If the Oil runs out- the BBC starts looking at post-peak oil
Posted by Heading Out on May 30, 2006 - 9:54pm
Topic: Supply/Production
Tags: anwr, bbc, cnn, fox, oil storm, peak oil, we were warned [list all tags]
Pause while 3,550,000 barrels of oil are consumed, (the show mentions that) and what did I think?
Well I could begin by suggesting they had the wrong buttons on the drill bit, but that would be a bit facetious. In a very small nutshell, it tracks a family during the time that the first well is drilled in ANWR, (in 2016) at the same time that President Chavez in Venezuela pulls his country out of OPEC, and that Saudi and China get together to do a goods for oil swop. Oil prices rise and the consequences are transiently illustrated through the impact on the family (losing job, long gas lines, food prices up, aspirin (an oil product) out of stock, and the like). The well is being drilled in the purported last hope for oil. And it does not find the 250 m of oil that was anticipated. But seven months later they are through the crisis and into another world.
There were, however, a number of technical errors relative to the story, particularly in terms of how the rig would be run, and the line about the difficulty in hitting a target 50 m across at a depth of 2,500 m. As a point of reference, at the last Peak Oil meeting in Denver there were a couple of drillers who gave a presentation - they talked about steering a bit down a track within a foot. So, for what it is worth, the drilling section was much more out of Campbell's Kingdom than the operations of a major oil company in the 21st Century.
The disappointment was, that as with Oil Storm, and the CNN version of the same story We Were Warned, the story sensibly stops at the peak of the crisis and says, "Gee, well seven months later everything is OK again." Gentle Cough! (3 times) Um, no it isn't.
They could have mentioned some of the things that are being put in place to ameliorate some of the problems between now and then, to show that it won't be total global disaster for everyone. They could have mentioned Russia (the second largest current producer of oil), they could have mentioned the problems with NG, well I could go on listing "coulda, shoulda' things but the list would get very long and so I will refrain, and merely suggest that it is, in many ways a very optimistic view of what will occur in terms of when. On the other hand I thought it overly pessimistic in terms of the speed of the collapse (even though they justified it with shots from 1973 and Sheik Yamani at his peak). I have commented earlier that it might be that way in the future, but I suspect that we are already in the period of adjustment and that a slower transition will reduce the immediate severity of some of the situation. (Though not, I fear for such countries as Bangladesh, where lack of fuel means that the rice did not get planted, and thus there will not be enough food).
But it was at least a start in bringing this to the European public attention, although at 11:20 pm start I am not sure that there was that much of an audience.
In other news, it should be noted that the Japanese and Chinese continue to talk about collaborating on energy savings, as well as considering their current disagreements.
Japan and China are also locked in a simmering stand-off over developing gas fields in the East China Sea.The two sides disagree over the position of the border between their exclusive economic zones in the East China Sea, and Japan fears that energy-hungry China's exploitation of the area could tap into resources in its own zone.
"The two countries have agreed that they will seek to resolve the issue by making the East China Sea the sea of cooperation," said Nikai, known for his close ties to China. "I hope the issue will be resolved at an early date through mutual efforts."
Chinese Commerce Minister Bo Xilai said closer cooperation on energy and the environment could vastly improve bilateral ties.
"If we can cooperate well in the fields of energy saving and the environment, the people of the two countries will benefit, and I believe it will push up Sino-Japanese ties to a new stage," Bo told the forum. "China and Japan are eternal neighbours."
Resource-poor Japan, which has been developing energy-saving technology since a global oil crisis in 1973, has been helping China reduce greenhouse gas emissions as a part of international efforts to combat global warming.
Finally traveler notes: some time ago I tried to explain some of the problems at Abqaiq by making reference to floating cream on coffee after dinner, a habit from my decadent student youth. Well, having come back to the part of the world where I learned the habit, it appears to be withering away and impractical since, these days what they serve as cream didn't float in the restaurants at all but one place that I ate at (the exception - the South Causey Hotel). So maybe no-one understands that analogy - ah, well!
