Articles tagged with "peak oil"
I often find myself wondering where my life would be today had I not stumbled across The Oil Drum in 2005. I don’t know that I would still be writing today were it not for my early experiences with TOD readers. As TOD winds down, I thought I’d share my story, which I have not told before.
In 2005 I was a chemical engineer at the ConocoPhillips Refinery in Billings, Montana. I worked in the group that among other things did refinery economics. We optimized the refinery for which crude slates to run and how the refinery should be run, depending on the crude slate as well as whether margins were higher for diesel or for gasoline. We could shift production about 5% one way or the other. We often joked about the fact that my boss was the Director of Optimization, Process, and Economics (the “DOPE”).
At that time the Montana government was in the midst of trying to implement an ethanol mandate for the state, and the refinery manager knew I had some background with ethanol from my graduate school days at Texas A&M University. So whereas other refineries in the state were sending their plant managers to testify, I was asked to go to the Montana State Legislature to provide testimony on this bill. As I was preparing for my testimony, I wanted to be sure I also emphasized the dangers of being overly dependent on a depleting resource like petroleum. I wanted the legislators to know that my testimony was not to maintain the status quo, but that instead we needed a different model. In the course of preparing my testimony, I read The Long Emergency and Twilight in the Desert – both books that had a big impact on my thinking -- and I began to frequent The Oil Drum and make comments.
I had started a little blog I called R-Squared – a play on my initials but also a term frequently used by engineers – to document and archive my findings as I prepared for my testimony at the legislature. I found that there was so much misinformation related to ethanol that I began to write essays debunking these claims. At some point Kyle Saunders, aka Professor Goose, asked me if I would become a contributor and share some of these articles at The Oil Drum as he felt like they could use some people with oil industry experience.
Posted by Big Gav on August 21, 2013 - 4:22am
Topic: Alternative energy
Tags: geothermal power, hydro power, ocean energy, otec, peak oil, renewable energy, solar power, tidal power, wave power, wind power [list all tags]
There are 4 obvious avenues open for dealing with peaking conventional oil production:
- Find more conventional oil
- Exploit unconventional oil sources
- Become more efficient in our use of oil
- Switch to alternatives
Over the years a lot of peak oil analysis has tended to focus on how far the first item can be pushed and what could happen once the limit is reached, with short shrift being given to the other 3 avenues (unless "powerdown" counts as "more efficient use of oil") - and even the amount of conventional oil available being somewhat underestimated (Iraq being the example I always used though as Euan pointed out recently - Brazil, West Africa, East Africa and Norway have all seen significant new discoveries in recent years).
The ability of the oil industry to expand unconventional oil production (the shale oil boom being the obvious example though production of tar sands and heavy oil deposits are also increasing) has been the key factor in pushing the date of the peak out further into the future (I liked Stuart Staniford's quip that this could possibly be characterised as a "frenzied scraping of the bottom of the barrel"). The dawning of the "gas age" has also kept fossil fuels in the picture for time being, with substantial unexploited conventional natural gas reserves being developed and unconventional gas production growing strongly.
While these developments have thus far dashed the hopes of the doomer community the fact remains that even if the whole world was made of oil, there would still be a finite supply of it - and thus at some point we will need to transition to alternative sources of energy, assuming the temperature of the planet hasn't risen to a point that makes it uninhabitable in the meantime. It's this transition to alternative energy which captured most of my attention when writing - and thus the one which I'll make the topic of this final post.
The story of oil limits is one that crosses many disciplines. It is not an easy one to understand. Most of those who are writing about peak oil come from hard sciences such as geology, chemistry, and engineering. The following are several stumbling blocks to figuring out the full story that I have encountered. Needless to say, not all of those writing about peak oil have been tripped up by these issues, but it makes it difficult to understand the “real” story.
The stumbling blocks I see are the following:
1. The quantity of oil supply available is primarily a financial issue.
The issue that peak oil people are criticized for missing is the fact that if oil prices are high, it can enable higher-cost sources of production–at least until these higher-cost sources of production prove to be too expensive for potential consumers to buy. Thus, high price can extend oil production for longer than would seem possible, based on historical patterns. As a result, forecasts based on past patterns are likely to be inaccurate.
There is a flip side of this as well that economist have missed. If oil prices are low (for example, $20 barrel), the economy is likely to be very different from what it is when oil prices are high (near $100 barrel, as they are now).
This post is based on a talk I gave as an "undistinguished speaker" to the American Association of Petroleum Geologists (AAPG) oil finders lunch in Aberdeen a few weeks ago. This will be one of my last posts on The Oil Drum. There should be enough controversy below the fold to keep a hoard of Oil Drummers satiated for weeks;-)
This is a guest post by Kjell Aleklett, Professor of Physics at the Global Energy Systems Group of Uppsala University Sweden. and President of ASPO International.
At the end of August, The Oil Drum website will change from an active blog into a static archive for many extremely good articles on, primarily, the history and future of oil production. During the eight years that the website was active, its leadership did amazing work. The fact that so many influential bloggers have commented on its closure shows how influential The Oil Drum has been. I have just been contacted by a journalist from The Wall Street Journal (WSJ) who liked to discuss the many denials of Peak Oil and what the closing of The Oil Drum would mean for the Peak Oil movement. The reflections below are a part of my commentary to WSJ together with other thoughts on the future.
This is a guest post by James Hamilton, Professor of Economics at the University of California, San Diego. This post originally appeared on the Econbrowser blog here.
