure built around it is whats at risk - not pure exajoules available. This is rehashed in Robert Hirsches new report in Atlantic Council of United States here
First, oil makes about 37% of totla world energy supply. So decreasing oil productiion by 10% will take 3.7% off the global energy available.The global energy supply grew 4.3% in 2004 (BP) and that was a higher rate than the average that is about 2%. So take 10% off the oil and get -1.7% decrease in the world energy. Likely depletion of 3% a year will take 1 %-point off the growth of world energy growth.
Not all oil is used for transport, in the US about 70% but less in whole world.
But most important is that also natural gas is about to peak in 10 - 15 years. ASPO has scenarios also on this. Look what is happening in the US.
Coal production will also peak - but it is difficult to say when. The quite rapid growth of the global energy supply has been enabled by the very high growth rate - nearly 10% a year at a level of 2 billion tons - of the Chinese coal production. This cannot be sustained in any longer run. The US production might be able to grow considerably but the Chinese production is absolutely critical and when it growth rate slows the overall world energy supply cannot grow much any more. It is quite unlikely that coal could make up the missing oil and gas in 10 - 15 years time. The average growth rate of coal has been about 2.5% during the last 30 years. This means it will contribute under 1 percentage point to the total energy growth rate.
Nuclear ahs no significant groeth potentials now - also uranium is depleting. Renewables will not be able to offset the fossile fuels depeletion.
So we will really have a global energy peak in 10 - 15 years, may be sooner.
Although I might say the Energy Returned Over the Energy Invested in this discussion thread is less than 1, I will make some comments:
- Since ER/EI is a ratio, in the worst case (not an energy source) it lies between 0 and 1 inclusive. Even if it's greater than 1, the closer the value is to 1, the more worthless it is as an attractive investment as a fuel source. The value would have to be at least 3 for anything to actually happen in my view.
- Those asserting that Nuclear power is virtually free (as regards tar sand production in Alberta, Canada) should do some research about the energy costs of keeping a nuclear power plant humming. Total's tentative plans in this area only mean that the natural gas costs are killing them.
- EROEI involves all the costs involved in the production process. This involves not just BTUs but also how much you paid the guy who drives the truck who delivers the coal to the coal-fired power plant where it is converted. It is the total cost, which includes the "direct" energy costs. These energy costs are merely the biggest obstacle and in a world where fossil fuel prices are rising, the most important. The guy who drives the truck is an energy sink too. We are living beings and we all require energy to stay alive. So does he.
- If you doubt #3, think about tar sands as others above have done. Tar sands are not yet useable liquids. Nature has let us down in this case, the packaging is not complete. Therefore, there is extra cost in extracting and converting them to a useable liquid form. That's why the EROEI of tar sands is lower (but still greater than 1) than just sticking a well into the ground somewhere and sucking up the oil.
But what's discouraging to me about parts of this discussion is that there is a definite lack of appreciation of the "miracle of [conventional] fossil fuels". Nature created these fuels for free and packaged them up in such a way that it was really cheap (high EROEI) for us to convert them to forms we humans wanted to use. Those days are ending as conventional fuels peak and other methods must be employed for us to convert other sources to forms we want to use. Take so-called "oil shale". This is a marketing slogan. What you're really talking about is kerogen in marl rock sediments. It's not oil. It takes a hell of a lot of energy to make it into a useable liquid fuel. And that's what EROEI is all about.Is there anything more mainstream than that color coded news version of Highlights for Kids? Anyway, it made me happy to see. They even did a pretty good job of covering all of the bases. The major stars from the peak oil movement sans Kunstler, and of course the arguments of Yergin the ever optimistic. On the whole it comes off on the slightly negative side, especially when they talk about the potential limits of technology.
Nothing new to us, but hopefully a lot of Holiday Inn guests will be in for a rude awakening with their continental breakfast.
Posted 10/16/2005 11:10 PM Updated 10/16/2005 11:41 PM
Debate brews: Has oil production peaked?