And a couple of pictures to illustrate the post of the other day, first the pit pony in the roundabout.
I will come back to this in a short while in a comment that will relate to recent comments on the EROI of coal. And secondly a picture of the old and the new.
The old pit wheels buried in cement are in the foreground, the new energy is shown by the wind turbines in the background, and the contribution from biofuels perhaps illustrated by the very thin line of yellow rapeseed within the green of the hillside. Note that this was once a mine, and it is just outside the village of Shotton Colliery (which no longer has one).
I am not sure, given the travel of the next few days, that I will be back before next week, though I will try and put in the comment on coal - it depends on how bumpy the flight is later today.
I've seen you post the word sheeple several times. When a wolf runs into a herd, the herd splits into smaller groups to evade. Stragglers get eaten. Since you are saying/regurgitating the same rhetoric as many people, are you not a sheeple in the left herd? Or do you have wisdom placing you above all others?
Matt
This doctrine is, in some senses, valid even today. The problem is how to measure Non OPEC producers' marginal cost. Russia and Mexico are two important Non OPEC producers. But both of their oil companies are controlled by their governments which serve the interests of their states, and both of them have an OPEC observers' statures.
So, oil majors set up the price of the Non OPEC production costs. Like TOT, British Petroleum, XOM operates in 40 countries. Its cost should represent the cost of Non OPEC producers. We should not measure its production cost by counting its fixed assets. A lot of oil fields XOM acquired 10 or 20 years were on $15 to $20 oil and many of them have been written off. What we are concerned is present or 10 years off production cost.
One easy way to measure its marginal cost is to observe its shareholders' perception and expectation of XOM's future production cost. Today, XOM p/e is 10, BP is 10, COP is 6. That means millions of individuals and institutional share holders do not believe and do not expect XOM, in 10 years off, will enjoy a low marginal production cost and big volumes of future output. It is a common sense that investors will give a company high p/e ratio if they believe the company will have means to reduce the operating cost and increase output volumes.
In 1980, the oil price was high like today in real price terms. The oil majors enjoyed an average p/e ration above 30. And oil companies and oil service companies accounted for 30% of S & P 500 value. Because 25 years ago investors believed that oil majors had the capacity to hand on the low cost of the oil fields and increase output (output increases itself means cost reduction).
At the oil price of $72 today, shareholders believe that the future XOM's production cost will be $64 a barrel, because they put the former XOM's p/e ration at 9.
Now, in my experience companies talk a grander story about the "value added" they provide to customers than may really be the case ... but it is hard to find too many surviving companies that really get away without providing some value.
Coke and Pepsi deliver that sugar water (oops, I mean corn syrup). To be Ponzi schemes, they'd have to just promise to deliver that soda ... sometime in the future.
Ponzi himself started with a business model, which might have worked as a very small scale operation (trading postage coupons), but he went off the rails when investment swamped the opportunity, and he started cycling new investment back as false 'profit.'
Now, could another company make that unfortunate transition? Perhaps. But what I'm striking at is the idea that modern corporations (corporations that borrow?) can glibly be labelled as Ponzi schemes when they are not funneling back new investment, and presenting it as 'profit' on their balance sheets.
It's good to know what a real Ponzi scheme really is, because that helps us spot them. Like in Enron. The problem with blanket statements that "everything is Ponzi" is that it dilutes the meaning of the phrase.
Now, remember the (long) sentence I was replying to:
"And that makes perfect sense when one realizes that corporations are often just complex ponzi schemes designed to fill the coffers of those at the top, until the ship sinks and they fly away in their gold-plated choppers, leaving pensioners and average 'investors' holding the bag."
The oil price cannot be lowerthan Non OPEC producers' marginal cost, plus a reasonable profit ...
otherwise they will leave it in the ground (which will force prices up).
It's hard to see how they can reach such a conclusion : visibly, oil producers are conservative about investing in high-cost fields, and there are long lead times in bringing those fields into production. So there is plenty of scope for demand (and speculation) driving prices much higher than marginal cost of the most expensive producing fields.