Those behind the theory appear to have been dead wrong, at least in terms of when the peak would hit, having not anticipated the rapid shift in technology that led to exploding oil and natural gas production in new plays and areas long since dismissed as dried up.
These comments inspired me to revisit some of the predictions made in 2005 that received a lot of attention at the time, and take a look at what's actually happened since then.
Most of us have heard that Thomas Malthus made a forecast in 1798 that the world would run short of food. He expected that this would happen because in a world with limited agricultural land, food supply would fail to rise as rapidly as population. In fact, at the time of his writing, he believed that population was already in danger of outstripping food supply. As a result, he expected that a great famine would ensue.
Most of us don’t understand why he was wrong. A common misbelief is that the reason he was wrong is that he failed to anticipate improved technology. My analysis suggests that there were really two underlying factors which enabled the development and widespread use of technology. These were (1) the beginning of fossil fuel use, which ramped up immediately after his writing, and (2) a ramp up in non-governmental debt after World War II, which enabled the rapid uptake of new technology such the sale of cars and trucks. Without fossil fuels, availability of materials such as metal and glass (needed for most types of technology) would have been severely restricted. Without increased debt, common people would not have been able to afford the new types of high-tech products that businesses were able to produce.
This issue of why Malthus’s forecast was wrong is relevant today, as we grapple with the issues of world hunger and of oil consumption that is not growing as rapidly as consumers would like–certainly it is not keeping oil prices down at historic levels.
What Malthus Didn’t Anticipate
Malthus was writing immediately before fossil fuel use started to ramp up.
I, along with my editor Sam Avro, recently conducted a broad-ranging interview with John Hofmeister, former President of Shell Oil. The topics touched upon included future oil supplies and prices, climate change, U.S. energy policy, and topics familiar to R-Squared Energy readers such at Peak Lite and the Long Recession.
I will present this interview in a series of stories covering some of the various topics. In this first story, I will discuss Mr. Hofmeister’s detailed answer to the question, “What do you feel is the potential for expanding global oil production, and the time frames?”
Readers may recall that I have put forth a pair of hypotheses with respect to future oil production and prices. One is called Peak Lite. (See also: Five Misconceptions About Peak Oil)
The usual assumption that economists, financial planners, and actuaries make is that future real GDP growth can be expected to be fairly similar to the average past growth rate for some historical time period. This assumption can take a number of forms–how much a portfolio can be expected to yield in a future period, or how high real (that is, net of inflation considerations) interest rates can be expected to be in the future, or what percentage of GDP the government of a country can safely borrow.
But what if this assumption is wrong, and expected growth in real GDP is really declining over time? Then pension funding estimates will prove to be too low, amounts financial planners are telling their clients that invested funds can expect to build to will be too high, and estimates of the amounts that governments of countries can safely borrow will be too high. Other statements may be off as well–such as how much it will cost to mitigate climate change, as a percentage of GDP–since these estimates too depend on GDP growth assumptions.
If we graph historical data, there is significant evidence that growth rates in real GDP are gradually decreasing. In Europe and the United States, expected GDP growth rates appear to be trending toward expected contraction, rather than growth. This could be evidence of Limits to Growth, of the type described in the 1972 book by that name, by Meadows et al.
Figure 1. World Real GDP, with fitted exponential trend lines for selected time periods. World Real GDP from USDA Economic Research Service. Fitted periods are 1969-1973, 1975-1979, 1983-1990, 1993-2007, and 2007-2011.
Trend lines in Figure 1 were fitted to time periods based on oil supply growth patterns (described later in this post), because limited oil supply seems to be one critical factor in real GDP growth. It is important to note that over time, each fitted trend line shows less growth. For example, the earliest fitted period shows average growth of 4.7% per year, and the most recent fitted period shows 1.3% average growth.
In this post we will examine evidence regarding declining economic growth and discuss additional reasons why such a long-term decline in real GDP might be expected.
The International Monetary Fund (IMF) recently issued a new working paper called “The Future of Oil: Geology versus Technology” (free PDF), which should be of interest to people who are following “peak oil” issues. This is a research paper that is being published to elicit comments and debate; it does not necessarily represent IMF views or policy.
The paper considers two different approaches for modeling future oil supply:
- The economic/technological approach, used by the US Energy Information Administration (EIA) and others, and
- The geological view, used in peak oil forecasts, such as forecasts made by Colin Campbell and forecasts made using Hubbert Linearization.
The analysis in the IMF Working Paper shows that neither approach has worked perfectly, but in recent years, forecasts of oil supply using the geological view have tended to be closer than those using the economic/technological approach. Since neither model works perfectly, the new paper takes a middle ground: it sets up a model of oil supply where the amount of oil produced is influenced by a combination of (1) geological depletion and (2) price levels.
This blended model fits recent production amounts and recent price trends far better than traditional models. The forecasts it gives are concerning though. The new model indicates that (1) oil supply in the future will not rise nearly as rapidly as in the pre-2005 period and (2) oil prices are likely to nearly double in “real” (inflation-adjusted) terms by 2020. The world economy will be in uncharted territory if this happens.
It seems to me that this new model is a real step forward in looking at oil supply and the economy. The model, as it is today, points out a definite problem area (namely, the likelihood of oil high prices, if growth in oil production continues to be constrained below pre-2005 rates of increase). The researchers also raise good questions for further analysis.
At the same time, I am doubtful that the world GDP forecast of the new model is really right–it seems too high. The questions the authors raise point in this direction as well. Below the fold, I discuss the model, its indications, and some shortcomings I see.