By David J. Lynch, USA TODAY
Almost since the dawn of the oil age, people have worried about the taps running dry. So far, the worrywarts have been wrong. Oil men from John D. Rockefeller to T. Boone Pickens always manage to find new gushers.
But now, a vocal minority of experts says world oil production is at or near its peak. Existing wells are tiring. New discoveries have disappointed for a decade. And standard assessments of what remains in the biggest reservoirs in the Middle East, they argue, are little more than guesses.
"There isn't a middle argument. It's a finite resource. The only debate should be over when we peak," says Matthew Simmons, a Houston investment banker and author of a new book that questions Saudi Arabia's oil reserves.
Today's gasoline prices are high because Hurricanes Katrina and Rita disrupted oil production in the Gulf of Mexico. But emergency supplies from strategic oil reserves in the United States and abroad can largely compensate for that temporary shortfall. If the "peak oil" advocates are correct, however, today's transient shortages and high prices will soon become a permanent way of life. Just as individual oil fields inevitably reach a point at which it gets harder and more expensive to extract the oil before output declines, global oil production is about to crest, they say. Since 2000, the cost of finding and developing new sources of oil has risen about 15% annually, according to the John S. Herold consulting firm.
As global demand rises, American consumers will find themselves in a bidding war with others around the world for scarce oil supplies. That will send prices of gasoline, heating oil and all petroleum-related products soaring.
"The least-bad scenario is a hard landing, global recession worse than the 1930s," says Kenneth Deffeyes, a Princeton University professor emeritus of geosciences. "The worst-case borrows from the Four Horsemen of the Apocalypse: war, famine, pestilence and death."
He's not kidding: Production of pesticides and fertilizers needed to sustain crop yields rely on large quantities of chemicals derived from petroleum. And Stanford University's Amos Nur says China and the United States could "slide into a military conflict" over oil.
Rising global demand for oil
There's no question that demand is rising. Last year, global oil consumption jumped 3.5%, or 2.8 million barrels a day. The U.S. Energy Information Administration projects demand rising from the current 84 million barrels a day to 103 million barrels by 2015. If China and India -- where cars and factories are proliferating madly -- start consuming oil at just one-half of current U.S. per-capita levels, global demand would jump 96%, according to Nur.
Such forecasts put the doom in doomsday. Many in the industry reject the notion that global oil production can't keep up. "This is the fifth time we've run out of oil since the 1880s," scoffs Daniel Yergin, who won a Pulitzer Prize for his 1991 oil industry history The Prize.
In June, Yergin's consulting firm, Cambridge Energy Research Associates (CERA) in Cambridge, Mass., concluded oil supplies would exceed demand through 2010. Plenty of new oil is likely to be found in the Middle East and off the coasts of Brazil and Nigeria, Yergin says.
"There's a lot more oil out there still to find," says Peter Jackson, a veteran geologist who co-authored the CERA study.
Based on current technology, peak oil production won't occur before 2020, Yergin says. And even if it does, oil production volumes won't plummet immediately; they'll coast for years on an "undulating plateau," he says.
Debate growing sharper
Both sides in the peak oil controversy agree that oil is a finite resource and that every year, the world consumes more oil than it discovers. But those are about the only things they agree upon.
As the debate has persisted, it's grown personal. "Peak oil" believers disparage those who disagree as mere "economists" in thrall to the magic of the marketplace or simple-minded "optimists" who assume every new well will score.
Yergin emphasizes that the CERA study was developed by geologists and petroleum engineers, not social scientists. Of Simmons, Yergin says: "He's wonderful at stirring up an argument and slinging around rhetoric. ... For some of these people, it seems to be a theological issue. For us, it's an analytic issue."
When they're not trading insults, the two sides disagree fiercely over the likelihood of future technology breakthroughs, prospects for so-called unconventional fuel sources such as oil sands and even the state of Saudi Arabia's reserves.
The world's No. 1 oil exporter, in fact, is at the center of Simmons' new book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, which has reinvigorated the peak oil argument.