We have now seen prices rise nearly 3x from the previous opec controlled $25 level. Eventually, investors will conclude that higher prices are not just here to stay but will continue to climb, resulting in sharply higher shares and p/e's, particularly for the smaller e&p's that manage to increase reserves but even for those with less success, such as the largest oil firms. Consider that in 1980 there was no talk of peak oil - imagine how high prices might go if tod's conclusions become widely shared. 3x 75 = 225, which I expect to be reached before most have accepted the awful truth.
If all the MSM can offer is useless information, why bother.
Of course TOD trolls will dis Professor Chomsky as readily as they do Señor Chavez by calling him by his given name. No matter, Hugo has more huevos than George or the others.
You couldn't be more right about TOD trolls. I am convinced these people are paid to be obtuse.
It is difficult to believe a thing if one's paycheck and comfortable living depend upon not believing it, or at least depend upon acting as if it is not true. Hence, we who inhabit the USA -- and many other folks as well -- can be pretty obtuse about peak oil, global climate change, and so forth.
If the BBC "If the Oil Runs Out" disinfotainment show falls short, as have other disinfotainment shows about the topic, perhaps it is because the people who make the shows and the people who watch them are co-opted. We are paid to make up stories that keep us all compliant.
Even so, one can do one's bit to prepare and to share the wonderful news of peak oil at every opportunity. Our chances of success (surviving and thriving) look grimmer as the days go by, but then there are always surprises.
Unless, maybe, we've also reached "peak surprises" in which case there will be fewer and fewer of those around as well.
I have a feature magazine I've been publishing a long time, always focused on simpler lifestyles, solar living and walkable neighborhoods.
For a couple of years now, I've been writing a lot about peak oil, addiction to the car lifestyle, the danger of the debt Americans have thoughtlessly accumulated and of what certainly appears to be outright and systematic looting of the U.S. Treasury. These things put our nation at great risk.
I get two reactions:
"American is the greatest and richest country on Earth -- how dare you question it" and the more typical "Well, maybe the oil's going to run out, but there's nothing we can do about it."
There is something existential and massive about this group delusion that Americans are in about the future of their country.
I don't know what to do about it ...
The trouble is, a lot of these guys got really, really burned by the Hunt Brothers' silver scam years ago, so they're leery of precious metals. (Jeez, maybe they're right!}
But this is mostly either the Fox News or the NPR crowd, and if it's not on Britt Hume or All Things Considered, it's not part of their reality.
And if you say the media might have an agenda, then you start getting those strange looks ...
Seriously, I don't even go close to MSM bashing as it appears to be completely counter-productive. Oh, another point that does appear to resonate with the folks I try to talk to is to point out that we (in the US) use approx 25 barrels per person per year and that China is at approx 2.5 and India approx 1.5. Residents of these countries certainly "deserve" under any fairness view, and more importantly certainly can afford to buy and move up to 5 barrels per person per year each. That's 2.5 billion people that will more than double consumption in a very short time horizon. Even doubters tend to agree that for a period of time that will lead to price increases (until new supply magically appears) and potentially conflict.
Closer to home, I ll sometimes talk to people about such things as "where our water comes from", or "where the water goes when you pour it down the drain," or "where are we" in relation to the local mountains and valleys, or "where does the energy come from that comes out of the plug in the wall."
Its amazing how few people have a clue about the most basic things in their lives. To most people, its all more or less magic.
If they dont know where their water comes from, or where it goes, why should they have any notion of where their gasoline comes from. Especially since nobody ever sees the stuff; it just goes into a hole in the side of their car, and shows up on a guage. Ten gallons is actually a lot of liquid, and weighs a lot. If people had to pick it up and physically pour it into their gas tanks, they might think more about it.
So let me sing the praises of Apuleius, the rhetorician. Read, and respond with rhetoric.
P.S. Who's J.Lo? I know who John Yoo is.
Meanwhile, there are reality minded people here who don't think that caring about oil issues requires admiring a thug like Chavez. Learn from them, boy.
Don't let that stop your delusions, though.
http://en.w