Simmons says it's impossible for global production to keep up with surging demand unless the Saudis can increase daily production beyond today's 9.5 million barrels and continue pumping comfortably for decades. And, indeed, Yergin is counting on the Saudis to reach 13 million barrels a day by 2015.
Yet while the oil reserves of U.S. firms are verified by the U.S. Geological Survey, the Saudis -- like other OPEC countries -- don't allow independent audits of their reservoirs. So when Riyadh says it has 263 billion barrels locked up beneath the desert, the world has to take it at its word.
Simmons didn't. Instead, two years ago, he pulled about 200 technical papers from the files of the Society of Petroleum Engineers and performed his own assessment. His conclusion: The Saudis are increasingly straining to drag oil out of aging fields and could suffer a "production collapse" at any time.
Yergin is more optimistic both about the Saudis and the industry's prospects in general. If the past is any guide, technological breakthroughs will reshape both demand and supply, he says. In the 1970s, for example, the deepest offshore wells were drilled in 600 feet of water. Today, a Chevron well in the Gulf of Mexico draws oil from 10,011 feet below the surface.
Widespread use of technologies such as remote sensing and automation in "digital oil fields" could boost global oil reserves by 125 billion barrels, CERA says. Already, advanced software and "down hole measurement" devices to track what's happening in the well have elevated recovery rates in some North Sea fields to 60% from the industry average of 35%, Jackson says.
Technology also won't stand still on the consumption side of the equation, Yergin says. "By 2025 or 2030, we'll probably be moving around in vehicles quite different from the ones we drive today. Maybe we'll be driving around in vehicles that get 110 miles to the gallon," he says.
That's more than a guess. Toyota's 2001-model Prius hybrid got 48 miles per gallon; the 2005 model was up to 55 mpg. If automakers focused solely on energy efficiency, 110 mpg isn't out of the question.
Still, breakthroughs don't just happen, and in the late 1990s, after oil prices fell as low as $12 a barrel, major oil companies slashed research spending. Some who previously doubted the peak oil claims now wonder whether the industry is equipped to develop the necessary innovations.
"Before 1998, I was on the side that said, 'Technology solves all problems,' " says Roger Anderson of Lamont-Doherty Earth Observatory of Columbia University. "The problem is, after $12 oil, oil companies responded by merging and firing large portions of their technical staff."
Now, the International Energy Agency in Paris estimates that $5 trillion in new spending is needed over the next 30 years to improve exploration and production.
The limits of technology
As oil prices -- now about $63 a barrel -- stay elevated, so-called unconventional supplies of oil become economically feasible. Exhibit one: enormous deposits of Canadian oil sands, which could eventually yield more than 170 billion barrels of oil. On the list of the world's biggest oil countries, that total puts the USA's northern neighbor behind only Saudi Arabia.
That's the good news. The bad news is that wringing oil from the sludge-like tar sands is difficult and costly, and requires enormous quantities of water and natural gas -- itself an ever-pricier fuel.
Deffeyes calls talk of substantial tar sands production "the fantasy of economists," adding: "They believe if you show up at the cashier's window with enough money, God will put more oil in the ground."
In recent months, the peak oil camp has received support from some fairly sober quarters, including the U.S. government. A 91-page study prepared in February for the Energy Department concluded: "The world is fast approaching the inevitable peaking of conventional world oil production ... (a problem) unlike any yet faced by modern industrial society."
So far, almost no one in government is calling for immediate action because of the peak oil argument. But in a recent interview with USA TODAY, Energy Secretary Samuel Bodman sounded less than sanguine about the future.
"There's plenty of oil to deal with this over the near term, five years. But if you look out over the next 20, 25 years, we expect demand to grow 50% to 120 million barrels a day. I wouldn't want to opine that's available," says Bodman, a former professor of chemical engineering at Massachusetts Institute of Technology. "It could be, but I don't know."
Here is the link I forgot to include with the original post.
http://www.usatoday.com/money/industries/energy/2005-10-16-oil-1a-cover-usat_x.htm